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sRelated 51% group companies: 2cz | d e f i n i t o n graphics available at p. 30 Lernen beginnen
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One company directly or indirectly owns more than 50% of another, | or both are 51% subsidiaries of a third company.
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4cz | d e f i n i t i o n Lernen beginnen
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A parent company and all its direct| and indirect 75% subsidiaries.| The definition of 75% subsidiary is extended for GR purposes only.| In addition to owing 75% of shares, the parent must also be entitled to received 75% profits and assets on WINDING UP. 75%-75%-GRonly-W
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Capital gains (or loss) group: 3cz | d e f i n i t i o n Lernen beginnen
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A parent company and its 75% subsidiaries, | provided that principal member has more than 50% of effective interest in subsidiary. | A 75% subsidiary of a principal member cannot be a principal member itself.* 75% - 50% - one *that is a company can ONLY be a member of ONE gains group.
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4cz | d e f i n i t i o n Lernen beginnen
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One company owns at least 75% of SC of another. | or Both are 75% subsidiaries of a third company. | Includes direct and indirect holdings. | Including overseas companies.
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Consortium owned company: 4cz | d e f i n i t i o n graphics available at p. 30 Lernen beginnen
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At least 75% ordinary SC owned by companies, | each owing at least 5%, | and each member is entitled to at least 5% of PROFITS and net assets. | Excludes a company that is 75% subsidiary of another. 75%-5%-5%-75%
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Related 51% group companies include: 2 Lernen beginnen
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Overseas resident companies too. | Companies leaving group.
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Related 51% group companies exclude: 3 Lernen beginnen
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Dormant companies (if dormant for the whole period). | Non-trading holding companies. | Companies joining the group. DNJ
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The number of related companies is based on the position at ... accounting period, hence the treatment of companies joining and leaving in the period. Lernen beginnen
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at the END of the previous accounting period
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DIVIDE the THRESHOLD by the number of related companies to determine whether... effect of related 51% group companies Lernen beginnen
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whether instalments are necessary.
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Dividends from related UK and overseas companies are ... in augmented profits. effect of related 51% group companies Lernen beginnen
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effect of related 51% group companies Annual Investment Allowance Lernen beginnen
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Only one AIA is allocated between group companies. Annual Investment Allowance
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effect of related 51% group companies Lernen beginnen
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Group payment arrangement are available if... effect of related 51% group companies Lernen beginnen
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at least one company pays by quarterly instalments.
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Group relief (GR) transfers losses between ...... Lernen beginnen
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any member of a GR group.
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GR and overseas companies. 2cz Lernen beginnen
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Group includes overseas companies | but the relief can generally only be claimed by UK resident companies.
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A company can surrender any amount of ... year losses. GR rules Lernen beginnen
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GR. A company can surrender any amount of current year of: 2 Lernen beginnen
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Trading loss, | Non-trading loan relationships (NTLR) debits.
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GR. A company can surrender a trading loss and debits on trading loan relationship PLUS excess of: 3 Lernen beginnen
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QCD relief. | UK property losses. | Expenses of management. QUE netu QCD - qualifying charitable donations.
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GR. A company can surrender brought forward: # Lernen beginnen
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NTLR debits. | Expenses of management. | Trading losses. | UK property losses. que NETU NTLR - non-trading loan relationship
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The surrendering company can only surrender to the extent it... Lernen beginnen
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it cannot use the above against its own total profits.
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GR. Maximum claim formula: Lernen beginnen
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TTP less Current year losses TTP is after deduction of loses brought forward and QCD. | The company's own losses are taken into account in computing the maximum claim, but need not actually be claimed before GR.
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Lernen beginnen
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GR restricted to common accounting period (profits deemed to accrue evenly).
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GR. Companies joining group: 2cz Lernen beginnen
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GR available for losses arising whilst in the group. | Losses arising in a subsidiary before it joins the group are not available for group relief for 5 year after joining.
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GR. Companies leaving group, relief is only available for losses arising whilst ..., but... 2cz Lernen beginnen
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whilst in the group, | but no GR once arrangements for sale are in place.
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Due date group relief claim: Lernen beginnen
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12 months after the claimant company's filing date for the A.P. covered by the claim (that is usually 2 years after the end of the A.P.).
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Payment for group relief: 2cz Lernen beginnen
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The claimant company may pay the surrounding companies for the loss. Any such payment for the group relief is ignored in both companies' CT computations | as long as the amount of payment is no more than surrendered amount itself.
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Consortium relief and oversees companies: Lernen beginnen
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Consortium members can be resident anywhere in the world but only a UK resident consortium member can CLAIM or SURRENDER losses. Overseas companies can help to meet the definition.
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The maximum consortium loss relief available for surrender is: 3cz Lernen beginnen
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The lower of| the RESULTS of the consortium member*| and the consortium members’ % ENTITLEMENT to the RESULTS of the consortium company. *TPP/loss Exam focus: always consider whether or not any of the companies in the question form a consortium.
