Corporation Tax

Question 1

When is corporation tax due?

Answer 1

9 months and 1 day after the end of the accounting period

Return submitted 12 months after the end of the accounting period.

Question 2

How is corporation tax calculated?

Answer 2

Trade profit + Other income + Chargeable gains - Charitable donations x 19%

Companies DO not receive an annual exemption for capital gains

Question 3

What are trade profits? (Companie)

Answer 3

Income from trade MINUS salary and bonuses to directors MINUS dividends

(cannot make a deduction for paying dividends to members)

Question 4

How do we deal with trading losses?

Answer 4

1. Setting them against total profit in the current accounting period (before charitable exemptions)
2. Setting against total profits in the preceding 12 months (before charitable exemptions)
3. Carrying forward to a later accounting period (after charitable exemption)

Must do step 1 first

Question 5

What is a Close Company?

Answer 5

A company owned by up to 5 shareholders OR
Any number of shareholders who are also directors

Control = over 50% of voting shares or over 50% of share capital

Question 6

Loans to a director or employee of a close company with no or low interest

Answer 6

• If loan is over £10,000, it will be taxed as earnings of the recipient at the official rate of interest
• the company must pay 32.5% of the loan amount to HMRC
• payment will be refunded to the company when loan is paid back or forgiven
• if the loan is forgiven (written off), it is taxed as dividend income for the recipient at their tax rate