Corporate Tax Flashcards
(93 cards)
1
Q
What is VAT charged on?
A
Any supply of goods or services made in the UK where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by that person.
2
Q
Define ‘taxable supply’.
A
Any supply made in the UK which is not an exempt supply.
3
Q
Who is considered a ‘taxable person’?
A
A person who is, or is required to be, registered for VAT purposes, including individuals, partners, companies, and unincorporated organisations.
4
Q
What does ‘in the course or furtherance of any business’ refer to?
A
‘Business’ is a very wide term and includes any economic activity carried on regularly, excluding an employee’s services to an employer.
5
Q
What is the current VAT registration threshold?
A
£90,000.
6
Q
When must a person notify HMRC of exceeding the VAT registration threshold?
A
Within 30 days of the end of the month in which the threshold was exceeded.
7
Q
What is ‘output tax’?
A
The VAT chargeable by a business when making a supply of goods or services.
8
Q
What is ‘input tax’?
A
The VAT paid by a person on goods or services supplied to them.
9
Q
What is the standard rate of VAT currently?
A
20%.
10
Q
How is VAT calculated on a VAT inclusive price?
A
Multiply the price by the VAT fraction, which is currently 1/6.
11
Q
List the four types of supply under VAT.
A
- Standard Rated
- Reduced Rated
- Zero Rated
- Exempt
12
Q
What is the VAT rate for standard rated supplies?
A
20%.
13
Q
What types of supplies are reduced rated at 5%?
A
- Domestic heating and power
- Installation of mobility aids for the elderly
- Smoking cessation products
- Children’s car seats
14
Q
What items are included in zero rated supplies?
A
- Certain food categories
- Sewerage and water
- Books/newspapers
- Talking books for the blind
- New houses and their construction
- Public transport
- Children’s clothing
15
Q
What are exempt supplies?
A
Supplies that include insurance, finance, education/health services, and the sale of land and buildings (with exceptions).
16
Q
What is the main rate of corporation tax for the 2024/2025 tax year for companies with TTP greater than £250,000?
A
25%.
17
Q
What is TTP?
A
Taxable total profits chargeable to corporation tax.
18
Q
What are the most common types of company income?
A
- Rental income
- Trading income
- Interest
- Dividend income
19
Q
Are dividends paid to UK companies subject to corporation tax?
A
Generally exempt unless certain anti-avoidance provisions apply.
20
Q
What constitutes deductible expenditure for tax purposes?
A
Expenditure that is ‘wholly and exclusively’ incurred for the purposes of the trade.
21
Q
True or False: Input tax attributable to exempt supplies is recoverable.
A
False.
22
Q
What must a taxable business provide when making a standard or reduced rate supply?
A
A VAT invoice within 30 days of the supply.
23
Q
What is the due date for submitting a VAT Return to HMRC?
A
Usually within one month and seven days after the end of the VAT period.
24
Q
What is the threshold for businesses to opt for a cash accounting scheme?
A
Annual turnover less than £1,350,000.
25
What is the current deregistration threshold?
£88,000.
26
What is the purpose of the flat rate scheme?
To charge VAT at a flat rate on turnover rather than on every single transaction.
27
What tax liability does the tax already paid satisfy for the recipient company?
The recipient company’s tax liability in respect of the dividend.
28
Is the dividend tax deductible for the company paying it?
No, the dividend is not tax deductible for the company paying it.
29
What is tax deductible expenditure?
Expenditure by a company that is permitted to deduct from its income receipts, thereby reducing its overall tax bill.
30
What are the requirements for expenditure to be deductible for tax purposes?
* Wholly and exclusively incurred for trade purposes
* Not prohibited by statute
* Of an income nature
31
What is the corporate interest restriction (CIR)?
A limitation where a company with more than £2 million of net interest expense may only deduct a maximum of 30% of its income receipts.
32
Are capital expenditures generally deductible for calculating income profits?
No, capital expenditures are generally not deductible for calculating income profits.
33
What are capital allowances?
Tax reliefs available on qualifying items of capital expenditure.
34
What is the main rate capital allowance for plant and machinery?
Companies can deduct 18% of the value of plant and machinery on a reducing balance basis.
35
What is the annual investment allowance (AIA)?
Allows a company to deduct 100% of expenditure on new, used, and refurbished plant and machinery up to £1 million.
36
What is the tax written down value (TWDV) after claiming capital allowances?
The remaining value of plant and machinery for tax purposes after capital allowances are deducted.
37
What is full expensing in capital allowances?
A new allowance allowing companies to deduct 100% of the cost of new and unused plant and machinery, uncapped.
38
What is the super-deduction allowance?
A temporary capital allowance allowing companies to claim 130% first-year relief on qualifying plant and machinery expenditure.
39
What is the calculation for chargeable gains?
Sale proceeds less allowable expenditure, indexation allowance, and capital/trading losses.
40
What is the Substantial Shareholding Exemption (SSE)?
A relief that can exempt from corporation tax the whole of a chargeable gain from disposing of shares in a trading company under certain conditions.
41
What is rollover relief?
A tax deferral mechanism allowing deferral of tax on gains from the disposal of a qualifying asset when a replacement asset is purchased.
42
What types of assets qualify for rollover relief?
* Land and buildings
* Goodwill
* Fixed plant and machinery
* Ships and hovercraft
* Aircraft
* Lloyd’s syndicate capacity
43
What is the timing requirement for purchasing a replacement asset under rollover relief?
The replacement asset must be purchased within 12 months before or three years after the sale of the old asset.
44
What happens if not all sale proceeds are used to acquire the new asset in rollover relief?
The gain to be rolled over is reduced by the amount of sale proceeds not reinvested.
45
What is 'straddling' in the context of corporation tax?
