7 Corporation tax and VAT

Question 1

What is VAT charged on?

Answer 1

• any supply of goods or services made in the UK
• where it is a taxable supply
• made by a taxable person
• in the course of sale in a business

Question 2

2 types of VAT and meaning and WHERE do tax payers have to account it

Answer 2

1. Output tax
   - VAT chargeable by a business when making a supply of goods or services (eg invoice from solicitor to client)
2. Input tax
   - VAT paid by a person on goods or services supplied to the person

they have to account it to HMRC

Question 3

Types of supply in VAT

Answer 3

1. Standard rated - 20%
2. Reduced rated - 5%
3. Zero rated - 0%
4. Exempt

Question 4

Who pays corporation tax?

Answer 4

companies

Question 5

what is the main corporation tax rate for companies with profits greater than £250,000?

Answer 5

25%

Question 6

what is the main corporation tax rate for companies with profits greater than £50,000?

Answer 6

19%

Question 7

What relief applies to companies who have profits that fall between £50,000 and £250,000?

Answer 7

taper relief

Question 8

What is the sum of a company’s profits and gains known as?

Answer 8

Taxable Total Profit (TTP) chargeable to corporation tax

Question 9

What basis is corporation tax assessed on?

Answer 9

a financial year which runs from 1 April on one calendar year to 31 March in the next

Question 10

How is rollover relief applies to companies in relation to corporation tax?

Answer 10

• when the company is selling a capital asset they make a gain and buy a replacement qualifying asset, they can ‘roll’ the gain made on the sale of the original asset into the purchase price of the new asset
• so they delay paying tax liability on the gain

Question 11

A company will be a close company if it is under control of:

Answer 11

• five or fewer participators
• any number of participators who are also directors

Question 12

Who is a participator?

Answer 12

a person having a share or interest in capital or income son the company

Question 13

What is the meaning of control in relation of close companies?

Answer 13

having the right to voting shares that gives participators a control of the company ie more than 50% of the voting rights

Question 14

A company will NOT be a close company if:

Answer 14

• its shares are quoted on a recognised stock exchange; or
• it is controlled by one or more non-close companies, and it could only be a close company by treating a non-close company as one of the five or fewer participators having control.

Question 15

How long does the person have to own an asset to have rollover relief applies?

Answer 15

2 years and 5% of the shareholding