Corporate Tax

Question 1

What are the Corporation Tax Rules?

Answer 1

Financial Year for Companies = 01/04 to 31/03 next yr.
CT charged on income and gains of a company (Taxable Total Profits).

Question 2

What are the Basic Rules for the Accounting period?

Answer 2

Starts when trading begins/acquire source of chargeable income.
Only 12 months, anything more split into 2 periods.

Question 3

What are the Rules for the Taxable Total Profit Computation?

Answer 3

• Don’t adjust for private usage
• Different rules for capital allowance
• Dividends received not chargeable, dividends paid not deductible.
• Chargeable gains pooled with incomes.

Question 4

What are the Components of Taxable Total Profits?

Answer 4

• Adjusted Trading Income
• Non-Trading Loan Relationship
• Property Income
• Chargeable Gain
• Qualifying Donation

Question 5

What is the Formula and Rules for Adjusted Trading Income?

Answer 5

= Tax Adjusted Profit - Capital Allowances.
* Expense for private use allowable
* Dividend payment not deductible
* Dividend receipt not taxable
* Capital allowance no private adjustment

Question 6

How do Capital Allowances Work for Companies?

Answer 6

Accounted for 12 month period. Longer, apportioned WDA/AIA.
FYA of 100% also available for new/unused P&M in main pool (not cars) from 01/04/2023 - 31/03/2026.
Use either FYA or AIA.

Question 7

What is the Difference Between Allowable & Disallowable?

Answer 7

Allowable expenses are not taxable and reduce amount of tax to pay on profits. Disallowable expenses are taxable and cannot be written off at tax time. Added back.

Question 8

What is the Relationships like TTP Non-Trade Loans?

Answer 8

Interest receipts/expenses incurred from trading loan included in trading income (item 1 proforma).

Interest receipts/expenses incurred from non-trading loan treated as non-trading loan relationship (item 2 NTLR).

Question 9

How does TTP Works with Property Income?

Answer 9

Rental income from UK properties taxed as property income.
Rent dealt with on accruals basis (date of receipt irrelevant).
Only rents relating to accounting period is considered for tax purposes.

Question 10

How does TTP Works with Chargeable Gains?

Answer 10

Chargeable gains included in computation of TTP (+ income).

Question 11

What is the Difference Between Gains Calculations for Companies & Individuals?

Answer 11

• Company pays CT on income & gains
• No annual exemption for companies
• Exempt assets from companies include goodwill

Question 12

How does TTP Works with Charitable Donations?

Answer 12

Deducted from total income/gain when paid.

Question 13

Corporation Tax =

Answer 13

Taxable Total Profit x 19%/25%/(25% - Marginal Relief)

Question 14

How are the Rates Determined for Corporation Tax?

Answer 14

Profits < £50,000 = 19%
Profits > £250,000 = 25%
£50,000 < Profits < £250,000, marginal relief deducted.

Question 15

What is the Marginal Relief Formula?
MR =

Answer 15

(U - A) x (N/A) x SF
U = £250,000
A = Augmented Profits
N = TTP
SF = Standard Fraction for MR.

Question 16

When Should CT on Augmented Profits be Paid?

Answer 16

Augmented profits < £1.5m, CT due 9 months & 1 day after end of accounting period.
Augmented profits >£1.5m, pay quarterly instalments.

Question 17

What Dividends are Included in the Augmented Profit?

Answer 17

Dividends from UK or overseas companies that are not more than 50% owned.