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ACCA F6
Taxation(UK)
税法(英国)
ACCA Lecturer: Helen Zhang
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1 Computing taxable total profits
Chapter 19 Computing taxable total profits
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Chapter 19 Computing taxable total profits
1 The scope of corporation tax
2 Taxable total profits
3 Trading income
4 Property business income
5 Loan relationships (interest income)
6 Miscellaneous income
7 Qualifying charitable donations
8 Long periods of account
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Chapter 19 Computing taxable total profits
1 The scope of corporation tax
Companies must pay corporation tax on their taxable
total profits for each accounting period.
Company: A 'company' is
a) any corporate body (limited or unlimited) ,or
b) unincorporated association, e.g. sports club.
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Chapter 19 Computing taxable total profits
Accounting periods :
• Corporation tax is chargeable in respect of accounting periods.
• - A period of account is any period for which a company prepares accounts, any length is OK.
• - An accounting period is the period for which corporation tax is charged and cannot exceed 12 months.
• If a company has a period of account exceeding 12 months, it is split into two accounting periods: the first 12 months and the remainder.
• When an accounting period starts?
• When an accounting period finishes?
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Chapter 19 Computing taxable total profits
An accounting period starts on the earliest of:
• when a company starts to trade
• when the company otherwise becomes liable to
corporation tax (eg it opens a bank account which
pays interest)
• immediately after the previous accounting period finishes
An accounting period finishes on the earliest of:
• 12 months after its start
• the end of the company's period of account
• the company starting or ceasing to trade
• the company entering/ceasing to be in administration
• the commencement of the company's winding up
• the company's ceasing to be resident in the UK
• the company's ceasing to be liable to corporation tax
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Chapter 19 Computing taxable total profits
Financial year
• Corporation tax rates are set for financial years.
• Notes:
(a) Financial year runs from 1 April to the following 31
March. For example, the year ended 31 March 2014 is the
Financial Year 2013 (FY 2013).
(b) Tax year for income tax and CGT runs from 6 April to
the following 5 April.
(Tax year针对的是我们之前算个人所得税,遗产税时使用的
时间概念,特别注意,在牵涉到公司的相关税时,使用的时
间概念时financial year)
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Chapter 19 Computing taxable total profits
The residence of companies
Place of incorporation Corporation tax treatment
UK Treated as resident in the UK for
corporation tax purposes.
Overseas Only treated as resident in the UK if
its central management and control
are exercised in the UK
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Chapter 19 Computing taxable total profits
2 Taxable total profits
Taxable total profits= income + chargeable gains
– losses
– qualifying charitable donations
• A company may receive income from various sources.
All income received must be classified according to the
nature of the income as different computational rules
apply to different types of income.
• Income includes : Trading profits
Property business profits
Interest income
Miscellaneous income
• Taxable total profits does not include dividends received from other companies.
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Chapter 19 Computing taxable total profits
Taxable total profits computation
Trading profits X
Property business income X
Interest income from non-trading loan relationships X
Miscellaneous income X
Chargeable gains X
Total profits X
Less: losses deductible from total profits (X)
qualifying charitable donations (X)
Taxable total profits for an accounting period X
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Chapter 19 Computing taxable total profits
Trading income——adjustment of profits
Profit before taxation X
Add expenditure not allowed for taxation purposes X
Less: income not taxable as trading income (X)
expenditure not charged in the accounts but allowable
for the purposes of taxation (X)
capital allowances (X)
Profit adjusted for tax purposes X
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Chapter 19 Computing taxable total profits
• The adjustment of profits computation for companies
broadly follows that for computing business profits
subject to income tax (chapter 7).
• However, there are some minor differences. There is
no disallowance for ‘private use’ for companies.
• Qualifying charitable donations are added back in the
calculation of adjusted profit. As they are treated as a
deduction from total profits
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Chapter 19 Computing taxable total profits
Income not taxable as trading income
• Income taxed in another way
example:
rents taxed as property business income
capital receipts as chargeable gains
income from investment as interest income
• Income specifically exempt from corporation tax
example:
dividends received from other companies
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Chapter 19 Computing taxable total profits
Pre-trading expenditure
Pre-trading expenditure incurred by the company within the
7 years before trade commences is treated as
an allowable expense incurred on the first day of trading
provided it would have been allowable had the
company been trading when the expense was actually
incurred.
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Chapter 19 Computing taxable total profits
Capital allowances
• Capital allowances must be deducted in arriving at taxable trading income.
• Calculation of capital allowances follows income tax principles (chapter 8) with minor differences.
• - For companies, there is never any reduction of allowances relating private use of an asset.
• - Capital allowances computation must be based on each accounting period separately.
• - Company’s accounting period can never exceed 12 months.
• WDA = 18%×months/12, months here means length of relevant accounting period (≤12 months).
