Corporation Tax

Question 1

What is Corporation Tax and what is it charged on?

Answer 1

Companies pay Corporation Tax on both their income profits and capital gains

Question 2

When does the Corporate Tax year begin and end?

Answer 2

Begins 1 April and ends 31 March

Question 3

What is a “close company”?

Answer 3

A company controlled by five or fewer participators or any number of participators who are also directors.

Question 4

Dividends are deductible expenses for the purposes of Corporation Tax. True or false?

Answer 4

False, they are not deductible expenses.

Question 5

A deposit must be paid to HMRC whenever a close company makes a loan to a shareholder. True or false?

Answer 5

False, there are two exceptions:

1. for money lending businesses
2. for small loans.

Question 6

What is the main rate for corporation tax?

Answer 6

25%

Question 7

Seebach Limited makes up its accounts to 31 March in each year and has income profits of £90k and capital gains of £60k. How

much CT will the company pay?

Answer 7

£37,500

Question 8

How are income profits calculated?

Answer 8

Chargeable receipts
LESS
Deductible expenses
LESS
Capital Allowances

Question 9

What is the corporation tax calculation?

Answer 9

1. Calculate income profits
2. Calculate chargeable gains
3. Add together to give total profits
4. Apply any reliefs
5. Calculate the tax (25%)

Question 10

Is buyback of shares deductible for corporation tax purposes?

Answer 10

No