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BPT > CORP TAX > Flashcards

CORP TAX Flashcards

1
Q

CT loss planning

A

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

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2
Q

Which CT losses do you have to use first?

A

BROUGHT FORWARD losses you have to use first

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3
Q

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

A

“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.’”

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4
Q

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

A

Pay less tax/get refund SOONER

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5
Q

Advantage of an EMI scheme (for individual)

A

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

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6
Q

When do EMI shares qualify for BADR?

A

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

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7
Q

What to check for tax advantaged share schemes?

A

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

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8
Q

What to not forget about the SEIS?

A

It has a LIMIT (Of 200k)

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9
Q

What do all EIS schemes also require (terminology point)

A

Risk to capital

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10
Q

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

A

“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”

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11
Q

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

A

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

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12
Q

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

A

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

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13
Q

Are partner salaries tax deducible?

A

NO! (Obviously)

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14
Q

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

A

“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”

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15
Q

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

A

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

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16
Q

Can you get incorporation relief on inventory?

A

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

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17
Q

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

A

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

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18
Q

Incorporation relief: Crystallization of gain due to selling shares?

A

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

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19
Q

Transfer P&M to connected person?

A

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

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20
Q

How much is the balancing charge/allowance?

A

On the WHOLE PROCEEDS, not the gain

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21
Q

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

A

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

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22
Q

Buying international plant terminology

A

‘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’

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23
Q

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

A

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

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24
Q

One company SELLS SOMETHING and another company BUYS SOIMETHING

A

“CHECK FOR GROUP ROLLOVER RELIEF
Within 3y”

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25
Q

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

A

YES (Still an associated company)

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26
Q

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

A

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

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27
Q

CT considerations when buying plant?

A

Could claim ROR but will get capital allowances

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28
Q

Relief for goodwill?

A

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

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29
Q

NGNL transfer terminology

A

“‘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.’”

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30
Q

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

A

NO! (It was a trick question aha)

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31
Q

Consortium relief terminology

A

‘subject to the consortium members agreeing’

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32
Q

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

A

“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))”

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33
Q

What to remember when relieving losses with consortium relief?

A

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

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34
Q

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

A

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

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35
Q

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

A

Only if COMMON OWNERSHIP

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36
Q

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

A

‘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.’

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37
Q

Who must own a consortium company?

A

COMPANIES (I.e. not individuals)

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38
Q

The subtlety with gains groups identification?

A

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

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39
Q

Consortia: Member v consortium loss difference?

A

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

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40
Q

For companies, which redundancy costs are allowable?

A

ALL OF THEM (The limits are for personal tax)

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41
Q

Sale of inventory to connected company?

A

STILL a TRADING PROFIT (Revenue less cost aha)

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42
Q

What is the lower 19% rate up to?

A

“50k
PRO RATED IN GROUPS!! DON’T FORGET!”

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43
Q

What year do the marginal rates start?

A

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

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44
Q

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

A

PRO RATE!

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45
Q

Are dividends received from a foreign company usually taxable?

A

NO

46
Q

Terminology for consequences of a group/company becoming very large

A

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

47
Q

CT treatment of raising finance by issuing debentures?

A

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

48
Q

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

A

“Doesn’t go into TTP
Goes underneath (Because basically the same thing as payable tax)”

49
Q

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

A

Then DON’T DO ANYTHING!

50
Q

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

A

“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.’”

51
Q

Choice of business structure other matter terminology

A

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

52
Q

Difference between paying someone as salary versus dividend

A

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

53
Q

Is the AIA available for sole traders?

A

“YES
Sole traders and businesses”

54
Q

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

A

The savings is just the additional deduction

55
Q

How are CT patent costs dealt with?

A

‘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.’

56
Q

Easy thing to note when company paying a dividend?

A

Make sure has enough DISTRIBUTABLE RESERVES

57
Q

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

A

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

58
Q

Certain net cash payout required?

A

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

59
Q

Loss on sale of (shares in) company?

A

Reasonable trade loss available

60
Q

Incorporation releif: Sell building at undervalue?

A

Loss not available (proceeds v MV)

61
Q

What to watch out for with the S4S exemption?

A

“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)”

62
Q

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

A

“‘’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!”

63
Q

Acquiring T&A terminology?

A

‘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’

64
Q

What to always check if there is ACQUISITION OF PROPERTY

A
  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.’”
65
Q

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

A

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

66
Q

Acquiring plant and machinery terminology?

A

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’”

67
Q

CT: Change in OWNERSHIP AND TRADE

A

MCINCOT anti avoidance rules

68
Q

What can you ALSO defer with S4S?

A

QUALIFYING COROPRATE BONDS

69
Q

How to do the S4S exemption?

A

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

70
Q

QIPS process

A

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

71
Q

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

A

Then DEDUCT from profits

72
Q

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

A

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

73
Q

How do you treat pension contributions as a company?

A

They are DEDUCTIBLE

74
Q

Company loss on disposal of shares?

A

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

75
Q

Company buying trade and assets overseas?

A

-> Permanent Establishment

76
Q

Can an overseas PE surrender losses to UK companies?

A

“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.’’”

77
Q

What not to forget when dealing with PEs?

A

BRANCH EXEMPTION

78
Q

What to remember with the branch exemption?

A

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

79
Q

CFC rules before 23/4?

A

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

80
Q

Transfer pricing: Who adjusts but what can be considered?

A

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

81
Q

Where is an overseas PE probably taxed?

A

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

82
Q

DTR terminology

A

““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.””

83
Q

Gain on overseas property? FX effects

A

“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!”

84
Q

Incorporating O/S PE: Requirement for taxable disposals terminology

A

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

85
Q

UK doing all the work but contracts technically overseas?

A

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

86
Q

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

A

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

87
Q

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

A

Basic treatment is NO UK TAX

88
Q

When are transfer pricing rules only relevant?

A

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

89
Q

Easy secondary point when dealing with transfer pricing?

A

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

90
Q

Branch exemption made: What to still pay attention to?

A

“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”

91
Q

How does the value shifting adjustment work in the comp?

A

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

92
Q

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

A

Adds to the SALE PROCEEDS of the shares

93
Q

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

A

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

94
Q

Foreign company anti avoidance rules order of priority

A

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

95
Q

Easy points if company non-UK res?

A

“Don’t forget basic stuff:

Wouldn’t usually pay UK tax
Profits extracted to UK parent as dividend usually not taxed”

96
Q

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

A

It has to be at 25%

97
Q

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

A

“YES!
(Watch for assets sold in 6y)”

98
Q

Is DTR gross or net of WHT?

A

DTR IS GROSS OF WHT

99
Q

Can you get relief on UFT?

A

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

100
Q

What’s the difference with expense relief?

A

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

101
Q

Cessation of trade: Sale of trade and assets process

A

“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)”

102
Q

Other easy point to mention for sale of trade and assets

A

Distributable proceeds from sale will be reduced by SIUBTANTIAL LEGAL COSTS

103
Q

Restructure by sale of shares: 2 things to check

A

“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”

104
Q

Restructure by sale of shares: Implication

A

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

105
Q

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

A

CASH paid plus TAX paid

106
Q

Acquiring trade and assets; What to watch out for?

A

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

Degrouping charges

107
Q

Hive down process

A

“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”

108
Q

Transferring losses to newco in hivdeown terminology

A

‘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’

109
Q

Benefits of hivedown

A

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

110
Q

No degrouping charges in hivedown terminology

A

‘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 exempt.’

111
Q

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

A

“NO
Still have to pay SDLT”

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