• The computation must be carried out for each period separately.
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Chapter 19 Computing taxable total profits
Property business income
• Rental income is deducted in arriving at trading income but brought in again as property business income.
• The calculation of property business income follows income tax principles (chapter 6) with certain differences.
• Interest paid by a company on a loan to buy or improve
property is not a property business expense. The loan
relationship rules apply (see below).
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Chapter 19 Computing taxable total profits
Loan relationships
If a company borrows or lends money, including issuing or
investing in debentures or buying gilts, it has a loan
relationship, including creditor relationship (lends) or
debtor relationship (borrows).
• Loan relationships for trading purpose
• Loan relationships for non-trading purpose
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Chapter 19 Computing taxable total profits
a) Loan relationships for trading purpose
debits - interest paid are allowed as a trading expense
credits – interest income are treated as trading income
b) Loan relationships for non-trading purpose
Any debits or credits must be pooled.
A net credit on the pool is chargeable as interest income
(investment income).
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Chapter 19 Computing taxable total profits
Miscellaneous income
• Patent royalties received relating to non-trading are
taxed as miscellaneous income.
• Patent royalties received relating to trading are taxed
as trading income.
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Chapter 19 Computing taxable total profits
Qualifying charitable donations
• Qualifying charitable donations are deducted from
total profits.
• Donations to local charities which are incurred wholly
and exclusively for the purposes of a trade are
deducted as a trading expense when computing the
tax adjusted trading profits.
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Chapter 19 Computing taxable total profits
Marlborough Ltd ’s statement of profit or loss for the year ended 31
March 2013 is as follows:
Gross profit 700,000
Other income
Loan stock interest (note 1) 14,500
Rental income (note 2) 18,000
Expenses
Salaries (76,000)
Depreciation (37,900)
Loss on sale of non-current asset (1,400)
Impairment losses (all trade) (2,800)
Professional fees (note 3) (12,900)
Repairs and renewals (note 4) (17,100)
Other expenses (note 5) (25,600)
Finance costs
Loan interest (note 6) (12,000)
Profit before taxation 546800
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Chapter 19 Computing taxable total profits
Notes
(1) Loan stock interest
The loan stock interest is in respect of loan stock held by
Marlborough Ltd as an investment. The amount of £14,500 is the
amount received and accrued to 31 March 2013.
(2) Rental income
The rental income is in respect of a warehouse which is held as an
investment and is let out to an unconnected company. The rental
received of £18,000 is also the amount accrued to 31 March2013.
(3) Professional fees
Professional fees are as follows:
Accountancy and audit fees 4,600
Debt collection of trade debts 5,000
Legal fees in connection with renewing a 25 year lease 1,300
Legal fees in connection with director’s motoring offences 2,000
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Chapter 19 Computing taxable total profits
(4) Repairs and renewals
Repairs and renewals include:
Extension to factory 7,988
Repainting exterior of company’s offices 6,000
(5) Other expenses
Other expenses include:
100 pens with an advertisement for company, given to customers 2,100
Qualifying charitable donation 5,000
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Chapter 19 Computing taxable total profits
(6) Loan interest
The loan interest relates to the warehouse let out (see note (2)). The
amount shown is the amount paid and accrued to 31 March 2013.
(7) Plant and machinery
On 1 April 2012 the tax written down value of the main pool was
£22,500. The following transactions took place during the year ended 31
March 2013:
10 June 2012 Purchased general plant 20,200
25 January 2013 Sold a van (original cost £17,000) (11,500)
15 March 2013 Purchased a motor car CO2 emissions 128g/km
10,600
The motor car purchased on 15 March 2013 is used by the company’s
sales manager: 30% of the mileage is for private journeys
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Chapter 19 Computing taxable total profits
Answer
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Chapter 19 Computing taxable total profits
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Chapter 19 Computing taxable total profits
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Chapter 19 Computing taxable total profits
Continue
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Chapter 19 Computing taxable total profits
Long periods of account
Where the period of account differs from accounting period, profits in each period of account are allocated to the relevant accounting periods:
(1) trading income before capital allowances, time basis(按时间分配)
(2) capital allowances are calculated for each accounting period
(3) property income and miscellaneous income, time basis
other income is allocated to period to which it relates.
(4) arising basis:
chargeable gain/loss when realised,
qualifying charitable donations when paid, FII
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Chapter 19 Computing taxable total profits
Example 2
Xenon Ltd makes up an 18 month set of accounts to 30
September 2013 with the following results.
Trading income (no capital allowances claimed) 180,000
Interest income
18 months @ £500 accruing per month 9,000
Capital gain (1 August 2013 disposal) 250,000
Less: qualifying charitable donation (50,000)
389,000
What are the taxable total profits for each of the accounting
periods based on the above accounts?
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Chapter 19 Computing taxable total profits
Answer
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