7. Business Taxes & VAT Flashcards
How can capital losses be utilised? (2)
- offset against chargeable gains in same period
- carries forward against future gains/trading profits/investment income (relief capped at 50% of capital gains over £5m)
What are the criteria for exemption from chargeable gains when selling a substantial shareholding? (2)
Complete exemption if:
- must have owned 10% for 12 months in the last 6 years
- must be selling shares of trading company (incl via holding co)
How do capital allowances work, including rates?
Accounting depreciation is added back to profits
CAPEX is deductible up to annual investment allowance (excl cars)
Plant & Machinery not covered are added to a pool
%s of the pool are claimed:
- 18% for most assets
- 6% long life assets
- 3% new industrial buildings
What are the SME criteria for enhanced R&D relief?
The company + any >25% subs must have:
<500 employees
Turnover <€100m
Assets <€86m
A tax credit is claimed for any unrelieved loss, instead of being carried forward
What is the CT treatment of intangible assets? (3)
Relief equal to accounting depreciation
Disposals are taxable/deductible if made gain/loss
- rollover relief available if reinvested in other intangibles <1 year before or <3 years after disposal
When is the deadline to submit CT return?
Later of:
12 months from accounting period end
3 months after notice of return issued
What are the late filing penalties for CT?
1 day £100
3 months £100
6 months 10% liability
12 months further 10%
When is CT payment due?
If profits <£1.5m: 9 months +1 day
If >£1.5m: quarterly installments
- 14th of 7th month then every 3 months
- N/A in first year above threshold unless profits >£10m
- if >£20m then due 4 months earlier
What are the rules around CT loss relief? (4)
Must be claimed within 2 years
Applied to current year then previous year
Losses in final year of trading can be carried back 3 years
Unused losses can be c/f. Relief capped at 50% of profits above £5m
What is the condition for group relief and what are the reliefs (4)?
Applies to >75% ownership
CY and b/f losses can offset interco losses
Assets can be transferred at no P/L and no stamp duty
Can elect to offset capital losses against interco gains
Group is regarded as single entity for rollover relief
What are the criteria for a close company? (5)
Max 5 controlling parties
Only directors as participants
Max 5 directors entitled to majority of assets
Based in UK
Listed co’s can be close if <35% voting power is publicly held and traded
How are loans from close companies treated?
CT charge at 33.75% of YE balance
N/A if repaid or written off by 9 months later
How are share buybacks treated and what are the conditions to treat differently (4)?
If shareholder receives more than what they paid: liable to income tax
Conditions to treat as CGT instead:
Purchase made to benefit the co’s trade
Shareholder is UK resident
Shares owned for 5+ years
Shareholder disposes of bulk of holding
What are the (de)registration requirements for VAT? (4)
Required if sales in last 12 months are above registration threshold
- or expected to go above in next 30 days
- can volunteer if below threshold
Deregister if revenue falls below deregistration threshold
Examples of reduced rate supplies? (4)
Domestic heating fuels
Installation of energy saving materials
Contraceptive products
Property renovations/conversions
Examples of zero rate supplies? (9)
Most food and soft drinks
Domestic water/sewage supplies
Books/publications
New residential buildings / buildings used by charities - incl contractor costs
Renovated houses empty for 10 years
Public transport fares
Sanitary products
Medication
Children’s clothing/footware
Examples of exempt supplies? (5)
Insurance, finance, credit
Education / training
Charity fundraising
Subscriptions to membership organisations
Commercial land/buildings (can waive)
Key features of flat rate scheme? (2)
Available to small businesses with turnover under the scheme threshold
Account for VAT as % of turnover rather than working out input-output
Key features of second hand goods scheme?
VAT only paid on difference between purchase price and sales price
Excludes precious metals, stones or gold
Key features of agricultural flat rate scheme? (3)
No VAT returns so cannot claim input
Charge flat % on sales to VAT registered customers - farmers keep the uplift
Cannot join if non-farming activities are above VAT registration threshold
What is the VAT postponed accounting scheme for imported goods?
Input/output recorded in same VAT quarter rather than immediate payment when goods enter UK
Scenarios where output VAT is not due on bad debt? (5)
When using cash accounting basis
Debt is >6 months and <3.5 years old
Debt is written off and held in DDP
Debt has not been sold/factored
Did not charge more than normal price
How are late VAT filings penalised? (3)
Penalty point applied for each late submission
Once points meet threshold, £200 fine + £200 fine for each subsequent late filing
Points expire after time or can be removed by completing 24 months compliance
How is inaccurate VAT information penalised?
% of the additional VAT due is charged:
Careless: 0-30%
Deliberate, not concealed: 20-70%
Deliberate and concealed: 30-100%
50 200
