Corporation Tax

Question 1

Define Period of Accounts

Answer 1

Any period for which a company prepares accounts could be longer or shorter than 12 months.

Question 2

Define Accounting period

Answer 2

The period for which a charge to corporation tax is made. NEVER longer than 12 months.

Question 3

How to determine residence of a company

Answer 3

• If it’s incorporated in the UK
• Centrally managed and controlled in the UK

Question 4

Total Profits Formula

Answer 4

Total Profits = Worldwide income (excluding dividend) + net chargeable gains

Question 5

Taxable Total Profits Formula

Answer 5

TTP = Total profits - Qualifying charitable donations

Question 6

Augmented Profits formula

Answer 6

Taxable Total profits + Dividends from NON associated companies

Question 7

How to find the relevant corporation tax?

Answer 7

• Aug profits < lower limit = use small profits rate
• Aug profits > upper limit = use main rate

Question 7

What do you do if augmented profits fall in between the limits?

Answer 7

Use the main rate, however use the marginal relief deducted from corporation tax liability.

Question 8

What to do with short accounting periods

Answer 8

Adjust the upper and lower limits to match the month.

Question 9

Straddling accounting periods

Answer 9

When two accounting periods straddle each other, you break them into two if the corporation tax rates or limits change. This occurs from FY22 to FY23.

Question 10

What is control defined as?

Answer 10

If one company owns > 50% of:
- voting power
- share capital
- rights to receive net assets
- rights to receive distributable profit

Question 11

What to include in the number of associated companies?

Answer 11

• The parent company
• UK resident and overseas resident companies

do NOT include dormant companies

Question 12

What are the implications of being accosiated

Answer 12

• Upper and lower limit is divided by the number of companies in accusation.
• intra-group dividends are not included in the calculation of augmented profits.

Question 13

What are key differences for allowable expenditure in a company?

Answer 13

• Private use by the director or employee is allowable
• Dividends payable are not allowable

Question 14

Capital expenditure accounting periods (Corporation tax)

Answer 14

• Long periods are turned into one 12 month period and a short period after which is treated with the same rules as the short period rules.

Question 15

What is ECA?

Answer 15

Enhanced Capital Allowances which is available on newly purchased assets.