Corp tax

Question 1

Goodwill bought or created before what date is a chargeable asset?

Answer 1

5 April 2002

Question 2

Period for rollover relief (chargeable assets and IFAs) on newly acquired assets?

Answer 2

1 year before to 3 years after disposal

Question 3

What is a redeemable preference share?

Answer 3

Similar to loan finance
The holder of shares is entitled to fixed return and can get money back by redeeming shares
Minimised exposure to risk so right to participate in company affairs / voting will be limited

Question 4

Differences between informal v formal liquidation

Answer 4

Informal: no liquidator fees; however must not exceed £25k cap on final distribution to access lower CGT rates otherwise income treatment applies to distribution.
Formal: requires insolvency practioner and fees; however distribution not capped and treated as CGT with access to BADR @ 10%.

Question 5

What is the exception to the rule that goodwill transferred on incorporation is NOT eligible for CT relief?

Answer 5

Where the goodwill was purchased goodwill, and the sole trader/partnership also transferred other qualifying IP to the company.

Question 6

Benefit of incorporation vs sole trade?

Answer 6

A sole trader is taxed on all profits whether or not they draw profits for personal use.
Company can leave profits in business to develop, and director/employee only pays tax on extraction (control over how and when pay tax).

Question 7

Effect of a balancing charge and how does it arise?

Answer 7

It increases the trading profits (added back)
Arises where disposal value of plant is more than TWDV)

Question 8

How do companies companies account for income tax and when is it payable?

Answer 8

Through CT61 - report payment and tax deduction,
Return and tax due 14 days after end of quarter of payment.
Subsequently seek repayment of tax from individual.

Question 9

What is the restriction on sub-contracted work for R&D purposes?

Answer 9

Only 65% of expenses relating to subcontractors are deductible.
Prior to claiming R&D relief

Question 10

What is a CT61; and what sort of payments are recorded?

Answer 10

Used by companies to report and pay income tax deducted from certain payments.
E.g. interest or royalties to individuals which are paid net of 20% tax

Question 11

When is the corporation tax charge (under s.455) repayable the company?

Answer 11

9m after the end of the AP in which the debt is repaid.

Question 12

Implications of s.455 loan withstanding at liquidaiton?

Answer 12

Cannot complete until tax repayment is made. Suggest that employee repays prior to end of AP, as repayment not made until 9m after