Corporate taxation Flashcards
(223 cards)
1
Q
What tax applies to UK goods and services?
A
VAT
2
Q
What two conditions define a VAT supply?
A
Taxable supply Taxable person
3
Q
What is consideration for a supply?
A
Payment
4
Q
Where must supply of goods or services occur for UK VAT?
A
UK
5
Q
What kind of supply is not exempt?
A
Taxable supply
6
Q
Who must register for VAT?
A
Taxable person
7
Q
What constitutes business for VAT?
A
Economic activity
8
Q
What is excluded from business for VAT?
A
Employment services
9
Q
What is a VAT registered person or required to be?
A
Taxable business
10
Q
When must one register for VAT exceeding the threshold?
A
End of month
11
Q
How soon after exceeding the threshold must one notify HMRC?
A
Thirty days
12
Q
When does VAT registration start after exceeding the threshold?
A
Beginning of second month
13
Q
When must one register for expected VAT exceeding the threshold?
A
Any time
14
Q
What is the notification period for expected VAT exceeding the threshold?
A
Thirty days
15
Q
When does VAT registration start for expected threshold breach?
A
Beginning of thirty days
16
Q
What is the current VAT registration threshold?
A
£90000
17
Q
What is optional VAT registration called?
A
Voluntary
18
Q
What benefit does voluntary VAT registration offer?
A
Input VAT recovery
19
Q
What is a drawback of voluntary VAT registration?
A
Charging output VAT
20
Q
When can a VAT registration be cancelled?
A
Future annual taxable supplies below threshold
21
Q
What is the current VAT deregistration threshold?
A
£88000
22
Q
What is VAT charged on a business’s supplies?
A
Output tax
23
Q
What is VAT paid on a business’s purchases?
A
Input tax
24
Q
What can a VAT registered business offset?
A
Input tax against output tax
25
Who does a business pay the difference between output and input tax to?
HMRC
26
What role does a business play in VAT collection?
Tax collector
27
Can input tax be reclaimed without current output tax?
Usually yes
28
What determines the applicable VAT rate?
Type of supply
29
What is the current standard VAT rate?
0.2
30
What is assumed about a price if not stated otherwise?
VAT inclusive
31
What fraction calculates VAT from a VAT inclusive price at standard rate?
1/6
32
Who accounts for the VAT element of a VAT inclusive price?
Seller
33
What can a seller deduct from output VAT owed?
Input VAT incurred
34
How can prices be expressed regarding VAT?
Exclusive of VAT
35
What VAT rate applies generally?
Standard rate
36
What happens if a supply doesn't fit other VAT categories?
Standard rated
37
What can a VAT registered business do with input tax on standard rated supplies?
Recover
38
What is the VAT rate for a limited number of supplies like domestic fuel?
0.05
39
Name a supply with a reduced VAT rate?
Domestic heating
40
What is the VAT rate for zero rated supplies?
0
41
Are zero rated supplies taxable?
Yes
42
What benefit does making zero rated supplies offer?
Input VAT recovery
43
Name a zero rated supply?
Food
44
What VAT rate applies to exempt supplies?
None
45
Can input tax be recovered on exempt supplies?
No
46
Name an exempt supply?
Insurance
47
What is required for businesses above the VAT registration threshold regarding records?
Online records
48
What document must a taxable business provide to another for standard rated supply?
VAT invoice
49
How long does a business have to provide a VAT invoice?
Thirty days
50
How often must taxable businesses submit a VAT Return?
Every three months
51
When is the VAT Return usually due?
One month seven days after period end
52
What does the VAT Return show?
Output tax less input tax
53
When must businesses make monthly VAT payments on account?
High VAT payments
54
Name a special VAT scheme?
Retail Schemes
55
What difficulty do retail schemes address?
Issuing VAT invoices to public
56
What is a condition for using the cash accounting scheme?
Turnover below £1350000
57
When is output tax accounted for under cash accounting?
When invoice is paid
58
When can input tax be recovered under cash accounting?
When supplier is paid
59
What is a condition for using the annual accounting scheme?
Turnover not exceeding £1350000
60
How is VAT paid under the annual accounting scheme?
Instalments
61
What is a condition for using the flat rate scheme?
Turnover below £150000
62
Is input VAT usually recoverable under the flat rate scheme?
No
63
What determines the flat rate percentage?
Type of business
64
What rate applies to limited cost traders under the flat rate scheme?
0.165
65
What is the term for VAT charged by a business on its sales?
Output
66
What is the term for VAT paid by a business on its purchases?
Input
67
What happens to input tax related to exempt supplies?
Not recoverable
68
What is the default assumption about prices?
VAT inclusive
69
What is taxed under the corporation tax system?
Companies profits and gains
70
What two items form a company's taxable total profits?
Income profits Chargeable gains
71
What is the abbreviation for taxable total profits?
TTP
72
What period is used to assess corporation tax?
Financial year
73
Can a company's accounting period differ from the financial year?
Yes
74
What determines the amount of corporation tax payable?
Taxable total profits
75
What is the main corporation tax rate for high profits in 2024/2025?
0.25
76
What TTP amount triggers the main corporation tax rate?