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Capital gains group. Transfer of assets automatically take place at no gain/no loss regardless of the... Lernen beginnen
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regardless of the price paid.
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Capital gains group. Transfer of assets. Transferee company takes over asset at cost plus... Lernen beginnen
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plus indexation to date of transfer.
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Capital gains group; transfer of assets. Degrouping charge is where transferee company leaves the group still owning the asset, within ... years of the... Lernen beginnen
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6 years | of the no gain/no loss transfer.
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Capital gains group. Degrouping charge is calculated as gain have arisen, using ... value as proceeds, at date of no gain/no loss transfer. Lernen beginnen
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Capital gains group. Degrouping charge is added to... 2cz Lernen beginnen
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to the CONSIDERATION | received by the VENDOR COMPANY selling the shares in the company leaving the group.
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Degrouping charge. This additional consideration is ... to be taxable. Lernen beginnen
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unlikely to be taxable (as the company selling the shares is likely to benefit from SSE) As the company selling the shares is likely to benefit from the substantial shareholding exemption (SSE). In respect of any gain or loss on disposal of the shares, including the degrouping charge.
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Group ROR is ... for a degrouping gain. Lernen beginnen
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Capital gains group. Reallocation of gains. A joint election can be made to reallocate chargeable gains or allowable losses when an asset is sold... Lernen beginnen
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Key point: Remember that only current year chargeable gains or allowable losses can be transferred (not brought forward capital losses).
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Capital gains group. Reallocation of gains. The joint election enables: Lernen beginnen
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Group chargeable gains and allowable capital losses to be offset thus maximising the use of capital losses.
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Capital gains group. Rollover relief (replacement of business assets). For ROR purposes, all companies within the group are treated as... Lernen beginnen
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as carrying on a single trade. Gain in one company can be rolled into the acquisition by another group company.
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Capital gains group. Pre-entry capital losses can only be used against: 2 | t r i c k y Lernen beginnen
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Gains on OWN ASSETS held at date of joining group. | Gains on new assets acquired from outside group for USE IN BUSINESS. Pre-entry capital losses cannot be used against gains of other group companies.
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Capital gains group. Restrictions on trading losses CARRIED FORWARD. Any trading loss that arose before it joined the group cannot be set against this gain if the company: 2 Lernen beginnen
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RECEIVES a gain from the new group, | or MAKES a gain on an asset transferred from the new group within 5 years of the date of changing owners (that is joining the group).
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Capital gains group. Transfer of INTANGIBLES. Similar rules as in case of losses, that is tax neutral. Degrouping charge if transferee company leaves the group within ... years. Lernen beginnen
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Capital gains group. Transfer of intangibles. Degrouping charge ... be allocated to another group member. Lernen beginnen
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Capital gains group and transfer of intangibles. When applying SSE always remember about... Lernen beginnen
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ignoring the degrouping charge! If SSE applies to the share disposal, there will be no a degrouping charge. Application of SSE is automatic! The asset will remain at its Tax written down value (TWDV) and tax relief will continue as it would if the company had no left the group.
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Capital gains group. Assets subject to stamp duty and SDLT ... transferred between group members. Lernen beginnen
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can be transferred (as an exempt transfer).
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Capital gains group. Stamp taxes. If the transferee company leaves the group within ... years the duty is payable. Lernen beginnen
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Group questions. Alternative to GR: Lernen beginnen
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carrying back (after current period relief), as this can generate a repayment. Also try to reduce the TPP of companies exceeding the threshold. This will be beneficial to the group cash flow as CT instalments will no longer be required.
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Group reliefs stop when ... are in place. Lernen beginnen
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when sales arrangements are in place. If mid-year, time apportion needed.
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Sale of trade assets within 75% group. Trade losses can be... 2 Lernen beginnen
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can be transferred with the trade; | can be used against future total profits.
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Sale of trade assets within 75% group. Capital allowances. 3 Lernen beginnen
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Assets will be transferred at TWDV. | No BC/BA for transferor. | No FYA or AIA for transferee. BA/ - balancing allowance/charge | FYA - First-Year Allowance Structures and buildings allowances (SBAs) for transferee based on original cost.
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Sale of trade assets within 75% group: Lernen beginnen
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Assets pass as usual at no gain/no loss.
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Sale of trade assets within 75% group - if NOT capital gains group treatment: Lernen beginnen
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Capital gains or losses will arise on chargeable assets sold.
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Transfer pricing. The advantages company must... | The other company can... 2 Lernen beginnen
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must increase its taxable profits to reflect an arm's length price. | can reduce its taxable profits by a corresponding amount if it is UK-resident. Transfer pricing applies where transactions between group companies, which have not taken place at an arms length price, result in a tax advantage (decreased profits, increased losses to a UK company).
