Corporation Tax: More Computational Aspects (including Trading Losses and Gift Relief) Flashcards
(22 cards)
Why was the main CT rate historically reduced
The Corporation Tax main rate in the UK was historically reduced to encourage business investment post-2008 crisis
What did CT increase from in 2023/24
From 2023/24 CT increased from 19% to 25%
Who do small profit rates apply to
Small profits rates apply to companies with profits under £50,000
What does Marginal Relief apply to
Marginal Relief applies between £50,001 and £250,000
What can trading losses be used to reduce
Trading losses can be used to reduce PCTCT (Profits Chargeable to Corporation Tax)
What are Gift-Aid Payments
Gift-Aid payments are charitable donations made under the Gift Aid scheme
What are the key points of gift-aid payments
The key points of gift-aid payments are:
- Most be gross payments
- Relief applies in the period when paid
- Priority rule
What is the Priority rule
The priority rule means trading losses must be used first. If losses exceed PCTCT, Gift Aid deduction is wasted
What is mixed-year accounting
Mixed-year accounting is when a companies Chargeable Accounting Period (CAP) straddles two financial years
What are the required steps for mixed year accounting
The required steps for mixed year accounting are:
1. Time-apportion profit into segments matching each FY
2. Apply the relevant CT rate to each portion
3. Sum the tax liabilities
When is apportionment done
Apportionment is done before deducting capital allowances
What is R&D relief designed for
R&D relief is designed to encourage innovation and productivity in UK business
How much R&D expenditure is deducted
Deduct 100% of actual R&D expenditure
What does PLUS tax credit (RDEC) =
PLUS tax credit (RDEC) = 20% of qualifying R&D costs
How much capital allowance does Capex R&D
Capex R&D: also get 100% capital allowances
What is the definition of SME
SME definition:
- < 500 employees
- Turnover ≤ €100 million or assets ≤ €86 million
What are the conditions for R&D relief
Conditions:
- Expenditure must be wholly and exclusively for the trade
- Applies only if company is going concern and trading
What does patent box relief offer
Patent box relief offers a reduced 10% tax rates on profits from patented inventions
What does patent box relief apply to
Patent box relief applies to:
- Profits from sales of patented products
- Licensing out or selling patent rights
- Must be elected and relevant to UK or EU patents
Must must a Chargeable Accounting Period (CAP) not exceed
A Chargeable Accounting Period (CAP) must not exceed 12 months
What happens if a financial accounting period is > 12 months
If a financial accounting period (FAP) > 12 months, it is split into 2 CAPs
What’s the process for long accounting periods
The process for long accounting periods is:
1. Time-apportion adjusted profit
2. Deduct capital allowances based on specific CAPs
3. Compute CT separately for each CAP
