Speciman Exam Flashcards
R Ltd & CLt are UK resident establishing a company J Ltd in Garia.
What’s the amount of corporation tax payable in UK and Garia in respect of Jay Ltd profit if J was :
- Resident in the Uk
JAY LTD:
TTP: 135,000
Garia : 13% business tax
- If Jay Ltd is resident in UK
- subject to Corporation in world wide profit
- a permanent establishment in Garia isn’t a separate legal resident company
- double tax relief would be available
- amount payable in the UK would 19%-13%=6% of profit
UK corporation tax @ 19%
=135,000 x 0.19 = 25,650
Less: unilateral double tax relief
= 135,000 x 13% = (17,550)
UK corporation tax payable = 8,100
R Ltd & CLt are UK resident establishing a company J Ltd in Garia.
What’s the amount of corporation tax payable in UK and Garia in respect of Jay Ltd profit if J was:
- Not resident in the UK
JAY LTD:
TTP: 135,000
Garia : 13% business tax
- profit only subject to tax in Gharia @ 13% rate
- no UK corp tax liability based on their profits
- dividends received by R Ltd & C Ltd = exempt from corp tax
R Ltd & CLt are UK resident establishing a company J Ltd in Garia.
What would be the relief available to R Ltd if J Ltd business in Garia were to make a trading loss if the following :
Not sure if R wants to own 20% or 30% of J ltd
Not sure if J would be resident in Uk or Garia
- If J was Uk resident
a. If R owns 20%
- Then C owns 80% which is more that 75% and each own at least 5%
- J would not be a consortium company
- no relief available to R in regards to trading losses of J
b. If R owns 30%
- consortium
- R would be able to offset 30% of J Ltd trading loss against its own taxable profit - If J was resident in Garia
- no trading loss relief available in the UK for R ltd
- Explain the purpose of the CFC rules - -and the charge which can be levied under them
- UK tax system doesn’t charge corp tax on profits earned overseas by non-UK resident company
- UK resident company could exploit this by establishing non uk resident sub to generate overseas profit
- cfc is designed to prevent overseas sub being used to avoid tax this way
- where the rules apply & no exemptions available :
- uk resident company owning more than 25% of CFC
= charged with UK corp tax on their proportionate share of the CFC chargeable profits.
Explain how opting to tax building would enable purchaser to recover the VAT charged by the vendor.
Purchaser would then grant a 20 year lease of this building to one of a number of different business
When the purchaser grants a lease of the building to a tenant, it’ll be making an exempt supply.
So purchaser is not able to recover any VAT in regards to the building
unless it makes an election opting to tax it
Is the following true:
By opting to tax the building before granting the lease,
inputVAT would be recoverable
1. And has no effect on their tenant (businesses)
or 2. potential future purchaser
- No impact on tenant
- if the company opts to tax the building
- it would be required to charge VAT on monthly rental payments
- if tenants not making fully taxable supplies = will not be able to recover all the VAT charged
- this will represent an additional cost which can impact the tenants decision to the the building - No impact on a future sale of the building
-You’ll be required to charge VAR on a sale of the building
- which could impact eventual sale price , if future purchase wasn’t able to recover some/all of the VAT charged.
What’s the balancing charge:
The only capital asset within my business is a car which has always been used 65% for business purposes. I will withdraw this car from the business on 31 October 2023 when it will have a market value of £11, 100, which is less than its original cost. The tax written down value of this car as at 31 May 2022 was £8,700.
TWDV: 8,700
Disposal:
Market value (11,100)
= (2,400) x 0.65 (business use)
Balancing charge = 1,560
What is classified as a close company
Controlled by
- any no. If shareholders who are also directors
- 5 largest shareholders in the company
Control exercised by
- sh own more than half the co. Issued SC
- shareholder is regards as owning any shares owned by their associates in addition to the shares they own personally
- e.g direct relatives
When does hard pay back recoverable tax on loan from close company & what’s the rate
9months 1 day from date the loan is repaid.
33.75%
