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SQE 1 > Chapter 10 - Corporation tax > Flashcards

Chapter 10 - Corporation tax Flashcards

1
Q

What does CT stand for?

A

Corporation Tax

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2
Q

Do you need to know how CT is calculated for SQE ?

A

Yes

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3
Q

What else needs to be know or SQE?

A

Tax consequnces
Rules applications
Advice on payment and collection
Liability under anti-avoidance provisions

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4
Q

On what do Companies pay corporation tax?

A

On their income profits and capital gains

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5
Q

How are income profits calculated?

A

According to the income tax principles IT

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6
Q

How are capital gains calculated?

A

According to the capital gains tax CGT principles

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7
Q

What are the key charging statutes?

A

Corporation Tax At 2009
Corporation Tax Act 2010 (CTA)

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8
Q

When are companies assessed for CT ?

A

During the corporation tax financial year

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9
Q

What does CTFY stand for?

A

Corporation Tax Financial Year

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10
Q

When is the CTFY?

A

From 1st April in one year to 31st March in the next

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11
Q

When did CTFY start?

A

In April 2021

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12
Q

What happens if the company accounting period differs from the CTFY?

A

The rate changes and the company’s profits need to be apportioned

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13
Q

What is the corporation’s tax rate?

A

19%

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14
Q

How is the CT tax rate calculated?

A

By applying the appropriate rate to the profits made in each of the company’s accounting period

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15
Q

How to calculate CT in practice?

A

You add up the income profits and capital gains. The result will be X by 19%. The result is how much CT the company will have to pay

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16
Q

How often is CT renewed?

A

Annually. Make sure to check the rate every year

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17
Q

How many steps are to calculate CT?

A

5 steps

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18
Q

What is step 1 of calculating CT?

A

Calculate income profits

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19
Q

What is step two of calculating CT?

A

Calculate chargeable gains

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20
Q

What is step 3 of calculating CT?

A

Add together the income profit and the chargeable gain to give total profits

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21
Q

What is step 4 for calculating CT?

A

Apply reliefs

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22
Q

What is step 5 to calculate CT?

A

Calculate the tax

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23
Q

How is income profits calculated?

A

According to the usual principles of chargeable receipts, less deductible expenses, and capital allowance

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24
Q

What are copyrights, patents and trademarks?

A

Assets

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25
How is the gains treated from asssets?
They are treated as income rather than capital gain
26
How is expenditure treated on assets?
As a deductible expense
27
How is CT treat individuals who control a company?
They are treated as connected as if they are owning it with other people
28
From where are capital loses deducted?
From chargeable gains
29
When can the indexation allowance be applied?
Once the basic gain has been calculated
30
What is indexation allowance?
Adjustments to account for any increase in value that is a result of inflation
31
What are the dates when indexation allowance was introduced?
31 March 1982
32
When was the indexation allowance stopped?
31 December 2017
33
What cost do apply to indexation allowance?
aquisition costs incidental costs of aquisition subsequent expenditure
34
What is subsequent expenditure?
Is how much they spent on a property to double the size of the property
35
What is incidental costs of disposal?
Cost paid to lawyers and accountants
36
How to calculate the gain of the company after indexation?
You take the sale price of the company and minus the aquisition costs and the incidental cost of aquisition min us the incidental costs of disposal minus the subsequent expenditure
37
How to calculate the gain after indexation?
Use the numbers in the given text to multiply the acquisition costs and incidental costs, and do the same with subsequent expenditure
38
What does RORRQBA stand for?
Roll over relief on replacement of qualifying business assets
39
What is RORRQBA?
The mani relief for a company chargeable gains
40
How does RORRQBA relief work?
Same as the CGT relief for individuals
41
What is different between RORRQBA relief and CGT relief?
There are different rules for goodwill and intellectual property
42
How are the receipts from goodwill and intelectual property assets treated in RORRQBA relief?
They are treated as income
43
When are the roll-over reliefs available?
If these assets are sold and replaced with other goodwill or intellectual property
44
How to calculate total profit?
Add together the income profit and chargeable gains
45
Can the company decide which relief works best for them?
Yes
46
Can the same loss claimed twice?
No
47
What are the key reliefs for CT?
carry accros/carry back relief for trading loss terminal carry-back relief for trading losses carry forward relief for trading losses
48
What are the reliefs for?
For trading losses
49
How can a company deal with its profits?
Retain them for business Pay them as dividends to its shareholders Use them to pay loan/debenture interest Pay director's fees Making loans to directors/shareholders
50
Can dividends be deducted?
No
51
What can increase the company CT liability
Paying dividends
52
What means a close Company?
Is controlled by 5 or fewer participators or any number of participators who are directors
53
Who are the participators?
Shareholders and debenture holders
54
Who are considered the participators's associates?
Spouse, parents, children,siblings, and business partners
55
What happens if a close company makes a loan to a participator or a participator's associate?
The Company must pay a levy to HMRC equivalent to 32.5% of the loan
56
What happens if the loan is repayed?
The levy will be refunded and there are no tax consequences
57
What happens if the loan is written off?
The levy is refunded to the company, but in the hands of the recipient, it is taxed the same way as dividend
58
What are the two exemptions that apply for the loan?
Where the company is in business for money lending and the loan is made as part of that business Where the loan together with any outstanding balance, does not exceed 15K The borrower works full time for the company Owns 5% or less of the company's shares. All 3 conditions must be satisfied
59
how are group companies taxed? and why?
separately because they have a separate legal personality
60
What can be applied to or income losses and expenses and chargeable gains to group companies?
Group relief
61
What is a group Company?
Is one that owns 75% or more of the other's ordinary shares or both companies own 75% or more of the ordinary shares in another company
62
What does group relief for income profits and expenses allow?
Allows certain income losses and expenses to be transferred from one group company to another to reduce the transferee's income profits, in an accounting year which overlaps between the two companies
63
What does group relief for chargeable gain allow?
Allows group companies to transfer chargeable assets between them without a loss or gain occuring
64
What else can be used for group relief for chargeable gains?
Roll-over relief can be used to roll over a gain made from selling property into the aquisition of assets by another company in the same group
65
What is CT?
CT is a self-assessment tax
66
How far in advance does HMRC needs to be notified for tax?
Within 3 months of the start of the business period
67
When is CT payable?
9 months and 1 day from the end of the accounting period
68
When does the tax return should be done?
Must be made by 12 months from the end of the accounting period
69
How do bug companies with a taxable profit of 1.5 million make instalments?
They pay CT in 4 instalments and the dates are set by HMRC
70
How about companies that make £20m profit, how doe they pay CT and when?
There are different dates
71
Does the general anti-avoidance rule GAAR applies to CT?
Yes
72
What is HMRC requiring of the anti-avoidance rule?
May require adjustments to be made
73

SQE 1 (12 decks)

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