6. Corporation Tax and VAT

Question 1

Corporation Tax - Residency

Answer 1

UK-resident co’s liable on worldwide profits and chargeable gains

Non-Uk co’s are charged on profits generated in UK

Question 2

Corporation Tax - rates and Losses

Answer 2

FY (1 April - 31 Mar) must pay single rate of 19% of their profits

A company’s losses can be set against gains and income

Losses incurred in final 12 months can be carried back 3 years, but must be set against recent periods first

Question 3

Corporation Tax - paying the tax

Answer 3

CT liability is self assessed

Most co’s pay CT 9 months and 1 day after end of accounting period

Large co’s (profits of £1.5m+) must pay in four quarterly instalments

Question 4

VAT - when is it chargeable

Answer 4

VAT is chargeable on taxable supply of goods and services in UK

And import of goods and some services by a taxable person in course of their business

Question 5

VAT - registering

Answer 5

Trader must register for VAT with HMRC if taxable turnover is >£85,000

If turnover is below registration threshold business can register voluntarily

Question 6

VAT - Rates and Exemptions

Answer 6

0% - kids clothes and books
5% - energy products and services
20% - standard rate band

Zero-rated supply are different from exempt items, since they reclaim VAT

Question 7

VAT - financial advisers

Answer 7

Where a FA arranges sale of retail investment, then charges to customer are exempt from VAT

When the service is advice or recommendation, any charges to customer are subject to VAT at standard rate