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TC > 9. TC - Corporation Tax > Flashcards

9. TC - Corporation Tax Flashcards

1
Q

What is total taxable profits?

A

The total of income and gains of a company

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2
Q

What is corporation tax paid on?

A

paid by UK resident companies on their TTP for an accounting period

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3
Q

What does TTP stand for?

A

Total taxable profits

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4
Q

When is a company a resident in the UK?

A

When they are incorporated in the UK, or it is ‘centrally managed and controlled in the UK’

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5
Q

What income and gains are UK resident countries charged CT on? (Just UK or worldwide?)

A

Worldwide income and gains

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6
Q

How are non-resident companies charged CT?

A

Non-residential companies are chargeable to UK corporation tax on profits of any permanent establishments in the UK

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7
Q

When does an acc period start?

A

Either at commencement of trade

Or when the previous acc period ends

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8
Q

Can an accounting period exceed 12 months for companies?

A

NO

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9
Q

When does an accounting period end and why?

A

Can’t exceed over 12 month POA for companies, so ends the earliest of

  • 12 months after the beginning of the POA
  • the end of the company’s POA
  • the company begins/ceases to trade
  • the date the company ceases to be resident in the UK
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10
Q

What is the pro forma for the corporation tax computation?

A

-> Trading income X (adj trading profits less cap allowances)
-> Property income X (income from UK and overseas let property)
-> NTLR X Non-trade interest receivable less non-trade interest payable
-> Misc income x
Chargeable gains x (chargeable gains less capital losses)
= Total profits
Less qualifying donations (X) (National charity donations, i.e. QCD)
= Taxable total profits X (TTP)

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11
Q

What is the pro forma for calculating trading income?

A 
Net profit(Loss) per accounts X (X)
Add
Disallowable expenditure X 
Taxable income not in the accounts X 
Deduct 
Non trading income taxed elsewhere (X) 
Capital allowances (X)

Adjusted trading income(loss) X (X)

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12
Q

What are the main differences between adjustments for company and unincorporated traders when determining trading income?

A
  1. No pvte use restrictions for companies for expenses or capital allowances
  2. Capital allowances for companies are calculated for each accounting period (can’t exceed 12 months)
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13
Q

How is property income calculated for a company?

A 
Rent accrued X 
Allowable deductions (X) 
Property income (loss) X/(X)
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14
Q

How is interest payable on a loan to acquire or improve property treated in the accs?

A

Not allowed as property income expense (unlike for individuals)
Instead, relief is given under the loan relationship rules

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15
Q

What is the main difference for property income between corporate and ST?

A

Interest payable on loan to acquire or improve property is not allowed as property income expense for a company (unlike for individuals)
Instead, relief is given under the loan relationship rules

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16
Q

What is the difference between companies and unincorporated in terms of interest?

A

Interest for companies = accruals basis

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17
Q

How is interest receivable treated for companies?

A

Depends what it is
If trade is lending money then = trade (e.g. bank)
Rest = non-trading

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18
Q

How is interest payable treated for companies?

A

Trading:
Overdraft interest
Interest paid on loans to purch P&M
Interest on loans/debentures to fund daily operations
Interest on loan t buy trade and assets of another company

Non-trading
Interest on loan to buy property for non-trade purposes
Interest on loan to buy another company/inv
Interest on underpaid corporation tax

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19
Q

How is the following interest treated for companies? (Trading/ non-trading)
Overdraft interest

A

Trading

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20
Q

How is the following interest treated for companies? (Trading/ non-trading)
Interest paid on loans to purch P&M

A

Trading

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21
Q

How is the following interest treated for companies? (Trading/ non-trading)
Interest on loans/debentures to fund daily operations

A

Trading

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22
Q

How is the following interest treated for companies? (Trading/ non-trading)
Interest on loan t buy trade and assets of another company

A

Non-Trading

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23
Q

How is the following interest treated for companies? (Trading/ non-trading)
Interest on loan to buy another company/inv

A

Non-Trading

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24
Q

How is the following interest treated for companies? (Trading/ non-trading)
Interest on underpaid corporation tax

A

Non-Trading

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25
Q

What is the proforma for NTLR income?

