CORPORATION TAX

Question 1

PROVISION IS ALLOWABLE IF:

Answer 1

IN ACCORDANCE WITH FRS102

OBLIGATION TO MAKE PAYMENT AT THE YEAR END
PROBABLE TRANSFER OF ECONOMIC BENEFITS TO SETTLE OBLIGATION
RELIABLE ESTIMATE CAN BE MADE

Question 2

CORPORATION TAX PENALTIES

Answer 2

LATE - £100
3 MONTHS - £100
6 MONTHS - 10% of tax
12 MONTHS - 10% of tax

Question 3

S198 FIXED VALUE REQUIREMENT AND POOLING REQUIREMENT

Answer 3

Fixed value - within 2 years of completion for sale, seller and buyer jointly elect the sale proceeds attritibuted to fixtures and fittings.

Pooling - met if the seller has claimed Capital allowances or allocated the assets to a pool.

Question 4

EMPLOYEE PENSION CONTRIBUTIONS

Answer 4

Must be a registered scheme

Employees under 75, UK Resident and have taxable earnings.

Max £3,600 or 100% of their relevant earnings - trade, FHL and employment.

Extends the BRB - tax relief at 40/45%.

Question 5

EMPLOYERS PENSION CONTRIBUTIONS

Answer 5

Not a taxable benefit for the employee.

If wholly and exclusively for the trade - deductible for CT purposes.

Relief only when paid - cost of the scheme is capital.

Question 6

PENSION SPREADING

Answer 6

If the contributions are 210% of previous period - spread the increase in excess of 110% where £500k +

500k-1m - 2 years
1m-2m - 3 years
2m+ - 4 years

Question 7

ANNUAL ALLOWANCES

Answer 7

£40,000 per annum
Reduced for high income levels.

Adjusted income = income less gross personal pension over £110,000
Threshold income = net income plus er pension £150,000

Excess over £150,000 / 2 less the £40k
Maximum reduction to £10,000. Charged marginal rate of exceeded.

Use bfwd balances from previous 3 years, earlier first.

Question 8

LIFE TIME ALLOWANCE

Answer 8

£1.03 MILLION

CHARGED 55% on lump sums, 25% pension/cash payments

Question 9

S455 PENALTY TAX

Answer 9

Pay 32.5% on overdrawn balances outstanding longer than 9 months 1 day following year end.

Repay - proportionate amount repaid 9 months 1 day following the accounting period of repayment.

Question 10

BED AND BREAKFASTING (S464c1)

Answer 10

If in a period of 30 days, repayments of £5,000 or more are made, followed by £5k being drawn again - treated as repaying the subsequent loan.

Otherwise, Clayton case - offset against earlier withdrawals.

Doesn’t apply to repayments subject to income tax i.e bonuses.

Question 11

ARRANGEMENTS (S464c 2)

Answer 11

If the loan outstanding is £15,000 +, repayment of £5k+ and arrangements in place to draw further funds - repayment of subsequent loan again even if not withdrawn within 30 days.

Question 12

WAIVING A LOAN TO DIRECTOR

Answer 12

Income tax due on dividend
Not actually a dividend but still not deductible for CT purposes
Employee and Employers NIC due.
If caught by S455 - no deduction for CT.

Question 13

COMPANY PURCHASE OF OWN SHARES S.1000

Answer 13

Distribution for tax purposes under s1000.
Liable to income tax is s1033-1043 are met for capital treatment.

UK resident 
Unquoted trading company 
Owned shares for 5+ years 
Substantial reduction 75%
Must not be connected after 30%

Full withdrawal
Wholly for the benefit of the trade (check investments)

Advance clearance SP/82