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132 Cards in this Set
- Front
- Back
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Give an outline for a basic corporation tax computation. |
Trading Income plus Income from Investments plus Chargeable Gains equals Taxable Total Profits Corporation Tax on TTP
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The financial year for corporation tax runs from which dates each year? |
1st April - 31st March |
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The fiscal or tax year for income tax runs from which dates each year? |
6th April - 5th April |
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Which tax return form is used to collect information for corporation tax purposes? |
The Company Tax Return (CT600) |
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Describe the self-assessment system of tax. |
Companies / individuals declare their profits and other taxable income on a tax return and are able to work out their own tax and pay it wothout HMRC sending them the bill. |
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What is the deadline for a paper based tax return? |
31st October following the end of the tax year. |
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What is the deadline for an online tax return? |
31st January following the end if the tax year. |
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When is the Company Tax Return Form due? |
Within 12 months after the end of the company's chargeable accounting period. |
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When is payment of corporation tax due? |
Unless installments are paid, usually 10 months and 1 day after the end of the chargeable accounting period. |
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When is payment of income tax due? |
31st January following the end of the tax year. If paid in installments, then the first payment is due on the 31st January within the tax year, the second payment on the 31st July following the end of the tax year and the final payment when payment is usually due, 31st January following the end of the tax year. |
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Which classes of national insurance contributions apply to both sole traders and partners? |
Class 2 contributions are payable at a flat rate of £2.75/week unless a small earnings exception is claimed where profits are less than £5885.
Class 4 contributions are payable on profits above £7956 every year.
Neither class of national insurance contributions is payable by those under 16 or over pensionable age at the start of the tax year. |
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What are the rates payable for class 4 national insurance contributions? |
0% below £7956 9% between £7956 and £41865 2% above £41865 |
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How long do companies need to keep information relating to their tax records? |
For at least 6 years after the end of the accounting period. |
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How long do individuals in business need to keep records relating to income? |
For approximately 5 years plus 10 months from the end of the tax year to which they relate. |
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How long do individuals in business need to keep information relating to their tax records? |
For approximately 5 years plus 10 months from the end of the tax year to which they relate. |
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What is the penalty for not keeping the information required for tax records? |
Up to £3000 for each tax year for individuals.
Up to £3000 for each accounting period for companies. |
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What is statute law? |
Legislation that is passed through parliament, eg. the annual Finance Act. |
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What is statute law? |
Legislation that is passed through parliament, eg. the annual Finance Act. |
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What is case law? |
The result of decisions taken in court cases that have an impact on the interpretation of law. |
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What is the step-by-step procedure for a corporation tax computation? |
Adjust trading profits
Calculate capital allowances
Combine to form trading income assessment
Calculate gains on individual disposals
Combine to form chargeable gains total
Identify profits from investments
Identify gift aid payments
Combine to form taxable total profits (TTP)
Identify corporation tax rats based on financial years and augmented profits level
Calculate corporation tax liability based on taxable total profits |
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What is the basis of assessment for trading profits? |
The basis of assessment for trading profits is the tax-adjusted profits of the chargeable accounting period, prepared on an accruals basis. |
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How do you adjust profits for a corporation tax computation? |
First deduct any income that is not trading income, then add back any expenditure that had been deducted but is not allowable. |
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What are some examples of non-trading income? |
Non-trading interest receivable Rent receivable Gains on disposal of non-current assets Dividends received |
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What is the objective of adjusting the financial accounts in a corporation tax computation? |
The objective of adjusting the financial accounts therefore is to make sure that the only income credited is trading income and the only expenditure deducted is allowable trading expenditure. |
