CT- Computations

Question 1

what qualifies for R&D costs and what is the rule?

Answer 1

– salaries (including NICs and pension costs, excluding taxable benefits)
– consumables
– computer software
– power, water and fuel
– payments to agency workers
– subcontracted expenditure (capped at 65%).

100% relief- capital expenditure
130% deduction for SME’s against trading income- total deduction 230%

• if made loss can claim as cashback from HMRC for total of 14.9% of the loss surrendered.

Question 2

what are the tax treatments for intangible assets?

Answer 2

Goodwill
- amortisation and impairment losses are not allowed.
- losses cannot be carried back.

Other intangibles
- tax treatments follows accounting treatment/ if in capital gains group they are transferred at tax neutral amount

Other option:
- right off asset at 4% each year
- amortisation or impairment will not be allowed.
- election to apply must be made within 2 years of the end of account period.

rollover relief for IA
- if new asset acquired within 12 months prior and 36 months after.
- amount deferred is lower of proceeds or amount invested into new IA.

Question 3

what are the rules of transfer pricing?

Answer 3

• TPL requires transactions to be done at arms length i.e if they were independent of each other.
• rules don’t apply to SME’s unless they are buying or selling to an overseas company in non qualifying territory.

Question 4

what are the rules for thin capitalisation>

Answer 4

The rules will ensure that any excess of interest on the loan over what an independent third-party would’ve been prepared to lend is disallowed.