Chapter 2: Corporate Income tax and capital tax computations

Question 1

What is accounting profit?

Answer 1

Profit shown in the financial statements before taxation

Question 2

When an asset is disposed any profit or loss is treated as what?

Answer 2

Disallowable

Question 3

What is a balancing allowance?

Answer 3

Tax loss on disposal

Question 4

What is a balancing charge?

Answer 4

Tax profit on disposal

Question 5

If the proceeds are greater than the tax written down value what is it?

Answer 5

Balancing charge

Question 6

If the proceeds are less than the tax written down value what is it?

Answer 6

Balancing allowance

Question 7

Would a balancing charge be deducted or added to the accounting profit?

Answer 7

Added back

Question 8

Would a balancing allowance be deducted or added to the accounting profit?

Answer 8

Deducted

Question 9

When an entity makes a trading loss the assessment for that tax year will be what?

Answer 9

Nil

Question 10

How can you claim loss relief?

Answer 10

Carry losses forwards against future profits of the same trade
Carry losses backwards against previous periods
Offset losses against group company
Offset losses against capital gains in the same period

Question 11

What is terminal loss relief?

Answer 11

Enables the loss to be carried back up to three years

Question 12

What are the possible ways of relieving capital losses?

Answer 12

Carry forwards against future capital gains
Carry back against previous capital gains
Offset against trading income in the current period

Question 13

What is a group?

Answer 13

When one entity controls another entity, commonly through acquisition of a certain amount of ordinary shares.

Question 14

What is tax consolidation?

Answer 14

Enables a tax group to be recognised, allowing trading losses to be surrendered between different entities

Question 15

Can capital losses usually be surrendered between group entities?

Answer 15

No