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What is the general rule for expenditure to be allowable as part of a tax-adjusted trading profit conputation? |
It must be revenue rather than capital in nature and it must be wholly and exclusively for the purpose of trade. |
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What are some examples of expenditure which is not allowable as a part of tax-adjusted trading profit computation? |
Any capital expenditure Depreciation of non-current assets Part of lease rental payments got high emission cars (when a car with emission levels over 130g/km is leased for more than 45 days through an operating lease, 15% of the lease rental payment is disallowed) Entertainment of customers or suppliers Gifts to customers Increases in general bad debt provisions Charitable payments Fines for law-breaking, except minor motoring offences Certain legal expenses ie. forming company or acquiring a new lease Illegal payments ie. bribes, blackmail Donations to politicl prtiws Writing off non-trade loans Sividends pyable Corporation tax |
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What are some examples of allowable expenditure in a tax-adjusted trading profit computation? |
Normal cost of sales Normal business expenditure ie. distribution costs, administration, salaries, wages and employers NI, rent, rates, insurance, advertising, business travel & subsistence, accountancy services, research & development expenditure Operating lease rental payments for cars with emission levels under 130g/km Legal expenses on renewing a shirt (less than 50 years) lease Interest payable on trade loans Staff entertainment Trade bad debts written off Increases in specific provisions for trade bad debts and inpairment provisions based on objective evidence Gifts to customers containing a conspicuous advertisement, costing up to £50 per recipient per year, not including food, drink, tobacco or gift vouchers Gifts of trading stock to educational establishments, charities or registered amateur aports Employees' parking fines incurred while on business, not including directors Capital allowances |
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What are the two implications of a trading loss in a tax-adjusted profit computation? |
The trading income assessment for the CAP will be 0 and the amount of the negative profit figure will form the trading loss and the company can choose how to deal with it. |
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How can a company deal with a trading loss resulting from a tax-adjusted profit computation? |
The trading loss can be carried forward to reduce trading income from the same trade in the future - in which case the loss must be used up as quickly as possible.
The trading loss can be used to reduce or eliminate all of the TTP before gift aid deduction in the same CAP that the loss arose. If this option is chosen, the loss can then be set back against the TTP of the CAP(s) in the 12 months immediately prior to the one in which the loss occurred. |
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How can a company deal with a trading loss resulting from a tax-adjusted profit computation? |
The trading loss can be carried forward to reduce trading income from the same trade in the future - in which case the loss must be used up as quickly as possible.
The trading loss can be used to reduce or eliminate all of the TTP before gift aid deduction in the same CAP that the loss arose. If this option is chosen, the loss can then be set back against the TTP of the CAP(s) in the 12 months immediately prior to the one in which the loss occurred. If the loss is still not off-set, the remaining balance must follow the route of option 1. |
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What is a capital allowance? |
A capital allowance reduces the taxable profit for a CAP. It results from the acquisition and use of non-current assets. |
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What are some examples of plant and machinery with regards to capital allowances? |
Plant and machinery in the normal use of the phrase, including moveable items and fixed items plus their installation costs. This can range from factory conveyor equipment to cement mixers.
Vans, lorries and other commercial vehicles.
Cars owned by a limited company and used by its employees.
Furniture, carpets and other moveable items, for example specialist lighting for shop displays.
Computers and other electronic equipment, including software and communications technology. |
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What is plant and machinery in the normal use of the phrase? |
Fixed assets with which the business operates, as opposed to fixed assets such as buildings which the business operates in. |
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Name two ways in which capital allowances for plant and machinery are currently provided. |
The annual investment allowance and through other allowances such as first year allowances and writing down allowances. |
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What are some examples of plant and machinery with regards to capital allowances? |
Plant and machinery in the normal use of the phrase, including moveable items and fixed items plus their installation costs. This can range from factory conveyor equipment to cement mixers.
Vans, lorries and other commercial vehicles.
Cars owned by a limited company and used by its employees.
Furniture, carpets and other moveable items, for example specialist lighting for shop displays.
