Notes from Exam Practice Questions Flashcards
(14 cards)
What is holdover relief and when does a gain crystalise when using holdover relief
Holdover relief is when a gain on sale of an asset is reinvested in a depreciating asset.
The gain crystalises on the earlier of:
- The disposal of the asset;
- The asset ceases to be used in the trade; or
- 10 years following the date of acquisition of the new asset.
What should be provided if purchasing a building eligable for SBAs?
A written allowance statement to allow the company to continue claiming SBAs.
What can be claimed under s.179ZA TCGA 1992 in reference to de-grouping charge?
If on the date of transfer, a company paid £X under MV on that date and a future de-grouping charge arises.
The de-grouping charge can be reduced by £X amount to avoid double taxation.
How are QCBs, treasury stocks and exchanges gains/losses treated?
Under loan relationship rules
If asked about chargeable gains in regard to QCBs state they are out of scope.
How are leased car rentals that have emissions greater than 50g/km treated in comp?
Only 85% of rental payments allowable therefore restrict.
Explain an “earn-out”?
4 points
An earn out is when a disposal include deferred consideration.
If the earn-out is ascertainable then the additional proceeds are simply added to the main gain.
If the earn-out is unascertainable then we use the Marren vs Ingles principle. We must establish the value of the right to receive consideration and add to the main gain.
When the further consideration is recieved, this is considered a further disposal with the base cost being the amount included in the main gain.
What are the 2 options to treat software?
- IFA Regime;
- Elect to claim CAs
If no DTT is in place what type of tax relief can be given on overseas profits taxed?
Unilateral relief at lower of:
- UK CT
- Overseas tax paid
How can unsued DTR be used from Subs and PEs?
Subs - Wasted
PE - Carry back up to 3 years or carry forward
What do HMRC consider substantial non-trading activity (SSE purposes)?
Over 20% relates to non-trading.
How is a sale and leaseback treated?
Gain will be calculated on the sale of the property and rental payments will be tax deductible.
Rent payments in excess of the commercial market rent are disallowed and the excess can be carried forward for future relief if the rental payments fall below the commercial market rate.
Key notes for DPT?
5 points
- Payable 30 days after receiving notice from HMRC;
- Company must notify HMRC within 3 months of the end of the AP if they are liable to DPT;
- HMRC will issue a preliminary notice and then decide whether to issue a full notice after considering representations made by the company;
- No relief is available for CT in respect of amounts paid for DPT under a charging notice;
- Applies to “Large” company that has a UK presence that use transactions that lack economic substance resulting in a tax mismatch.
Key items to mention when comparing UK PE with UK Sub?
- Admin - Include tax rate and payment dates/thresholds
- Chargeable gains tax - Sub taxed on disposal of it’s assets, PE taxed on UK situated assets or assets used in the PE.
- Trading losses - Sub can only be used against UK business, PE can be brought into o/s parent
- TP rules
- Treatment on disposal of UK operations - Sub not taxable in UK, For PE gain will arise on sale of assets used in UK
What are the 3 conditions for a succession to apply?
- The transfer condition - One company ceases to carry on a trade and another company begins to carry it on (i.e. there is a transfer of a trade)
- The tax condition - The transferred trade must stay within the UK tax charge
- The ownership condition - The transferred trade must be owned as to at least 75% by the same persons both at some point in the period one year before the transfer and at some point in the 2 years after the transfer
