Corporation tax Flashcards
(45 cards)
What is Corporation Tax payable on?
All income profits and chargeable gains of a body corporate that arise in its accounting period
How is Total Taxable Profits calculated?
Sum of profits and gains
With regard to what time frame is corporation tax assessed?
The financial year - although the company can still choose its own accounting period
What is the Corporation Tax rate for companies with profits greater than £250,000?
25%
What is the Corporation Tax rate for profits between £50,000 and £250,000?
19%
What is the basic calculation for coporation tax?
- Income profits (= income receipts - deductible debts - capital allownace - trading losses)
- Chargeable gains (no AE)
- Consider straddling or reliefs
- Total the numbers
What is the process for calculating chargeable income?
Aggregate all chargeable income receipts (rent, trading income, interest, dividend) and deduct all tax-deductible expenditure.
What qualifies as deductible expenditure for income purposes?
Expenditure must be:
- wholly and exclusively incurred for the purposes of the trade
- not prohibited by statute
- of an income nature with an element of recurrence.
What are Capital Allowances?
Deductions against income receipts for qualifying capital expenditure incurred on plant and machinery.
Deduct from income
What percentage of Plant and Machinery value can companies deduct annually?
Companies can deduct 18% of the value of Plant and Machinery from their income receipts each year.
What happens when a company claims capital allowances on P&M?
The value of the P&M is reduced by 18%, giving the Tax Written Down Value.
What is the Annual Investment Allowance?
A company can deduct 100% of expenditure up to a specified amount, currently £1 million.
What happens to expenditure above the Annual Investment Allowance limit?
Normal capital allowance of 18% can be applied to the balance of any expenditure above that amount.
What is Full Expensing?
A new capital allowance that allows companies to deduct 100% of the cost of new and unused plant and machinery.
When must a claim for Full Expensing be made?
Claim must be made in the period in which expenditure is incurred.
What are the rules for calculating chargeable gains for companies?
The same rules apply as for individuals. Initial expenditure, subsequent expenditure, and costs of disposal can be deducted.
BUT no AE!
What is the status of the indexation allowance for companies?
The indexation allowance continues to be available for companies but is frozen.
What is the Substantial Shareholding Exemption?
It exempts a company from corporation tax when it disposes of shares in a trading company, provided certain conditions are met
This is not BADR or IR (for individuals only)
What are the conditions for the Substantial Shareholding Exemption?
The disposing company must hold at least 10% of the ordinary share capital for at least 12 consecutive months in the last 6 years.
What is Rollover Relief?
It is a tax deferral mechanism when a company/sole trader/partnership disposes of one qualifying business asset but buys another qualifying asset.
Does Rollover Relief apply to individuals?
Yes, it also applies when an individual owns, sells, and buys the asset for their company.
Does the replacement asset need to be the same type as the original asset for Rollover Relief?
No, it does not have to be the same type of asset.
When is tax postponed until under Rollover Relief?
Tax is postponed until the replacement asset is sold.
What are the qualifying assets for Rollover Relief?
Qualifying assets include:
- land and buildings
- goodwill
- fixed plant and machinery
- ships and hovercraft
- aircraft
- Lloyd Syndicate Capacity.
