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Professional Level: TC > Corporation Tax > Flashcards

Corporation Tax Flashcards

1
Q

What is different about chargeable gains for companies than for individuals?

A

No CGT, corporation tax is charged on gains

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2
Q

What is different about dividend income for companies than for individuals?

A

Companies do not get taxed on dividend recieved

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3
Q

What can differ between charitable donations n the accounts for a company and Qualifying Charitable Donations that are deducted from total profits?

A

Donations in the accounts may be based on the accrued amount for the year, but QCD is only the cash basis

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4
Q

What is the additional first year allowance avaliable for companies?

What are its crieria?

How does it interact with AIA?

How does it impact disposal?

A

Expenditure incurred between 1 Apr 21 - 31 March 23
Superdeduction
* 130% for main pool assets
* 50% for special rate pool assets

Criteria
* Not avaliable on second hand assets
* Not avaliable on cars
* Not avaliable in cessation

AIA
* Cannot claim FYA then AIA on balance
* But can claim AIA then FYA on balance

Disposal
* Balancing charge will arise - 130%/50% * disposal value, limited to original cost
* This doesn’t go in main pool or special rate pool, but is a negative figure in allowances collumn

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5
Q

What do you need to remember about claiming 6% WDA when there have been FYA?

A

WDA & FYA cannot be claimed in the same period. WDA not based on any balance left over from FYA

e.g. if there is a b/f balance in special rate pool and only additions that qualify for FYA - then WDA will only be based on b/f balance

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6
Q

When does a chargeable accounting period end?

A

Earliest of:
* 12 months from the start of the accounting period
* The company ceases to trade
* The company ceases to be resident in the UK
* The date that the POA ends

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7
Q

Can a chargeable accounting period ever exceed 12 months?

Can a POA ever exceed 12 months?

A

A POA can exceed 12 months, but chargeable accounting periods can never exceed 12 months

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8
Q

How is a long POA split into chargeable accounting periods?

A

Period 1: First 12 months
Period 2: Balance of time

Period 2 is always short

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9
Q

What is the filing date for a CT return for a long POA?

A

12 months from the end of the POA (both due on same date)

Filing deadlines are in tax tables

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10
Q

What are the large company limits for CT purposes?

What are the exceptions to being considered large?

A

Augmented profits > £1,500,00

Augmented profits = TTP + dividends from non subsidiaries (<50%)

£1,500,000 is scaled down for short accounting periods and for number of group companies (excluding dormant companies)

A company will not be treated as large if:
* Tax liability < £10,000 or
* It was not large in prior 12m & Augmented profits < £10mil

(Rules are in tax tables)

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11
Q

How do you calculate the indexation allowance when calculating the chargeable gain of a company?

What are the rules relating to indexation?

A

Cost * [ (RPR now less RPI then) / RPI then ]

RPI then being when asset was purchased

  • Must be rounded to 3dp
  • Indexation allowance cannot create or increase a loss
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12
Q

What is Substantial Shareholding Exemption?
How do you check if a disposal of shares by a company qualifies for a substantial shareholding exemption?

A

Only avaliable to companies that are disposing of shares
If qualify, the shares disposal is exempt - so no chargeable gain

TTTS
Ten % holding of ordinary share cap
Trading company being disposed of
Twelve months continuous ownership of shares during 6Y preceeding disposal
Six years ^

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13
Q

If a disposal of shares does not qualify for SSE, how do you calculate a gain on disposal of shares?

A
  1. Shares are matched against any acquisitions on the same day
  2. Shares are matched against any acqusitions in the previous 9 days on a FIFO basis (different to personal disposal rule)
  3. Section 104 pool, where cost is indexed before each operative event (not bonus issue)

Only index on stage 3

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14
Q

How can chargeable gains losses be dealt with for companies?

A
  1. Set off against any gains in current accounting period
  2. Carried forward to be set off against future avaliable gains

A capital loss incurred by a trading company is never set off against income

Companies do not get an annual exempt amount

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15
Q

How are bonus shares dealt with in the S104 pool for companies?

How is this different to the treatment of a rights issue?

A

Bonus issue
* Deemed to have been acquired on the same date as shares to which they relate
* Added in at nil cost
* No indexation for bonus issues

Rights issue
* Deemed to have been acquired on the same date as shares to which they relate
* Added with a cost
* Indexation does apply to rights issues

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16
Q

How do you treat NTLR in CT?

A

Pool NTLR income & expenses and add as a separate NTLR line in CT comp

If there is a net profit position, this amount is taxable

Net loss - releif

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17
Q

Is a loan to purchase shares in another company trade related or a NTLR?

A

NTLR

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18
Q

What are the special rules for companies relating to intangible assets?

A

Not treated as capital items so no chargeable gain. Included as allowable trading income/expense
* The only exception is amortisation/impairment of goodwill which is never allowable

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19
Q

What are the key differences regarding property income treatment for individuals and for companies?

A
  • Companies must use accruals basis for property income
  • Individuals use cash basis by default
  • No £1000 Property Allowance for companies
  • Interest on loans for rental property is NTLR expense, it is not netted from property income
  • Property losses are first set off against total profits of same period
  • Remaining losses are carried forward and set against total profits in future periods
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20
Q

Are Pension contributions on behalf of employees allowable or disallowable against trading profits for companies?

A

Allowable
Pension contributions on behalf of employees

21
Q

What constitutes qualifying R&D revenue expenditure?

A
  • Direct staff costs
  • Consumables
  • Computer software
  • Power, water & fuel
22
Q

What is a SME under the R&D scheme?

How does this impact R&D expenditure?