A

Non-trade interest receivable X
Non-trade interest payable (X)

NTLR income/ (Deficit) X

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26
Q

What is the difference for the calc of chargeable gains for indivs vs companies?

A

Calc is the same for indiv except companies receive an indexation allowance rather than AEA

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27
Q

What is the difference for qualifying donations between a company and an individual?

A

All amounts for a company are paid gross

Whereas Gift Aid for indivs is grossed up

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28
Q

How are charitable donations treated in the accounts?

A

Deductible in the period in which they are paid

29
Q

Are charitable donations for a company on a receipts or accrual basis?

A

Receipts basis

30
Q

How are dividends treated in the accounts?

A

Dividends are usually exempt from corporation tax but they may have an impact on a due date for the payment of corporation tax

31
Q

How do dividends affect corporation tax?

A

Dividends are usually exempt from corporation tax but they may have an impact on a due date for the payment of corporation tax

32
Q

How are long periods of account dealt with for a company?

A

If there is a period of account of more than 12 months, it must be split into 2 acc periods as follows:
1st 12 months
Remainder of the period of account

33
Q

How is the following allocated in a long period of account?

Trading profits before capital allowances

A

Ajdjust profit for period of account for tax purposes and then time apportion

34
Q

How is the following allocated in a long period of account?

Capital allowances

A

Separate calculation for each accounting period

Pro-rate AIA and WDA if AP < 12m

35
Q

How is the following allocated in a long period of account?

Property income

A

Time apportion

36
Q

How is the following allocated in a long period of account?

Non-trading loan relationships

A

Accruals basis

37
Q

How is the following allocated in a long period of account?

Chargeable gains

A

Date of disposal

38
Q

How is the following allocated in a long period of account?

QCDs

A

Date charitable donation made

39
Q

What is the rate of corporation tax for FY18?

A

19%

40
Q

When is the financial year?

A

1 April - 31 March

41
Q

TYU4: Lace Ltd had taxable total profits of £1,620,000 in its year ended 31 March 2020 and dividends received on £6,400
What is the corporation tax liability?

A

TTP = 1,620,000

Corp tax = 1,620,000 x 19% = £307,800

42
Q

If there is a long period of account over 18 months, how many submission and payment dates are there?

A

2 associated payment dates

Only 1 submission dat

43
Q

What does the penalty for failure to make a return depend on?

A

Depends on the length of the delay and whether or not the company has persistently failed to make a return

Late submission penalties are in HP 148

44
Q

What consists to be a ‘persistent failure’ ?

A

Failure to make a return on time for 3 consecutive returns

45
Q

What is the payment date for a company that is not classified as large?

A

9 months and 1 day

46
Q

When is a company deemed to be large?

A

When augmented profits exceed £1,500,000 over 12 months

47
Q

Suggest when the limit for being a large company is adjusted and how it is adjusted

A

The £1,500,000 limit must be adjusted as follows

  • Scaled down in POA < 12 months
  • Divided by number of related 51% group companies
48
Q

How are augmented profits calculated?

A

TTP X
Exempt ABGH distributions (X)
= Augmented profits X

49
Q

What amount is taxed for corporation tax - TTP or Augmented profits?

A

TTP is taxed

But Augmented profits are used to determine whether large or small company

50
Q

What are exempt AGBH distributions used for?

And give some examples of what these are

A

Used to calc Augmented profits to determine whether company is large or small for payment dates

Examples
Dividend from 51% group companies
A foreign dividend which the question specifically states is not exempt

When including exempt foreign div in augmented profits calc, the dividend isn’t grossed up for any overseas tax suffered

51
Q

What are exempt AGBH distributions used for?

And give some examples of what these are

A

Used to calc Augmented profits to determine whether company is large or small for payment dates

Examples
Dividend from 51% group companies
A foreign dividend which the question specifically states is not exempt

When including exempt foreign div in augmented profits calc, the dividend isn’t grossed up for any overseas tax suffered

52
Q

When are 2 companies related 51% group companies?

