Chapter 17: Corporation tax

Question 1

Accounting period

Answer 1

Period for which taxable total profits are calculated

Question 1

Residence - for companies

Answer 1

A company is a UK resident if it:
-incorporated in the UK or
-Has its centre of management and control in the UK e.g board meetings are held in the UK

Question 2

Period of account

Answer 2

A period for which a company prepares accounts.

Question 3

Accounting reference date

Answer 3

This is the date to which the company prepares accounts

Question 4

Accounting period start/end dates

Answer 4

Accounting period starts:
-on commencement of trade
-on acquisition of source of chargeable income (eg open bank account)
-immediately after last period

Accounting period ends:
-12 months after start
-At end of period of account
-Commencement of winding up
-Company ceases to be a UK resident

Question 5

Taxable total profits include

Answer 5

worldwide income (excluding dividends)
Net chargeable gains

Question 6

Pro forma CT computation

Answer 6

Adjusted trading profit (after capital allowances)

Non-trade loan relationships (net non-trading interest income)

Property business profits

Chargeable Gains

Total profits

Less: QCDs

Taxable total profits

Question 7

Capital allowances - disposal of 130% claim superdeduction

150%

Answer 7

Proceeds are brought in as a balancing charge, not deducted from the main pool

For expenditure which fell into the special rate pool a 50% first year allowance was available. When disposed after 31/03/2023,
50% of the sale proceeds are deducted from the special rate pool
50% of the proceeds are brought in as a balancing charge

Question 8

Disposal on asset where 50% FYA was not claimed on all expenditure

Answer 8

Use the proportion of the sale proceeds which relate to the 50% FYA

Question 9

Loan relationship rules

Answer 9

Accruals basis

A loan is a trade loan if a company borrows to:
Purchase P&M
Provide working capital
Purchase a property used for trading purchases such as an office, warehouse or factory

Non trade loan relationship
-net off debits and credits
-net credits are taxable investment income. Net debits are not examined

Question 10

Property business profits

Answer 10

Individuals - Cash basis
Company - Accruals

Interest on a loan to buy a property is dealt with under the loan relationship rules and so is NOT deductible against property profits

Question 11

Chargeable gains and losses

Answer 11

During the accounting period

Pay CT on net chargeable gains

Question 12

QCDs

Answer 12

deducted from company’s total profits - paid gross

disallowed as a trading exp

Question 13

Trading income
Capital allowances
Property profits
Net non-trade loan income
Miscellaneous income
Gains
QCDs

Answer 13

Trading income - Accrual basis, time apportion

Capital allowances - cash basis

Property profits - accruals

Net non trade loan relationships - accruals

Miscellaneous income - accrual

Gains - Accruals

QCDs - Accruals

Question 14

Augmented profits

Answer 14

Taxable total profits + dividend income from companies which are not associated

Question 15

Adjustments to upper and lower limits of corp tax

Answer 15

A short accounting period (lower and upper limits are pro-rated)

Associates (The lower and upper limits are shared if a company has associated companies)

Question 16

Accounting period straddling 1 April 2023

Answer 16

FY2022 single rate of corporation tax at 19%

Seperate calculations on a time apportioned basis

Time apportion the marginal relief calculation rather than each separate figure