Chapter 10 - Corporation tax

Question 1

What does CT stand for?

Answer 1

Corporation Tax

Question 2

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

Answer 2

Yes

Question 3

What else needs to be know or SQE?

Answer 3

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

Question 4

On what do Companies pay corporation tax?

Answer 4

On their income profits and capital gains

Question 5

How are income profits calculated?

Answer 5

According to the income tax principles IT

Question 6

How are capital gains calculated?

Answer 6

According to the capital gains tax CGT principles

Question 7

What are the key charging statutes?

Answer 7

Corporation Tax At 2009
Corporation Tax Act 2010 (CTA)

Question 8

When are companies assessed for CT ?

Answer 8

During the corporation tax financial year

Question 9

What does CTFY stand for?

Answer 9

Corporation Tax Financial Year

Question 10

When is the CTFY?

Answer 10

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

Question 11

When did CTFY start?

Answer 11

In April 2021

Question 12

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

Answer 12

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

Question 13

What is the corporation’s tax rate?

Answer 13

19%

Question 14

How is the CT tax rate calculated?

Answer 14

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

Question 15

How to calculate CT in practice?

Answer 15

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

Question 16

How often is CT renewed?

Answer 16

Annually. Make sure to check the rate every year

Question 17

How many steps are to calculate CT?

Answer 17

5 steps

Question 18

What is step 1 of calculating CT?

Answer 18

Calculate income profits

Question 19

What is step two of calculating CT?

Answer 19

Calculate chargeable gains

Question 20

What is step 3 of calculating CT?

Answer 20

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

Question 21

What is step 4 for calculating CT?

Answer 21

Apply reliefs

Question 22

What is step 5 to calculate CT?

Answer 22

Calculate the tax

Question 23

How is income profits calculated?

Answer 23

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

Question 24

What are copyrights, patents and trademarks?

Answer 24

Assets

Question 25

How is the gains treated from asssets?

Answer 25

They are treated as income rather than capital gain

Question 26

How is expenditure treated on assets?

Answer 26

As a deductible expense

Question 27

How is CT treat individuals who control a company?

Answer 27

They are treated as connected as if they are owning it with other people

Question 28

From where are capital loses deducted?

Answer 28

From chargeable gains

Question 29

When can the indexation allowance be applied?

Answer 29

Once the basic gain has been calculated

Question 30

What is indexation allowance?

Answer 30

Adjustments to account for any increase in value that is a result of inflation

Question 31

What are the dates when indexation allowance was introduced?

Answer 31

31 March 1982

Question 32

When was the indexation allowance stopped?

Answer 32

31 December 2017

Question 33

What cost do apply to indexation allowance?

Answer 33

aquisition costs incidental costs of aquisition subsequent expenditure

Question 34

What is subsequent expenditure?

Answer 34

Is how much they spent on a property to double the size of the property

Question 35

What is incidental costs of disposal?

Answer 35

Cost paid to lawyers and accountants

Question 36

How to calculate the gain of the company after indexation?

Answer 36

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

Question 37

How to calculate the gain after indexation?

Answer 37

Use the numbers in the given text to multiply the acquisition costs and incidental costs, and do the same with subsequent expenditure

Question 38

What does RORRQBA stand for?

Answer 38

Roll over relief on replacement of qualifying business assets

Question 39

What is RORRQBA?

Answer 39

The mani relief for a company chargeable gains

Question 40

How does RORRQBA relief work?

Answer 40

Same as the CGT relief for individuals

Question 41

What is different between RORRQBA relief and CGT relief?

Answer 41

There are different rules for goodwill and intellectual property

Question 42

How are the receipts from goodwill and intelectual property assets treated in RORRQBA relief?

Answer 42

They are treated as income

Question 43

When are the roll-over reliefs available?

Answer 43

If these assets are sold and replaced with other goodwill or intellectual property

Question 44

How to calculate total profit?

Answer 44

Add together the income profit and chargeable gains

Question 45

Can the company decide which relief works best for them?

Answer 45

Yes

Question 46

Can the same loss claimed twice?

Answer 46

No

Question 47

What are the key reliefs for CT?

Answer 47

carry accros/carry back relief for trading loss terminal carry-back relief for trading losses carry forward relief for trading losses

Question 48

What are the reliefs for?

Answer 48

For trading losses

Question 49

How can a company deal with its profits?

Answer 49

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

Question 50

Can dividends be deducted?

Answer 50

No

Question 51

What can increase the company CT liability

Answer 51

Paying dividends

Question 52

What means a close Company?

Answer 52

Is controlled by 5 or fewer participators or any number of participators who are directors

Question 53

Who are the participators?

Answer 53

Shareholders and debenture holders

Question 54

Who are considered the participators's associates?

Answer 54

Spouse, parents, children,siblings, and business partners

Question 55

What happens if a close company makes a loan to a participator or a participator's associate?

Answer 55

The Company must pay a levy to HMRC equivalent to 32.5% of the loan

Question 56

What happens if the loan is repayed?

Answer 56

The levy will be refunded and there are no tax consequences

Question 57

What happens if the loan is written off?

Answer 57

The levy is refunded to the company, but in the hands of the recipient, it is taxed the same way as dividend

Question 58

What are the two exemptions that apply for the loan?

Answer 58

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

Question 59

how are group companies taxed? and why?

Answer 59

separately because they have a separate legal personality

Question 60

What can be applied to or income losses and expenses and chargeable gains to group companies?

Answer 60

Group relief

Question 61

What is a group Company?

Answer 61

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

Question 62

What does group relief for income profits and expenses allow?

Answer 62

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

Question 63

What does group relief for chargeable gain allow?

Answer 63

Allows group companies to transfer chargeable assets between them without a loss or gain occuring

Question 64

What else can be used for group relief for chargeable gains?

Answer 64

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

Question 65

What is CT?

Answer 65

CT is a self-assessment tax

Question 66

How far in advance does HMRC needs to be notified for tax?

Answer 66

Within 3 months of the start of the business period

Question 67

When is CT payable?

Answer 67

9 months and 1 day from the end of the accounting period

Question 68

When does the tax return should be done?

Answer 68

Must be made by 12 months from the end of the accounting period

Question 69

How do bug companies with a taxable profit of 1.5 million make instalments?

Answer 69

They pay CT in 4 instalments and the dates are set by HMRC

Question 70

How about companies that make £20m profit, how doe they pay CT and when?

Answer 70

There are different dates

Question 71

Does the general anti-avoidance rule GAAR applies to CT?

Answer 71

Yes

Question 72

What is HMRC requiring of the anti-avoidance rule?

Answer 72

May require adjustments to be made