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Question 1

Corporation Tax rates and bands

Answer 1

From £0 @ 19%
That’s it…
No “personal allowance”
No thresholds

Question 2

Company taxable profits

Answer 2

Depreciation is NOT tax deductible, so add back. Loss on the sale of an asset is NOT tax deductible, so add back.
(Note: a profit the sale of an asset would be deducted from
profits…)

Deduct Net capital Allowances. This is a ‘kind of’ depreciation for tax purposes only.

Question 3

Capital Allowances

Answer 3

Main Rate Pool
18%
Special Rate Pool
6%
Single Asset Pool
6% or 18%

Assets used for more than one year = “Non-Current Asset”.
Financial accounting uses depreciation to account for use / loss of value.
Depreciation is HIGHLY SUBJECTIVE
Tax rules must be OBJECTIVE

Capital Expenditure for tax purposes means useful life > two years

Question 4

Main Rate Pool

Answer 4

You can claim 18% tax relief on all ‘plant and machinery’ you buy, unless the items need to go into:
- the special rate pool
- a single asset pool (for example, because you have chosen to treat
them as ‘short life’ assets or you’ve used them outside your business

Question 5

Special Rate

Answer 5

You can only claim 6% tax relief on:
- parts of a building considered integral - known as ‘integral features’; items with a long life; solar panels; thermal insulation you’ve added to a building; cars with CO2 emissions over a certain threshold.
- Long life assets

Question 6

What does not count as plant and machinery?

Answer 6

You cannot claim plant and machinery allowances on:
- things you lease (unless you have a hire purchase contract or long funding
lease) - you must own them.
- items used only for business entertainment, for example a yacht or karaoke machine.
- land
- structures, for example bridges, roads, docks
- buildings, including doors, gates, shutters, mains water and gas systems

Question 7

Additions and Disposals

Answer 7

All additions are added to the pool at cost.
Main Rate Pool B/Fwd 01/01/2022 = £50,000
Additions = £10,000
Capital Allowance for 2022 = 18% x £60,000

All disposals are removed from the pool at their disposal value (proceeds of sale or original cost, whichever is lowest)
Disposals: Original cost = £10,000 (01/01/2020)
Proceeds of sale = £2,000
Capital Allowance for year = 18% x (£50,000 - £2,000) = 18% x £48,000 = £8,460

Question 8

Annual Investment Allowance

Answer 8

The first £1,000,000 of asset
purchases can enjoy 100%
capital allowance in year of
purchase

Question 9

FYA – “First Year Allowance”

Answer 9

Same as AIA, but in addition to, incentivise investment >£1,000,000
eg: Environmentally friendly projects

Question 10

Disallowable

Answer 10

Very similar to self-employed
Typical disallowed:
Entertaining
Depreciation
Costs linked to investment in assets (Legals)
Charitable donations
Gifts to customers (>£50 or all if food, drink or tobacco)
Capital losses
Dividends

Question 11

Allowable

Answer 11

Typical allowed:
Capital allowances
Some charitable donations (registered charity, CASC)
“Wholly and exclusively”
NOTE: Some costs allowable as they give rise to employment benefits (cars for example)

Question 12

Losses

Answer 12

Trading losses can be:
Used against other profits / gain in year.
Carried forward for use against future profits.
Carried back for use against last year’s profits.
IF it is the final year of trading then losses can be carried back for up to three years.