Atx Flashcards
AP definition & how long
Accounting period = period for which a charge to CT is made
Time = usually 12 months but can be less (cant be more)
Period of account more than 12 months
Then AP must be split into 1st 12 months, followed by balance
When does an AP Start?
A co. Starts to trade OR
Profits of a co. Become liable to CT
Or when previous AP ends
When does a co. Notify HMRC of its establishment?
Within 3 months of its first AP
When does a co. Notify HMRC of its chargeability to tax?
Within 12 months from end of its period of account
What is a co. Period of account?
Time for which it prepares it’s FS
When does an AP end ?
Earliest of 12 months after start date / end of period of account / when the co. Ceases to trade or goes under admin
CT Computation
TTP x 19%
FY runs from
1 april to 31 march
CT rate
19%
AP straddling 31 march
CT must be calculated for each year separately
Due date of CT (non large co.)
9 months and 1 day after end of AP
Due date of CT (large co.)
Quarterly instalment payments
How is CT paid ?
Electronically
Definition of a large Co.
Aug Profits are more than 1.5 milli but less than 20 milli
What are augmented profits
TTP +dividend from non group companies
Dividends received impact on CT
They are exempt from CT but impact if a comoany is determined large or not
1.5 milli threshold to determine whether a co. Is large or not
Short AP - time apportion
Related 51% group co. - Divide by no. Of co.
Related 51% group co. Includes and excludes
Includes - overseas resident companies
Excludes - dormant companies & non trading holding companies
51% group companies during APs
Companies joining during AP are included from the following AP
Companies leaving during AP are included until the AP ends
Consequences of 51% group companies
1.5milli threshold is divided by total number of 51% group co.
When are quarterly instalments for large companies paid
4 instalments by 14 days of months 7, 10, 13 and 16 following start of the AP
Exception to instalments for large Co.
Co. Whose liabilities for the year is below 10k
They became large during the AP and werent large the previous AP
Short AP’s for large companies - instalments
1st instalment due 14th day of 7th month
Subsequent at 3 monthly intervals
For short periods AP, all the remainder is paid on date of last instalment
Amount of instalments for short AP
(Estimated CT liability for AP) x (n/length of AP)
N = 3 months or however many months fit into the AP
Late payment interest dates
Runs from normal due date on any tax paid late
To date of payment made
Group payment arrangements are available by
One group company paying quarterly instalments of CT on behalf of the group
(But each co. Must prepare a separate corporation tax computation)
Impact of taxation on cash flow of a business
Co. Need to take account of their tax payments when considering their cash flow forecasts for the year
Self assessment for corp taxpayers
Calc their own CT liability for AP
Submit self assessment of CT within 12 months after end of P of A
Pay any CT withing 9 months + 1 day or quarterly
Self assessment tax return form must be submitted by
THE LATER OF
12 months after the end of AP
3 months after the issue of the notice to file a return
Self assessment tax return MUST
Contain all info required to calculate the companys TTP
Include self assessment of amount of CT payable for that AP
Be submitted online
Determination assessments reason
HMRC can issue a determination assessment to prevent co. Delaying submission of a return
What is a determination assessment
Its treated as a self assessment by the company and theres no right of appeal against the determination assessment
When can a determination assessment be filed ?
At any time withing three years of the filing date
What records should a company keep ?
All receipts and expenses
All goods purchased and sold
All supporting docs related to transactions
How long should records be retained until ?
Until later of
6 yrs after end of AP
Date on which compliance check is complete
Date on which its impossible to start a compliance check
If records arent kept then
A penalty may be charged
Maximum penalty is only likely to be imposted in the most serious cases
Amendments to the return
A company can amend the return within 12 months of filing
Errors to the return
HMRC may correct any obvious errors or mistakes within 9 months of the return being filed
Errors to the return at a later date
The company can make a claim for overpayment relief to recover any overpayments
Claim for overpayment relief
Claim can be made in respect of errors made and mistakes from misunderstanding laws
Claim must be made within 4 yrs of AP it relates to
Compliance checks into returns can be made as a result of
Suspicion income is undeclared
Suspicion deductions are incorrectly claimed
Being part of random selection proces
Compliance check written notice
If return filed on time - notice must be issued within 12 months
If return filed late, on 31/01, 30/04, 31/07 or 31/10 following date of delivery
Compliance check procedure
HMRC can demand docs, accounts, other written particulars and full answers to specific questions
Compliance check info timeframe
Company has 30 days to comply with the request and 30 days to appeal in writing
Discovery assessments (an additional assessment)
Discover assessment can be raised at a later date and its restricted unless loss of CT was brought about carelessly or deliberately by the company
Time limit for discover assessment
Basic error - 4yrs
Careless error - 6yrs
Deliberate error - 20yrs
Penalties for late filing of CT
Within 3 months - fixed £100
More than 3 months - fixed £200
Additional penalties
6-12 months after filing - additonal 10%
More than 12 months - additional 20%
Failure to keep records - up to £3000 per AP
Pro forma computation
Name of Co.
