1、Chapter 23,Chargeable gains for companies,Syllabus Guide Detailed Outcomes,Calculate the indexation allowance for companies. Explain and apply the identification rules as they apply to companies including the same day, nine day matching rules. Explain the pooling provisions. Explain the treatment of
2、 bonus issues, rights issues, takeovers and reorganisations. Explain and apply rollover relief as it applies to companies.,Slide 516,Overview,Slide 517,Chargeable gains for companies,Capital losses,Computing chargeable gains,Sales and securities,Indexation allowance,Slide 518,Chargeable gains compan
3、ies,Proceeds X Less cost (X) Unindexed gain X Less IA % increase in RPI to 3 d.p. x cost (X) Indexed gain X,Indexation allowance,RPI in month of sale - RPI in month of purchaseRPI in month of purchase,Slide 519,Lecture Example 1,A company acquires an asset on 10 May 1984 (RPI = 89.0) at a cost of 12
4、,000. Enhancement expenditure of 2,000 is incurred on 1 September 1986 (RPI = 98.3). The asset is sold for 40,000 on 20 December 2010 (RPI = 232.1). Required Calculate the chargeable gain arising.,Answer to lecture example 1,Lecture Example 2,ABC Ltd bought 1,000 shares in XYZ Ltd for 2,750 in Augus
5、t 1996 (RPI = 153.1) and another 1,000 for 3,250 in December 1996 (RPI = 154.4). On 2 July 2010 ABC Ltd purchased another 1,500 shares for 4,000. ABC Ltd sold 3,000 shares on 10 July 2010 for 17,000 (RPI = 226.4).Required Compute the gain and the value of the FA85 Pool following the disposal.,Answer
6、 to lecture example 2,Answer to lecture example 2 contd,Chapter summary,Slide 525,Chapter 24,Losses,Syllabus Guide Detailed Outcomes,Understand how trading losses can be carried forward. Understand how trading losses can be claimed against income of the current or previous accounting periods. Recogn
7、ise the factors that will influence the choice of loss relief claim. Explain how relief for a property business loss is given.,Slide 527,Overview,Slide 528,Losses,Carry forward relief,Current year relief,Carry back relief,Slide 529,Year end position, Gains in yr Losses in yr,X,X,(X),(X),(X),X,OR,Sli
8、de 530,Corporation tax losses,000s Net profit / loss in accounts X / (X)Add: expenditure not deductible for tax X Less: items not taxed as trading income - income assessable elsewhere (X)- non-taxable income (X) Less: Capital allowances- Plant and machinery (X)- Industrial buildings (X) Adjusted Tra
9、ding Loss (X), NIL,Trading losses,Trading income assessments Current year relief Carryback of losses Unrelieved gift aid payments,Slide 531,Lecture Example 1,Answer to lecture example 1,Answer to lecture example 1 contd,Slide 535,Loss relief proforma,Lecture Example 2,Khiva Ltd ceased trading on 31
10、March 2011. It had the following results for the five accounting periods to 31 March 2011.,Lecture Example 2 contd,RequiredShow profits chargeable to corporation tax for all periods affected, assuming loss relief is taken as soon as possible.,Answer to lecture example 2,Answer to lecture example 2 c
11、ontd,* 4,500 (36m carry back) = 2,250 maximum set off,Other losses,Capital losses Property losses,Slide 540,Chapter summary,Slide 541,Chapter 25,Groups,Syllabus Guide Detailed Outcomes,Define a 75% group and recognise the reliefs that are available to members of such a group. Define a 75% capital ga
12、ins group and recognise the reliefs that are available to members of such a group.,Slide 543,Overview,Slide 544,Groups,Capital gains group,Associated companies,75% group,Slide 545,Loss relief proforma,2009 2010 2011 Trading income X nil X C/fd relief Other inc/gains X X X CYR CBR Less Gift aid (X) (
13、X) (X) PCTCT X X X,(X)2,(X)1,(X)3,Associates,3 Assoc,2 Assocs,3 Assocs,2 Assocs,Mr A,Slide 547,Associated companies significance,Divide limits 1,500,000 300,000,Profits = PCTCT + FII,Lecture Example 1,Required Which companies, if any, are associated with Butter Ltd? What are the upper and lower limi
14、ts which Butter will use in establishing its rate of tax?,Slide 549,Lecture example 1 (solution 1),Butter Ltd,A,A,A,A,Slide 550,Lecture example 1 (solution 2),Revised limits,= 375,000= 75,000,1,500,000 4 300,000 4,Slide 551,Losses group definition,Beware sub-subsidiaries 75% effective interest (EI)
15、needed:,A Ltd,75%,75%,EI = 75% x 75%= 56.25%,Lecture Example 2,A Ltd,B Ltd,C Ltd,D Ltd,E Ltd,90%,80%,100%,90%,Required,How many associated companies are there ? How many loss groups are there?,Slide 553,Lecture example 2 solution 1,A Ltd,How many associated co.s?,5,How many loss groups?,2,Slide 554,
