Corporation Tax Flashcards
Pro Forma CT Comp
Trading income x
Property income x
NTLR x
Chargeable gains x
Qualifying donations (x)
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TTP xCorporation Tax - residence
A company is liable to corporation tax on its worldwide profits if it is resident in the UK
It is resident if either
- it is incorporated in the UK
- it is incorporated outside the UK but its central management and control are exercised in the UK
CT: A chargeable accounting period starts…
- When the company begins to trade OR acquires a source of chargeable income
- when the previous accounting period ends and the company is still within the charge to corporation tax
Period of account vs accounting period
period of account is the period for which the company prepares its accounts. Accounting period is usually the same but special rules for CT.
CT: an accounting period ends….
on the earliest of:
- the end of 12 months from the start of the accounting period
- the date the company begins or ceases to trade or
- the date the company ceases to be resident in the UK or
- the period of account ends
CT: If a company has a period of account exceeding 12 months…
there will be two accounting periods, each giving rise to a separate computation. The first will be the first 12 months of the period, the second the remainder.
CT: Trading income - capital allowances
are computed for accounting periods not periods of accounts. This means capital allowances for companies can never be computed for a period longer than 12 months.
Capital allowance computations for companies will never include private use adjustments.
A 100% FYA is available for expenditure incurred by a company on NEW plant and machinery for use in a designated enterprise zone. The expenditure must be incurred in the 8 years from the date the enterprise zone is established.
CT: Property income
A company’s rental income from property situated in the UK is taxed as property income. Rent received is dealt with on an accruals basis.
CT: Dividends received
Assume all dividends received by a company are exempt.
Chargeable gains pro forma
Disposal consideration Less; incidental costs of disposal Net disposal consideration Less: allowable costs Unindexed gain Less: indexation allowance if applicable Chargeable gain
Indexation allowance
RD-RI
_____
RI
(big minus little over little)
RD = RPI for December 2017 RI = the month in which expenditure incurred
Restriction of indexation allowance
It cannot make a loss
Trading loan relationships eg
Bank overdraft interest
Interest on loans to buy plant and machinery
Interest on loans to buy premises used in the trade
Non-trading loan relationships eg
Interest on loans to
- purchase / improve a let property
- acquire shares in another company
- interest on overdue corporation tax
- write off a non-trading loan such as a loan to a former employee
Interest receivable
- interest on bank and building society accounts
- gilt edged securities
- debentures and other loan stock
- repayments of overpaid corporation tax (repayment supplement)
Non trading loan relationship treament
the debits and credits are combined. If there is a net profit this amount is taxable as a non-trading loan relationship
Augmented profits
Taxable total profits plus exempt ABGH distributions
Exempt ABGH distributions
Include dividends received from UK and overseas companies other than those within 51% group
When is Corporation tax payable - augmented profit limit
£1.5m. The limit is adjusted for periods of less than 12 months and if there are any 51% group companies at the end of the previous accounting period.
51% group companies
Company B is a related 51% group company of another company A in an accounting period if A is a 51% subsidiary of B or if B is a 51% subsidiary of A or if both A and B are 51% subsidiaries of the same company.
Ignore dormant companies
Divide the limit used for determining a company’s corporation tax payment dates by the number of 51% group companies
Corporation Tax - large companies
A large company is one which has augmented profits in excess of the limit
However, a company is not treated as large if
- it has a tax liability of less than £10,000 or
- It was not a large company in the preceding 12 months and has augmented profits of less than £10m in this accounting period. (10m limit divided between 51% group companies)
CT Payment - large companies
A large company is required to pay CT in four equal instalments based on estimated liability for the accounting period.
The instalments are due on the 14th day of the 7th, 10th, 13th and 16th months after the start of a 12 month accounting period.
CT payment - other companies
9 months and one day after the end of the chargeable accounting period
CT payment - short accounting periods
Each instalment is the lower of
- 3 x CT/n where CT is the corporation tax for the accounting period and n is the number of months in the accounting period and
- the remaining corporation tax due for the accounting period
Where the whole of the corporation tax is not paid by the first instalment, subsequent instalments are calculated i the same way until the amount paid equals the corporation tax due. Instalments must have been paid by the 14th of the fourth month following the end of the accounting period.
Business payment support setvice
launched by HMRC to help businesses that because of economic conditions are having difficulty in making payments of tax. In these circumstances BPSS will agree to spread tax payments over a period to meet the needs of the business.
