Corporation Tax

Question 1

What is a large company?

Answer 1

One with augmented profits > £1,500,000 and < £20m

Question 2

When is a large company not a large company?

Answer 2

If it has a tax liability of less than £10k

OR

It was not a large company in the preceding 12 months and it has augmented profits of not more than £10 million in the current accounting period

Question 3

When are CT installments due for a large company?

Answer 3

14th of 7th month in accounting period, then every 3 months until the 14th day of the fourth month after the end of the accounting period

Question 4

How do you work out the value of each instalment in a corporation tax period?

Answer 4

3 x CT/n where n is the number of months of the accounting period

Question 5

When is a company very large?

Answer 5

When it’s augmented profits exceed £20m

Unless it’s tax liability is less than £10k

Question 6

What would make a company exempt from CT on gain from sales of shares in another company?

Answer 6

If they were a substantial shareholder - I.e. a holding of at least 10% of the ordinary share capital + entitled to 10% of distributable profits and 10% of the assets on winding up for a continuous period of at least 12m during the six years prior to disposal

Question 7

What are the restrictions on carried forward relief for CT?

Answer 7

£5m per 12m period

50% of excess profits over this amount

Question 8

How far back can you use terminal loss relief?

Answer 8

36 months (prior to the year of the loss) on a LIFO basis

Question 9

How do you deal with non-trade loan relationship deficits?

Answer 9

Take the NTLRD off the profit that same year

Question 10

What is the order of losses out of trading profit, property losses, non-trading loan relationships

Answer 10

NTLRDs
Property
Trading losses

Question 11

What is the difference between a group relief group and a chargeable gains group?

Answer 11

Group relief group is all 75% of the boss company

Chargeable gains is 75% one company to another and any company has to be 51% of the boss company

Question 12

What is the corporation tax proforma?

Answer 12

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Trade income
Property income
Non-trade loan relationships
Misc income
Chargeable gains
Total profits
Qualifying charity donations
Total taxable profits

Question 13

What are the R&D expenditure rules for Small and Medium enterprise?

Answer 13

You get an enhanced deduction
An extra 130% in R&D revenue expenditure

Also 100% first year allowance on R&D

If you subcontract revenue expense, you only get 65% of the 130%

Question 14

How many months are in a corporation tax year?

Answer 14

The first 12 months of the accounting period, no more

Question 15

What happened with revenue expenditure for large corporations? Or also Smes that are doing R&D for a large company?

Answer 15

You work out 12% of the total qualifying R&D expense

You then add this to ttp, work out the ct at 19% and then take the same R&D credit amount of this tax figure

Question 16

Should you add loss on a patent into trading profits or not?

Answer 16

Yes, assuming it is used in trade of the biz

Question 17

What is Sse?

Answer 17

Substantial shareholding exemption

• if you have held 10% or more of shares in a trading company and you are a trading company AND
• you have held them for 12 months continuous or more with the last two years

Then you can deduct gains from selling these shares

Question 18

How do CT instalments work if you have less than 12m?

Answer 18

Each instalment is 3 months and then there is a balancing payment when less than 3 months can make up the last instalment

Question 19

When making consol accounts, and a loss is incurred in a sub, what do you put in the trading income bit?

Answer 19

Nil, you then can do loss relief first against the other income that sub has and then against other entities in the group

Question 20

What is a substantial shareholding?

Answer 20

• a holding of at least 10% of the ordinary share capital….
• for a continuous period of TWELVE MONTHS during the 6 years preceding the disposal

Question 21

What is the substantial shareholding exemption?

Answer 21

If a company disposes of shares in a trading company out of a substantial shareholding:

• any Capital gain arising is exempt from CT
• any capital loss is not allowable

Question 22

What is a SME?

Answer 22

Less than 500 employees and

Either:

• annual turnover not exceeding 100m euros or
• annual balance sheet total not exceeding 86m euros

Question 23

What key things do you need to remember for CT in the exam?

Answer 23

Interest receivable is NOT taxed for CT

Dividends received from unrelated UK companies are NOT taxed for CT

indexed gain is the gain that is taxed

No restriction for personal use on company capital allowances

Round index # up to 3dp

Question 24

What order in a current period are deficits on NTLRs, trading losses and property business loans set against total profits?

Answer 24

1) deficit on NTLR
2) property business loan losses
3) trading losses of the current period

Question 25

What is a group relief group?

Answer 25

When one company is a 75% sub of another, sibling companies count in the group family

Question 26

What is a chargeable gains group for CT?

Answer 26

It is for chargeable gains and it comprises a principle company and any offspring companies which are 75% owned by their parent. The subs of subs of subs etc must be 51% owned by the don company