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Transfer pricing. Special rules apply where the SENDING COMPANIES involved are large (ALWAYS) or medium sized under limited circumstances.* Rules apply if: Lernen beginnen
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Small or medium company is overseas company in non-qualifying territory (no DTR agreement).*
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Transfer pricing. Special rules do NOT apply if: 2 Lernen beginnen
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S_M sends to UK S_M. | or S_M sends to overseas company in qualifying territory (DTR agreement exists).
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VAT group registration membership conditions: 3 Lernen beginnen
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Voluntary possibility. | By any UK company under COMMON CONTROL. | Non-corporate entities may form a VAT group if they are the controller of a group of companies and have a UK trade.* VCN *sole trader meets the definition, but simple individual does not.
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Consequences of VAT Group registration. # Lernen beginnen
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Only one VAT return. | Representative member responsible for accounting. | AAS and FRS not available. | CAS applied to whole group. | Joint and several group VAT liability for all members. | Intra-group sales without VAT. ORACJI CAS - cash accounting scheme; AAS - Annual accounting scheme. | FRS - Flat rate scheme.
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When considering to explain whether or not a company should be included in a VAT group special attention is required for: 2 Lernen beginnen
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Company making zero-rated supplies (exclude if in monthly repayment position to maintain CF advantage). | Companies making exempt supplies (inclusion in group will make the group partially exempt)*. *This could increase the total input tax recovered by the group, e.g. if the results of the group as a whole satisfy the partial exemption de minimis limits. But it could also result in a reduction in the total input tax recovered - consideration needed.
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Company has 16 months period of account. What are due dates for submission of returns? 2 Lernen beginnen
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12 months after the end of the long period of account for BOTH returns (for the first 12 months AP and the balance of the time). | Note that there are two separate payment days (9 months and 1 day after each end). The period of account cannot be more than 18 months long (unless the company is in administration). | An accounting period (AP) for C.T. purposes can never exceed 12 months. Therefore accounts for long period must be split.
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What is a tax treatment when company sells a subsidiary with a loss or gain? Lernen beginnen
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The sale will be covered by SSE*, accordingly there will be no relief for gain on the disposal of the shares. Capital losses are disallowable. *If hold at least 10% of shareholding for continuous 12 months |within last 6 years | a subsidiary i a TRADING company. | If conditions not met allowable loss or chargeable gain arise.
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Pre-entry capital loss methods of utilisation: 2cz Lernen beginnen
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Pre-entry loss is restricted so it can only be offset against loss on disposal of assets owned before joining the group | or bought subsequently from unconnected persons for use in its own business. Capital losses are more restricted than trading losses.
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Large company spend £169,000 for RaD. Calculate the ATL credit: Lernen beginnen
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13% - 'above the line' credit
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Large company spend £169,000 for RaD and has total taxable profits of £1,675,000. Calculate the total amount of C.T. saved by claiming RaD relief: Lernen beginnen
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£49,906 of C.T. saved in total. 21,970 ATL credit + 27,936 basic C.T. saving (19% of 147,030).
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Advantages of acquisition of company by company owned by individual rather than by this individual personally: 4 Lernen beginnen
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Assets are transferred within a group take place on no gain no loss basis. | Trading losses can be transferred. | Capital gains can be transferred. _| Land, buildings and fixed machinery used in business are qualifying assets for rollover relief purposes. NTCL
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Disadvantages of acquisition of company by company owned by individual rather than by this individual personally: 2 Lernen beginnen
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C.T. instalment threshold is reduced. | Only one AIA for the group*. *However it might one AIA anyway, if companies of individual share the same premises or operate in the same sector.
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Amortisation of goodwill in C.T. context: Lernen beginnen
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Amortisation of goodwill disallowable for C.T. purposes. Any amortisation charged in the accounts must be added back for tax purposes.
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Amortisation of patent acquired from capital gains group member C.T. treatment: Lernen beginnen
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Amortisation charge must based on original price paid, not the price of internal transfer. Amortisation of patent is allowable deduction for C.T. purposes.
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Transfer pricing concern the ... companies. Lernen beginnen
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Companies are connected if: one company directly or indirectly participates in the management, control or capital of the other company | or a third party directly or indirectly participates in the management, control or capital of both companies.
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Transfer pricing in qualified territories context: Lernen beginnen
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When double tax treaty exist then transfer pricing rules do not apply. If there is no treaty, UK company can seek advance approval from HMRC in respect of any intra-group pricing arrangements, including the rate of interest to be charged on a loan.
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The thin capitalisation rules aim: Lernen beginnen
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to stop UK companies from getting excessive tax relief on interest. It occurs usually because they received a loan from a related party that exceeds the loan an independent lender would be prepared to lend. The rules ensure that the excess is disallowed.
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An overseas resident company ... transfer assets at no gain, no loss within a capital gains group. Lernen beginnen
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the fact that overseas company is not a UK resident company means that the asset will no longer be within the charge to UK taxation.
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