A

If either:
one of the companies is a 51% subsidiary of the other
or they are both 51% subsidiaries of the same company

53
Q

Define a 51% subsidiary

A

It is one where more than 50% of the ordinary share capital is owned directly or indirectly

54
Q

What companies and include and excluded when determining how many related 51% group companies there are?

A

UK and overseas companies are both included

But dormant companies are excluded

Only include companies if they were related 51% group companies at the end of the prev acc period

If 2 companies are over 50% owned by an individual, they are NOT 51% group companies are companies can only be linked through a corporate parent company

55
Q

Are the following included when determining how many related 51% group companies?
UK companies

A

YES

56
Q

Are the following included when determining how many related 51% group companies?
Overseas companies

A

YES

57
Q

Are the following included when determining how many related 51% group companies?
Dormant companies

A

NO

58
Q

Are the following 51% group companies?

2 companies that are over 50% owned by an individual?

A

NO
If 2 companies are over 50% owned by an individual, they are NOT 51% group companies are companies can only be linked through a corporate parent company

59
Q

What are the payment instalment timings for companies classified as large?

A 
Must pay corp tax in 4 instalments by 14th day of 
7th
10th
13th
16th month of 12 month acc period
60
Q

Whens a company treated as large?

A
  • If tax liability is more than £10,000
  • If it was large in the previous 12 months
  • Augmented profits were more than £10,000,000 in the current year
61
Q

What is the first instalment payment then CT is required to be paid in instalments for short accounting periods?

A

The lower of
3 x CT/n where CT= corp tax for the acc period
n = number of months in accounting period

Or the total corporation tax for the accounting period

Subsequent instalments are calc’ed in the same way until the liability is paid

62
Q

How many instalments are there for a short period?

A

Calc corp tax = lower of
3 x CT/n where CT= corp tax for the acc period
n = number of months in accounting period

Or the total corporation tax for the accounting period

And then keep paying subsequent instalments are calc’ed
First instalment is due by 14th of 7th month following start of acc period. Subsequent payments are due every 3 months.
Last instalment is due by 14th day of 4th month after the end of acc period

63
Q

TYU7: Thirst Ltd has TTP of £750k in its 8 months to 31 March 2020
The comp received div from a wholly owned subsidiary of £85k (the share were acquired in 2012)
Thirst Ltd was a large company in the prev period
Show the amount and due date of each instalment

A

Profit limit of £1.5m must be adj for short acc period and fact there are 2 related 51% group companies
£1.5m x 8/12 (months) / 2 = £500k
Aug profits for 8 months = TTP = £750k
Aug profits exceed limit so must pay in instalments
Corp tax due = £750k x 19% = £142.5k

Instalments = 14th of 7th month, 3 months later = next one & keep going until last payment =14th day of 4th month following the end of the acc period

First instalment 
=3/8 x £142.5k 
Due 14 Feb 20 
Second instalment 
3/8 x £142.5k 
Due 14 May 20 
Third instalment 
2/8 x £142k 
Due 14 July 20
64
Q

What are the instalment payment dates for a company that is classified as very large?

A

Must pay its corporation tax in 4 instalments by 14th day of
3rd
6th
9th
12th month following the start of a 12 month accounting period

65
Q

When is a company deemed to be ‘very large’?

A

If its augmented profits exceed £20m

66
Q

When does a very large company have to pay tax in instalments?

A

if it’s corporation liability is more than £10k

67
Q

What does BPSS stand for?

A

Business Payment Support Service

68
Q

What does the BPSS do?

A

Helps businesses that are having difficulty making payments of copr tax or income tax, NI contribution , amounts collected VIA PAYE and VAT

69
Q

How does BPSS help people?

A

Will seek to agree to spread the tax payments over a period to meet the needs of the business, including taking into account trading losses being made in the current year

TC (25 decks)

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