Ch 18 & 19: Corporation Tax + additional aspects Flashcards
How do you calculate augmented profits?
TTP x
Dividends received x
(UK + foreign <50%)
= Augmented profits x (this decides how the tax is paid)
What is the augmented profit limit?
£1.5m
What is the default date to pay corp tax?
9 months 1 day after accounting period end
What is the criteria for SSE?
- At least 10% shares owned
- Owned for 12 months of the last 6 years
- Must be in a trading company
What happens if SSE applies?
Any gain on disposal is exempt and any loss is allowable
*SSE is automatic and can’t be dis-applied
When is the filing date for corp tax?
12 months after the accounting period
What revenue expenditure qualifies for the super SME deduction?
staff costs
materials
utilities
65% of payments to subcontractors
What is the super deduction % for SMEs?
An additional 130%
What is the % of repayment to a loss making SME?
14.5% of the surrenderable loss
What is the surrenderable loss equal to?
The lower of:
- the trading loss
- 230% of the R&D expenditure
When do the pension provisions apply?
Where:
- the amount of the employer pension contribution in the current period exceeds 210% of the previous
- the amount exceeding 110% of that paid previously is > £500k = the excess
What is a close company?
- A UK resident company
- controlled (>50%) by
- 5 or fewer shareholders (participants) or any number of directors
- participants = direct relatives and business partners
What are the payment dates for installments?
Pay in quarterly installments -
starting in mths 7 of the accounting period then mths 10,13,16 on the 14th day
What % repayment do loss making companies get for energy saving P&M?
12.67% tax credit
How are chargeable gains calculated for companies?
Same as individuals EXCEPT:
- companies get an indexation allowance
- they DO NOT receive an annual allowance
- they pay CT on their CGT
- rollover relief is available if the criteria is met and is applied to the gain after IA
How do you calculate the indexation allowance?
allowable cost x indexation factor (to Dec 2017)
* indexation can’t cause a loss
What is the R&D relief available for large companies?
They may claim a tax credit of 12% of costs
- this is taxed as taxable income, but also
reduces the CT liability
*can be reduced to a max of 0
Close companies - What is the impact on the COMPANY of loans to participators/shareholders?
- the company must pay penalty tax of 32.5% of the loan to HMRC
- the tax will be repaid when the loan is repaid/written off
- IGNORE loans of < £15,000 to full time directors/ employees owning < 5% of the company
Close companies - What is the impact on the PARTICIPATOR of loans to participators/shareholders?
Calculate ‘cheap loan’ taxable benefit
- for employee participator, tax as employment income (20/40/25%)
- for non-employee participator, tax as a dividend (1st £2k 0%, 7.5/32.5/38.1%)
Treat any amount written off as dividend income
What are the conditions for the DIVIDEND (distribution) treatment of a Share buy-back situation?
Individuals - automatic dividend treatment if capital treatment doesn’t apply
Corporate shareholders - only capital treatment can ever apply
What are the conditions for the CAPITAL treatment of a Share buy-back situation (6 things)?
Automatic if corporate shareholder, OR
- unquoted trading co
- repurchase for benefit of trade
- shareholder resident in the UK
- shares held >5yrs (3yrs if inherited)
- shareholders holding reduced by 25%
- shareholder left with < 30% of co
What treatment is applied to distributions pre-winding up of a company?
Dividend treatment = value returned to shareholder, companies tax exempt, individuals normal rates of DI tax applies
What treatment is applied to distributions post-winding up of a company?
Capital treatment i.e. sale of shares - company exempt if SSE applies, individual entrepreneurs relief if applicable
How do you calculate whether the shareholders holding reduced by 25%?
Before: shares held/original share capital
After: shares left/ reduced share capital of company
