Corporation Tax: More Advanced Flashcards
(20 cards)
Does CGT or CT have and annual exemption
CGT has and annual exemption but CT doesn’t
Does CGT or CT have Business Asset Disposal Relief (BADR)
CGT has BADR but CT doesn’t
Does CGT or CT have indexation allowance
CGT tax indexation was abolished in 2008, CT has it up to Dec 2017
What are the tax rates for CGT and CT
CGT is progressive while CT is flat (typically 25%)
What are chargeable gains in CT
In CT, chargeable gains are one component of Profits Chargeable to Corporation Tax (PCTCT) and integrated into the final tax calculation
Standard company capital gain calculation
Disposal proceeds – Incidental costs of disposal = Net proceeds – Acquisition cost – Incidental costs of acquisition = Unindexed gain – Indexation allowance (up to Dec 2017) = Chargeable gain
What happens if the indexation allowance fully eliminates the unindexed gain
If the indexation allowance fully eliminates the unindexed gain, the gain becomes zero, but not a capital loss
Can indexation allowance create or increase a capital loss
IA cannot create or increase a capital loss
What happens if total chargeable gains < losses in CAP
If total chargeable gains < losses in a CAP, no gain is included in PCTCT
Why is the net capital loss carried forward
The net capital loss is carried forward only, to offset against future capital gains, not trading income
What is the purpose of indexation allowance
Indexation allowance compensates companies for inflation by adjusting the acquisition cost of assets
What is indexation allowance calculation
Indexation factor = RPI at disposal - RPI at acquisition / RPI at acquisition
When does IA apply
IA applies only to historical cost + incidental acquisition costs
When did IA freeze
IA was frozen after December 2017
What do companies use when they buy and sell the same class of shares
When companies buy and sell the same class of shares over time, they use the matching rules and a Section 104 Pool
What does the Share Pool do
The Share Pool:
- Records cumulative number of shares, original cost, and index cost
- Adjusted every time shares are brought or sold
- Bonus shares
- Rights issues
Where do profits from investments appear
Profits from investments appear in the investment income section of PCTCT
What do profits from investments include
Profits from investments include:
- Interest received
- Rental Income
Are dividends taxable under CT
Dividends are not taxable under Corporation Tax
Why are dividends exempt
Dividends are exempt because the underlying profit has already been taxed once at the company level
