Corporation Tax Flashcards
A company makes a loss in the year to 31/12/2019.
By when must the company make a claim if they want to relieve these losses in the current year (vs total income)
Must be made within 2 years of the end of the accounting period.
So 31/12/2019
What may a company’s chargeable losses (i.e. loss on selling property or shares) be offset against?
Chargeable losses may ONLY be offset against other chargeable gains in current or future years.
Cannot be used against trading or property, etc.
Cannot be carried back.
When you opt to use current year losses against total income in either the current or prior year, can you select how much loss you use (in order to maximise QCDs)?
No. When you go back vs total income in the current year, there are no partial claims - either use it all or none.
However, you can make partial claims vs future years.
Note: group relief is more flexible than this.
A large company and a very large company have year ends of 31/12/2019: by when must they pay tax.
Both are in 4 equal installments.
Large = 01/10/2019, 01/01/2020, +3m, +3m
Very large = 14/03/2019, 14/06/2019, +3m, +3m
What is included in ‘augmented profits’?
Total taxable income and dividends.
(£1.5m / n of 51% companies) = large
How do you deal with corporation tax relief if a company is (aug/ prof. > £1.5m):
a) small
b) large
Small = one payment. 9 months + 1 days after the end of the accounting period.
Large = 4 equal payments on account of (tax/4). paid on:
- 6 months + 14 days
- 9 months + 14 days
- etc.
- etc.
What conditions need to be in place to allow a seller of shares to use the capital treatment?
- must be unlisted
- The purpose of the buy-back must be to ‘benefit the company’s trade’
- selling shareholder must be UK resident
- selling shareholder must have held shares for 5 years
Explain how corporation tax losses may be used against:
a) current year
b) prior year
c) future profits
Current year = vs TOTAL INCOME. Can’t choose how much (all or nothing), therefore QCDs may be lost.
Prior year = vs TOTAL INCOME. Can only got back 12 months. Can’t choose how much so QCDs may be lost. Only available if CY is fully relievable first.
Carry forward (loss incurred before April 2017) = vs profits in SAME TRADE. Can’t choose how much so QCDs may be lost.
Carry forward (after April 2017) = vs TOTAL PROFITS. Can choose how much loss to use which maximises QCD relief.
Is corporation tax group relief flexible?
Yes. You can choose exactly how much CY loss to give yourself or a group in order to keep augmented profits below the ‘large’ PoA threshold.
What is the substantial shareholding exemption?
Policy that allows you to sell shares of a company, in which you hold a substantial shareholding, without paying any chargeable gains tax.
So, a company pays NO chargeable gains tax on the disposal of shares, if:
a) they held more than 10% of shares
b) then sell shares
c) now hold less than 10% of shares
For a very large company (augmented profits > £20m), how much loss may be shared between group companies?
The group has a £5m allowance.
They can split this between themselves in any way they choose.
Up to £5m of losses can be shared at 100%; beyond this, further losses can be shared at 50%
