Corporation Tax Flashcards
When should companies file tax returns?
Corporation tax returns are always submitted 12 months after the end of the period of account.
cf - corporation tax liability must be paid 9 months and 1 day after the end of the period of account.
What happens when a close company offers a loan to a participant?
A close company which makes a loan to a participator (shareholder) must pay 32.5% of the loan over to HMRC 9 months and 1 day after the end of the accounting period (1 Jan 2020). This notional tax charge is refunded to the company 9 months and 1 day after the end of the accounting period in which the loan is repaid or waived (1 Jan 2022). If the loan is written off, this will be taxed on the participator as dividend income. The loan write-off to a participator is not an allowable expense for the company.
If a company’s profits do not exceed £1.5 million, what is the deadline for a
company to pay its corporation tax?
9 months + 1 day after accounting period
If a company’s profits exceed £1.5 million, when do they pay their taxes?
In quarterly instalments.
How do companies pay tax on capital gains?
They pay corporation tax (19%) on next chargeable gains.
Are dividends a deductible expense for companies?
No - Not deductible for purposes of calculating trade profits.
Shareholders pay dividend tax on dividends paid out.
What is a close company?
Either
5 or fewer participants (shareholders)
OR
Any number of directors who are also shareholders.
How is a loan to a participator in a close company at no interest or below official interest rate, taxed?
IF a close company makes a loan to a participator/shareholder who is also an employee/director and either charges no interest or charges interest below the official rate - a taxable benefit arises.
IF loan exceeds £10,000 benefit must be reported to HMRC and taxed as earnings of the participator.
**Taxed only on the benefit. EG only on the interest that should have paid.
What tax does a company pay for a loan to a participator?
Company pays a notional tax of 32.5% of the loan. Tax will be refunded to the company when the loan is repaid/written off.
IF written off, then recipient of the loan pays tax on the loan as if it’s a dividend!
