CT: Reliefs Flashcards
What are reliefs?
deductions a company can set off against its profits.
CArry back
dsa
This chapter set out the deductions a company can set off against its profits.
It covered the rules for setting off trading losses against other profits, including the rules which allow a company to carry back a trading loss to any AP falling wholly or partly into the 12 months immediately preceding the start of the loss making period.
It also explained that the carry-back period is extended to three years when a company terminates its trade. A loss arising in the period of 12 months ending with the date of cessation of a trade is available for carry back to APs falling wholly or partly within that three year period.
It then explained the rules in respect of management expenses, including the order in which relief can be set off against other profits of the AP or against profits of other APs.
You then learned how non-trading loan relationship deficits are relieved by way of set off.
After a brief exposition of other reliefs such as charges and group relief, you learned how the Deductions Allowance imposes certain limits on the amount that can be used if losses should be brought forward. That includes not only losses brought forward but group relief claimed under Part 5A CTA10 on losses that consist of brought forward group relief.
Now try the learning check.
What is a Group for Group Relief?
One of the conditions for group relief is that one company must be a 75% subsidiary of the other in terms of ordinary share capital owned directly or indirectly
What is a subsidiary?
Their relationships, in terms of ordinary share capital,
- B Ltd is called the subsidiary of A Ltd
- A LTD is called the parent company or holding company
What is small profits relief?
- 19% for taxable profits below £50,000 - the small profit rate
- 25% for taxable profits above £250,000 - the main rate.
In between these figures you would consider marginal rate relief - reintroduced.
What is a close company?
The CTA10 defines a close company as one that is under the control of either
* PArticipator Test - five or fewer participators, or
* Director Test - any number of participators who are directors.
What is a participator?
What is an associate ?
Participator
Any person with a share or interest in the capital or income of the company. The definition specifically includes all shareholders, and all loan creditors of the company, except banks and trade creditors
Associate is defined in section 448 CTA10. They include relatives and a relative is defined as being a
* spouse, except a divorced spouse
* civil partner
* parent or remoter forebear, meaning a linear ancestor, such as a
grand-parent, great grand-parent and so on
* child or remoter issue, meaning a linear descendant, such as a grand-child, great grand-child and so on
* brother or sister. It includes a half brother or sister.
Relatives do not include step-family, in-laws, common-law spouses, or remoter blood-relatives such as aunts, uncles, and cousins.
