CORP TAX

Question 1

CT loss planning

Answer 1

Allocate against capital losses first. If nothing else to go on, then do based on instalments (Augmented profits 1.5m/20m)

Question 2

Which CT losses do you have to use first?

Answer 2

BROUGHT FORWARD losses you have to use first

Question 3

CT loss planning: Is setting up a company preferable during early years of trade versus being a sole trader?

Answer 3

“Sole trader losses are more flexible (can be set against total income) so might be preferable if making losses early! (Subject to deductions allowance!)
‘Losses in a new limited company can only be set off against current period income and/or carried forward against future total profits. Losses therefore can remain unrelieved if the company does not make taxable profits in the near future at a time when the business could benefit from the cash flow effect of a tax refund. To determine whether the business has a tax loss, the potential additional deductions available to the business must be identified and the taxable profit adjusted.’”

Question 4

If everything else has been considered what is a tie-break for arranging losses?

Answer 4

Pay less tax/get refund SOONER

Question 5

Advantage of an EMI scheme (for individual)

Answer 5

No IT OR NIC on grant or exercise
Gain only taxable when shares sold

No minimum period of 3y before vesting (like other tax advantaged schemes)

BADR benefits

Question 6

When do EMI shares qualify for BADR?

Answer 6

FULL TIME EMPLOYEE
2y
(no 5% for EMI)”

Question 7

What to check for tax advantaged share schemes?

Answer 7

“Company might have other share options already
(Company size etc.)”

Question 8

What to not forget about the SEIS?

Answer 8

It has a LIMIT (Of 200k)

Question 9

What do all EIS schemes also require (terminology point)

Answer 9

Risk to capital

Question 10

How can an SSAS help buy something (e.g. a building)

Answer 10

“An SSAS could LEND money to the company

Or BUY (e.g. building) itself and RENT it to the company.
(And then I think can use the whole find value, not capped at 50% like it is for lending)

She SSAS could even raise a commercial MORTGAGE to buy a property”

Question 11

Benefits of using an SSAS to puy something (instead of the actual company)

Answer 11

“No CGT on subsequent sale
RENT received not taxable
Protected from creditors in case the company becomes INSOLVENT”

Question 12

Could a company set up 2 share option schemes at once?

Answer 12

“YES
But maybe better to set up ONE because COSTS to set up”

Question 13

Are partner salaries tax deducible?

Answer 13

NO! (Obviously)

Question 14

What are the 2 options for relief when incorporating a business?

Answer 14

“1. Transfer ALL T&A? Then INCORPORATION RELEIF
2. Not transferring all of it? GIFT RELEIF

WON’T GET BADR LATER? MAYBE USE BADR NOW!
Don’t forget you can disapply the share for share rules if, e.g., you would loose BADR (I.e. if your % shareholding dips under 5%!) So if there is a share for share exchange, check the shareholding before and after”

Question 15

Incorporation relief: Sell trade and assets then some of the assets sold later?

Answer 15

(Yes some of the incorporation relief crystallises but) THE GAIN YOU MAKE IS BASED ON THE MARKET VALUE AT TRANSFER

Question 16

Can you get incorporation relief on inventory?

Answer 16

“NO
You can’t get incorporation relief on stock because it is not a chargeable asset (selling stock always = profit)”

Question 17

Companies in group (after transfer) and transfer of shares?

Answer 17

“Share transfer is exempt due to SSE
(But any incorp relief or goodwill deferral still crystalises)”

Question 18

Incorporation relief: Crystallization of gain due to selling shares?

Answer 18

The proportion is based on the MARKET VALUES OF THE SHARES disposed of, and held before

Question 19

Transfer P&M to connected person?

Answer 19

“Can elect to transfer at TWDV so no balancing charge (succession election)
Doesn’t change tax itself but does change TRADING PROFITS so tax”

Question 20

How much is the balancing charge/allowance?

Answer 20

On the WHOLE PROCEEDS, not the gain

Question 21

Does something that had capital allowances still attract CGT when sold?

