Computing Taxable Total Profits (1)

Question 1

What must companies pay?

Answer 1

Corporation tax CT on their taxable total profits for each accounting periods

Question 2

What is a company?

Answer 2

Any corporate body (limited or unlimited) or unincorporated association

Question 3

What are companies resident in the Uk liable to>?

Answer 3

Pay corporation tax on their worldwide profits

Question 4

A company is UK resident if?

Answer 4

Incorporated in UK

Not incorporated in UK but central management and control

Question 5

What is a chargeable accounting period?

Answer 5

Period for which corporation tax is charged and cannot exceed 12 months

Question 6

What is a period of account?

Answer 6

Any period for which a company prepares accounts. Usually will be 12 months in length but may be longer or shorter than this

Question 7

Where does an accounting period start?

Answer 7

Earliest of:

When a company starts to trade

When a company is liable to corporation tax

Immediately after previous accounting period finishes

Question 8

When does an accounting period finish (1)

Answer 8

Earliest of:

12 months after its start

End of company’s period of account

Company starting or ceasing to trade

Company entering/ceasing to be in administration

Question 9

When does an accounting period finish (2)

Answer 9

Commencement o company’s winding up

Company ceasing to be resident in the UK

Company ceasing to be liable to corporation tax

Question 10

Dividends received from other companies? (TTP)

Answer 10

Usually exempt and so not included in taxable total profits

Question 11

Dividends paid (TTP)

Answer 11

Not deductible

Question 12

Corporation tax (TTP)

Answer 12

Companies pay CT on chargeable gains

Question 13

Donations (TTP)

Answer 13

All donations to charity are paid gross by companies

Question 14

Patent royalties (TTP)

Answer 14

Patent royalties received do not relate to trade are taxed as miscellaneous income

Question 15

Patents royalties related to trade (TTP)

Answer 15

Included in trading income normally on an accruals basis

Question 16

Pre-trading expenditure (TTP)

Answer 16

Pre-trading expenditure incurred in the seven years prior to commencement of trade is deductible

Question 17

Adjustments of profit (disallowance)

Answer 17

No disallowance for private use for companies. Director or employee is taxed on benefit received

Question 18

What is added back to the calculation of adjusted profit?

Answer 18

Qualifying charitable donations which are not small donations to local charities

Question 19

How are qualifying charitable donations treated?

Answer 19

As a deduction from total profits

Question 20

What happens with investment income

Answer 20

Deducted from profit before taxation in arriving at trading income by broughout in again further down in the computation