Computers and other electronic equipment, including software and communications technology. |
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What is plant and machinery in the normal use of the phrase? |
Fixed assets with which the business operates, as opposed to fixed assets such as buildings which the business operates in. |
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Name two ways in which capital allowances for plant and machinery are currently provided. |
The annual investment allowance and through other allowances such as first year allowances and writing down allowances. |
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Describe the annual investment allowance. |
The AIA applies to virtually all plant and machinery except cars and provides an allowance of the whole amount spent on this plant and machinery up to a total amount of £500,000 per year for CAPs starting on or after 1/4/14. Between 1/1/13 and 31/3/14 the allowance was £250,000. The relevant limit is reduced proportionally for CAPs less than 12 months in length. For CAPs which carry on through each of these periods, their AIA for the entire year would be based on the length of time the CAP had spent in each, with a limit of £250,000 in the period before 1/4/14. |
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What is a pooled expenditure calculation? |
Some situations fall outside the scope of the AIA. These are:
Balances of unrelieved capital expenditure brought forward from earlier periods;
Expenditure during period on cars;
Expenditure on plant and machinery during period in excess of AIA limit;
Disposals during period of plant and machinery.
These situations require a seperate calculation in the capital allowance computation that will be used to calculate any capital allowances which are due. |
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What is a pooled expenditure calculation? |
Some situations fall outside the scope of the AIA. These are:
Balances of unrelieved capital expenditure brought forward from earlier periods;
Expenditure during period on cars;
Expenditure on plant and machinery during period in excess of AIA limit;
Disposals during period of plant and machinery.
These situations require a seperate calculation in the capital allowance computation that will be used to calculate any capital allowances which are due. |
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What are the three expenditure pools used in pooled expenditure calculations? |
A single asset pool for each asset deemed to have a short life
A special rate pool which is used for high emission cars, certain long life assets and integral features
The general / main pool for everything else |
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What capital allowances are claimable for each of the three expenditure pools? |
An 18% Writing Down Allowance is available on pool balances, except single asset pools where the asset has been disposed of before the end of the period, and the special rate pool.
An 8% WDA is available for the special rate pool.
Balancing Allowances (or the opposite Balancing Charges) are calculated when a single asset pool is closed because the asset has been disposed of. It can also occur in the general pool if the business is closed. |
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Describe 100% first year allowances. |
FYAs are only available for new low emission cars (below 95g/km), new zero emission goods vehicles and certain energy efficient and water efficient plant. This is seperate from the AIA and the entire amount spent on these assets is claimable. |
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What is a pooled expenditure calculation? |
Some situations fall outside the scope of the AIA. These are:
Balances of unrelieved capital expenditure brought forward from earlier periods;
Expenditure during period on cars;
Expenditure on plant and machinery during period in excess of AIA limit;
Disposals during period of plant and machinery.
These situations require a seperate calculation in the capital allowance computation that will be used to calculate any capital allowances which are due. |
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What are the three expenditure pools used in pooled expenditure calculations? |
A single asset pool for each asset deemed to have a short life
A special rate pool which is used for high emission cars, certain long life assets and integral features
The general / main pool for everything else |
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What capital allowances are claimable for each of the three expenditure pools? |
An 18% Writing Down Allowance is available on pool balances, except single asset pools where the asset has been disposed of before the end of the period, and the special rate pool.
An 8% WDA is available for the special rate pool.
