Additional aspects of corporation tax

Question 1

How is NTLR element of total taxable profits calculated?

Answer 1

NTLR interest received - NTLR interest payable.

Question 2

Is overdue corporation tax NTLR?

Answer 2

Yes, it is non-trade related.

Question 3

Is interest on a loan to buy or improve a property NTLR?

Answer 3

Yes.

Question 4

Is rent a qualifying expenditure for R&D?

Answer 4

No.

Question 5

Does profit or loss on disposals of debt instruments fall under NTLR?

Answer 5

Yes.

Question 6

Is there indexation allowance on disposals of debt instruments?

Answer 6

No.

Question 7

What are the two types of R&D expenditure?

Answer 7

• Revenue expenditure
• Capital expenditure

Question 8

Is qualifying R&D revenue expenditure treated as an allowable expense?

Answer 8

Yes.

Question 9

How is RDEC (only on revenue expenditure) calculated?

Answer 9

• 20% of revenue expenditure is firstly added in TTP computation.
• The 20% of revenue expenditure is then deducted after corporation tax liability is calculated.

Question 10

When DTR interacts with other deductions (trade losses & qualifying donations), how are deductions treated?

Answer 10

• Firstly deduct against UK income.
• Then deduct against foreign income suffering the LOWEST rate of tax.

Question 11

What is the FYA allowance on capital R&D expenditure?

Answer 11

100% (except land).

Question 12

DTR is on the lower of…?

Answer 12

• UK corporation tax on foreign income
• Overseas tax suffered on foreign income

Question 13

When is DTR available on underlying tax (UT)?

Answer 13

If the UK company controls at least 10% of the overseas company.

Question 14

How is UT calculated?

Answer 14

Dividend gross of withholding tax / distributable profits x overseas corporation tax paid

Question 15

Once the gross dividend has been calculated (dividend + WHT + UT), how is DTR applied?

Answer 15

Lower of:
- UK corporation tax
- Overseas tax (Withholding tax + underlying tax)

Question 16

If subcontractors are unconnected to the company then what percentage of payment to subcontractors is eligible for RDEC?

Answer 16

65% of the payment.

Question 17

If the subcontractor is a connected company, RDEC is claimed on the lower of…?

Answer 17

Lower of:
- payment made to connected subcontractor
- relevant expenditure incurred by the subcontractor

Question 18

In the exam, do you assume the company is connected or unconnected if not stated?

Answer 18

• Unconnected.
• But a company can elect to make subcontractors a connected company.