Corporation Tax Flashcards
What is the financial year of a company?
The tax year is the financial year/fiscal year and runs from 1 April to 31 March.
What is the accounting period of a company?
Companies pay corporation tax on taxable profits for each accounting period. The company’s corporation tax accounting period is normally 12 months long, it matches the company’s 12-month financial year.
What is the accounting period of a company?
Companies pay corporation tax on taxable profits for each accounting period. The company’s corporation tax accounting period is normally 12 months long, it matches the company’s 12-month financial year.
What are the filing requirements if the accounting period of a company is over 12 months?
The tax accounting period can’t be more than 12 months, so two company tax returns would need to be filed - two corporation tax accounting periods.
When does a private limited company have to file its annual accounts with CH?
When a company files its first accounts with CH, it must do so within 21 months after the date it was registered with CH. After, a company has 9 months after the contract be it its financial year to file the annual accounts with the registrar of companies.
When is corporation tax due for payment?
Generally, a company must:
-pay by 9 months and one day after the end of its corporation tax accounting period;
-file by 12 months after the end of its corporation tax accounting period.
What is the basis for corporation tax charge?
Corporation tax is charged on both all of the taxable income and the chargeable gains of a company, which together make up its “profits”.
Income profits = trading receipts or chargeable receipts less deductible or allowable expenses less capital allowances.
Chargeable gains = sale proceeds less allowable expenditure less indexation less capital/trading losses
Income receipts + chargeable gains = total taxable profits
What is considered a business expense?
A business expense can only be offset against corporation tax if it is judged to have been incurred solely for business purposes - e.g. NI payments on behalf of employees, business insurance, accounting costs, employees’ wages, interest paid on business loans, pension contributions.
What are chargeable gains?
Companies liable to corporation tax don’t pay CGT separately on any gains. Instead, they pay corporation tax on “chargeable gains”. Chargeable gains are made when the company sells/disposes of a capital item for more than they paid for it.
What is the basic calculation of corporation tax?
- Calculate income profits.
- Calculate chargeable gains.
- Add together the income profits and chargeable gains to give total profits.
- Apply reliefs.
- Calculate tax.
How do you calculate income profits??
Income profits are calculated according to the usual principles of chargeable receipts less deductible expenses and capital allowances.
Dividends and payment for the buyback of shares are NOT deductible expenses for CT purposes.
Gains from goodwill and IP are treated as income, expenditure is a deductible expense.
What are the main corporation tax rates?
25% for companies with profits greater than £250,000.
19% for companies whose profits don’t exceed £50,000.
For companies in between, marginal relief may apply which has a tapering effect.