Balancing Allowances (or the opposite Balancing Charges) are calculated when a single asset pool is closed because the asset has been disposed of. It can also occur in the general pool if the business is closed. |
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Describe 100% first year allowances. |
FYAs are only available for new low emission cars (below 95g/km), new zero emission goods vehicles and certain energy efficient and water efficient plant. This is seperate from the AIA and the entire amount spent on these assets is claimable. |
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Describe the process for carrying out a computation using pools. |
Begin with the written down values brought forward from the previous period
Add the elegible expenditure on any acquisitions that do not qualify for FYAs or AIA
Calculate the FYAs on any new low emission cars or other qualifying plant
Calculate the AIA
Where expenditure exceeds AIA, add any remaining balance of expenditure into the relevant pool
Deduct the proceeds of disposals (limited to original costs)
Calculate the WDAs
Calculate any balancing allowances or charges
Calculate the written down values of each pool to be carried forward into the next CAP
Calculate the total capital allowances that can be claimed |
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What is a short life asset? |
A short life asset is any which the company believes will be disposed of within 8 years. If the asset is not disposed of within 8 years following the end of the CAP in which it was acquired, the balance of expenditure brought forward is transferred to the main pool and the short life pool is closed. |
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What impact does a short CAP have on capital allowances? |
FYAs, balancing allowances and balancing charges are all unaffected. WDAs and the AIA are all time-apportioned. |
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How are CAPs split for accounting periods longer than 12 months? |
The CAPs are split into one 12 month period and one period for the remaining months. |
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What effect do long accounting periods have on capital allowances? |
As long accounting periods are divided into 2 CAPs, we need to calculate capital allowances for each.
Each acquisition and disposal of assets needs to be allocated to the correct CAP.
The written down values at the end of the first CAP will be brought forward at the start of the second CAP.
The rules regarding time-apportionment of WDAs for short CAPs will be applied. |
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What rules apply to capital allowances when companies cease trading? |
There can be no WDA, FYA or AIA in this final cap.
All remaining assets will have been disposed of, with any proceeds brought into the computation as normal.
There can be no written down values to carry forward in any pools, so the pools must be closed by using balancing allowances or balancing charges to bring all pool balances to zero.
(Balancing allowances / charges apply to the general pool as well as all single-asset pools which are simultaneously closed.) |
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What is a chargeable gain / capital loss? |
A chargeable gain / capital loss occurs when a company disposes of an asset outside of its regular trading activities.
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What are the main differences for chargeable gains in business tax and capital gains in personal tax? |
There is no annual exempt amount, however there is an indexation allowance which can be claimed up until the date of disposal. There are special rules for the disposal of shares. |
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What is the basis of assessment for chargeable gains? |
Chargeable gains less capital losses as a result of disposals that occur during the CAP. |
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Give two examples of assets which can be considered chargeable gains / capital losses upon disposal. |
Land and buildings
Shares |
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Give two examples of assets which can be considered chargeable gains / capital losses upon disposal. |
Land and buildings
Shares |
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What are the main assets which are considered exempt from chargeable gains? |
Trading inventory (gains on disposal are considered trading income)
Cars
Chattels bought and sold for £6000 or less (chattels are moveable property)
Government securities (gilts)
Animals, for example race horses |
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How are multiple disposals managed in a chargeable gains computation? |
When there is more than one disposal during a single CAP, the gains less any losses are considered in aggregate. To determine these figures, a seperate chargeable gains computation is carried out upon each disposal. |
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What happens when there is a net capital loss in a chargeable gains computation? |
When chargeable gains less any capital losses result in negative figures during any CAP, then bo chargeable gains are brought into the corporation tax computation. The net capital loss must then be brought forward into the next CAP, though it cannot be used to off-set any other income, only future chargeable gains. |
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What does a chargeable gain computation look like? |
proceeds on disposal less incidental costs of disposal
equals net proceeds
less original cost less incidental costs of acquisition
equals unindexed gain
less indexation allowance
equals chargeable gain
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When an asset is given away or sold to a connected person at less than the market value, how does this affect the chargeable gains computation on disposal? |
The market value is used in the computation rather than the actual amount received. Note that companies under the same control are connected with one another. |
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When an asset is lost or destroyed, how does this affect the chargeable gains computation? |
The asset will be considered to have been disposed of for zero proceeds and zero will be used in the computation. If an insurance claim has neen made, the proceeds from the claim will be used instead. |
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What are some examples of incidental costs of acquisition? |
Legal fees
Auction costs |
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What are some examples of incidental costs of acquisition? |
Legal fees
Auction costs |
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What is an indexation allowance? |
