Corporation tax

Question 1

What is corporation tax?

Answer 1

A tax chargeable on a company’s income profits and capital gains

Question 2

When is the corporation tax financial year?

Answer 2

1 April in one year to 31 March in the next year

Question 3

What is the main rate for corporation tax?

Answer 3

Main rate – A company with profits over £250,000 will pay corporation tax at 25% on all of its profits.

Question 4

What is the small profit rate?

Answer 4

Small profit rate – A company with profits below £50,000 will pay corporation tax at 19% on its profits.

Question 5

What is the marginal relief?

Answer 5

Marginal relief– A company with profits between £50,001 - £250,000 will pay corporation tax at 19% on the first £50,000 of profit and corporation tax at 26.5% on profits over £50,000 up to £250,000.

Question 6

What are the basic steps to calculate corporation tax?

Answer 6

1. calculate income profits
2. calculate chargeable gains
3. add together the income profits and chargeable gains to give total profits
4. apply reliefs
5. calculate the tax

Question 7

How do you calculate income profits?

Answer 7

Chargeable receipts LESS deductible expenses and capital allowances

Question 8

What are not considered deductible expenses for corporation tax?

Answer 8

Dividends and payment for the buyback of shares

Question 9

What is an indexation allowance?

Answer 9

Adjustment to account for any increase in value that is simply a result of inflation between 31 December 1982 and 31 December 2017