CT

Question 1

What to deduct first from Total Profits? Losses or QCDs?

Answer 1

Losses

Question 2

What to do if taxable profits are between £50-£250k?

Answer 2

Calculate marginal relief

Question 3

Treatment of QCDs?

Answer 3

Add back ALL QCDs in trading profits

Deduct QCDs PAID in period

Question 4

Rule for pensions in trading profits? How to correct this?

Answer 4

Only pensions paid in period are allowable. Add back diff.

Question 5

Treatment of leased vehicles with >50g/km emissions?

Answer 5

Add back 15% cost

Question 6

Treatment of dividends received by company?

Answer 6

Exempt from tax (remove from trading profits if necessary)

Add to TTP for augmented profits

Question 7

Treatment of qualifying R&D expenses?

Answer 7

20% RDEC credit add to trading profits

Deducted from tax payable

Question 8

Treatment of the following for an extended period:

Trading income
Capital allowances
Property
NTLR
Chargeable gains
QCDs (deduction)

Answer 8

Trading income - time apportioned

Capital allowances - two separate calculations

Property - accrual basis

NTLR - accrual basis

Chargeable gain - period the gain arises

QCDs - period they are PAID

Question 9

How to calculate augmented profits?

Answer 9

Total taxable profits + Dividends received

Question 10

What can affect the limits to what qualifies as a large/very large company? How to adjust limit?

Answer 10

Associated companies / length of period / whether it was a large company in prior period or not

Period - time apportion
Associated companies - dividend by no. of companies

Question 11

How to calculate CT instalments if shorter period?

Answer 11

3 x CT/n

3rd payment is balance due

Question 12

Method of CT payment if large / very large company?

Answer 12

Quarterly payments (dates in Hardman’s).

Fourth payment is CT balance.

Question 13

How to calculate DTR for CT?

Answer 13

Lower of:
- Overseas tax suffered
- Effective CT rate on gross overseas income

Question 14

What to do with indexation factor before calculating indexation allowance?

Answer 14

Round to 3 decimal places
(apart from for shares)

Question 15

Potential exemption available for sale of shares by a company?

Answer 15

SSE (Substantial Shareholding Exemption)

Question 16

What qualifies for Substantial Shareholding Exemption? How is it treated?

Answer 16

Sale of shares are EXEMPT from gains if:

• 10%+ shareholding
• Shares held for more than 12 continuous months (in past 6 years)
• Shares are in a trading company / holding co. in a trading group

Question 17

How to calculate cost of shares disposed? How to calculate value of pool of shares?

Answer 17

Calculated in order:
1) Shares purchased on same day
2) Shares purchased in past 9 days
3) Average of all shares

Index pool value each time new shares purchased (not inc. bonus issues)

Question 18

What if capital asset is replaced 12 months before or 3 years after sale? How to calculate?

Answer 18

Roll-over relief available.

If ALL proceeds are re-invested - no chargeable gain.

If only some of the proceeds are re-invested - gain is lower of:
- Proceeds not re-invested
- Gain on disposal of item

Question 19

How can trading losses be used? (Current year/carried back/carried forward)

Answer 19

1) Used against TOTAL profits (before QCDs)
2) Carried back against TOTAL profits
3) Carried forward to use against TOTAL profits (can decide when to use)

Question 20

What are terminal losses and how are they used?

Answer 20

Losses in last 12 months of trade before cessation.

1) Use against current period’s TOTAL profits
2) Can be carried to set against TOTAL profits in previous 3 years

Question 21

How can property losses be used? (Current year/carried back/carried forward)

Answer 21

1) Use against current year’s TOTAL profit
2) CANNOT be carried back
3) Carried forward to use against TOTAL profits (can decide when to use)

Question 22

How can NTLR deficits be used? (Current year/carried back/carried forward)

Answer 22

1) Use against current year’s TOTAL profit
2) Can be carried back to use only against NTLR income
3) Carried forward to use against TOTAL profits (can decide when to use)

Question 23

How can Capital losses be used? (Current year/carried back/carried forward)

Answer 23

1) Can ONLY be used against other chargeable gains
2) CANNOT be carried back
2) Can be carried forward to use against NEXT available chargeable gains

Question 24

Restriction of use of b/fwd losses? What affects this amount?

Answer 24

£5m
+ 50% of remaining profits after £5m in CURRENT period

• Group companies share this restriction.
• Time apportioned for shorter periods (inc. short period in long period of accounts)

Question 25

What % is required to be part of a CT loss group? What about foreign companies?

Answer 25

75% (multiply %s for branched companies) Foreign companies can provide a link but not participate

Question 26

What losses can be surrendered under group losses?

Answer 26

- Trading losses - NTLR deficits - Property losses - Excess QCDs (after using as much as possible)

Question 27

Maximum amount of loss surrendered to group company? What if the company has only been part of group for part of year or accounting periods don't align?

Answer 27

Lower of: - Company A's loss - Company B's TTP in same period after it's own deduction of losses Time apportioned max losses to be surrendered

Question 28

Restriction of use of b/fwd losses surrendered to group company?

Answer 28

£5m + 50% profits over £5m after use of own losses in year 50% needs to be calculated for each company receiving the loss (can't receive more than the max loss able to be used)

Question 29

What % is required to be part of a chargeable gains group?

Answer 29

Connected by 75% and indirect links by 50%

Question 30

How are the sale of capital items between connected companies treated? What is the cost calculated as?

Answer 30

NIL Gain / NIL Loss Original cost + indexation

Question 31

When would a de-grouping charge occur and how is it calculated?

Answer 31

If a company leaves the group within 6 years after receiving asset at NG/NL. The chargeable gain is then what the gain would have been at point of transfer.

Question 32

Can capital gains and losses be transferred between group companies?

Answer 32

Yes - losses can only be transferred at the amount of the other company's capital gain.

Question 33

What % of external staff costs are allowable for RDEC credit?

Answer 33

65%

Question 34

How do you include capital losses b/fwd in tax comp?

Answer 34

Offset against capital gains before including in comp (not like other losses utilised)

Question 35

Can indexation create a loss?

Answer 35

No - becomes £NIL value

Question 36

How long after accounting period do you have to elect loss relief?

Answer 36

2 years

Question 37

How to calculate PAYE settlement?

Answer 37

Work out the income tax due on the benefit: x 20/80 for basic rate band payers x 40/60 for higher rate band payers Then add Class 1B NIC due (calculated on grossed up amount)

Question 38

If a company was not large last year, but large this year, what are the payment terms?

Answer 38

Usual one payment 9 months + 1 day after year end. Starts making instalment payments for next year.