This is the deduction which is used to compensate for the impact of inflation on the value of the asset. Figures from the retail price index (RPI) are used to calculate an inflation factor to multiply by the original cost and any other acquisition costs. |
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What are some examples of incidental costs of acquisition? |
Legal fees
Auction costs |
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What is an indexation allowance? |
This is the deduction which is used to compensate for the impact of inflation on the value of the asset. Figures from the retail price index (RPI) are used to calculate an inflation factor to multiply by the original cost and any other acquisition costs. |
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What calculate is used to determine the indexation factor? |
RPI at the date of disposal less RPI at the date of acquisition divided by the RPI at the date of acquisition. The result of this is rounded to three decimal places before being multipled by the historical cost figure. |
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How is indexation affected by the RPI at disposal being lower than the RPI at acquistion? |
If the calculation resulted in a negative figure then no indexation would occur. |
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What happens when indexation allowance exceeds unindexed gains? |
The allowance is restricted to the amount of the unindexed gain, therefore indexation cannot turn a gain into a loss. |
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How is indexation affected by an unindexed loss? |
An unindexed loss will result in an indexation allowance of zero, therefore indexation cannot increase any losses. |
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What formula is used to calculate the original cost in the case of a part-disposal? |
Original cost of whole asset multiplies by A over A plus B, where A equals proceeds or market value of the part disposed of (whichever is higher) and B equals the market value of the part retained. |
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What is improvement expenditure? |
Improvement expenditure is when capital expenditure has occurred to enhance an asset after it has been purchased. This forms an allowable cost in the chargeable gains computation and will also attract an indexation allowance running from the date the asset was inproved to the date it was disposed of in that condition. |
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What formula is used to limit the gains from a chattel disposed of for more than £6000 in the chargeable gains computation? |
Gross Proceeds less £6000, multiplied by 5 and divided by 3
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What rules apply when a chattel costing more than £6000 is sold at a loss? |
The figure £6000 will be used in place of the actual proceeds in the chargeable gains computation if actual proceeds were less than this figure. This means that the capital loss will be smaller than the actual loss incurred. In this case, we will use the term 'deemed proceeds' whenever actual proceeds are less than £6000, but the chattel was bought for more than £6000. |
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What special rules apply when matching shares sold to the cost of shares originally bought in a chargeable gains computation? |
First, any shares bought the same day of the disposal are matched with that disposal.
Second, any shares bought in the nine days prior to the disposal are matched with those disposed. In this case there is no indexation allowable.
Finally, all remaining shares not yet matched are deemed to have come from the FA 1985 Pool of Shares. |
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What is the FA 1985 Pool of Shares? |
This is a device for merging shares of the same type in the same company together, and applying indexation allowances at the same time. The pooling process is similar to the calculation of weighted average inventory calculations, with the additional complication of indexation allowances. |
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What is the FA 1985 Pool of Shares? |
This is a device for merging shares of the same type in the same company together, and applying indexation allowances at the same time. The pooling process is similar to the calculation of weighted average inventory calculations, with the additional complication of indexation allowances. |
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How is the FA 1985 Pool of Shares used? |
The pool must record the numbrr of shares in each transaction, actual costs and indexed costs. The pool begins with the first shares bought. The cost of these is then indexed up to the time when other shares are bought (or sold). These are then added in, and the cumulative indexed cost is then re-indexed up to the date or the next purchase or sale. This process is repeated until the disposal date of the shares for which we are working out the gain. The indexed balance in the pool is then used to calculate the cost of shares from the pool that are sold, by apportionment based on the number of shares. Shares are apportioned by multiplying the total indexed cost by the number of shares sold divided by the total number of shares. |
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How are bonus shares delt with in a chargeable gains computation? |
Bonus shares are treated as though they were acquired at the same time as the original shares which generated the bonus issue. Bonus shares are added to the pool once received, and since no payment has been made, there is no adjustment to the cost or indexed cost figures. |
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How are bonus shares dealt with in a chargeable gains computation? |
Bonus shares are treated as though they were acquired at the same time as the original shares which generated the bonus issue. Bonus shares are added to the pool once received, and since no payment has been made, there is no adjustment to the cost or indexed cost figures. |
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How are rights issues dealt with in a chargeable gains computation? |
Shares bought as part of a rights issue are treated as though they were bought with the original shares which generated the rights issue. However, any indexation which applies to rights issue shares will only apply from the date that they were paid for. |
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What is rollover relief? |
Rollover relief allows chhargeable gains on the disposal of an asset to be postponed indefinitely, provided all of the proceeds are invested into one or more replacement assets. If the replacement asset is sold later, the deferred chargeable gains will be carried on in the new computation.
