Corporation Tax

Question 1

How many sets of AIA does a group of companies get?

Answer 1

Only one AIA, which is shared between them.

Question 2

If an asset that received super-deduction/full expensing is disposed of - what is the number taken for the balancing charge arising from the disposal and where is it allocated?

Answer 2

• Lower of cost and proceeds
• Not allocated to the main pool on acquisition therefore no deduction from main pool.

Question 3

Corporation periods of account cannot be longer than…?

Answer 3

• 12 months.
• The remainder would be a separate accounting period.

Question 4

What dividends do we not include when calculating augmented profits?

Answer 4

• Group dividends - a dividend from associated companies (own 50% or more).
• A foreign dividend which the question specifically states is not exempt - dividend is not grossed up for any overseas tax suffered.

Question 5

Is corporation tax applied to augmented profits?

Answer 5

No - it is taxed on TTP (total taxable profits) but augmented profits determines the rate of corporation.

Question 6

What is the marginal relief calculation for companies with augmented profits falling between £250,000 and £50,000?

Answer 6

(£250,000 - augmented profits) x (total taxable profits/augmented profits) x (3/200)

Question 7

For short accounting periods, the upper and lower limits of £50,000 and £250,000 must be…

Answer 7

Time apportioned.

Question 8

If a company has associated companies (own more than 50% of), the upper and lower limits of £50,000 and £250,000 must be…

Answer 8

Divided by the number of associated companies in the group.

Question 9

Are overseas companies included as associated companies?

Answer 9

Yes.

Question 10

Are dormant companies included as associated companies?

Answer 10

No.

Question 11

How does FYA work for special rate pool?

Answer 11

50% of the cost is added at the end before TWDV c/f.

Question 12

Are dividends from associated companies added to get augmented profits?

Answer 12

No.

Question 13

What is the threshold for large companies pertaining to corporation tax payment instalments?

Answer 13

Augmented profits are less than £1,500,000.

Question 14

What are the dates of instalments for large companies?

Answer 14

• 1st instalment - 14th day of the 7th month after the START of the accounting period. Subsequent instalments are every 3 months after.
• Final instalment (being a balancing payment) - 14th day of the 4th month after the END of the accounting period.

Question 15

If the accounting period is shorter than a year, what is the calculation for the first instalment?

Answer 15

3/number of months in accounting period x CT

Question 16

If you are not considered a large company, when is your due date for corporation tax?

Answer 16

9 months and 1 day after the accounting period.

Question 17

Is there an annual exemption allowance on chargeable gains for companies?

Answer 17

No.

Question 18

Indexation allowance is not allowed on…?

Answer 18

Assets acquired after December 2017.

Question 19

Can indexation allowance create or increase a loss?

Answer 19

No, it is restricted to whatever amount brings down the gain to 0.

Question 20

How is indexation allowance calculated?

Answer 20

(RPI for month of disposal - RPI in month of expenditure) / RPI in month of expenditure

Question 21

What is indexation allowance on gains (excluding shares) rounded to?

Answer 21

3 decimal places.

Question 22

What are the steps for share disposals?

Answer 22

1) Same day disposal
2) 9 days before disposal on a FIFO basis
3) Share pool (before disposal date)

Question 23

What is the indexation allowance for shares rounded to?

Answer 23

It isn’t rounded.

Question 24

What is an operative event?

Answer 24

• When shares acquired (other than in a bonus issue) or sold.
• Cost of shares must be indexed (accounted for inflation) for every operative event.

Question 25

What date must operative events (shares) be indexed till?

Answer 25

Till December 2017.

Question 26

For rights issues & bonus issues, do we index?

Answer 26

- Rights issues we index. - Bonus issues we don't index.

Question 27

What is the criteria for the substantial shareholding exemption?

Answer 27

- Disposal of shareholding is 10% or above, which has been held for 12 months continuously in the six years before disposal. - Must be a shareholding in a trading company. - Company selling shares must be a UK but the company that the shares are held in doesn't have to be a UK company.

Question 28

What are the two elections you can make for non-resident companies' gains?

Answer 28

- An election can be made to recognise the whole gain or loss over the whole period of ownership. - A second election can be made for the gain to be the total gain over the whole period, time apportioned for the period from 6 April 2015.

Question 29

What happens is a non-resident company makes no election on a gain?

Answer 29

The base cost is treated as the market value at 5 April 2015 and the gain is calculated as normal - with index allowance.

Question 30

Every gain that a company makes there is...?

Answer 30

Index allowance (for assets acquired before December 2017).

Question 31

When can accrued bonuses be included in total taxable profits?

Answer 31

When corporation tax has been paid within 9 months and 1 day.

Question 32

For a SRP asset that benefited from 50% FYA, how is the disposal treated?

Answer 32

- Lower of costs vs proceeds - Half is deducted from special rate pool, other half is deducted as a balancing charge.

Question 33

If AIA is available, should you use it before full-expensing on plant & machinery?

Answer 33

- Yes. - A balancing charge arises on the disposal of plant & machinery when fully-expensed at acquisition.

Question 34

When is the filing return deadline for corporation tax?

Answer 34

12 months after the accounting period (even if it is a longer accounting period).

Question 35

What must augmented profit limit (£1.5m limit for large companies) be apportioned for?

Answer 35

- Number of associated companies - Accounting period length

Question 36

Are dividends taxed?

Answer 36

No, but they are included in the augmented profits computation.

Question 37

What years is full-expensing available for?

Answer 37

1 April 2023 to 31 March 2026.

Question 38

How are pension contributions treated?

Answer 38

On a cash basis.