Corporation Tax Flashcards
Who pays Corporation Tax?
Companies
What is Corporation Tax rate?
Tax rate is 19% of income and capital gains (corporations don’t pay separate CGT).
What are the dates for paying corporation tax?
After end of accounting year:
* Within 9 months one day corporation tax must be paid for company’s who’s profits do not exceed £1.5million (if profits exceed £1.5million must pay taxes in quarterly installments).
* Within 12 months submit corporation tax returns
What is calculation for corporation tax?
(Trade Profit + Other Income + Chargeable Gains – Charitable Donations) x 19%
What is calculation for Trade Profit?
Trade income – (cost of sales + capital allowances)
What is replacement of business asset/rollover relief?
Company is entitled to tax relief when disposes of a capital asset at a profit and uses the profit to buy a replacement asset. Gain is deferred to when replacement asset is sold.
If a company has a loss in a particular year what are the options?
- Setting it against total profits (before qualifying charitable donations) in the current accounting period (if there are any other profits)
- Carrying it back to set it against total profits (before qualifying charitable donations) in the preceding 12 months (this can be done after a current period offset)
- Carrying it forward to set it against total profits (before qualifying charitable donations) of a later accounting period.
What are allowable deductions against a company’s taxable trading profits?
Salaries and bonuses paid to directors and employees
How are dividends dealt with?
Dividends paid by a company are a distribution of all/part of a company’s profits to the shareholder so are not a deductible expense for the company. They are a taxable benefit for the shareholders who receive them.
What are rules for close company loans?
If a close company (controlled by (1) 5 or less shareholders or (2) any number of directors who are also shareholders) makes a loan to a shareholder who is also an employee/director and either charges no interest or interest below the official rate the forgone interest is a taxable benefit for loans exceeding £10,000.
The close company making the loan pays HMRC 32.5% of the loan. The payment must be made within 9 months and one day after the end of the accounting period the loan is made within. The payment will be refunded to the company when the loan is repaid or written off – if written off is taxed as a dividend distribution to the shareholder instead.