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What is rollover relief? |
Rollover relief allows chhargeable gains on the disposal of an asset to be postponed indefinitely, provided all of the proceeds are invested into one or more replacement assets. If the replacement asset is sold later, the deferred chargeable gains will be carried on in the new computation.
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What are some rules regarding rollover relief? |
The replacement asset or assets must be acquired between one year before and three years after the disposal of the first asset.
Both the original asset and its replacement(s) will have to come under one of the following categories, though it does not need to be a like-for-like replacement: Land & buildings Inmovable plant & machinery Ships, aircraft & hovercraft |
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How do dividends received from other UK companies affect the corporation tax computation? |
Dividends received are not brought into the computation and are not taxed, as they have already been taxed through another company's computation, however the amount of dividends received plus their associated tax credits do have an impact on the rate of corporation tax which is payable. |
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What is the difference between gift-aid payments made by individuals and gift-aid payments made by limited companies? |
Gift aid payments from limited companies are paid in gross and the amounts paid are deducted as an allowable expense from the corporation tax computation. |
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What is the purpose of the corporation tax computation? |
To calculate taxable total profits, from which corporation tax liability can be calculated. |
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What is the augmented profits figure for use in corporation tax liability calculations? |
Taxable total profits plus net amount of UK dividends received plus their associated tax credits. This figure is used to calculate the tax band, not the actual tax due. Tax due is calculated on TTP. |
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What is franked investment income? |
Dividends received plus associated tax credits. |
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How does corporation tax differ from personal tax calculations? |
Corporation tax has three seperate bands plus possible marginal relief available, though unlike income tax you are not required to work through each band and the taxable total profits do not need to be analysed into different categories of income. |
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What are the three augmented profit bands and their rates for financial years ending 14 and 15? |
£0-£300,000 Small Profits Rate 20% 13/14 & 14/15
£300,001-£1,500,000 Main Rate less marginal relief 23% 13/14 21% 14/15
£1,500,001+ Main rate 23% 13/14 21% 14/15 |
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What is the corporation tax calculation where no marginal relief is available? |
TTP multiplied by the appropriate tax rate |
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What is the corporation tax calculation where marginal relief is available? |
Marginal relief fraction multiplied by (upper limit of band minus augmented profits) multiplied by (normal TTP divided by augmented profits) |
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What is marginal relief? |
Marginal relief is a deduction in the calculation of the corporation tax amount; it has the effect of smoothing transition from one tax rate to the next. |
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What is the marginal relief fraction for use in corporation tax calculations? |
In 13/14 the fraction is 3/400 In 14/15 the fraction is 1/400 |
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How are corporation tax bands affected by associated companies? |
If a company is part of a group of companies or one of a number of companies all controlled by the sane person, then they are considered to be associated for tax purposes and their tax bands are divided by the total number of companies in association. For example if company A is one of three companies owned by Dr Dre then its main tax band would be up to £500,000 rather than £1,500,000. Marginal relief is similarly scaled down. |
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How are corporation tax bands affected by short CAPs? |
Tax bands are reduced in proportion to the length of the CAP, ie. multiplied by the number of months in the CAP and divided by 12. |
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How are corporation tax bands affected when a company is both one of several associated companies and its CAP is short? |
First the limits are divided by the number of companies and then they are multiplied by the length of the CAP divided by 12. |
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What is the procedure to be taken when a CAP crosses financial years with different tax rates? |
First, the augmented profits figure will be used to determine the tax band.