Over £250000
77
What is the lower corporation tax rate in 2024/2025?
0.19
78
What TTP amount qualifies for the lower corporation tax rate?
£50000 or less
79
What relief may apply between the lower and main TTP thresholds?
Marginal relief
80
What is the effect of marginal relief?
Tapering tax rate
81
Are capital and income receipts taxed at different corporation tax rates?
No
82
What distinguishes income receipts and expenditure?
Everyday trading
83
What distinguishes capital receipts and expenditure?
One-off transactions
84
What are income receipts from business activity not exempt?
Chargeable income receipts
85
How are taxable income profits calculated?
Aggregate receipts less deductible expenditure
86
Name a common type of company income?
Rental income
87
Is trading income subject to corporation tax?
Yes
88
Is interest income usually subject to corporation tax?
Yes
89
Are dividends paid to UK companies always subject to corporation tax?
No
90
What is the general rule for dividends received by UK companies?
Generally exempt
91
Why are received dividends generally exempt from corporation tax?
Tax already paid
92
Are dividends paid by a company tax deductible?
No
93
What is expenditure deductible from income receipts called?
Tax deductible expenditure
94
What is a key condition for expenditure to be tax deductible?
Wholly and exclusively for trade
95
Is expenditure partly by way of gift tax deductible?
No
96
Is business entertainment expenditure tax deductible?
No
97
Are provisions for doubtful debts tax deductible?
No
98
Name an example of tax deductible income expenditure?
Rent
99
Are interest payments on business loans usually deductible?
Yes
100
What restriction may apply to large net interest expenses?
Corporate interest restriction
101
What is the broad limit for deductible interest under CIR?
30% of income receipts
102
Is depreciation an allowable deduction for tax purposes?
No
103
What allowance allows spreading the cost of capital assets?
Capital allowances
104
Are capital allowances deducted from income or capital receipts?
Income receipts
105
What type of expenditure qualifies for main rate capital allowance?
Plant and machinery
106
What is the main rate of capital allowance?
0.18
107
What basis is the main rate capital allowance calculated on?
Reducing balance
108
What is the tax value of plant and machinery after claiming allowances called?
Tax written down value
109
What is the abbreviation for tax written down value?
TWDV
110
What other capital allowance allows 100% deduction?
Annual investment allowance
111
What is the abbreviation for annual investment allowance?
AIA
112
What is the current limit for AIA per year?
£1 million
113
Can AIA be claimed on used plant and machinery?
Yes
114
What happens to expenditure above the AIA limit?
Normal capital allowance applies
115
What is the capital allowance allowing 100% deduction for companies on new P&M?
Full expensing
116
Is there a cap on the full expensing allowance?
No
117
Is full expensing a first year allowance?
Yes
118
What temporary allowance offered 130% relief on new P&M?
Super-deduction
119
Did the super-deduction apply to used assets?
No
120
Can trading losses offset profits?
Yes
121
What is the calculation for chargeable gains?
Sale proceeds less allowable expenditure indexation losses
122
What arises when a company sells a capital asset?
Sale proceeds
123
Are the rules for allowable expenditure the same for companies and individuals?
Yes
124
Is there an annual exemption for capital gains for companies?
No
125
Is indexation allowance still available for companies?
Yes
126
Up to what date is indexation allowance frozen?
31 December 2017
127
What exemption can apply to gains on disposal of shares in trading companies?
Substantial Shareholding Exemption
128
What is the minimum shareholding for SSE?
0.1
129
What is the minimum holding period for SSE?
Twelve consecutive months
130
Can individuals claim Substantial Shareholding Exemption?
No
131
Can companies claim Business Asset Disposal Relief?
No
132
Can companies claim Investors Relief?
No
133
Can trading losses offset capital gains?
Yes
134
Can capital losses offset trading profits?
No
135
What relief defers tax on replacement of business assets?
Rollover relief
136
Is rollover relief a tax deferral or exemption?
Deferral
137
Must the replacement asset be the same type as the old asset for rollover relief?
No
138
How does rollover relief affect the cost of the new asset?
Reduces it by the gain
139
When is tax postponed under rollover relief?
Until replacement asset is sold without new replacement
140
Name a qualifying asset for rollover relief?
Land and buildings
141
What is the time limit for purchasing a replacement asset before disposal?
Twelve months
142
What is the time limit for purchasing a replacement asset after disposal?
Three years
143
How is rollover relief restricted if not all sale proceeds are reinvested?
Gain reduced by unreinvested amount
144
What happens if unreinvested proceeds exceed the gain?
No rollover relief
145
What is it called when a company's accounting year spans two financial years?
Straddling
146
How is TTP treated if an accounting year straddles financial years with different tax rates?
Apportioned between FYs
147
How are the proportions of TTP taxed in a straddling year?
At the applicable rates for each FY
148
What is a trading loss?
Deductible expenditure exceeds income receipts
149
Against what profits can current year trading losses be offset?
All other profits
150
What is the time limit to claim offset of current year trading losses?
Two years
151
Against what profits can trading losses be carried back?
Taxable profits of the previous year
152
What condition applies to carrying back trading losses?
