Corporation Tax - Payment and Administration

Question 1

What are augmented profits?

Answer 1

Corporation tax is charged on TTP but a company’s augmented profits are used to determine when the tax is due for payment

Question 2

How do you calculate augmented profits?

Answer 2

TTP + Exempt ABGH distributions = Augmented profits

Question 3

What are exempt ABGH distributions?

Answer 3

Exempt ABGH distributions are dividends received from other companies (UK and overseas). Dividends from 51% subsidiaries are not included

Question 4

What happens if augmented profits exceed the limit?

Answer 4

If augmented profits exceed the limit a company is classed as large for corporation tax purposes and tax is payable by instalments (tax tables)

Question 5

When does the augmented profit limit apply?

Answer 5

The augmented profits limit applies for accounting periods of 12 months, so if an accounting period is shorter than 12 months, the limit must be reduced proportionately

Question 6

What does control mean?

Answer 6

Control means directly or indirectly owning (or being eligible to) more than 50% of a company’s issued ordinary share capital, voting power, distributable income or assets on wind up (cessation)

Question 7

How do you treat the augmented profits limit if there are 51% subsidiaries?

Answer 7

The augmented profits limit is divided by the number of related 51% group companies at the end of the previous accounting period

Question 8

When are companies in a related 51% group?

Answer 8

If:

• one of the companies is under the control of the other, or
• if they are both under common control of another company

Both UK resident and overseas resident companies are included as related 51% group companies; dormant companies are excluded

Question 9

Are dividends received from 51% subsidiaries exempt from ABGH distributions?

Answer 9

No

Question 10

If a company is acquired, are they related?

Answer 10

Only in the next accounting period, provided they are over 51%

Question 11

When does a large company NOT have to pay tax by way of instalments?

Answer 11

A large company (with augmented profits in excess of the profits threshold) does not have to pay its tax by way of instalments in one of two possible situations:

• its corporation tax liability for the period is less than £10,000, or
• it was not large in the prior period and in this period its augmented profits are no more than £10 million (this limit is reduced for short accounting periods and divided by the number of 51% group related companies in accordance with the same rules as the way in which the profits threshold is calculated).

Question 12

What is a very large company?

Answer 12

One with augmented profits in excess of £20,000,000

Question 13

When must a company inform HMRC of its first accounting period?

Answer 13

In order to avoid a penalty a company must inform HMRC within 3 months of the start of its first accounting period, stating when the period begins

Question 14

When must a company notify HMRC they have not received a notice?

Answer 14

HMRC will issue a notice to the company requiring the directors to complete a tax return. This is usually issued after the accounting year end.

If the notice is not issued the company must notify HMRC within 12 months of the period end that it has taxable total profits or face a penalty

Question 15

What is the corporation tax return known as?

Answer 15

CT600 - information available in tax tables

Question 16

How must companies submit their return?

Answer 16

They must do it online and submit a self-assessment in ‘inline eXtensible Business Reporting Language’ (iXBRL)

Question 17

When can HMRC amend a company return?

Answer 17

HMRC have 9 months within the actual filing date to process amendments to the return. Therefore, irrespective of whether the return is filed early, on time or late, they always have 9 months from the date they receive it.

Question 18

When can the company amend errors?

Answer 18

• Amend the return for any reason within 12 months of the due filing date
• Make a claim for ‘overpayment relief’ (where errors in the tax return resulted in tax being overcharged) within 4 years of the end of the accounting period

Question 19

What extra rules for keeping adequate information apply to employers?

Answer 19

Employers must also keep specific records for PAYE. The information retained can be electronic but must be available in legible form on request. The length of time for which information must be retained depends on the tax

Question 20

Information related to corporation tax must be kept for how long?

Answer 20

6 years from the end of the accounting period

Question 21

Information related to income tax and capital gains tax, specifically business records, must be kept for how long?

Answer 21

5 years from 31 January following tax year

Question 22

Information related to income tax and capital gains tax, specifically personal records, must be kept for how long?

Answer 22

1 year from 31 January following tax year

Question 23

Information related to VAT must be kept for how long?

Answer 23

6 years

Question 24

Who must have an SAO?

Answer 24

A large company with turnover in excess of £200 million and/or gross assets in excess of £2 billion.

A company must notify HMRC of the name of its SAO; otherwise a £5,000 penalty may be imposed

Question 25

What is an SAO?

Answer 25

A designated senior accounting officer of a large company who is personally responsible for certifying each year that the company’s accounting systems can produce accurate tax information

Question 26

What penalties can an SAO suffer?

Answer 26

The SAO may be charged a £5,000 penalty for failure to provide an accurate annual certificate or failure to establish an adequate accounting system

Question 27

What is repayment interest?

Answer 27

Repayment interest (paid by HMRC on any overpayment of corporation tax) is taxable as non-trading loan relationship income.

Question 28

When does repayment interest run from?

Answer 28

The later of:

• the due date, and
• the date of actual payment

To the date of repayment, again not counting the actual due date or the date of payment

Question 29

How do you treat interest on late paid corporation tax?

Answer 29

Interest is automatically charged if corporation tax is paid late, but is deductible as a non-trading loan relationship expense
Runs from the period between the due date to the date of payment (excluding those days themselves)

Question 30

Where can you find the penalties for late filing of returns?

Answer 30

In the table ‘Corporation tax: penalties for late filing of a corporation tax return’