corporation tax

Question 1

What is the small profits rate for companies with taxable profits of up to £50,000?

Answer 1

19%

Question 2

What is the main corporate tax rate for companies with taxable profits exceeding £250,000?

Answer 2

25%

Question 3

Which corporate tax rate applies to companies with taxable profits between £50,000 and £250,000?

Answer 3

A marginal rate of tax applies, calculated to gradually transition between the small profits rate (19%) and the main rate (25%).

Question 4

What happens if a company sells an asset below market value as a bad bargain?

Answer 4

The actual sale price will be used as the figure for proceeds of disposal.

Question 5

What happens if a company sells an asset below market value with a gift element?

Answer 5

The market value of the asset will be used as the figure for proceeds of disposal.

Question 6

Can indexation allowance be applied to initial or subsequent expenditure after 31 December 2017?

Answer 6

No, indexation allowance does not apply to expenditure after this date - it only applies BEFORE this date.

Question 7

What does rollover relief on the replacement of qualifying business assets allow?

Answer 7

It allows companies to postpone the payment of corporation tax following the disposal of a qualifying asset, if the proceeds are used to acquire another qualifying asset

Question 8

What are the main types of qualifying assets?

Answer 8

• Land and buildings used in the company’s trade.
• Fixed plant and machinery, but with restrictions if they are wasting assets.
• Ships and other unusual qualifying assets.

Question 9

What assets do NOT qualify for rollover relief?

Answer 9

• Company shares.
• Goodwill and intellectual property (covered under a separate relief).
• Movable items not classed as fixed plant and machinery.

Question 10

for rollover relief, do the replacement asset and original asset need to be the same type?

Answer 10

No, they just need to both fall within the definition of qualifying assets

Question 11

What is the time limit for acquiring a replacement asset for rollover relief?

Answer 11

• The replacement asset must be acquired within 1 year before or 3 years after the disposal of the original asset.
• Extensions may be granted by HMRC.

Question 12

When does the corporation tax financial year run?

Answer 12

The corporation tax financial year runs from 1 April to 31 March.

Question 13

What is carry-across/carry back relief for trading losses?

Answer 13

Carry-across relief allows companies to set trading losses from an accounting period against total profits from the same accounting period.

Question 14

What does carry-back relief allow if there are no profits in the current period?

Answer 14

Carry-back relief allows trading losses to be set against total profits from the previous 12 months if the company was carrying on the same trade

Question 15

What happens to remaining losses after carry-across relief is applied?

Answer 15

Remaining losses can be carried back and set against total profits from the accounting period(s) falling in the 12 months prior to the period of the loss, provided the company was carrying on the same trade.

Question 16

What is terminal carry-back relief for trading losses?

Answer 16

When a company ceases to trade, it can carry back trading losses and set them against total profits from accounting periods in the three years prior to the final 12 months, taking later periods first.

Question 17

What is carry-forward relief for trading losses?

Answer 17

Carry-forward relief allows a company to set trading losses from an accounting period against profits in subsequent accounting periods

Question 18

What conditions must be met for carry-forward relief to apply?

Answer 18

The company must continue to trade - claim must usually be made within two years of the end of the accounting period in which the losses will be applied.

Question 19

What happens to any unused trading losses under carry-forward relief?

Answer 19

Remaining losses can be carried forward again and set against total profits in future years.

Question 20

What is the maximum amount that can be claimed under carry-forward relief?

Answer 20

The maximum claim is £5 million, plus 50% of remaining total profits after deduction of the allowance.

Question 21

What defines a “close company”?

Answer 21

A close company is a company that is either controlled by five or fewer participators or by participators who are directors or shadow directors.

Question 22

Who is considered a “participator” in a close company?

Answer 22

A participator is a person who owns shares in the company or has the right to acquire shares in the company.

Question 23

What is the test to determine if participators “control” a close company?

Answer 23

Participators control the company if they own more than half of the shares, have more than half of the voting power, or have the right to acquire more than half of the shares.

Question 24

What happens when a close company loans money to a participator or their associate?

Answer 24

The company must pay 33.75% of the loan amount to HMRC as a deposit, refundable if the loan is repaid or written off.

Question 25

Are there exceptions to the rule where a close company loans money to a participator or their associate?

Answer 25

Yes, there is no tax if the loan is made in the ordinary course of a money-lending business, or if the loan is no more than £15,000 and the borrower works full-time for the company and owns no more than 5% of the company’s ordinary share

Question 26

How are separate companies in a group of companies taxed?

Answer 26

each company in a group of companies is a separate legal entity, each company will be charged to tax
separately.

Question 27

What is group relief for a group of companies?

Answer 27

Group relief allows one company to transfer certain losses and expenses to another company within the same qualifying group, helping reduce the transferee’s taxable profit.

Question 28

What criteria must be met for group relief to apply?

Answer 28

Both companies must be part of the same group, meaning one must be a 75% subsidiary of the other, or both must be 75% subsidiaries of a third company

Question 29

How does group relief work once two companies are in the same group?

Answer 29

The transferor company can surrender certain items (like trading losses or management expenses) to the transferee company, which will use them to reduce its profits in the overlapping accounting period.

Question 30

How many principal companies can be in a group for chargeable gains purposes?

Answer 30

The group is only permitted to have one principal company.

Question 31

What is a tax benefit of being part of a group of companies in relation to stamp duty?

Answer 31

Stamp duty and stamp duty land tax will not be charged on transfers of assets between companies in a qualifying group, provided certain conditions are met.

Question 32

How does VAT apply to a group of companies?

Answer 32

A group of companies may be able to register for VAT as a group under a single registration.

Question 33

What must a company do to inform HMRC about the start of its first accounting period?

Answer 33

A company must notify HMRC in writing about the beginning of its first accounting period within 3 months of its start.

Question 34

What is the deadline for filing a self-assessment corporation tax return with HMRC?

Answer 34

The deadline is 12 months from the end of the relevant accounting period.

Question 35

When is corporation tax payable for most companies?

Answer 35

Corporation tax is payable within nine months and one day from the end of the relevant accounting period.

Question 36

What defines a “large” company for corporation tax instalment purposes?

Answer 36

A large company is one with annual taxable profits between £1,500,000 and £20,000,000.

Question 37

How often must large companies pay corporation tax in instalments?

Answer 37

Large companies must pay tax in 4 instalments, typically due on these dates:

• Six months and 13 days after the start of the accounting period.
• Three months after the first instalment due date.
• Three months after the second instalment due date.
• Three months and 14 days after the end of the accounting period.

Question 38

what defines a VERY large company?

Answer 38

Have annual taxable profits of over £20,000,000

Question 39

how often must VERY large companies pay corporation tax in instalments?

Answer 39

Must pay the tax in 4 instalments during the accounting period