CH 1 - Introduction to corporation tax

Question 1

When a company is UK resident for CT purposes?

Answer 1

A company is UK resident if it is either:
* incorporated in the UK (A Ltd or A plc), or
* centrally managed and controlled from the UK.

Question 2

on what a non-resident companies are still liable to CT?

Answer 2

• trading profits, UK property income and chargeable gains of a UK permanent establishment, and
• UK property income and chargeable gains from disposals of UK land and buildings.

Question 3

when an accounting period begins?

Answer 3

on earliest of;
* the commencement of trading by the company;
* the acquisition of a source of income;
* the company becoming resident in the United Kingdom;
* immediately after the previous accounting period ends.

Question 4

When accounting period ends?

Answer 4

on earliest of;
* the cessation or commencement of trading;
* the end of a company’s period of account;
* 12 months after it began;
* the company beginning or ceasing to be resident in the United Kingdom.

An accounting period can never exceed 12 months in length.

Question 5

What are deductible qualifying charitable donations in arriving at TTP?

Answer 5

Donations to national charities of;
* cash
* shares quoted on a recognised stock exchange
* UK land and buildings

Donations to charity are paid gross by companies.

Question 6

What a company can do with a post-cessation reciepts?

Answer 6

Company can ellect within 6 years following cessation to be related back to the date of cessation to set against unsused trading losses.

Question 7

When buildings qualifies for SBA?

Answer 7

• where construction takes place on/after 2018
• is used for non-residential purpose
• new buildings and structures
• renovation/conversion of an existing building

Question 8

How is SBA calculated?

Answer 8

qualifying expenditure x 3% per annum (time approportioned)

Question 9

What includes qualifying expenditure for SBA?

Answer 9

• construction cost
• land preparation cost
• demolition cost
• does not include cost of land or planning permission (incl. legal fees & stamp duty)

Question 10

What happens on sale with SBA?
(for buyer and seller)

Answer 10

SELLER
no balancing adjustment on sale for seller
SBA = qualifying expenditure × 3% × (number of months in AP before sale ÷ 12)

add total amount of SBA’s claimed to the consideration received in the calculation of the chargeable gain/allowable capital loss
(this claws back the allowances previously given)

BUYER
SBA = qualifying expenditure$ × 3% × (number of months used in AP of purchase ÷ 12)

$-Qualifying expenditure is always the original qualifying expenditure incurred by the first ever user of the building.

SBA gives tax relief for the original qualifying expenditure over 33 1⁄3 years.

Question 11

What is a special tax sites annual rate relief?

Answer 11

There is relief at an annual rate of 10% for special tax site qualifying expenditure incurred by a company on S&B.