Lecture 1 - Corporation Tax Flashcards
Who pays corporation tax?
UK resident companies
What is corporation tax paid on?
Total taxable profits for the accounting period
What is total taxable profits?
The combination of income and gains
What’s the difference between the way a company pays tax vs an individual?
A company has one computation for tax (a combination of income and gains) = total taxable profits
An individual has 2 separate computations for tax (Income tax and capital gains tax)
What is the difference between an accounting period and a period of account?
An accounting period is defined for tax purposes and cannot be greater than 12 months
A period of account is the period in which a company prepares it’s financial statements upon, this can be less than 12 months, equal to 12 months or more than 12 months up to a maximum of 18 months
What is the maximum amount of months for an accounting period?
For tax purposes, the accounting period cannot exceed 12 months
How do you treat a period of account which exceeds 12 months?
Split into 2 accounting periods
1st = first 12 months
2nd = remainder
NO other split is allowed
What does the payment date of corporation tax depend on?
Augmented profits of the company
How are augmented profits calculated?
Total taxable profits
Plus: Dividends received from non-group companies
What is the threshold for augmented profits for corporation tax payment due dates?
£1.5 million
What 2 elements is the augmented profits threshold impacted by?
Related 51% companies (divide by total number of group companies at the end of the AP)
Short AP (time apportion)
i.e. £1.5m / n x AP/12
When it comes to 51% companies in a group, how do we determine who is included?
We look at the members who were there at the end of the PREVIOUS accounting period
With a 51% group, what happens if a member leaves the group in the current accounting period?
We still include them in the group for the period,
as we base it off who was there at the end of the previous accounting period
With a 51% group, what happens if a member joins the group in the current accounting period?
We ignore them from group reporting, as we base it off who was there at the end of the previous accounting period
What companies are included in 51% groups?
Overseas companies
What companies are excluded in 51% groups?
Dormant companies
Non-trading companies
When are the installment payments for corporation tax due?
6 months and 14 days after the start of the accounting period, then 3 months after that (quarterly)
If the accounting period is 1 April 2020 - 31 March 2021, when will the first installment be due?
6 months and 14 days after the start of the AP
14th October 2020
Then every 3 months
Is interest charged on underpayment of instalment of corporation tax?
Yes, interest will be charged for underpayments in a quarterly payment
How are short accounting periods calculated for instalment payments?
First instalment will be the lower of:
3/AP months x corporation tax
total corporation tax for accounting period
Why are short accounting periods 3/AP months?
Because ideally we want the instalments to be split over 3 months
What is the interest rate charged if corporation tax is paid underpaid?
2.75%
From the date the interest was due until the date the payment has been made
What is the interest rate paid by HMRC if corporation tax is overpaid?
0.5%
From the later of: the due date, or the actual date of payment
To the date of repayment
