CH 22 - Accounting for Income Tax

Question 1

What payment types made by company to individuals are required to be paid net of income tax?

Answer 1

• patent royalties
• loan stock / debenture interest
• ‘annual payments’ (conditions apply)

Question 2

What characteristics must have a payment to be classified as ‘annual payments’ comanding company to restrict payment to be net of income tax?

Answer 2

‘Annual payments’ are payments with the following characteristics:
* * Payable under a legal obligation
* * The obligation extends for more than one year
* * Income, not capital, in the recipient’s hands
* * Represent pure income profit to the recipient, ie the recipient does not have to do anything in return for receiving the payment

Question 3

How patent royalites and annual payments received by companies from individuals are received as? (Gross/Net of Tax?)

Answer 3

Patent royalties and annual payments received by UK companies from individuals are received net of 20% tax.

Question 4

When Retrun CT61 must be made and what is due date and tax due date?

Answer 4

CT61 - must be filled by a company each quarter having witheld tax from individuals.

The due date for return and any income tax due is 14 days after then of the quarter ( Mar,June, Sep, Dec).

(if not alighned 5 return period applies, 1:3:3:3:2)

Question 4

How tax witheld under CT61 is repaid?

Answer 4

Refund tax on the tax suffered by the company is required from HMRC up to the amount of tax the company has already paid over so far in the accounting period.

Excess tax suffered (refund position) is c/fwd to a later quarters and can be fully recovered from corporation tax liablity by the end of the accounting period. (should CT liability be below tax suffered, HMRC will repay the tax sufered)