AAT L4 Business Tax Computations 3

Question 1

A company sells a factory it has used for 12 years for £600,000. The original cost was £350,000 and indexation allowance (up to December 2017) is £95,000. What is the chargeable gain?

Accepted Answer

£155,000

Answer

Gain before indexation = £600,000 − £350,000 = £250,000. Indexation allowance = £95,000. Chargeable gain = £250,000 − £95,000 = £155,000.

Question 2

For the financial year 2023 (FY2023), the main rate of corporation tax applies to companies with profits above what threshold?

Accepted Answer

£250,000

Answer

From 1 April 2023, the main rate of 25% applies to profits above £250,000. The small profits rate of 19% applies up to £50,000, with marginal relief between £50,000 and £250,000.

Question 3

A company makes a loan to its director of £30,000. The company does not charge interest. Which of the following tax charges applies?

Accepted Answer

A section 455 CTA 2010 charge of 33.75% of the loan amount applies

Answer

A s455 CTA 2010 charge of 33.75% (£10,125) is payable by the company when a loan is made to a participator (shareholder/director). It is repayable when the loan is repaid.

Question 4

Company A has trading profits of £300,000 and Company B (a 75% subsidiary) has a trading loss of £80,000. They wish to use group relief. What is Company A's taxable profit after group relief?

Accepted Answer

£220,000

Answer

Group relief allows a 75% subsidiary's trading losses to be surrendered to the parent. Company A can claim £80,000 of Company B's loss, reducing its taxable profit to £300,000 − £80,000 = £220,000.

Question 5

What is the purpose of the 'disincorporation relief' or, more broadly, the 'substantial shareholding exemption' (SSE) in corporation tax?

Accepted Answer

To exempt gains on disposal of shares in trading subsidiaries where certain conditions are met

Answer

The Substantial Shareholding Exemption (SSE) provides a complete exemption from corporation tax on gains arising from the disposal of shares in trading subsidiaries where the conditions (12 months' 10%+ holding in a trading company) are met.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Business Tax Computations 3