F6 Taxation (UK)

2 Section A: The UK tax system Section B: Income tax liabilities Section C: Chargeable gains Section D: Corporation tax liabilities Section E: Inheritance tax Section F: National insurance contributions Section G: Value Added Tax Section H: The obligations of tax payers and/or their agents Taxation (UK)

3 Designed to give you the knowledge and application of: Corporation tax liabilities D1. The scope of corporation tax D2. Taxable total profits D3. The comprehensive computation of corporation tax liability

4 D1: The scope of corporation tax  Define the terms ‘period of account’, ‘accounting period’, and ‘financial year’. [1]  Recognise when an accounting period starts and when an accounting period finishes. [1]  Explain how the residence of a company is determined. [2] Learning outcomes

5 Any incorporated body whether limited / unlimited is a company. Any corporate body / unincorporated organisation chargeable to corporation tax is also a company. Company It is a period for which a company prepares its set of accounts. No specific period of account is specified by law, so companies can prepare their accounts for any period as they see fit. Period of accounts The terms ‘period of account’, ‘accounting period’ and ‘financial year’ 6 months 30 months 12 months18 months Therefore, the length of a period of account can be Refer to Example (Alpha, Beta and Gamma Ltd) on page 328 Continued…

6 It is a period for which the government charges corporation tax. It can never exceed 12 months. Accounting period Refer to Example (Alpha, Beta and Gamma Ltd) on page 328 a)the period for which rates of corporation tax are fixed by government b)runs from 1 April to the succeeding 31 March c)it is identified by calendar year in which it begins Financial year (FY) Continued…

7 Important: when accounting period falls in two FYs, the chargeable profits should be apportioned between two FYs in ratio of the months falling in each FY. Example The financial year (FY) 2009 covers the period from 1 April 2009 to 31 March 2010 and FY 2010 covers the period from 1 April 2010 to 31 March Accounting period starts on the earliest of these events Company starts to trade Immediately after end of previous accounting period Company becomes liable to corporation tax When an accounting period starts and when an accounting period ends Continued…

8 The accounting period ends on the earliest of these events At the end of company’s period of account After 12 months period from start of accounting period On commencement of winding up proceedings On company’s ceasing to be liable to corporation tax On a change in the residential status of company Continued…

9 There are two possibilities A company’s set of accounts consists of period less than 12 months A company’s set of accounts consists of period more than 12 months So the accounting period is also 6 months ended 30/06/11 The period covered by set of accounts will be divided into 2 / more accounting periods The first 12 months will be assessed as first accounting period Remaining period will be assessed as next accounting period Refer to Test Yourself 1 on page 330 Continued…

10 Residence of a company depends upon where company is incorporated. 1.If a company is incorporated in the UK, then it is resident in the UK. 2. A non-UK incorporated company is treated as resident in the UK if its central management and control is exercised in the UK. The residence of a company is determined Example A company is incorporated in a country other than the UK, say France, but its Board of Directors conducts its affairs through meetings held in the UK. In this case, is the company resident in the UK or in France? The answer is that the company is resident in the UK because its affairs are conducted (central management and control) through meetings of Board of Directors in the UK. Continued…

11 There can be three different situations depending upon the place of incorporation of a company: Company resident in UK 3.Company incorporated in a place other than UK but control & management of the company situated in UK Company non- resident in UK 2.Company incorporated in a place other than UK Company resident in UK 1.Company incorporated in UK. Residential statusPlace where company is incorporated Continued…

12 RECAP  Define the terms ‘‘period of account’, ‘accounting period’, and ‘financial year’. [1]  Recognise when an accounting period starts and when an accounting period finishes. [1]  Explain how the residence of a company is determined. [2]