BLP TAX Flashcards
Corporation tax rates for 22/23 and 23/24?
19%
TTP > 250,000 = 25%
TTP 50,000 or less = 19%
In between - taper effect
What are the qualifying periods for rollover relief?
Bought in 12 months before and 3 years after
What are the key principles of rollover relief?
Can rollover chargeable gain as long as replacement asset is more expensive than original.
If new asset is cheaper than original then rollover relief will be reduced (e.g. 200,000 sale (with chargeable gain of £80,000) to buy land £180,000 = 80,000 - (200,000 - 180,000) = 60,000).
If new asset is so much cheaper that difference between old asset and new asset is greater than the chargeable gain - no rollover relief can be claimed e.g. sale 200,000 (chargeable gain 80,000), new asset £110,000 = 200,000 - 110,000 = 90,000 (>80,000)).
How can you offset trading losses (4 ways).
Trading losses can be offset against income and chargeable gains:
- In current year
- In previous year (as long as carrying on same trade in both years)
- Future years (up to £5mn in each accounting period (Deductions Allowance) - anything over this is up to 50% of profits)
- Group - one company in a group which makes a loss can surrender a loss to a profitable company in the group to offset losses.
When should claims be made when offsetting trading losses in current year or previous year? (what if company has ceased trading?
Within 2 years after end of accounting period in which loss arose
If a company ceases trading = any trading loss in final 12 months can be set off against profits made in 3 years prior to start of 12 months
When calculating taxable income profits, what can be deducted for tax purposes? What is it deducted from?
Wholly and exclusively for purposes of trade (expenditure partially by way of gift)
Not prohibited by statute (e.g. cannot deduct business entertainment expenditure + provisions made for doubtful debts)
Income nature - rent, interest paid, wages and repairs
Gross trading receipts
What are the most common forms of company income?
Rental, trading, interest + dividend
What are capital allowances deductible from?
Income receipts (even though they relate to capital expenditure)
Income profits = income receipts - deductible expenditure, capital allowances, trading losses
What can capital losses be offset against? How much? When should a claim be made?
Current and future chargeable gains (not previous). Up to Deductions Allowance (£5mn) + then max 50% after.
Within 4 years from end of accounting period.
How should tax be paid for companies with TTP X or less or more than X
(what figure is X as well)
1,500,000 or less = 9 months + 1 day of end of accounting period (with tax return filed within 12 months)
More than 1,500,000: 4 instalments over relevant accounting period and next
What is reduced rated VAT figure?
5%
If a business pays more than X mn to HMRC in VAT they must …
£2.3mn, must make monthly payments on account and then pay the balance when submitting the quarterly return
What businesses can make an annual VAT return if they opt to?
Annual turnover not exceeding £1,350,000
Who can opt into the flat rate scheme?
taxable annual turnover not exceeding £150,000 + total annual turnover not exceeding 230,000
What are the 4 types of VAT supply? What are the characteristics of each?
Standard rated (doesn’t come under exceptions below) - 20%
Reduced rated (5%) - domestic heating + power, installation of mobility aids, smoking cessation products, children’s car seats
Zero rated - food, sewerage, books/newspapers, new houses, public transport, children’s clothing (able to recover input from HMRC)
Exempt - insurance, finance, education/health services, sale of land and buildings (not able to recover input from HMRC)
What are considered qualifying assets for rollover relief?
What cannot be claimed alongside relief?
Land and buildings
Goodwill
Fixed plant and machinery
Ships and hovercraft
Aircraft
Lloyd’s syndicate capacity
Annual exemption (£6,000) - if individual (companies don’t get an AE)
What are the tax rates for non-savings, savings and dividends?
Non-savings:
0-37,700 - 20%
37,700-125,140 - 40%
125,140+ - 45%
Savings:
0-37,700 - 20%
37,700-125,140 - 40%
125,140+ - 45%
Dividend:
0-37,700: 8.75%
37,700-125,140: 33.75
125,140+: 39.35
What is the definition of a close company? Control?
Company under control of:
Five or fewer participators (shareholder)
and any number of participators who are also directors
Control: More than 50% of issued share capital (or greater part of assets on winding up)
What are the exclusions for close company?
Shares are quoted
Wholly-owned subsidiary of a non close company
What is caught in regard to loans for close companies?
What is the tax effect?
What must tax on loan be paid?
All advances of credit are caught except:
-loan for goods and services normally supplied by company where duration of credit does not exceed 6 months
-loan in ordinary course of business - money lending
-Loan (together with other outstanding loans to borrower) does not exceed £15,000 and borrower works full time for company and does not have a ‘material interest’ (more than 5% shares)
If the loan is written off or waived, the company may claim a refund and the participator is deemed to receive a dividend equal to amount of loan written off or waived
tax on loan must be paid within 9 months and 1 day
What are the conditions for business asset disposal relief? Effect of relief?
(1) disposes all or part of business:
-Trading business
-Owned for 2 years
(2) Disposes of assets in business which used to trade:
-Owned for 2 years before it ceased to trade (and the assets must have been used in business when it ceased to trade)
-Assets disposed within 3 years of ceasing to trade
(3) Shares
-Owned for 2 years
-must be an officer or employee of company (and own at least 5% of ordinary voting shares + entitled to 5% net assets on winding up)
(4) Shares in company that used to trade
-Owned 2 years before ceased to trade
-must be an officer or employee of company (and own at least 5% of ordinary voting shares + entitled to 5% net assets on winding up)
-shares disposed within 3 yrs of ceasing to trade
Reduces higher rate of CGT from 20% to 10%
Apart from BADR, what are the other two reliefs?
BADR - up to Lifetime allowance - up to £1mn at reduced rate 10%
Investors relief - unlisted trading company and held for 3 years: reduced rate of 10% up to lifetime limit of £10mn (and the person is not an officer or employee of the company (or connected company)!!)
What is hold-over relief?
What does it apply to?
Where individual gives away business asset, the CGT liability is postponed until the donee eventually disposes of the asset
Goodwill, business assets, unlisted shares in trading company
What does BPR on death estate apply to?
Held for 2 years
100% relief - unquoted, or business or interest in a business (e.g. sole trader or partnership)
50% relief - quoted, land buildings machinery or plant, partnership where transferor was a partner
