Corporation Tax - Lecture 8

Question 1

Corporation tax =

Answer 1

Tax of profits of corporations (ltd/plc) or unincorporated association (club/ political association)

Question 2

UK resident company liable to CT on

Answer 2

Worldwide income

Question 3

UK resident company =

Answer 3

One registered in UK or has central control and decision making carried out in UK

Question 4

Dividends received from other companies

Answer 4

Not liable to CT

Question 5

Dividends paid

Answer 5

Not allowable trading expense

Question 6

Classical tax system

Answer 6

• Company pays taxes on all profits whether distributed or not
• Shareholders independent of company (taxed twice)

Question 7

Imputation tax system

Answer 7

Some tax imputed to shareholders to reduce income tax payable

Question 8

TTP (taxable total profit) =

Answer 8

Income + Gains - Charges

Question 9

CAP length

Answer 9

Anything up to 12 months (cannot exceed)

Question 10

CAP starts when (3)

Answer 10

• Company begins to trade
• Company acquires source chargeable income
• Previous CAP ends

Question 11

CAP ends when (4)

Answer 11

• 12 months after starts
• Date accounts made up to
• Date company ceases to trade/ winds up
• Date company ceases to be UK resident

Question 12

Company’s rental income received and short lease premium income is assessable under

Answer 12

Property business profit

Question 13

Expenses incurred as result renting property

Answer 13

Deductible

Question 14

Interest paid on loan to purchase rental property

Answer 14

Not deducted as expense

Question 15

Separate calculation needed

Answer 15

Each rental property

Question 16

Interest income from trading vs non trading

Answer 16

Included in tax adjusted trading profit. (Non trading = TTP)

Question 17

Overseas income

Answer 17

Profits made by overseas branch where branch controlled by overseas management.

Question 18

If overseas branch controlled by UK management

Answer 18

Branch profits included in TTP

Question 19

Election for exclusion branch profits within TTP

Answer 19

Covers all branches, irrevocable decision

Question 20

Chargeable gains =

Answer 20

One-off gains on disposal capital assets

Question 21

Indexation allowance =

Answer 21

0.XXX x cost on acquisition/ enhancement

Inflation adjustment

Question 22

Indexation factor =

Answer 22

(RPI month disposal - RPI month acquisition/ enhancement) / RPI month acquisition/ enhancement

Question 23

Negative Indexation factor

Answer 23

Cannot happen, if RPI falls, 0

Question 24

Research and development basic treatment

Answer 24

Deduction of 230% R&D allowed (must be spending over £10,000)

Question 25

Research and development basic treatment > loss situation

Answer 25

Can claim refundable credit £14.50 every £100 R&D expenditure

Question 26

Research and development above the line

Answer 26

Credit 11% expenditure and offset against current year CT

Question 27

Double taxation relief

Answer 27

Credit the lower of: - Overseas tax suffered - UK corporation tax attributable to overseas income

Question 28

Payment quarterly installments

Answer 28

14th month for months 7, 10, 13, 16 accounting period. If taxable profits > £1.5m

Question 29

Criticisms of classical system (3)

Answer 29

- Double taxation of earnings - Not neutral between equity and debt capital - Encourages retention of earnings > may inflate value of shares

Question 30

Full imputation =

Answer 30

All CT imputed

Question 31

Partial imputation =

Answer 31

Part of CT imputed