Answer 21

“YES!
(Though no tax if chattels or loss (likely))”

Question 22

Buying international plant terminology

Answer 22

‘Purchases of plant should have the same 100% relief in the UK as abroad under the ‘full expensing’ rules, provided the plant is all new and not special rate pool expenditure, which will only qualify for 50% first-year allowances unless covered by the group’s AIA’

Question 23

What to do if there is ever more than one company?

Answer 23

“CHECK FOR GROUPS, AND CONSORTIA (Just manually check every time)
And don’t forget the marginal rates have to be pro-rated”

Question 24

One company SELLS SOMETHING and another company BUYS SOIMETHING

Answer 24

“CHECK FOR GROUP ROLLOVER RELIEF
Within 3y”

Question 25

Doe a new foreign company in a group still affect rate and instalments?

Answer 25

YES (Still an associated company)

Question 26

One company sells a factory and another one buys a building that is partly for business use?

Answer 26

"You can only rollover the proportion that is business use Don’t forget it's within THREE YEARS"

Question 27

CT considerations when buying plant?

Answer 27

Could claim ROR but will get capital allowances

Question 28

Relief for goodwill?

Answer 28

Relief of 6.5% on straight line basis (IF qualifying intellectual property bought with it)

Question 29

NGNL transfer terminology

Answer 29

"‘deemed proceeds = allowable expenditure plus indexation allowance up to the date of the transfer (or to December 2017, if earlier)’ ‘The no gain/no loss treatment applies if both the transferor and transferee company are part of the same group at the time of transfer and are either both UK resident or the asset is chargeable both before and after the transfer.’"

Question 30

Does it matter if the rest of a 75% group (i.e. not your bit) is owned by a foreign person

Answer 30

NO! (It was a trick question aha)

Question 31

Consortium relief terminology

Answer 31

‘subject to the consortium members agreeing’

Question 32

Can you have a consortium of just 2 companies owning one?

Answer 32

"Yes! Can have a consortium of just 2 companies owning one, at e.g. 35% & 65%... (Both over 5% and own at least 75% (100% aha))"

Question 33

What to remember when relieving losses with consortium relief?

Answer 33

It is the OWNERSHIP PERCENTAGE of the loss that you can take

Question 34

If there is no loss group before a transfer, can you keep the losses with a transfer of T&A?

Answer 34

"NO If there is NO LOSS GROUP before, then you can’t keep the losses with a transfer of t&a"

Question 35

When can you transfer assets at NGNL in a CT group?

Answer 35

Only if COMMON OWNERSHIP

Question 36

When do you get the CT relief for amortization of goodwill?

Answer 36

‘Due to the lack of other intellectual property being purchased, relief is not available for amortisation of goodwill i.e., it is not deductible from trading profits for tax purposes. Relief will only be available on realisation of the goodwill.’

Question 37

Who must own a consortium company?

Answer 37

COMPANIES (I.e. not individuals)

Question 38

The subtlety with gains groups identification?

Answer 38

Gains groups still need a 75% holding at EACH STAGE (even though 50% indirect)

Question 39

Consortia: Member v consortium loss difference?

Answer 39

With a consortium loss, you have to make a notional c/y/ claim first

Question 40

For companies, which redundancy costs are allowable?

Answer 40

ALL OF THEM (The limits are for personal tax)

Question 41

Sale of inventory to connected company?

Answer 41

STILL a TRADING PROFIT (Revenue less cost aha)

Question 42

What is the lower 19% rate up to?

Answer 42

"50k PRO RATED IN GROUPS!! DON’T FORGET!"

Question 43

What year do the marginal rates start?

Answer 43

FROM THE 23/4 TAX YEAR (I.e. from April 2023)

Question 44

What to do with the marginal rates if the accounting year straddles the 23/4 year?

Answer 44

PRO RATE!

Question 45

Are dividends received from a foreign company usually taxable?

Answer 45

NO

Question 46

Terminology for consequences of a group/company becoming very large

Answer 46

Accelerates the payment dates by four months, due to the threshold of £20 million being hit

Question 47

CT treatment of raising finance by issuing debentures?

Answer 47

Counts as NTLR so you can deduct (assume already in TTP if before adjusting for) from TTP the incidental costs of raising the finance and the interest it has to pay the loan holders

Question 48

Reclaiming tax (e.g. on a beneficial loan) CT treatment?

