Chartered Institute of Taxation (CIOT / CTA) Taxation of Major Corporates Advisory Syllabus

Taxation of Major Corporates Advisory syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Taxation of Major Corporates Advisory in Chartered Institute of Taxation (CIOT / CTA), not a summary of it.

1. 1

   Corporate Computations and Reliefs

   4 topics

   • Computation of corporation tax for large companies
     • Quarterly instalment payments
     • Marginal relief and associated companies
   • Loan relationships and derivative contracts
     • Connected party rules and impairment
     • Corporate interest restriction
   • Intangible fixed assets regime
   • Research and development and patent box
2. 2

   Groups and Reorganisations

   4 topics

   • Group relief and consortium relief
     • Surrender of losses and limitations
     • Carried-forward loss restriction and group cap
   • Capital gains groups
     • No gain no loss transfers
     • Degrouping charges
   • Substantial shareholding exemption
   • Group reorganisations and demergers
3. 3

   International Corporate Taxation

   4 topics

   • Cross-border structuring and permanent establishments
   • Controlled foreign companies regime
     • Gateway tests and exemptions
     • CFC charge computation
   • Transfer pricing and thin capitalisation
     • Arm's length principle and OECD guidelines
     • Documentation and country-by-country reporting
   • Diverted profits tax and Pillar Two/global minimum tax
4. 4

   Compliance, Governance and Anti-Avoidance

   4 topics

   • Senior accounting officer regime
   • Corporate criminal offence of failure to prevent tax evasion
   • General and targeted anti-avoidance rules
     • GAAR and the double reasonableness test
     • Disclosure of tax avoidance schemes
   • Tax risk management and publication of tax strategy

Taxation of Major Corporates Advisory flashcards for Chartered Institute of Taxation (CIOT / CTA)

24 of 62 cards from the Taxation of Major Corporates Advisory deck — real questions with worked answers.

1. What is the main rate of UK corporation tax and the threshold above which it applies from 1 April 2023?

   The main rate is 25%, applying to companies with augmented profits above the upper limit of $\pounds 250{,}000$. Below $\pounds 50{,}000$ the small profits rate of 19% applies, with marginal relief between the two.

2. State the formula for marginal relief on corporation tax (financial year 2023 onwards).

   $$\text{MR} = F \times (U - A) \times \frac{N}{A}$$ where $F$ is the standard fraction ($\frac{3}{200}$), $U$ the upper limit ($\pounds 250{,}000$), $A$ augmented profits, and $N$ taxable total profits (TTP).

3. What are 'augmented profits' for corporation tax rate purposes?

   Taxable total profits (TTP) plus exempt distributions received from non-group (non-51%) companies. Used to determine which rate band and marginal relief apply; the limits are divided by the number of associated companies plus one.

4. How do associated companies affect the corporation tax limits?

   The $\pounds 50{,}000$ and $\pounds 250{,}000$ limits are divided by the number of associated companies (companies under common control, worldwide), including the company itself. More associates push profits into the marginal/main rate band sooner.

5. For a large company, when are corporation tax instalment payments due (12-month accounting period)?

   In months 7, 10, 13 and 16 from the start of the accounting period — i.e. roughly the 14th of months 7 and 10 of the period, and months 1 and 4 after it ends. 'Very large' companies pay 4 months earlier (months 3, 6, 9, 12).

6. Define a 'large' versus 'very large' company for quarterly instalment payments (QIPs).

   Large: augmented profits exceed $\pounds 1.5$m (divided by associates). Very large: augmented profits exceed $\pounds 20$m (divided by associates). Very large companies pay all four instalments within the accounting period itself.

7. What is a 'loan relationship' under the CTA 2009 regime?

   A company stands in the position of creditor or debtor in respect of a money debt arising from a transaction for the lending of money. It captures interest, debt and most corporate borrowing/lending for tax purposes.

8. Distinguish trading from non-trading loan relationship debits/credits.

   Trading LR amounts (debt used for trade purposes) are dealt with as trading income/expense. Non-trading LR amounts are pooled; a net non-trading credit is taxable as income, while a net non-trading deficit (NTLRD) can be relieved flexibly.

9. How can a non-trading loan relationship deficit (NTLRD) be relieved?

   Set against total profits of the same period; surrendered as group relief; carried back against non-trading LR profits of the prior 12 months; or carried forward against total profits (post-1 April 2017 deficits) subject to the loss restriction.

