Chartered Institute of Public Finance and Accountancy (CIPFA) Taxation Flashcards

24 sample cards from the Taxation deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. How are capital allowances on cars determined?

   By $CO_2$ emissions: zero-emission cars get a 100% first-year allowance; low-emission cars get 18% main pool WDA; higher-emission cars get 6% special rate pool WDA. AIA is not available on cars.

2. What is a balancing charge in capital allowances?

   A taxable addition to profits arising when sale proceeds of an asset exceed its tax written-down value (or when a pool's disposal proceeds exceed the balance), effectively clawing back excess allowances.

3. How can a company relieve a current-year trading loss?

   Set it against total profits of the current accounting period, then carry back against total profits of the previous 12 months, with any remainder carried forward against total profits of future periods.

4. Against what can carried-forward trading losses (post-April 2017) be set?

   Against the company's total profits of future periods (subject to the deductions allowance/loss restriction for large profits), not just future trading profits — giving greater flexibility.

5. What is the definition of a 75% group for group relief purposes?

   One company is a 75% subsidiary of another if the parent owns (directly or indirectly) at least 75% of ordinary share capital, and is entitled to at least 75% of distributable profits and net assets on winding up.

6. What is group relief?

   A relief allowing a company in a 75% group to surrender current-period trading losses (and certain other amounts) to another group company to set against that company's taxable total profits.

7. Define a 'chargeable gains group' and its threshold.

   A group where the principal company holds at least 75% directly in each subsidiary and over 50% effective interest throughout; assets can be transferred between members at no gain/no loss.

8. What is the main rate of UK Corporation Tax and the small profits rate for FY2024?

   Main rate $25\%$ on profits over $£250{,}000$; small profits rate $19\%$ on profits up to $£50{,}000$, with marginal relief between these limits.

9. Write the marginal relief formula for Corporation Tax.

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

10. When must a 'small' company (not large) pay its Corporation Tax?

    Nine months and one day after the end of its accounting period.

11. How do 'large' companies pay Corporation Tax?

    By quarterly instalments — for a 12-month period, due in months 7, 10, 13 and 16 from the start of the accounting period (large = augmented profits over $£1.5$m, scaled for group size).

12. What is the standard rate of UK VAT and the reduced rate?

    Standard rate $20\%$; reduced rate $5\%$ (e.g. domestic fuel and power).

13. Distinguish zero-rated, exempt and standard-rated supplies for VAT.

    Zero-rated: taxable at $0\%$, input VAT recoverable (e.g. most food, books). Exempt: no output VAT and input VAT not recoverable (e.g. insurance, education). Standard-rated: $20\%$ with input VAT recoverable.

14. What is the VAT registration threshold (taxable turnover) for 2024/25?

    $£90{,}000$ — registration is compulsory once taxable turnover in any rolling 12 months exceeds this, or is expected to exceed it in the next 30 days.

15. Write the formula for VAT payable to HMRC on a return.

    $$\text{VAT payable} = \text{Output VAT (on sales)} - \text{Input VAT (on purchases)}$$

16. What is the tax point (time of supply) for VAT, and what is the basic tax point for goods?

    The tax point determines which VAT period a supply falls in. The basic tax point for goods is when they are removed/made available; an invoice or payment within 14 days can create an earlier/actual tax point.

17. How does a local authority's VAT recovery position differ from that of an ordinary business?

    Under s33 VATA 1994, local authorities can recover input VAT on their non-business (statutory) activities as well as business activities, which ordinary businesses cannot do for non-business use.

18. What is a 'section 33 body' for VAT purposes?

    A public body (e.g. local authority, fire authority, police) entitled under s33 VATA 1994 to reclaim VAT incurred on purchases relating to its non-business statutory functions.

19. Why must local authorities still monitor exempt input VAT despite s33?

    VAT relating to exempt business activities is recoverable only if it falls below the partial exemption de minimis limits (broadly 5% of total input VAT and a small monetary cap); otherwise it becomes irrecoverable.

20. How are capital gains charged on companies, and at what rate?

    Companies pay Corporation Tax on their chargeable gains, which are included within Taxable Total Profits and taxed at the company's Corporation Tax rate (not the separate CGT rates that apply to individuals).

21. Write the basic computation of a chargeable gain for a company.

    $$\text{Gain} = \text{Proceeds} - \text{Incidental costs of disposal} - \text{Allowable cost} - \text{Indexation allowance (to Dec 2017)}$$

22. What is indexation allowance for company chargeable gains and its current status?

    An allowance that increased the base cost in line with RPI inflation to reduce the gain. It was frozen at December 2017, so no indexation accrues after that date and it cannot create or increase a loss.

23. What is the Substantial Shareholding Exemption (SSE) for companies?

    An exemption from corporation tax on gains where a trading company disposes of shares in a trading company/group in which it has held at least 10% for a continuous 12 months in the prior 6 years.

24. What is rollover relief on the replacement of business assets?

    A relief deferring a chargeable gain when proceeds from a qualifying business asset are reinvested in another qualifying asset; the gain is 'rolled over' by reducing the base cost of the new asset.

What this deck covers

Taxation flashcards FAQ