BLP: Corporate Taxation

Question 1

What is a ‘taxable supply’ for VAT purposes?

Answer 1

Any supply of goods or services made in the UK that is not exempt and is made by a taxable person in the course or furtherance of business

Question 2

When must a person register for VAT?

Answer 2

When their taxable supplies exceed £90,000 in a rolling 12-month period or when they expect supplies to exceed that threshold within 30 days

Question 3

What is the deregistration threshold for VAT?

Answer 3

£88,000 of taxable supplies in a rolling 12-month period

Question 4

What is the difference between ‘output tax’ and ‘input tax’?

Answer 4

Output tax is VAT charged on sales; input tax is VAT paid on purchases, which can be reclaimed

Question 5

How does a VAT-registered business calculate the amount to remit to HMRC each period?

Answer 5

Output tax charged minus input tax suffered equals the VAT payable (if output > input) or reclaimable (if input > output)

Question 6

What are the four categories of VAT supply?

Answer 6

Standard rated (20%), reduced rated (5%), zero rated (0%), and exempt

Question 7

Give three examples of zero-rated supplies.

Answer 7

Food for human consumption, children’s clothing, and books/newspapers

Question 8

Give three examples of exempt supplies.

Answer 8

Insurance, education services, and sale of used residential property

Question 9

What record-keeping requirement applies to VAT invoices?

Answer 9

A VAT-registered business must issue a VAT invoice for standard or reduced rate supplies to another VAT-registered business within 30 days and keep a copy

Question 10

What is the last quarter return due date for a quarterly VAT period?

Answer 10

One month and seven days after the end of that VAT quarter

Question 11

What turnover thresholds allow use of the VAT Flat Rate Scheme?

Answer 11

Annual taxable turnover up to £150,000 (excluding VAT) and total turnover up to £230,000 (including VAT and exempt income)

Question 12

What is the main benefit of the VAT Flat Rate Scheme?

Answer 12

Simplifies accounting by applying a single flat percentage to all VAT-inclusive turnover instead of tracking input tax

Question 13

Which VAT scheme allows a business to account for VAT only when invoices are paid?

Answer 13

Cash Accounting Scheme, for businesses with turnover under £1,350,000

Question 14

What criteria allow use of the Annual Accounting Scheme for VAT?

Answer 14

Turnover under £1,350,000; must make nine interim payments based on previous year’s liability and one final balancing payment

Question 15

Define ‘share capital’ in corporate tax context.

Answer 15

Money raised by a company through issuing shares, representing shareholders’ investment in the business

Question 16

What is the main rate of corporation tax for 2024/25?

Answer 16

25% on taxable total profits over £250,000

Question 17

What is the small profits rate of corporation tax for 2024/25?

Answer 17

19% on taxable total profits £50,000 or less

Question 18

What relief is available for companies with profits between £50,001 and £250,000?

Answer 18

Marginal relief: a tapered reduction so the effective rate moves from 19% to 25% as profits increase

Question 19

How is Taxable Total Profits (TTP) calculated?

Answer 19

Income profits (revenue – allowable expenditures – capital allowances) plus chargeable gains (sale proceeds – allowable costs – indexation/reliefs) equals TTP

Question 20

Which company receipts are exempt from corporation tax?

Answer 20

Dividends received by a UK company from another UK company (broadly exempt unless anti-avoidance provisions apply)

Question 21

What conditions must expenditure meet to be tax-deductible for income purposes?

Answer 21

Wholly and exclusively incurred for the purposes of the trade, not prohibited by statute, and of an income nature

Question 22

How are capital allowances calculated?

Answer 22

18% reducing balance on qualifying plant and machinery (main rate) or 100% Annual Investment Allowance up to £1 million on qualifying assets

Question 23

What is the Annual Investment Allowance (AIA) limit for 2024?

Answer 23

£1,000,000 of qualifying expenditure per year

Question 24

What is the full expensing allowance for capital expenditure?

Answer 24

100% first-year deduction on new, unused plant and machinery incurred between 1 April 2023 and 31 March 2026

Question 25

What relief allows deferral of a chargeable gain when a qualifying business asset is replaced?

Answer 25

Rollover Relief: the gain is rolled into the cost of the replacement asset, reducing its base cost

Question 26

Within what timeframe must the replacement asset be acquired to claim Rollover Relief?

Answer 26

12 months before to three years after the disposal of the original asset

Question 27

What is the purpose of the Substantial Shareholding Exemption (SSE)?

Answer 27

To exempt 100% of a chargeable gain on sale of shares in a trading company if at least 10% of ordinary share capital was held for at least 12 months within the preceding six years

Question 28

What conditions must be met for SSE to apply?

Answer 28

The disposing company must hold ≥10% of the target’s ordinary share capital for at least 12 consecutive months, and the target must be a trading company or the holding company of a trading group

Question 29

When can trading losses be carried back?

Answer 29

Against profits of the previous accounting period for the same trade, up to one year (or up to three years for final-year losses) if the company ceases trading

Question 30

How are carried-forward trading losses relieved in future periods?

Answer 30

Set off automatically against future total profits, subject to the £5 million Deductions Allowance or 50% restriction on excess profits

Question 31

What is group relief for trading losses?

Answer 31

A loss-making group company can surrender losses to a profit-making group company in the same accounting period, reducing its taxable profits

Question 32

What is the ‘straddling’ rule for corporation tax when an accounting period spans two financial years?

Answer 32

Taxable profits are apportioned on a day-count basis between the two financial years, with each portion taxed at its applicable rate

Question 33

What is a close company for tax purposes?

Answer 33

A UK company controlled by five or fewer participators or any number of participators who are also directors

Question 34

Define ‘participator’ in the context of a close company.

Answer 34

A person holding shares or interest in the capital or income of the company, including shareholders and certain creditors

Question 35

What is the tax effect on a close company that makes a loan to a participator?

Answer 35

The company pays a tax charge at 39.35% (higher-rate dividend equivalent) on the loan amount, repayable within nine months after year-end, reclaimable if the loan is repaid

Question 36

What happens if a close company writes off or waives a loan to a participator?

Answer 36

The participator is treated as receiving a dividend equal to the amount written off, subject to income tax on dividends

Question 37

How does the Close Companies regime treat distributions?

Answer 37

Benefits in kind or living accommodation provided to participators are treated as distributions and may attract tax charges

Question 38

What are the Transactions in Securities rules?

Answer 38

Anti-avoidance provisions preventing conversion of income distributions into capital distributions via close company arrangements, triggering income tax if they apply

Question 39

What is ‘share capital’ for VAT purposes?

Answer 39

(N/A—share capital is not directly a VAT concept; remove this row)

Question 40

What triggers a VAT Flat Rate Scheme election?

Answer 40

Turnover ≤£150,000 (excluding VAT) and total income ≤£230,000 (including VAT) in a 12-month period

Question 41

What is the VAT registration point for expected turnover exceeding the threshold in 30 days?

Answer 41

Must notify HMRC within 30 days and become registered from the beginning of that 30-day period