Mixed questions Flashcards
What is incorporation loss relief
Normal carry forward losses are not available on incorporation.
May lose these accumulated c/f losses
Incorporation loss relief may be available to offset trading losses b/f from sole trader against personal income derived from company
First offset against salary then dividend income
What is incorporation relief?
On incorporation, the business assets from the sole trader business will be sold to the limited company in exchange for shares in the limited company
The sale of these assets will result in capital gains. These gains can be deferred until the disposal of shares in the limited company
What are the conditions of a TOGC? (4)
Transfer whole business as a going concern
No change in trade
No significant break in trade
Transferee is or becomes VAT registered
UK resident conditions (2)
- Incorporated in the UK
- Centrally managed and controlled in the UK (head office, board meetings)
VAT on sale of new residential building
ZR
VAT on sale of new commercial building
SR
Sale of old commercial building
Exempt
How are distributions pre-appointment of liquidator treated as to both individual shareholders and corporate shareholders?
Pre-appointment of liquidator:
Treated as a dividend
Individual = Taxed at normal dividend rates
Corporate = Exempt
How are distributions post-appointment of liquidator treated as to both individual shareholders and corporate shareholders?
Treated as capital distribution (gain):
Individual = AEA, 10%/20%/BADR/Capital losses
Corporate = Exempt if SSE conditions met
UK permanent establishment conditions (2)
A business is carried out in the UK through fixed place; OR
An agent has authority to do business in the UK
Group relief is where companies of the same loss group can transfer losses between eachother.
What are the restrictions on surrendering losses?
The surrendering company can surrender CY/NTLR losses without using them
The surrendering company must utilise any bf / QCDs / property losses itself before surrendering
Explain the issues that arise on the seller for the sale of shares by a company (seller = parent of target)
Short answer:
1. Gain on disposal
2. Group implications
3. No VAT on sale of shares
Long answer
1. Sale of shares to third party = gain on disposal
If SSE available, gain is exempt
If no SSE, consider reducing gain by:
- Pre-sale dividend strip
- Capital losses (in parent or gains group)
- Trading losses (in parent or loss group)
- Group implications
- Ceasing group relief with that sub
- Ceasing gains group relief with that sub
- Potential DGC arises on disposal, but exempt if SSE available - No VAT on shares
What is the anti-diversion rule?
Profits to which the overseas PE exemption applies to are actually NOT exempt if the CFC rules would have applied if they had been incorporated
RNRB allowance
£175,000
Can unused RNRB be transferred to spouse?
Yes