When a company’s accounting year does not coincide with a financial year, requiring apportionment of TTP between FYs.
46
How can trading losses be set off for corporation tax purposes?
* Current year profits
* Previous year profits
* Future trading profits
47
What is a trading loss?
Occurs when tax deductible expenditure exceeds income receipts for a specific period.
48
What is the time frame for carrying back trading losses?
12 months of trading losses can be carried back against profits made in the three years prior.
49
What happens to unused trading losses in future accounting periods?
They are automatically carried forward and set against all the company’s taxable total profits.
50
What is the Deductions Allowance for carried forward losses?
Carried forward losses may be used against taxable profits of up to £5 million in each accounting period.
51
What is 'loss restriction' in the context of carried forward losses?
Carried forward losses may relieve a maximum of 50% of unrelieved profits exceeding the Deductions Allowance.
52
What is group relief?
One company with a trading loss can surrender that loss to another profitable company in the group.
53
What are the anti-avoidance rules regarding trading losses?
Trading losses cannot be carried forward or back if the company has been sold and the trade has substantially changed within five years.
54
What temporary measure was introduced regarding trading losses due to the pandemic?
Trading losses incurred between 1 April 2020 and 31 March 2022 could be carried back for an additional two years with caps.
55
What is the general rule for deductibility of capital losses?
Capital losses can only be set off against capital gains and cannot generally be carried back.
56
What is the Deductions Allowance for carried forward capital losses?
Carried forward capital losses may be used against capital gains of up to the available Deductions Allowance.
57
How long can capital losses be carried forward?
Capital losses can be carried forward indefinitely within the company that made them.
58
What must be done to crystallize a capital loss?
A claim must be made to HMRC within four years from the end of the accounting period in which the loss arose.
59
What is the procedure for companies with TTP of £1,500,000 or less?
Estimate tax liability and pay HMRC within 9 months and one day, and file a tax return within 12 months.
60
What is the procedure for companies with TTP of more than £1,500,000?
They must pay their tax bills in four installments over the relevant accounting period.
61
What does 'Profits' mean in the context of corporation tax?
'Profits' means income profits and chargeable gains.
62
What is rollover relief?
Rollover relief defers tax due on disposal of a qualifying asset by rolling the gain into the replacement asset's base cost.
63
What are the characteristics of close companies?
Close companies are under the control of five or fewer participators or any number of participators who are also directors.
64
What qualifies a company as a close company?
A company is close if it is controlled by five or fewer participators or any number of participators who are directors.
65
What is a 'Participator'?
A participator is a person having a share or interest in capital or income of the company.
66
What is meant by 'Control' in the context of close companies?
Control refers to the ability to exercise control over the company’s affairs, typically by voting rights.
67
What are exclusions from the definition of a close company?
A company is not a close company if its shares are quoted on a stock exchange or controlled by non-close companies.
68
What are the tax implications of loans to participators?
A company must pay corporation tax on the loan amount, and the recipient participator may be deemed to receive a dividend if the loan is written off.
69
What is the definition of 'Material Interest'?
Material Interest means indirect control of more than 5% of the ordinary share capital.
70
What does the term 'distribution' include for close companies?
Distribution includes living accommodation and other benefits in kind provided to participators.
71
What are the Inheritance Tax implications for close companies?
A transfer of value by a close company results in the value being apportioned between its shareholders.
72
What are the Transactions in Securities rules?
These rules apply to transactions that give a tax advantage by changing income into capital receipts.
73
True or False: Close companies are subject to special tax treatment.
True
74
What is the maximum corporation tax rate applied to profits?
25%
75
Fill in the blank: Capital losses can be set off against _______.
capital gains
76
What is the stationery trading loss in the year 2023/24?
£200,000
## Footnote
This loss is set off against the trading profits made by the printing business in the same year.
77
What is the amount of the unused loss at the end of the year 2023/24?
£25,000
## Footnote
This unused loss can potentially be used in future accounting years.
78
In which year can the unused loss of £25,000 be set off against trading profits?
2024/25
## Footnote
It can be set off against trading profits of either the printing or stationery business.
79
Can the capital loss of £27,000 in the printing business be carried back to offset against capital gains in 2022/23?
No
## Footnote
The capital loss cannot be carried back or forward due to lack of chargeable gains.
80
What is the trading income recorded by Select Limited for the accounting period?
£2,700,000
81
What is the total outgoings recorded by Select Limited?
£1,053,500
## Footnote
This includes wages, heating costs, trade expenses, advertising costs, interest, and capital allowances.
82
What is the taxable income profits figure for Select Limited?
£1,646,500
83
What is included in the taxable income profits calculation?
Gross income receipts minus tax deductible expenditure
## Footnote
Tax deductible expenditure includes wages, heating costs, trade expenses, advertising costs, and interest.
84
What is the chargeable gain on the sale of land for Select Limited?
£37,000
85
What is the total taxable profit (TTP) for Select Limited after including the chargeable gain?
£1,683,500
86
What is the corporation tax rate applied to Select Limited's TTP?
25%
87
What is the corporation tax payable by Select Limited?
£420,875
88
What is the deadline for paying corporation tax for companies with TTP over £1,500,000?
Four instalments spread over the accounting period
## Footnote
Specific deadline to avoid penalties is dependent on the accounting period.
89
What is the sale price of the office premises sold by Jones Fabrication Limited?
£94,000
90
What was the original purchase price of the office premises sold by JFL?
£69,000
91
What is the indexation allowance for JFL's office premises sale?
£14,000
92
What relief can JFL claim for selling and purchasing business assets?
Rollover relief
## Footnote
This allows deferral of tax on gains by reducing the base cost of the new asset.
93
What is the new tax base cost of the replacement asset for JFL?
£111,000
