Introduction to Corporation Tax Flashcards
(12 cards)
What is corporation tax charged on?
A) Personal income
B) All income profits and chargeable gains of a company
C) Only trading profits
D) Capital receipts only
B - All income profits and chargeable gains of a company
Explanation: Corporation tax applies to a company’s total income profits and chargeable gains for an accounting period.
What is the TTP for corporation tax purposes?
A) The company’s dividends
B) The sum of income profits and chargeable gains
C) Only capital gains
D) Interest income only
B - The sum of income profits and chargeable gains
Explanation: Taxable Total Profits (TTP) = all income profits + chargeable gains arising in the period.
What is the corporation tax rate for companies with TTP of £40,000?
A) 25%
B) 19%
C) 21%
D) 15%
B - 19%
Explanation: For companies with TTP of £50,000 or less, the rate is 19%.
A company has £120,000 in TTP. What happens?
A) Pays 19% flat rate
B) Pays 15%
C) Pays at 25% but marginal relief applies
D) Pays no corporation tax
C - Pays at 25% but marginal relief applies
Explanation: For profits between £50,000 and £250,000, 25% applies with marginal relief to ease the transition.
Company A has accounting year 1 January 2023 to 31 December 2023. How is TTP calculated?
A) Entirely under 19% rate
B) No apportionment needed
C) TTP is apportioned between two financial years
D) Dividends are added to TTP
C - TTP is apportioned between two financial years
Explanation: As the accounting period straddles two financial years, TTP must be apportioned based on time.
If a company sells plant and machinery and buys new equipment within 18 months, which relief can defer the gain?
A) Annual Investment Allowance
B) Super-Deduction
C) Rollover Relief
D) Capital Loss Relief
C - Rollover Relief
Explanation: Rollover Relief defers the tax due if a qualifying replacement asset is bought within the time limits.
Company B incurs £3 million in trading losses. How much can it offset immediately under Deductions Allowance rules?
A) £1 million
B) £4 million
C) £2 million
D) £5 million
D - £5 million
Explanation: Up to £5 million of carried forward losses can be offset annually under the Deductions Allowance.
A company’s interest payments exceed £2 million. What restriction applies?
A) Full deduction
B) Only 19% relief
C) No deduction at all
D) Deduction capped at 30% of income receipts
D - Deduction capped at 30% of income receipts
Explanation: The Corporate Interest Restriction limits deduction to 30% of income if £2m threshold is exceeded.
Which of the following capital allowance schemes was available between April 2021 and March 2023?
A) Super-deduction
B) Full expensing
C) Annual investment allowance
D) Main rate allowance
A - Super-deduction
Explanation: Super-deduction gave 130% relief on new plant and machinery purchases during COVID recovery.
Dividends received by a UK company from another UK company are:
A) Fully taxable
B) Partially exempt
C) Only taxable if reinvested
D) Generally exempt from corporation tax
D - Generally exempt from corporation tax
Explanation: Dividends are generally exempt unless anti-avoidance provisions apply.
What happens if not all sale proceeds are reinvested in a new asset under rollover relief?
A) The gain available for rollover is reduced by the non-reinvested amount
B) No rollover relief is available
C) The gain is exempt automatically
D) Full rollover relief still applies
A - The gain available for rollover is reduced by the non-reinvested amount
Explanation: Any part of the proceeds not reinvested reduces the amount of gain eligible for deferral.
Which expenditure is deductible for corporation tax?
A) Expenses wholly and exclusively for business purposes
B) Private gifts
C) Business entertainment
D) Political donations
A - Expenses wholly and exclusively for business purposes
Explanation: Only expenses incurred wholly and exclusively for trade are deductible for corporation tax.