Same trade in both years
153
What is the carry back period for losses in the final 12 months of trading?
Three years
154
Against what profits are carried forward trading losses set?
All future taxable total profits
155
Must the company continue the same trade to use carried forward losses?
Yes
156
Is the use of carried forward losses restricted to profits of the same trade?
No
157
What annual limit applies to setting off carried forward losses?
£5 million Deductions Allowance
158
What happens if taxable profits exceed the Deductions Allowance?
Loss restriction
159
What is the maximum percentage of unrelieved profits that can be offset by carried forward losses?
0.5
160
Does the Deductions Allowance apply per company or per group?
Per group
161
What tactical decision is needed regarding the Deductions Allowance?
Allocation between trading and capital losses
162
What allows a loss-making company to transfer losses to a profitable group member?
Group relief
163
What rules prevent loss carry forward/back after a change in ownership and trade?
Anti-avoidance rules
164
What was the temporary extension for carrying back trading losses due to the pandemic?
Extended carry back period
165
Can capital losses offset income profits?
No
166
Against what can capital losses generally be set off?
Capital gains
167
Can capital losses be carried back to a previous year?
Generally no
168
Against what can carried forward capital losses be set?
Future capital gains
169
Is there a time limit for carrying forward capital losses?
No
170
What limit applies to setting off carried forward capital losses against capital gains?
Deductions Allowance
171
What happens if capital gains exceed the Deductions Allowance?
Loss restriction
172
What is the maximum percentage of unrelieved capital gains that can be offset by carried forward losses?
0.5
173
Is there a time limit to claim a capital loss?
Four years from end of accounting period
174
When must companies with TTP under £1.5m pay corporation tax?
Nine months and one day after period end
175
When must companies with TTP under £1.5m file a tax return?
Twelve months after period end
176
How are tax returns usually filed?
Electronically
177
When is a company's tax computation usually finalised for smaller companies?
Twelve months after filing date
178
How do larger companies pay their corporation tax?
Four installments
179
What is the definition of profits for corporation tax purposes?
Income profits and chargeable gains
180
What type of expenditure reduces income profits?
Deductible expenditure
181
What type of allowance reduces income receipts?
Capital allowances
182
What type of expenditure reduces chargeable gains?
Allowable expenditure
183
What relief defers tax on disposal of qualifying assets?
Rollover relief
184
Are dividends received by companies generally taxed?
No
185
Can losses reduce a company's tax liability?
Yes
186
What type of companies face special tax treatment?
Close companies
187
What is the purpose of the close company tax regime?
Anti-avoidance
188
How many or fewer participators can control a close company?
Five
189
Can any number of director participators control a close company?
Yes
190
Who is a participator in a close company?
Shareholder some creditors
191
What does control usually mean in a close company context?
Voting rights income assets on winding up
192
What percentage of income if distributed indicates control?
More than 50%
193
What proportion of assets on winding up indicates control?
Greater part
194
When is a company not considered a close company due to stock exchange listing?
Shares quoted on recognised exchange
195
When is a company not a close company due to non-close company control?
Controlled by one or more non-close companies
196
What type of subsidiary is usually not a close company?
Wholly-owned of non-close company
197
Whose rights are considered when assessing control?
Nominees associates controlled companies
198
Who is considered an associate for close company control?
Close relative
199
Who is a nominee in a close company context?
Person owning property for another
200
What are advances of credit to participators usually considered?
Loans
201
What type of credit for goods or services is usually exempt from loan rules?
Short duration normal limit
202
What type of loan by a money lending business is exempt?
Ordinary course of business
203
What aggregate loan amount to a full-time non-material interest worker is exempt?
£15000
204
What level of indirect share control constitutes material interest?
More than 5%
205
What entitlement on winding up constitutes material interest?
More than 5% of assets
206
Who pays corporation tax on loans to participators?
The company
207
At what rate is tax on loans to participators calculated?
Higher rate income tax on dividends
208
When must tax on loans to participators be paid?
Nine months one day after period end
209
When can a company claim a refund of tax paid on a loan?
Loan repaid satisfied written off waived
210
What is a written off or waived loan treated as for the participator?
Dividend
211
Is there a tax effect for the participator if a loan is repaid in full?
No
212
Does distribution have a wider meaning for close companies?
Yes
213
What benefits in kind to participators can be considered distributions?
Living accommodation other benefits
214
Are benefits by reason of employment usually considered distributions?
No
215
What tax is relevant to transfers of value by close companies?
Inheritance Tax
216
Who ultimately bears the IHT burden from a close company transfer?
Shareholders
217
What rules can apply to transactions giving a tax advantage by changing income to capital?
Transactions in Securities rules
218
What example illustrates the Transactions in Securities rules?
Winding up instead of dividend
219
What action may be advisable for transactions under these rules?
Apply to HMRC for advance clearance
220
Who typically advises on seeking advance clearance from HMRC?
Specialist tax advisers
221
Are close companies generally larger companies?
No
222
How many or fewer participators or director participators can trigger close company status?
Five or any number of director participators
223
Are there tax implications for both the company and the borrowing participator for loans?
Yes