Second, the TTP will be time-apportioned according to the length of time spent in rach financial year.
Third, tax will be calculated seperately for each part of the CAP using the appropriate rates and marginal relief calculations. If marginal relief is to be calculated, then the augmented profits figure must also be time-apportioned.
Finally, add together the two tax figures.
Even if rates remain the same, figures may still be needed when required to fill in a tax return. |
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How can rental losses be set off against TTP? |
Rental losses can be et against current period TTP and any amount not used carried forward and set against future TTP before gift aid payments. |
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What should you remember when asked to recommend how trade losses should be off-set? |
You should try to reduce the amount of tax paid in the marginal relief band as it is effectively higher than the rate paid in the other bands. |
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How can rental losses be set off against TTP? |
Rental losses can be et against current period TTP and any amount not used carried forward and set against future TTP before gift aid payments. |
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What should you remember when asked to recommend how trade losses should be off-set? |
You should try to reduce the amount of tax paid in the marginal relief band as it is effectively higher than the rate paid in the other bands. |
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What are effective rates in corporation tax? |
The difference in tax paid at £300,000 and the tax paid at £1,500,000. The difference in TTP is £1,200,000 and the difference in tax paid is £255,000. This is 21.25% of £1,200,000. |
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How are profits split across long accounting periods for corporation tax purposes? |
Trade income is time apportioned between CAPs
Capital allowances are calculated for each CAP seperately
Interest from non-trade investments is split based on how much relates to each CAP
Profits from renting property are split the same way
Chargeable gains are allocated to each CAP depending on when the disposal took place
The TTP is calculated by adding together the above elements for wach period
The FFI associated with each CAP is then added to the TTP for each CAP and is used to determine the appropriate tax band, with band limits for the short CAP being scaled down appropriately
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When is a company required to pay corporation tax in installments? |
When it is paying tax at the main rate without marginal relief |
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When is a company required to pay corporation tax in installments? |
When it is paying tax at the main rate without marginal relief |
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When corporation tax is paid in installments, how many installments are necessary and on which dates are they paid? |
There are four installments required, each for 25% of the total tax liability.
The first installment is due on day 14 of month 7 within the CAP to which it relates. The next three installments follow at 3 month intervals. Any remaining balance (since the installments were estimated) will be payable at the normal date, 9 months and 1 day after the end of the CAP. |
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When is the company tax return due? |
The CT600 must be returned online by 12 months after the end of the company's accounting period from which the CAP was derived. This will be the same date as 12 months and 1 day after the CAP, unless the accounting period is over 12 months long and divided into two CAPs. |
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What are the interest rates charged for late payments of corporation tax? |
1.5% on underpaid quarterly installments and 3% on late final payments. This is an allowable deduction as non-trading interest when calculating tax due. |
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What are the interest rates charged for late payments of corporation tax? |
1.5% on underpaid quarterly installments and 3% on late final payments. This is an allowable deduction as non-trading interest when calculating tax due. |
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At what interest rate does HMRC refund overpayments of corporation tax? |
0.5% Note that interest paid to the company is considered taxable income. |
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What are the penalties for not informing HMRC that your company is liable for corporation tax? |
HMRC must be made aware of companies within three months of the time they begin trading. If this is not done, the penalty will be based on a percentage of the income tax that would be due, ranging from 0% if reasonable care was taken to register the company and 100% if the act was deliberate and concealed. |
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What are the penalties for failing to submit a corporation tax return on time? |
Initial penalties of £100 for submitting up to three months late and £200 for submitting more than three months late. These can increase for repeat occurences.
Additionally, 10% of the corporation tax due can be charged where the return is 6-12 months late, increasing to 20% for more than 12 months. |
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What are the penalties for failing to submit a corporation tax return on time? |
Initial penalties of £100 for submitting up to three months late and £200 for submitting more than three months late. These can increase for repeat occurences.