16、Example of a group via foreign parent,A Inc,3 associates loss group = B & C,Group relief,Overseas companies Surrendering company Claimant company Marginal rate of tax Illustration,Slide 555,Slide 556,Group relief planning,Minimise the groups tax liability,1,500,000 / n,300,000 / n,Profits,28%,21%,29
17、.75%,Lecture Example 3,Tony Ltd owns 100% of the share capital of Gordon Ltd. Results for year end 31.3.11 are as follows:,Lecture Example 3 contd,RequiredWhat would you advise Tony Ltd to do with its losses and how much corporation tax would the group save if it followed your advice?,Answer to lect
18、ure example 3,Tony should surrender the whole if its loss to Gordon Ltd. Working UL = 1,500,000 2 = 750,000 LL = 300,000 2 = 150,000 Therefore before loss relief Gordon would be paying tax 29.75% and Tony would be paying tax 21%.,Answer to lecture example 3 contd,Tax saving is as follow:,Tax saving
19、29,750 (29.75% x 100,000),Exam approach,Identify companies for group relief. Identify associates and adjust limits. Set out PCTCT for each company. Relieve loss, saving tax at highest marginal rate.,Slide 561,Lecture Example 4,H Ltd and its wholly owned subsidiaries S Ltd and B Ltd have the followin
20、g results for y/e 31.3.2011.,Required What are the options for relieving the loss and which is the most beneficial method?,Answer to lecture example 4,3 AssociatesLimits: UL = 500,000LL = 100,000 Current year relief in S Ltd saves tax at 21%. Group relief to H Ltd saves tax at 28% (in full rate band
21、). Group relief to B Ltd saves tax at 29.75% and 21%. Best option: GR 10K to B Ltd and 10K to H Ltd. Saves tax of 5,775 (10,000 29.75% and 10,000 at 28%).,Slide 564,Lower of,Loss (20k) x 9/12 =(15k),Profit 30K x 9/12 =22.5K,Non-coterminous year ends,Slide 565,Utilise losses,B Ltd,A Ltd,100%,Selling
22、asset at gain,Capital losses,Slide 566,Implications,B Ltd,A Ltd,100%,Selling asset at gain,21%,Reduce tax liability,29.75%,Capital gains groups,Definition Sub-subsidiaries Intra-group transfers,Slide 567,Lecture Example 5,Hand Ltd owns 90% of Glove Ltd. On 6 June 2010 Hand Ltd transferred a building
23、 to Glove Ltd for 120,000. On this date its market value was 275,000 and it had cost Hand Ltd 140,000 on 30 April 1995 (Indexed rise = 53%).Required What are the tax implications of this transfer?,Answer to lecture example 5,Building automatically transferred at NG/NL. ie cost + indexation to date o
24、f transfer ie 140,000 + (0.53 140,000) = 214,200 Glove Ltd has a base cost for the building of 214,200 for future disposal.,Advantages,Can make use of groups capital losses Get gains taxed at lowest marginal rate in group More chance of roll-over relief being available.,Slide 570,Chapter summary,Sli
25、de 571,Chapter summary,Slide 572,Chapter 26,Overseas matters for companies,Syllabus Guide Detailed Outcomes,Explain how the residence of a company is determined. Calculate double taxation relief for withholding tax. Explain the basic principles of the transfer pricing rules.,Slide 574,Overview,Slide
26、 575,Overseas matters for companies,Transfer pricing,Residence,Structure of overseas operations,DTR,Slide 576,UK resident company,A Ltd,Incorporated in UK,or,Managed & controlled from UK,= Double taxation,Foreign income will be taxed overseas too,The structure of overseas operations,Overseas branch
27、Non-resident subsidiary,Slide 577,Slide 578,Non-resident company,A Inc,Incorporated overseas,and,Managed & controlled overseas,Always tax at 30%,Operation of foreign income,Overseas income of a UK company is grossed up for any overseas tax suffered (see 4 below) and included in PCTCT.,Slide 579,Slid
28、e 580,Overseas expansion,A Ltd,- UK CAs,- Not an associate,- No group relief,- Associate,Double tax relief,Calculation Withholding tax (WHT) Allocation of charges and losses,Slide 581,Lecture Example 1,Slinky Ltd is a UK resident company with taxable trading profits of 600,000 for the year ended 31
29、March 2011. It has a 80% shareholding in Wobbly Ltd from which it received a dividend of 20,000 during the year. It made a Gift Aid payment of 50,000 during the year. Slinky Ltd also has an overseas branch which generated trading income of 30,000(gross). This income was subject to 25% withholding ta
30、x. Required Calculate Slinky Ltds MCT liability for the year ended 31.3.2011.,Answer to lecture example 1,Answer to lecture example 1 contd,Workings(W1) 2 associates therefore limits are Upper limit 1,500,000/2 = 750,000 Lower limit 300,000/2 = 150,000 NB: Dividend from Wobbly Ltd is exempt from CT.
