Module 15: Corporation Tax Flashcards
CAP can’t be longer than
12 months
Non-trade loan relationships
Accruals basis
Property income
Accruals basis
Chargeable gains
Date of disposal
Miscellaneous income
Date of receipt
Qualifying charitable donations
Date of payment
Dividends
Date of receipt
Company is not a close company if
It is quoted and 35% of the voting power is in the hands of the public
Benefits to participators - employee
Normal employment income benefits
Benefits to participators - not employees
Calculate benefits as normal = dividend
Benefits to participators - not employees: individual
Dividend taxed at normal rates
Benefits to participators - not employees: company
Costs relating to benefit are not tax deductible
Advantages of dividends (3)
- no employee or employer NICs
- no PAYE
- tax % lower
Disadvantages of dividends (2)
- not tax deductible
- not UK earnings for pension purposes
If company makes pension contributions of behalf of directors (2)
- company received a corporation tax deduction for the contributions
- contributions themselves are tax free benefit for the directors
Purchase of own shares - income treatment
Sale proceeds treated as a dividend
Income treatment computation
Amount received for shares (actual proceeds) X
Original subscription price (X)
Taxable dividend X
Deemed sale proceeds (original subscription price) X
Actual cost (X)
Capital loss X
Purchase of own shares - capital treatment
Treated as a normal capital gains computation
Connected with the company shareholding
30%
If company is not buying all of an individuals shares
Unlikely that the trade benefit test will be met
Accruals basis means
Pro rate across whole period of account
Management expenses
Deducted from the total profits of the company
Excess management expenses
Carried forward and treated as management expenses of next period
Substantial reduction test
25% in individual’s shareholding before and after buy back
Remember that number of shares in issue will have decreased after buy back as shares will be cancelled by company