Answer 48

"Doesn't go into TTP Goes underneath (Because basically the same thing as payable tax)"

Question 49

Something (e.g. beneficial loan interest) correctly recorded in the accounts?

Answer 49

Then DON’T DO ANYTHING!

Question 50

Writing off a beneficial loan? What tax does the company have to pay?

Answer 50

"NIC The ee will have to ‘pay’ class 1 NIC on the write off too, thought should be recovered by the C (if not, even lower profit in the C TTP) ‘This treatment takes priority over any employment income charge and therefore no income tax should have been collected via the payroll. Instead for income tax purposes the distribution should be taxed at the employee's highest marginal rate for dividends.’"

Question 51

Choice of business structure other matter terminology

Answer 51

‘Tax is only one consideration and there are other non-tax considerations to consider when deciding upon an appropriate business structure.’

Question 52

Difference between paying someone as salary versus dividend

Answer 52

"Dividends aren’t tax deductible at arriving at a company’s TTP (salaries are) But save NICs!"

Question 53

Is the AIA available for sole traders?

Answer 53

"YES Sole traders and businesses"

Question 54

Potential trick when working out the savings from the 86% R&D deduction?

Answer 54

The savings is just the additional deduction

Question 55

How are CT patent costs dealt with?

Answer 55

‘Patent costs will be treated as intangible fixed assets and amortised in the statement of profit or loss. Tax relief for intangible fixed assets follows the **accounting treatment**, so this amortisation will be an allowable deduction against her company’s taxable profits.’

Question 56

Easy thing to note when company paying a dividend?

Answer 56

Make sure has enough DISTRIBUTABLE RESERVES

Question 57

What 2 taxes is a company comparing when deciding whether to pay a salary or dividend?

Answer 57

"NIC and CORP TAX (@ marginal rate?) (Because the IT is deductible from gross salary which is exempt)"

Question 58

Certain net cash payout required?

Answer 58

"Need to ensure you work out the GROSS AMOUNTS (Careful, more maths needed)"

Question 59

Loss on sale of (shares in) company?

Answer 59

Reasonable trade loss available

Question 60

Incorporation releif: Sell building at undervalue?

Answer 60

Loss not available (proceeds v MV)

Question 61

What to watch out for with the S4S exemption?

Answer 61

"CHECK FOR SSE (10% and 6y) as this TAKES PRECEDNECE (still no chargeable gain at the time but cost changes) (Ignore indexation allowance here – it’s a trick aha)"

Question 62

Terminology when a new company incorporated (and part of a group)

Answer 62

"‘'Will start trading and must notify HMRC that it is within the charge to corporation tax.’ Assuming coterminous then can say all the dates, if running out of things to say!"

Question 63

Acquiring T&A terminology?

Answer 63

‘Will acquire assets in accordance with the purchase agreement. In the absence of an alternative attribution of the consideration, the total consideration is likely to be attributed based on market values with the balance attributable to purchased goodwill’

Question 64

What to always check if there is ACQUISITION OF PROPERTY

Answer 64

1. Check **SBAs**! (NEW building, constructed after Nov **2017**) 2. If includes eligible fixtures (e.g. aircon) then **CAPITAL ALLOWANCES** may be available ‘In addition, if the property includes eligible fixtures (e.g., air conditioning units) capital allowances may be available. These allowances will only be available if the company has previously claimed allowances in respect of the fixtures and a joint election is signed agreeing the value to be attributed to the fixtures. Relief will therefore be available at either 18% or 6% depending upon the nature of the assets.’"

Question 65

An easy point to note if there is ever a GAIN?

Answer 65

Can always note that the ‘proceeds’ (e.g. MV) will be the base cost when sold aha

Question 66

Acquiring plant and machinery terminology?

Answer 66

Acquiring P&M? **AIA** might be available. If not then **main pool** **Not new assets**? Full expensing/FYAs not available ‘The plant and machinery acquisitions may qualify for the annual investment allowance (100% capital allowances would be available in the accounting period ended 31 March 2025). Otherwise the additions would be added to the main pool. As these are not new assets, full expensing and special rate pool FYAs would not be available’"

Question 67

CT: Change in OWNERSHIP AND TRADE

Answer 67

MCINCOT anti avoidance rules

Question 68

What can you ALSO defer with S4S?