A

SMEs:
* < 500 employees
AND
* Annual turnover < 100 million euros

Can claim 100% normal deduction for revenue expenditure
AND
Additional deduction of 130%

23
Q

What relief is given for R&D capital expenditure

What are the restrictions?

A

Eligible for 100% FYA

If workers are contracted from an unconnected company, only 65% expenditure is qualifying

24
Q

How do large companies get R&D relief?

A

13% of qualifying expenditure is added to TTP and aldo reduces CT liability

RDEC is used twice

25
Q

How do you determine whether a company is UK resident?

A

A company is UK resident if;
* It is incorporated in UK
OR
* It is incorporated outside UK but its central control and management are in the UK

26
Q

Are foreign dividends exempt income for CT?

A

Yes, unless specifically told otherwise

27
Q

How does the current year claim work for companies

A
  • Loss is set against total profits (before QCDs) of same period
  • All or nothing claim
28
Q

How does the carry back claim work for companies?

A
  • Can only be made after the current year claim
  • Individuals can do a carry back claim without first doing current year but companies cannot
  • Balance of loss can be carried back against losses in previous 12 months
  • All or nothing claim
29
Q

How does carry forward loss releif work for companies?

A
  • Claim to carry forward loss against total profits
  • Individuals can only carry forward agaisnt losses of same trade
  • Full amount does NOT need to be used
  • (£5m + 50% of excess profits ) = restriction for carrying forward losses
30
Q

What are the time limits for companies on making loss relief claims?

A

Loss relief claims must be made within 2Y of the end of the accounting period in which the loss is made

31
Q

How does terminal loss relief work for companies?

A
  • Loses incurred in the 12m before trade ceases can be carried back 3Y
  • Losses can be carried back against total profits on a LIFO basis
32
Q

Hpw does NTLR defecit relief work?

Must not say NTLR loss

A

No order in which the claims must be made.

Can chose amount in each claim to preserve QCDs

Current year claim against total profits
Carry back against NTLR gains
Carry forward against total profits

Takes priority over trading losses

33
Q

How are property losses relieved?

A
  1. Current year: set against Total Profits (before QCDs)
  2. Carry forward to next acc period. Can choose amount to preserve QCDs
34
Q

If there are is a NTLR defecit, Property losses and a trading loss in the same year, what order should the loss relief claims be made?

A
  1. Relief for NTLR defecit
  2. Property loss relief
  3. Trading loss relief
35
Q

How are losses carried forward restricted?

A

£5 million deduction allowance
+
50% profits over the deduction allowance

36
Q

How can capital losses be relieved?

A

Can only be offset against capital gains either in the current or future years

37
Q

What is the relevant maximum for capital losses?

A

No restriction for current year losses - only carried forward

£5m deductions allowance (once this is used it cannot be used again to calculate maximum other losses, theses will just be restricted overall maximum less cap losses b/f)
+
50 % (Gains less 5m)

38
Q
  1. What constitutes a group normally?
  2. What constitutes a group in regards to group releif?
  3. Can you be in more than one loss relief group?
  4. How does 51% group impsct the loss group?
A
  1. 51% direct or indirect subsidiaries
  2. 75% direct or indirect subsidiaries are in a loss group
  3. Yes
  4. Company limits are dictated by number of 51% companies in group, but losses can only be shared between 75% group
39
Q

How does group relief work for CY losses?

A

Losses of one company in a 75% group can be set against TTP of another group co

QCDs & property losses must be set off against any gains before sharing loss

Lossess carried back cannot be relieved

40
Q

How does group relief work for c/f losses?

A

Loss making company cannot surrender the loss if it could use the loss against its own profits in the period
A company cannot take c/f lossess of another company if they have unusaed c/f losses of their own

41
Q

How do chargeable gains groups work?

Can you be in more than 1 chargeable gains group?

A

Different to a group relief group
* Direct link must be >= 75%
* Indirect link must be >= 51%
* You can only be in 1 chargeable gains group

42
Q

How do intra group transfers of capital assets work between members of the same capital gains group?

A

Nil Gain / Nil Loss transfers

A+B
(A)
(B)
= 0

A+B Deemed proceeds (balance)
(A) Less cost to transferor
(B) Less indexation allowance
= 0

  • MV at the date of transfer is irrelevant
  • Cash paid between group is irrelevant

Deemed proceeds for seller becomes deemed cost for ‘buyer’ when it is eventually sold

43
Q

How do you reallocate a chargeable gain or loss to other group companies?

A
  • Can choose amount
  • Companies must have been in group when gain/loss arose
  • Can only reallocate against other gains, not TTP
44
Q

How does group rollover relief work?

A

When a disposed asset is replaced within 4 years around date of sale

Relief can be rolled over against any qualifying asset purchase in group

45
Q

What is a degrouping charge and how does it work?

A

If a copmany leaves a group within 6Y of a nil gain nil loss asset, then a degrouping charge applies

The degrouping charge is the gain that should have arisen at the nil gain nil loss date

Instead of proceeds being the balance of the cost + indexation, proceeds is MV at the time of transfer

46
Q

How does the substantial shareholding exemption rules differ for groups?

A
  • TTTS still applies
    Trading company being sold
    Ten% shares held
    Twelve months ownership of shares in past
    Six years
  • If disposal is to a member of chargeable gains group, nil gain nil loss rule overrides SSE
  • 10% minimum ownership can be spread across 51% group members
47
Q

How does AIA differ for groups?

A

Only one AIA per group
Can choose how to allocate - e.g. used against SRP first
AIA is time apportioned

48
Q

Is interest recievable always classed as NTLR income?

A

Yes

Professional Level: TC (10 decks)

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