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  • Tax Memo - Corporation tax - General principles - Liability to tax - Accounting periods - 1150
    Tax is charged for an accounting period, although the rates and thresholds are set for financial years. In the normal course of events, a company's accounting period will be the same as the 12-month period for which it makes up its statutory accounts (the accounting reference date). Accounting periods run consecutively, and a new one starts as soon as the previous one ends. A financial year (FY) runs from 1 April through to 31 March and is denoted by the year in which it starts, for example, FY18 runs from...
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  • Tax Memo - Corporation tax - Chargeable gains - Particular situations - Liquidation - 9685
    When a company enters into liquidation it is, for chargeable gains purposes, a non-event. Although the assets become vested in the liquidator, there is no chargeable disposal. The actions of the liquidator are deemed to be the actions of the company, and any disposals during the liquidation are therefore taxed in accordance with the normal rules. - Where the company is a member of a 75% CG group of companies (¶13130), the liquidation does not affect that position, and therefore assets continue to be eligible...
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  • Tax Memo - Corporation tax - Computation - Calculation of the corporation tax liability - Calculating the tax - Accounting period coinciding with financial year - 11590
    Where the company's accounting period coincides with the FY (i.e. runs from 1 April through to 31 March) corporation tax is calculated simply by multiplying the taxable total profits by the appropriate rate of tax. A Ltd has taxable total profits of £59,000 for the year to 31 March 2018. The corporation tax due is therefore £11,210 (£59,000 × 19%).
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  • Tax Memo - Corporation tax - Administration - Notification - Notification by the company - 18050
    HMRC is notified by Companies House when a new company is formed and will usually send a form CT41G, which can be used by the company to notify coming within the charge. However, it is the company's responsibility to ensure that it gives notice to HMRC when it has come within the charge to corporation tax. It must do this within 3 months of the beginning of its first accounting period. The information does not have to be provided on a form CT41G and can be supplied in any other reasonable manner. If a dormant...
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  • Tax Memo - Corporation tax - Administration - Returns - Filing date - 18580
    The basic rule is that the filing date for a return is the later of: - 12 months from the end of the period to which the return relates; or - 3 months after the date the notice to file is received. A Ltd prepares accounts for the 12 months to 31 August 2017 and receives a notice to make a return for this period. The notice was issued on 22 September 2017, therefore the filing date is 31 August 2018. 1. As a general rule, 12 months from the end of the return period is taken to be the same day of the same month...
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  • Tax Memo - Income tax - Trading income - Sole traders - Profits - Computation of trading income - General rules - 21000
    Trading income comprises profits from a trade, profession or vocation. Tax is charged for each tax year on the profits of the basis period for that year (¶21100). The profits of sole traders (individuals) are computed in the same manner as the trading profits of companies (see ¶3000+), except that for sole traders there are special rules in relation to: - the trading income allowance (¶21082); - disposals of trading stock other than in the course of the trade (¶21085); and - home working arrangements (¶21090)....
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  • Tax Memo - Income tax - Trading income - Sole traders - Profits - Taxation of trading profits - Commencement of trade - Why are there special rules? - 21125
    The basis period rules on the commencement of a trade attempt to ensure that profits are taxed evenly over the first 3 years. The results of one accounting period may be spread across more than one tax year and apportionment may be necessary. Similarly, more than one set of accounts may relate to each tax year and the results may need to be aggregated. 1. Strictly speaking, the apportionment should be made on the basis of the number of days in the respective periods. In practice HMRC may accept another reasonable...
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  • Tax Memo - Income tax - Trading income - Sole traders - II. Losses - Commencement of trade - Claiming relief - 21450
    Where a loss arises in the first 3 years of a new business (or on the change of an accounting date), the losses in aggregation rule must be applied. This states that where the results of one accounting period are used as part of the basis period for more than one year of assessment, any losses arising can only be used once. See ¶21125 for the detailed basis period rules. - Mr H commences trading on 1 June 2017. He prepares accounts for the 8-month period to 31 January 2018 and annually thereafter. Adjusted...
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  • Tax Memo - Income tax - Trading income - Partnerships - Partnership profits - Taxation of partnership profits - Apportionment between the partners - 21720
    Partnership profits (or losses) for an accounting period are allocated among the partners in accordance with their interests in the partnership during that period. Each partner is then treated as if the profits were derived from a separate business carried on as a sole trader, using the same basis periods as for sole traders (¶21105+). When a partner leaves or joins a continuing partnership (one in which there is at least one common partner before and after a change), the opening and closing year rules and...
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  • Tax Memo - Income tax - Trading income - Special trades - Lloyd's underwriters - General principles - Accounting year - 22475
    The accounting year at Lloyd's is the calendar year, so the accounting year ending on 31 December 2017 is known as “the 2017 underwriting account”. Each account is normally kept open for 2 more years, so the 2015 account would close on 31 December 2017. An account may, however, be left open for a further year (or more) because the liabilities remaining at the end of the period cannot be estimated with any certainty. This is known as a run-off account. - As underwriting accounts are kept open, the time limits...
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