Answer 68

QUALIFYING COROPRATE BONDS

Question 69

How to do the S4S exemption?

Answer 69

"MAKE A TABLE Of individual costs and them proportions (i.e. split individually)"

Question 70

QIPS process

Answer 70

Pay ¼ in payment 3, balance in payment 2 (assuming know payment 1)

Question 71

Allowable DEDUCTION (e.g. raising finance expense)?

Answer 71

Then DEDUCT from profits

Question 72

Treating (e.g. loan write off) as dividend?

Answer 72

Dividends are NOT ALLOWABLE so ADD BACK (the loan) to TTP so it can get taxed

Question 73

How do you treat pension contributions as a company?

Answer 73

They are DEDUCTIBLE

Question 74

Company loss on disposal of shares?

Answer 74

Invest C loss on unquoted UK trad C shares? Potential share loss relief

Question 75

Company buying trade and assets overseas?

Answer 75

-> Permanent Establishment

Question 76

Can an overseas PE surrender losses to UK companies?

Answer 76

"Yes, unless separate trade: '‘If the permanent establishment did make losses, it is likely that they could only be used against its own future trading profits. This is because it would be a separate overseas trade as it could not be part of an existing trade of the purchasing C as it does not have an existing trade.’'"

Question 77

What not to forget when dealing with PEs?

Answer 77

BRANCH EXEMPTION

Question 78

What to remember with the branch exemption?

Answer 78

"Only starts in next AP (so not as useful to tax planning anyways) Losses, future tax rates…"

Question 79

CFC rules before 23/4?

Answer 79

The base CT rate increasing to 25% will affect the 75% test! ‘will have to be monitored’

Question 80

Transfer pricing: Who adjusts but what can be considered?

Answer 80

"Transfer pricing rules: The C that gets the tax advantage has to adjust But can consider justifiable management charge"

Question 81

Where is an overseas PE probably taxed?

Answer 81

Taxed in the UK. And probably taxed abroad too (DTR)

Question 82

DTR terminology

Answer 82

"“DTR **either** in the form of **treaty relief** or **unilateral DTR** should apply to prevent the company suffering tax twice. The **details** of the DT **treaty** should be **reviewed** since treaties will take **precedence** over UK tax law. Assuming DTR is available, either under the treaty or unilaterally, the **OECD standard model** which allows **foreign tax as a credit against a UK corporation tax liability** is likely to apply. DTR is allowed **up to the UK corporation tax attributable to the foreign branch profits**.”"

Question 83

Gain on overseas property? FX effects

Answer 83

"Two separate bits 1.Basic gain/loss just at different FX rates at the different times 2.A gain/loss when the proceeds remitted: PROCEEDS when received (same as above) less value of proceeds when remitted That’s on the whole proceeds (not gain) because that's what in their account!"

Question 84

Incorporating O/S PE: Requirement for taxable disposals terminology

Answer 84

Incorporation will result in BALANCING ADJUSTMENTS arising on BRANCH ASSETS transferred to the non-UK company

Question 85

UK doing all the work but contracts technically overseas?

Answer 85

"Likely ‘avoided PE’ so diverted profits tax (DPT) on notional PE profits (Takes precedence over CFC)"

Question 86

What can you say when there are fees or after sales services (even if just potential)?

Answer 86

Then potentially transfer pricing adjustments if not at arms-length prices

Question 87

Profits from overseas SUB (already taxed) sent to UK parent as dividends?

Answer 87

Basic treatment is NO UK TAX

Question 88

When are transfer pricing rules only relevant?

Answer 88

"When the (UK) company is LARGE (e.g. more than 250 ees) Profits would have to be restated in the UK"

Question 89

Easy secondary point when dealing with transfer pricing?

Answer 89

HMRC and foreign tax authorities could reach an ADVANCE PRICING AGREEMENT (to ensure arm’s length)

Question 90

Branch exemption made: What to still pay attention to?