Additionally, 10% of the corporation tax due can be charged where the return is 6-12 months late, increasing to 20% for more than 12 months. |
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What are the penalties for errors in tax returns? |
Penalties are based on a percentage of the extra tax due. If the error is due to a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due. If the error is deliberate, the penalty is between 30% and 70%. If the error is deliberate and concealed, the penalty will be between 30% and 100% of the extra tax due. The penalties can be reduced by informing HMRC and assisting them in working out the extra tax due. If an error is made despite taking reasonable care then no penalty will arise. This system also applies to income tax. |
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What are the penalties for failing to submit a corporation tax return on time? |
Initial penalties of £100 for submitting up to three months late and £200 for submitting more than three months late. These can increase for repeat occurences.
Additionally, 10% of the corporation tax due can be charged where the return is 6-12 months late, increasing to 20% for more than 12 months. |
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What are the penalties for errors in tax returns? |
Penalties are based on a percentage of the extra tax due. If the error is due to a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due. If the error is deliberate, the penalty is between 30% and 70%. If the error is deliberate and concealed, the penalty will be between 30% and 100% of the extra tax due. The penalties can be reduced by informing HMRC and assisting them in working out the extra tax due. If an error is made despite taking reasonable care then no penalty will arise. This system also applies to income tax. |
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What is the penalty for failure to keep accurate records pertaining to corporation tax for the correct length of time? |
£3000 per CAP for companies. |
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What typical records are required for corporation tax purposes? |
Ledger accounts
Financial documents eg. invoices, credit notes, bank statements
Payroll records
VAT records
Statements of profit or loss Taxation working papers, including capital allowance computations
Copies of tax returns
Invoices relating to allowable expenditure and the acquisition of fixed assets
Details if non-trade income
Non-current asset schedules |
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What typical records are required for corporation tax purposes? |
Ledger accounts
Financial documents eg. invoices, credit notes, bank statements
Payroll records
VAT records
Statements of profit or loss Taxation working papers, including capital allowance computations
Copies of tax returns
Invoices relating to allowable expenditure and the acquisition of fixed assets
Details if non-trade income
Non-current asset schedules |
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What are the time limits for corrctions to tax returns? |
Four years, provided the company has taken reasonable care, otherwise six years if the errors are a result of careless behaviour. If the error was deliberate, the time limit for corrections is twenty years. |
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How long must corporation tax records be kept for? |
Six years from the end of the accounting period. |
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What are the badges of trade? |
Profit motive, when driving motivation is to score a profit
Subject matter, when items sold which are of no personal use to the seller
Length of ownership, when items are sold shortly after acquisition
Frequency of transactions, when there is a series of similar transactions
Supplementary work, when an individual carries out work on the items (ie. repairs) to make them more saleable
Reasons for acquisition or sale, when an intentional purchase and planned sale has occurred |
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What are the time limits for notifying HMRC of trading income? |
Within three months of the end of the month when trade began in order to register for class 2 NI contributions and within 6 months following the end of the tax year for income tax purposes. |
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What is the basis of assessment for trading income? |
Trading income is assed on an accruals basis, taxable as part of the tax year in which the business' accounting period ended. Profits are adjusted to account for capital allowances. |
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What special rules apply to basis periods in the first years of trading income? |
The first basis period is from the start date until the end of the tax year
The second basis period is the 12 month period that ends on the accounting date in the second tax year
The third basis period is the regular 12 month accounting period that ends in the third tax year |
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What are overlap profits? |
Overlap profits occur when the basis periods for tax years overlap and so the same profits are effectively taxed twice. |
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How are the opening basis periods affected by accounting periods which end in the first tax year? |
The first basis period is from the start date until the end of the first tax year
The second basis period follows the actual tax year
The third basis period is the three months whicih lead to to end of the accounting period |