10. On what basis are loan relationship debits and credits generally measured?

    On an amortised cost / fair-value basis following the amounts recognised in the company's accounts under GAAP (the 'accounts-based' approach), provided they are recognised in determining profit or loss.

11. What is a 'derivative contract' for corporation tax, and how is it taxed?

    A relevant contract (option, future or contract for differences) meeting accounting and underlying-subject-matter conditions. Profits/losses follow the accounts, taxed as trading or non-trading (mirroring the loan relationship rules) depending on purpose.

12. Which company assets fall within the intangible fixed assets (IFA) regime?

    Intangible assets and goodwill recognised under GAAP that are created or acquired on or after 1 April 2002, including patents, trademarks, know-how and capitalised development costs. Relief follows the accounting amortisation.

13. How is relief for intangible fixed assets normally given?

    As a trading (or non-trading) debit following the accounting amortisation/impairment, or alternatively a company may elect for a fixed-rate 4% per annum writing-down allowance on cost.

14. What is the tax treatment of goodwill and customer-related intangibles acquired on a business purchase from 1 April 2019?

    Relief is available where the goodwill is acquired with qualifying intellectual property, capped at 6.5% per annum of the lower of cost or 6 times the qualifying IP expenditure. Between 2015–2019 no relief was available.

15. How are gains and losses on disposal of post-2002 intangible fixed assets treated?

    As income (taxable credit or deductible debit) within the IFA regime, not as chargeable gains. Rollover relief into other qualifying intangibles is available to defer the credit.

16. What is the merged scheme R&D expenditure credit (RDEC) rate from 1 April 2024?

    A 20% above-the-line taxable expenditure credit on qualifying R&D costs. The credit is itself taxable, giving a net benefit of roughly 15% after the 25% main rate.

17. What enhanced support exists for R&D-intensive loss-making SMEs from 1 April 2024?

    R&D-intensive SMEs (qualifying R&D at least 30% of total expenditure) can claim an enhanced deduction of 86% extra and surrender losses for a payable credit of 14.5%, outside the merged RDEC scheme.

18. What is the effective rate of corporation tax on Patent Box profits, and how is it achieved?

    An effective 10% rate on profits attributable to qualifying patents, achieved by an additional deduction. $$\text{Deduction} = RP \times \frac{(\text{MR} - \text{PB rate})}{\text{MR}}$$ where RP is relevant IP profits, MR the main rate (25%), PB rate 10%.

19. What is the 'nexus fraction' in the Patent Box regime?

    It restricts qualifying profit by reference to a company's own R&D versus acquired IP/related-party R&D: $$\text{Nexus} = \frac{(D + S_1) \times 1.3}{D + S_1 + S_2 + A}$$ capped at 1, where $D$ is in-house R&D, $S_1$ unconnected subcontracting, $S_2$ connected subcontracting, $A$ IP acquisition cost.

20. State the basic conditions for group relief (current year).

    A 75% group relationship: one company is a 75% subsidiary of the other, or both are 75% subsidiaries of a third. Requires 75% of ordinary share capital, plus 75% of distributable profits and assets on winding up (economic ownership).

21. Which losses can be surrendered as current-year group relief?

    Trading losses, excess capital allowances, non-trading loan relationship deficits, qualifying charitable donations, UK property losses, management expenses and non-trading IFA losses — broadly current-period amounts, with non-trade items only after offsetting the surrendering company's own profits.

22. What does the group relief for carried-forward losses (CFLR) regime, from 1 April 2017, allow?

    Post-1 April 2017 carried-forward losses (trading, NTLRD, management expenses etc.) can be surrendered to 75% group members, subject to the $\pounds 5$m deductions allowance and 50% restriction applying group-wide.

23. Define consortium relief and the consortium condition.

    A company is consortium-owned if at least 75% of its ordinary share capital is held by companies (members) each holding at least 5% but less than 75%. Losses can be surrendered between the consortium company and members in proportion to ownership.

24. What is the £5m deductions allowance in the corporate loss restriction?

    From 1 April 2017, carried-forward losses can only offset 50% of profits above a $\pounds 5$m annual deductions allowance (shared across a group). Below $\pounds 5$m, profits can be fully relieved; above, only 50% of the excess.

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