31、 It doesnt count as FII as Wobbly is an associated company,Answer to lecture example 1 contd,Lecture example 2,Assortment Ltd received a dividend from Liquorice Gmbh of 45,000 (net of WHT of 20% ) Required(a) How will this dividend be treated if Assortment owns 10% of Liquorice Ltd.(b) How will the
32、treatment differ if Assortment Ltd owns 70% of Liquorice Ltd.,Slide 586,Answer to Lecture Example 2,Dividend will be exempt from corporation tax. It will be included as FII as 50,000 (45,000 100 / 90) Dividend will be exempt from corporation tax and not included as FII as it is group income.,Slide 5
33、87,Slide 588,Transfer pricing,A Ltd,B Inc,Sells goods MV = 1m,UK tax advantage,Profit now overseas,Slide 589,Taxable & exempt supplies (sales),EXEMPT,std rated,zero rated0%,Slide 590,Compulsory registration,Two registration tests exist: Historic test,- e.g. exceed limit on 30 NovemberNotify HMRC wit
34、hin next 30 days (by 30th December)Registered from start of next month (1st January),Slide 591,Compulsory registration,Forward looking (future) test,- 30 Days to notify HMRCRegistered from start of the 30 day period,Slide 592,Tax point,Example sale on credit,Which VAT return is the sale recorded in?
35、,Slide 593,Default surcharge,Q1 Q2 Q3 Q4,VAT PAID LATE LATE ON TIME LATE,RESULT,SLN Issued,2% penalty (reset SLN),-,5% penalty (reset SLN),SLN removed after 4 consecutive clean returns,Chapter summary,Slide 594,Chapter summary,Slide 595,Chapter 27,Self assessment and payment of tax by companies,Syll
36、abus Guide Detailed Outcomes,Explain and apply the features of the self assessment system as it applies to companies. Explain the circumstances in which HMRC can enquire into a self assessment tax return. Explain the procedures for dealing with appeals and disputes. Calculate interest on overdue tax
37、. State the penalties that can be charged.,Slide 597,Syllabus Guide Detailed Outcomes,Recognise the time limits that apply to the filing of returns and the making of claims. Recognise the due dates for the payment of tax. Explain how large companies are required to account for corporation tax on a q
38、uarterly basis. List the information and records that taxpayers need to retain for tax purposes.,Slide 598,Self assessment for companies,Payment of tax Filing date Assessment Interest to the HMRC Interest from the HMRC,Slide 599,Lecture Example 1,Milton Ltd paid its MCT liability for the year ended
39、31 December 2010 on 29 August 2011. The final accounts showed an overpayment of 12,000 tax. Required From what date will interest from HMRC run?,Answer to lecture example 1,Normal due date (NDD) for year ended 31 December 2010 is 1 October 2011. Original tax for year ended 31 December 2010 was paid
40、on 29 August 2011. . Interest runs from the later of these two dates ie 1 October 2011.,Lecture Example 2,A plc has a 31 March year end and has PCTCT of 2m per year.Required Show the corporation tax instalments for the year ended 31 March 2011.,Answer to lecture example 2,Lecture Example 3,B plc has
41、 a 10 months period to 31.10.10.Required When will the corporation tax be due if the total liability is expected to be 4m?,Answer to lecture example 3,Chapter summary,Slide 606,Slide 607,Slide 607,End of day 5 - Three Steps to Success,Slide 608,Closing talk moving from learning to revision,Must keep working! Need to quickly become comfortable with key knowledge Must be capable of attempting exam standard questions by start of revision courses Revisit checkpoint guidance as necessary Remember Course Exam 2 Revision courses and question days Tutor still available for help with queries,
