9. TC - Corporation Tax Flashcards
What is total taxable profits?
The total of income and gains of a company
What is corporation tax paid on?
paid by UK resident companies on their TTP for an accounting period
What does TTP stand for?
Total taxable profits
When is a company a resident in the UK?
When they are incorporated in the UK, or it is ‘centrally managed and controlled in the UK’
What income and gains are UK resident countries charged CT on? (Just UK or worldwide?)
Worldwide income and gains
How are non-resident companies charged CT?
Non-residential companies are chargeable to UK corporation tax on profits of any permanent establishments in the UK
When does an acc period start?
Either at commencement of trade
Or when the previous acc period ends
Can an accounting period exceed 12 months for companies?
NO
When does an accounting period end and why?
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
What is the pro forma for the corporation tax computation?
-> 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)
What is the pro forma for calculating trading income?
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)
What are the main differences between adjustments for company and unincorporated traders when determining trading income?
- No pvte use restrictions for companies for expenses or capital allowances
- Capital allowances for companies are calculated for each accounting period (can’t exceed 12 months)
How is property income calculated for a company?
Rent accrued X Allowable deductions (X) Property income (loss) X/(X)
How is interest payable on a loan to acquire or improve property treated in the accs?
Not allowed as property income expense (unlike for individuals)
Instead, relief is given under the loan relationship rules
What is the main difference for property income between corporate and ST?
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
What is the difference between companies and unincorporated in terms of interest?
Interest for companies = accruals basis
How is interest receivable treated for companies?
Depends what it is
If trade is lending money then = trade (e.g. bank)
Rest = non-trading
How is interest payable treated for companies?
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
How is the following interest treated for companies? (Trading/ non-trading)
Overdraft interest
Trading
How is the following interest treated for companies? (Trading/ non-trading)
Interest paid on loans to purch P&M
Trading
How is the following interest treated for companies? (Trading/ non-trading)
Interest on loans/debentures to fund daily operations
Trading
How is the following interest treated for companies? (Trading/ non-trading)
Interest on loan t buy trade and assets of another company
Non-Trading
How is the following interest treated for companies? (Trading/ non-trading)
Interest on loan to buy another company/inv
Non-Trading
How is the following interest treated for companies? (Trading/ non-trading)
Interest on underpaid corporation tax
Non-Trading
What is the proforma for NTLR income?
Non-trade interest receivable X
Non-trade interest payable (X)
NTLR income/ (Deficit) X
What is the difference for the calc of chargeable gains for indivs vs companies?
Calc is the same for indiv except companies receive an indexation allowance rather than AEA
What is the difference for qualifying donations between a company and an individual?
All amounts for a company are paid gross
Whereas Gift Aid for indivs is grossed up
How are charitable donations treated in the accounts?
Deductible in the period in which they are paid
Are charitable donations for a company on a receipts or accrual basis?
Receipts basis
How are dividends treated in the accounts?
Dividends are usually exempt from corporation tax but they may have an impact on a due date for the payment of corporation tax
How do dividends affect corporation tax?
Dividends are usually exempt from corporation tax but they may have an impact on a due date for the payment of corporation tax
How are long periods of account dealt with for a company?
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
How is the following allocated in a long period of account?
Trading profits before capital allowances
Ajdjust profit for period of account for tax purposes and then time apportion
How is the following allocated in a long period of account?
Capital allowances
Separate calculation for each accounting period
Pro-rate AIA and WDA if AP < 12m
How is the following allocated in a long period of account?
Property income
Time apportion
How is the following allocated in a long period of account?
Non-trading loan relationships
Accruals basis
How is the following allocated in a long period of account?
Chargeable gains
Date of disposal
How is the following allocated in a long period of account?
QCDs
Date charitable donation made
What is the rate of corporation tax for FY18?
19%
When is the financial year?
1 April - 31 March
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?
TTP = 1,620,000
Corp tax = 1,620,000 x 19% = £307,800
If there is a long period of account over 18 months, how many submission and payment dates are there?
2 associated payment dates
Only 1 submission dat
What does the penalty for failure to make a return depend on?
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
What consists to be a ‘persistent failure’ ?
Failure to make a return on time for 3 consecutive returns
What is the payment date for a company that is not classified as large?
9 months and 1 day
When is a company deemed to be large?
When augmented profits exceed £1,500,000 over 12 months
Suggest when the limit for being a large company is adjusted and how it is adjusted
The £1,500,000 limit must be adjusted as follows
- Scaled down in POA < 12 months
- Divided by number of related 51% group companies
How are augmented profits calculated?
TTP X
Exempt ABGH distributions (X)
= Augmented profits X
What amount is taxed for corporation tax - TTP or Augmented profits?
TTP is taxed
But Augmented profits are used to determine whether large or small company
What are exempt AGBH distributions used for?
And give some examples of what these are
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
What are exempt AGBH distributions used for?
And give some examples of what these are
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
When are 2 companies related 51% group companies?
If either:
one of the companies is a 51% subsidiary of the other
or they are both 51% subsidiaries of the same company
Define a 51% subsidiary
It is one where more than 50% of the ordinary share capital is owned directly or indirectly
What companies and include and excluded when determining how many related 51% group companies there are?
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
Are the following included when determining how many related 51% group companies?
UK companies
YES
Are the following included when determining how many related 51% group companies?
Overseas companies
YES
Are the following included when determining how many related 51% group companies?
Dormant companies
NO
Are the following 51% group companies?
2 companies that are over 50% owned by an individual?
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
What are the payment instalment timings for companies classified as large?
Must pay corp tax in 4 instalments by 14th day of 7th 10th 13th 16th month of 12 month acc period
Whens a company treated as large?
- 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
What is the first instalment payment then CT is required to be paid in instalments for short accounting periods?
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
How many instalments are there for a short period?
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
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
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
What are the instalment payment dates for a company that is classified as very large?
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
When is a company deemed to be ‘very large’?
If its augmented profits exceed £20m
When does a very large company have to pay tax in instalments?
if it’s corporation liability is more than £10k
What does BPSS stand for?
Business Payment Support Service
What does the BPSS do?
Helps businesses that are having difficulty making payments of copr tax or income tax, NI contribution , amounts collected VIA PAYE and VAT
How does BPSS help people?
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
