Corporation Tax

Question 1

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

Answer 1

No CGT, corporation tax is charged on gains

Question 2

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

Answer 2

Companies do not get taxed on dividend recieved

Question 3

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

Answer 3

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

Question 4

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?

Answer 4

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

Question 5

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

Answer 5

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

Question 6

When does a chargeable accounting period end?

Answer 6

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

Question 7

Can a chargeable accounting period ever exceed 12 months?

Can a POA ever exceed 12 months?

Answer 7

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

Question 8

How is a long POA split into chargeable accounting periods?

Answer 8

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

Period 2 is always short

Question 9

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

Answer 9

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

Filing deadlines are in tax tables

Question 10

What are the large company limits for CT purposes?

What are the exceptions to being considered large?

Answer 10

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)

Question 11

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

What are the rules relating to indexation?

Answer 11

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

Question 12

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

Answer 12

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 ^

Question 13

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

Answer 13

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

Question 14

How can chargeable gains losses be dealt with for companies?

Answer 14

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

Question 15

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

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

Answer 15

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

Question 16

How do you treat NTLR in CT?

Answer 16

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

Question 17

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

Answer 17

NTLR

Question 18

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

Answer 18

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

Question 19

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

Answer 19

• 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

Question 20

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

Answer 20

Allowable
Pension contributions on behalf of employees

Question 21

What constitutes qualifying R&D revenue expenditure?

Answer 21

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

Question 22

What is a SME under the R&D scheme?

How does this impact R&D expenditure?

Answer 22

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

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

Question 23

What relief is given for R&D capital expenditure

What are the restrictions?

Answer 23

Eligible for 100% FYA

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

Question 24

How do large companies get R&D relief?

Answer 24

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

RDEC is used twice

Question 25

How do you determine whether a company is UK resident?

Answer 25

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

Question 26

Are foreign dividends exempt income for CT?

Answer 26

Yes, unless specifically told otherwise

Question 27

How does the current year claim work for companies

Answer 27

* Loss is set against total profits (before QCDs) of same period * All or nothing claim

Question 28

How does the carry back claim work for companies?

Answer 28

* 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

Question 29

How does carry forward loss releif work for companies?

Answer 29

* 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

Question 30

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

Answer 30

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

Question 31

How does terminal loss relief work for companies?

Answer 31

* 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

Question 32

Hpw does NTLR *defecit* relief work? | Must not say NTLR *loss*

Answer 32

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

Question 33

How are property losses relieved?

Answer 33

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

Question 34

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?

Answer 34

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

Question 35

How are losses carried forward restricted?

Answer 35

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

Question 36

How can capital losses be relieved?

Answer 36

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

Question 37

What is the relevant maximum for capital losses?

Answer 37

*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)

Question 38

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?

Answer 38

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

Question 39

How does group relief work for CY losses?

Answer 39

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

Question 40

How does group relief work for c/f losses?

Answer 40

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

Question 41

How do chargeable gains groups work? Can you be in more than 1 chargeable gains group?

Answer 41

*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

Question 42

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

Answer 42

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

Question 43

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

Answer 43

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

Question 44

How does group rollover relief work?

Answer 44

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

Question 45

What is a degrouping charge and how does it work?

Answer 45

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

Question 46

How does the substantial shareholding exemption rules differ for groups?

Answer 46

* TTTS still applies **T**rading company being sold **T**en% shares held **T**welve months ownership of shares in past **S**ix 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

Question 47

How does AIA differ for groups?

Answer 47

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

Question 48

Is interest recievable always classed as NTLR income?

Answer 48

Yes