Answer 90

"WOULD HAVE had UK profits though CFC? Those profits are still UK profits I.e. no point being a PE even if make the election"

Question 91

How does the value shifting adjustment work in the comp?

Answer 91

"INCREASES PROCEEDS (Even though technically the cost has been artificially reduced - note it does have the same effect)"

Question 92

If you sell shares then get the degrouping charge, where does the degrouping charge go?

Answer 92

Adds to the SALE PROCEEDS of the shares

Question 93

What else to look out for when there is a DGC?

Answer 93

Might be SDLT needed to be paid then too (3y period for SDLT)

Question 94

Foreign company anti avoidance rules order of priority

Answer 94

Check diverted profits tax first (UK PE or lack of substance) IF NOT, then CFC

Question 95

Easy points if company non-UK res?

Answer 95

"Don’t forget basic stuff: Wouldn’t usually pay UK tax Profits extracted to UK parent as dividend usually not taxed"

Question 96

What's the thing to bear in mind if non-res companies have to pay CT (e.g. have a UK PE)?

Answer 96

It has to be at 25%

Question 97

Do you get incorporation relief when setting up an overseas sub? What to watch out for?

Answer 97

"YES! (Watch for assets sold in 6y)"

Question 98

Is DTR gross or net of WHT?

Answer 98

DTR IS GROSS OF WHT

Question 99

Can you get relief on UFT?

Answer 99

ONLY ON PEs! (Can carry back 3y and forward on that PE)

Question 100

What's the difference with expense relief?

Answer 100

Get taxed in UK, but NET OF WHT (As opposed to gross with unilateral relief)

Question 101

Cessation of trade: Sale of trade and assets process

Answer 101

"1. Dispose all assets (CT to pay) 2. Work out cash available to the company SELLING (to distribute) Cash proceeds from sale, minus any CT paid (On a. profits b. disposal above) 3. Extract the profits a. EXCESS OF ORIGINAL COST paid for the shares as a DIVIDEND (pre liquidation) b. THE ORIGINAL COST as a CAPITAL DISTRIBUTION (post liquidation)"

Question 102

Other easy point to mention for sale of trade and assets

Answer 102

Distributable proceeds from sale will be reduced by SIUBTANTIAL LEGAL COSTS

Question 103

Restructure by sale of shares: 2 things to check

Answer 103

"Does SSE apply? If so then gain for seller exempt (preferable for C selling) Degrouping charge? (6y prev) Qualifying share disposal? DGC added to sale proceeds SSE? DGC ALSO EXEMPT"

Question 104

Restructure by sale of shares: Implication

Answer 104

Trading loss kept for buying company (unless change in trade)

Question 105

Total cost (e.g. for buyer through trade and assets)?

Answer 105

CASH paid plus TAX paid

Question 106

Acquiring trade and assets; What to watch out for?

Answer 106

OTHER TAXES E.g. buyer will have it pay SDLT on acquiring a (used) building! Degrouping charges

Question 107

Hive down process

Answer 107

"1. Transfer trade and assets to newco 2. Move losses to newco 3. Extract cash received on sale from oldco (income+capital) 4. Liquidate oldco"

Question 108

Transferring losses to newco in hivdeown terminology

Answer 108

‘The trading losses are able to pass to Newco as at the time of the asset transfer they are under the same 75% beneficial ownership. So provided there is **no major change in the nature or conduct of the trade** now within Newco the losses are available’

Question 109

Benefits of hivedown

Answer 109

"1. Losses transferred 2. Negative history (tax, commercial, contingent liabilities) not transferred 3. No degrouping charges"

Question 110

No degrouping charges in hivedown terminology

Answer 110

‘Degrouping charges **will arise** on the assets transferred to Newco. However, as they were held and used in the trade of **original company for 12 months** before the transfer, and will be used in the **trade of Newco** at the time of the share sale, the shares in Newco will be treated as having been *held* for 12 months and it will be treated as having *traded* for the previous 12 months. The share sale will be a sale of a **substantial shareholding** and so the gain on share sale and the degrouping charge will **also be exemp**t.’

Question 111

Hivedown: Do you get exemption from SDLT when acquiring relevant T&A (e.g. factory)?

Answer 111

"NO Still have to pay SDLT"