Intro to CT Flashcards
List who is charged to Corporation Tax
Any Corporate Body:
Limited & Unlimited Companies
Unincorporated associations.
Members clubs
Political Associates
CTA 2010s , s.1121
When would a company not incorporated in the UK be resident?
If their place of
central management and control is in the UK
What income are UK resident companies taxed on?
Companies which are resident in the UK are liable to tax on their worldwide income and gains, i.e. income earned and gains realised all over the world.
CTA 2009, s.5(1)
Name the two accounting periods?
AP - Accounting Period
POA - Period of Account
When does an accounting period begin?
An accounting period begins on the earliest of: CTA 2009, s.9
i. the commencement of trading by the company;
ii. the acquisition of a source of income;
iii. immediately after the end of the previous accounting period
An accounting period ends on the earliest of?
CTA 2009, s.10
i. the cessation or commencement of trading;
ii. the company becoming dormant, i.e. having no sources of income;
iii. the end of a company’s period of account;
iv. 12 months after the accounting period began.
An accounting period can never exceed 12 months in length
When is the following companies first three accounting periods?
Oak Ltd was incorporated on 1 January 2018. The company opened an interest
bearing bank account on 1 March 2018 and commenced to trade on 1 June
2018. Oak Ltd prepared its first set of accounts to 31 August 2019 and annually
thereafter to 31 August.
The first three APs are therefore:
First AP: 1 March 2018 – 31 May 2018 (3 months)
Second AP: 1 June 2018 – 31 May 2019 (12 months)
Third AP: 1 June 2019 – 31 August 2019 (3 months)
List the proforma
Proforma Corporation Tax Computation
A Ltd
Corporation tax computation for the accounting period (≤ 12 months)
£
Trading Income
Adjusted profits before capital allowances X
Less: Capital allowances (X)
Trade profit X
Other Income
Non-trading profits (loan relationships) X
UK property business X
Overseas property business X
Net chargeable gains X
Less: Qualifying charitable donations (X)
Taxable Total Profits (TTP) X
Corporation tax liability (TTP × appropriate rate) X
What is the corporation tax computation?
Profit before tax per accounts X
Add back: Disallowable expenditure X
Deduct: Income not taxed as trading income (X)
Tax adjusted profits before capital allowances X
Deduct: Capital allowances (X)
Trade profit X
What kind of interest is added back in the CT comp?
Interest incurred on a non-trading loan.
What period are capital allowances calculated?
Capital allowances for a company are always calculated for the accounting
period and not for the period of account. Therefore, the capital allowances
computation for a company can never be for more than 12 months
What is the Companies capital gains computation?
Net disposal proceeds X Less: Acquisition cost (X) Enhancement expenditure (X) Unindexed gain X Less: Indexation allowance (X) Chargeable gain X
What is the indexation factor formula?
Indexation factor = (RD – RI)/RI
Porter Ltd bought an office for a total cost of £150,000 on 10 January 2005. Porter
Ltd sold the office on 10 May 2019 for gross sale proceeds of £400,000. Estate
agents’ fees of £5,000 were incurred on the sale.
Porter Ltd prepares accounts to 30 September each year.
What is the chargeable gain made by Porter Ltd on the sale of the office?
Gross sale proceeds (May 2019) 400,000 Less: Estate agent's fees (5,000) Net sale proceeds 395,000 Less: Acquisition cost (January 2005) (150,000) Unindexed gain 245,000 Less: Indexation allowance (278.1 – 188.9)/188.9 = 0.472 × 150,000 (70,800) Chargeable gain 174,200
What are the three types of qualifying charitable donations that are allowed as deductions?
Cash donations to charity
Gifts of shares to charity
Gifts of UK land and buildings to charity
How do we calculate the share or property price when gifting to charity?
Market value
What is common control?
“Common control” means that:
a. the companies are controlled by the same person; and
b. the companies are “related” to one another.
Companies are “related” to one another if either: CAA 2001, s.51G
a. their businesses are carried on from the same premises; or
b. more than 50% of the turnover of each of the companies is derived from the
same economic activities.
Long periods of account - adjusted trading profit?
Time apportionment
Long periods of account - capital allowances?
One for each period.
Long periods of account - FYA?
Not time apportioned
Long periods of account - uk property business?
Accruals basis
Long periods of account - non trading profits from loan relationships?
Accruals
Long periods of account - chargeable gains?
Date of disposal
Long periods of account - charitable donations?
Date paid
Which of the following are chargeable to corporation tax?
a. Online Tutors Limited
b. Unilever Plc
c. Oxfam
d. Seaford Golf Club
e. London Borough of Camden
f. The Green Party
g. Chris Jones
h. The Jones Family Trust
Answer 1
a), b), d) and f) are chargeable to Corporation Tax.
Advent Ltd is incorporated on 1 June 2018 and makes up its accounts to 31
October 2019. It opens an interest bearing bank account on 1 September 2018
and starts trading on 1 October 2018.
What are Advent Ltd’s first three accounting periods?
- 9.2018 – 30.9.2018
- 10.2018 – 30.9.2019
- 10.2019 – 31.10.2019
What is the special rule regarding AIAs and groups?
Only one AIA for members of a group or under common control.
What is a group for the purposes of AIAs?
A parent company and its 51% subs
What is common control?
a. the companies are controlled by the same person; and
b. the companies are “related” to one another.
Companies are “related” to one another if either: CAA 2001, s.51G
a. their businesses are carried on from the same premises; or
b. more than 50% of the turnover of each of the companies is derived from the
same economic activities.
Indexation factor formulae?
(RD-RI)/RI
RD is the RPI at date of disposal
RI is the RPI the month it is disposed
What legal fees relating to leases are allowed ?
Legal fees on the renewal of a short lease (<50 years). Not a new lease.
