Chapter 1 - Intro to CT

Question 1

Corp Tax

Answer 1

Charged on any corporate body: limited and unlimited companies and unincorporated associations (members’ clubs and political associations)

Question 2

Company

Answer 2

A co is any body which has been incorporated. Will be limited (ltd) or public (plc). Must be registered at Companies House

Question 3

Corp Tax

Answer 3

Charged on companies income and chargeable gains (profits). Co’s will have trading profit, non trade profit, property income and capital gains

Question 4

Residence

Answer 4

A co is UK res if it’s incorporated here. If incorporated abroad, they are still UK res if their place of central management and control is in the UK. UK res co’s are liable to tax on their worldwide income and gains

Question 5

Accounting Periods

Answer 5

CT is charged on each accounting period (AP/CAP). Usually the period for which a company makes up its accounts.

Question 6

Accounting Period Beginning

Answer 6

Begins at the earliest of:

• Commencement of trading
• Acquisition of a cource of income
• Immediately after the end of the previous accounting period.

Question 7

Accounting Period End

Answer 7

Ends at the earliest of:

• Cessation or commencement of trading
• The company becoming dormant (no source of income)
• End of the period of account
• 12 months after the account period began

Question 8

Accounting Period Note

Answer 8

An AP can never exceed 12 months

Question 9

Proforma CT Calculation

Answer 9

Trading income
Adjusted profit before CAs: x
Less: CAs (x)
Trade profit: x

Other income
Non-trade profit (loan relationships) x
UK property business x
Overseas property business x
Net chargeable gains x
Less: QCD (donations) (x)

Total taxable profits x

CT liability (TTP x tax rate) = x

Question 10

CT Computation

Answer 10

PBT x
Add back: disallowables x
Deduct: income not taxed as trading income (x)
Tax adjusted profit before CAs x
Deduct: CAs (x)
Trade profit x

Question 11

CT Comp Notes

Answer 11

In adding back disallowables, there are no adjustments for private expenditure by a company.

Question 12

CT Comp - Interest

Answer 12

Interest expenses incurred on a non-trading loan must be added back.
Interest payable on trading loans is allowed as a deduction.
Interest receivable will be treated as non-trade profits usually

Question 13

CT Comp - Dividends

Answer 13

Co’s do not pay tax (normally) on divs received, nor do they receive tax relief on divs paid

Question 14

CT Comp - Gains

Answer 14

Co’s pay CT on net chargeable gains. Indexation allowance is deducted in arriving at chargeable gains.

Question 15

Indexation

Answer 15

Calculation is (RPI at date of disposal - RPI at date of expenditure incurred)/RPI at date of expenditure incurred
(RD - RI)/RI
Round to 3 decimal places

Question 16

Further Provisions

Answer 16

51% groups of companies and companies under common control are treated as one businesses for AIA purposes ie only one AIA between them

Question 17

Common Control

Answer 17

Companies are controlled by the same person and the companies are related to one and another.
Related:
- their businesses are carried on from the same place; or
- more than 50% of the turnover of each of the co’s is derived from the same economic activities

Question 18

Note

Answer 18

Look at the proformas in the joggers/study manual