Corporation tax computation, for AP ended
Trading profit Interest income Property income Misc income Net chargeable gains
Total profit
Less QCD
TTP
Trading Profits differences
Any interest receivable/ payable is included in TP
Dividends payables arent an allowable Trading expense
Enhanced deductions are available for R&D if conditions are satisfied
AIA time & max
The max AIA is £1million for a 12month accounting period
AIA and related companies
A group of Co. Are related then only one AIA is entitled but the group can choose how to split it
AIA allocation
Doesnt have to be divided equally between them, all can be given to one group
Companies owned by the same individuals are related if
Theyre engaged in same activities
Or on same premises
Unrelated companies owned by the same individual
Are each entitled to the full AIA
SBAs allowance
Eligible for an annual 3% straight line
SBA qualifying cost
New Buildings including offices, retail and wholesale premises, factories, warehouse, hotels & carehomes
SBA qualifying use
Includes use in the trade or in property letting (time apportioned if its use is part way through a period)
SBA (structure and building allowance)
Non qualifying costs
Include land, legal fees, stamp duty, land tax or R & M
Pooling system for SBA
No pooling system, kept separate from AIA
SBA Asset Sold
Buyer takes over the remaining useful life and the 3% is apportioned
Expenses related to borrowing money
Interest paid on overdrafts, bank loans
Other costs such as arrangement fees
Write off of impaired debt from lending money
Income received from lending money
Interest income including interest from bank deposits, loads and g.ment stocks)
Income from borrowing - trade purposes
Only applicable to banks that make money on loans
Expenses from loans for trade purposes
Interest payables/expense related to
Loan taken out for P&M, to purchase property, loan or overdraft too fund daily operations
Income from loan, non trade purposes
Interest receivable on bank accounts, interest receivable on investments and interest from HMRC
Expense from loan, non trade purposes
Interest payable / expense related to a loan to purchase a property
A loan to acquire shares of another company
Interest payable to HMRC
Tax treatment - trade purpose
Amounts that are for trade purposes are included in trading profits part of TTP
Tax treatment - non trade purposes
Amounts for non trade are included in the calculation of TTP
Overseas income
Any overseas income can be included inTTP
Dividens from overseas are exempt from CT
Overseas profits are included
Property income
A co. Is always taxed on an accrual basis
Miscellaneous income
Its uncommon, but royalties can be received, if for trade purposes included in trade profits.
Non trade purposes e.g. held as investments
QCD
Small local donation allowed as a trade expense
Other donations are allowable deduction from total profits
Long period of account
A company requires permission from registrar of companies if it wishes to extend its period of account beyond 12 months (cant be longer than 18 months)
Period of account for CT
Must be prepared with two CT computations and two separate payment dates
Indexation allowance availability
Available for assets acquired prior to December 2017
Rules for IA
Cost of asset x indexation factor (from month of purchase to month of disposal)
Rollover relief
Can be claimed on gains of disposals of QBAs where proceeds are reinvested in new QBAs eithin time period (12 months before disposal to 3 yrs after disposal)
Rollover relief rules
Goodwill doesnt qualify for rollover relief and is applied to the gain after deducting IA
If all net proceeds from sale are reinvested then the whole gain can be deferred.
If only part are reinvested then the gain left must be lower of gain / proceeds not reinvested
Capital losses
All capital losses must be netted off against chargeable gains arising in the same AP.
Any net gain is chargeable as TTP
Net capital losses are carried forward
Chargeable gain calculations
Calculate chargeable gainsm / capital loss arising on disposal of an asset separately
Calculate total net chargeable gains (less capital losses)
Deduct capital losses brought forward = total net chargeable gains
Include in TTP computation
Annual exempt amount (AEA)
None
Disposal of shares should be matched as follows
Acquisitions on same day as disposal
Acquisitons during nine days before disposals
Acquisitions in share pool
Share pool for companies keeps records of
Number of shares acquired and sold
Cost of shares
Indexed cost of shares
Substantial shareholding exemption
On disposal by a company of shares out of a substantial shareholding in another company
Gains = exempt
Losses = not allowable
A substantial shareholding is defined as a holding
Of > 10%
Owned for atleast 12 months in 6 yrs before disposal
Shares owned for less than 12 months out of the previous 6yrs
Ownership can be satisifed if
Shares being disposed of are in a new company
New company received assets from another 75% group company
Assets transferred were held and used in the trade of another group company for 12 months before the transfer
Diff between individuals and companies
Gains
I - Capital gains tax, separate from income
C - Include in TTP and tax with income
Diff between individuals and companies
AEA
I - yes
C - no
Diff between individuals and companies
Indexation allowance
I - No
C-yes
Diff between individuals and companies
Matching rules for shares
I - shares purchased same days, following 30 days, share pool
C - shares purchased same days, previous 9 days, share pool
Scheme for SME’s
Enhanced relief is available for qualifying R&D
Can deduct an additional 130% of qualifying expenditure for tax purposes.
If deduction creates a loss it may be surrended in return for cash from HMRC of 14.5% of surrendered amount.
Qualifying R&D expensiture must be revenue expenditure that is relevant to a companys trade
Staffing costs for staff working in R&D Agency staff for R&D Materials, water fuel and power for R&D Software directly used in R&D Payments to subcontracters
