Chapter 8 – Corporation Tax (1 or 2) Flashcards
CT is charged on a company’s taxable total profits
What can these profits include?
Could come from many sources, such as trading, disposals and investing. So, not just ‘income’.
When must a company pay their corporation tax bill?
The CT itself is due 9 months and 1 day after the end of the company’s accounting period.
Large companies (those with profits over £1.5m) pay their CT in quarterly instalments.
What is a close company?
A close company is one that is controlled by:
5 or fewer shareholders;
or
Its directors (regardless of number)
Just like an individual, a company can be resident or non-resident in the UK for tax purposes True or false
All companies that are resident in the UK are liable to UK CT.
Companies incorporated overseas are viewed as UK residents if their central management and control is exercised in the UK.
If their central management and control is not in the UK no UK CT is payable so being resident overseas allows companies to avoid paying CT on profits earned in the UK. This is what big companies like amazon, google do)
Rates of Corporation tax
The current main rate for CT is 25%, but the rate in 2022/23 was 19%. With this change came the introduction of a small profits rate of 19% and a marginal rate of 26.5%.
The small profits rate is for companies whose taxable profits are below £50,000, known as the lower limit.
The main rate applies for companies whose taxable profits are above £250,000, known as the upper limit.
The concept of marginal rate is to provide a gradual increase in Corporation Tax rate between the small profits rate and the main rate.
It is not immediately obvious how a rate of 26.5% will achieve this, so let’s look at an example of how this works.
LOOK AT EXAMPLE IN 8.1
What does CT stand for, and how is it determined for companies?
What types of losses can be offset against capital gains according to the CT regulations?
What is the main corporate tax (CT) rate in the UK?
What is the small profits rate for companies with profits up to £50,000?
At what rate is CT applied to companies with profits up to £250,000?
Which financial year does the CT rate apply to, and when is CT due after the accounting period?
Why have some major international companies, like Amazon and Google, been accused of avoiding CT in the UK?
How long after a company’s accounting period ends must CT be paid?
What is the difference between chargeable capital losses and trading losses in the context of CT?
How does being resident overseas affect a company’s CT liability in the UK?
What does CT stand for, and how is it determined for companies?
CT stands for Corporation Tax. It is paid by companies based on the income and gains that make up their total taxable profits.
What types of losses can be offset against capital gains according to the CT regulations?
Chargeable capital losses can be offset against chargeable capital gains, and trading losses can be offset against other income and chargeable gains.
What is the main corporate tax (CT) rate in the UK?
The main CT rate is 25%.
What is the small profits rate for companies with profits up to £50,000?
The small profits rate is 19% for companies with profits up to £50,000.
At what rate is CT applied to companies with profits up to £250,000?
A marginal rate of 26.5% applies to companies with profits up to £250,000.
Which financial year does the CT rate apply to, and when is CT due after the accounting period?
The CT rate applies to the financial year from April to March. CT is due 9 months and 1 day after the end of a company’s accounting period.
Why have some major international companies, like Amazon and Google, been accused of avoiding CT in the UK?
Some major companies with a large UK presence have been accused of avoiding CT by being resident overseas, which allows them to avoid paying full UK taxes on their profits.
How long after a company’s accounting period ends must CT be paid?
CT must be paid 9 months and 1 day after the end of a company’s accounting period.
What is the difference between chargeable capital losses and trading losses in the context of CT?
Chargeable capital losses can be offset against chargeable capital gains, whereas trading losses can be offset against other income and chargeable gains.
How does being resident overseas affect a company’s CT liability in the UK?
Being resident overseas may allow companies to avoid paying CT on profits earned in the UK
The main CT rate is 25%.
What is the small profits rate for companies with profits up to £50,000?
At what rate is CT applied to companies with profits up to £250,000?
The small profits rate is 19% for companies with profits up to £50,000.
A marginal rate of 26.5% applies to companies with profits up to £250,000.
25% for companies with profits over £250000
Corporation Tax
Paid by private limited companies and public limited companies
The rate is on your tax tables
The standard rate for the 2024 financial year at 25%
A small limited company with a turnover of £400,000 has a trading year which ends on the 30 September. According to HM Revenue and Customs, what is the latest date the company should pay any corporation tax?
31 December the same year
31 January the following year
1 July the following year
30 September the following year
1 July the following year
Corporation tax is due 9 months and 1 day after the end of the company’s accounting period.
A company can reduce their total taxable profits subject to corporation tax by all of these except
by offsetting expenses incurred wholly and exclusively for the purpose of the business
by making qualifying pension contributions
by making qualifying charity donations
by paying dividends
by paying dividends
The payment of a dividend has no tax consequences for the company, as these are paid out after corporation tax has been paid on the profits.
