Chapter 18 Corporation tax Flashcards
For what period do companies do a corporation tax computation?
Generally speaking the corporation tax computation will cover the same period as the accounts (even if the accounts are less than 12 months).
The exception to this is if the company has an accounting period that is greater than 12 months - then there would have to be 2 separate tax computations (1 for the 1st 12m and 1 for the remaining period)
Are salaries/bonuses a tax deductible expense for companies?
Yes, but only if they are paid within 9 months of the end of the period.
When would interest payable be deducted as a trading expense?
When the loan is taken out for a trading purpose.
Examples:
- To buy plant and machinery for use in trade
- To buy a building for use in trade
- On an overdraft needed to keep the business going
When would interest RECEIVABLE be taxed as part of trade income?
Only if the the money was lent by a business whose trade is to lend money (i.e. a bank)
So - never in the exam
When would interest RECEIVABLE be taxed as part of NTLR?
In the exam all interest receivable will be taxed as NTLR. Examples:
Interest received on:
- debentures
- loanstock
- overpaid corporation tax
- loans to employees
When would interest PAYABLE be treated as an NTLR expense?
When the loan was taken out for a non-trading purpose.
Examples:
- to buy shares
- to buy an investment property
Are QCDs always deductible in arriving at TTP?
No, they are only deductible if they are actually paid (not accrued)
Are companies taxed on dividends received?
No. They are exempt and should be excluded from the CT computation
BUT remember to include them in ‘Augmented Profits’ when determining the size of the company.
What differences are there between capital allowances for sole traders and capital allowances for companies?
For companies:
- No private use adjustments (ever)
- Done for the period of the tax computation
- Extra FYA’s available (for expenditire in Enterprise Zones and on R&D)
- If the co is part of a group , the maximum AIA has to be shared between the group (can choose how)
What are Augmented Profits?
TTP plus dividends received from non-group companies
Augemented profits are not what is taxed - they are just used to determine what size the company is (in order to know what date/s they have to pay their CT)
What are the consequences for a company of having a short accounting period (<12 months)?
The tax computation would be done to match that period.
Maximum AIA would have to be pro-rated for the short period
WDA @18% would have to be pro-rated
It would affect the payment fates for tax
When does a ‘small’ company pay its tax?
9 months and 1 day after the year end (use Hardmans)
When does a ‘large’ company pay its tax?
Quarterly instalments on the 14th day of months 7, 10, 13 and 16
(counting from the start of the period)
Use Hardmans
When does a ‘ very large’ company pay its tax?
Quarterly instalments on the 14th day of months 3, 6, 9 and 12
(counting from the start of the period)
Use Hardmans
How do you know if a company is ‘small’ ‘large’ or ‘very large’
By comparing Augmented profits to the thresholds of £1.5m/£20m (use Hardmans).
The thresholds need to be adjusted for:
- accounting periods <12 months
- groups (divided by total co.s in group)
