AAT L4 Business Tax (UK Corporation Tax) 3

Question 1

Under the loan relationship rules, loan relationship credits (interest income received by a company) are:

Accepted Answer

Taxable as income in the period in which they accrue

Answer

Loan relationship credits (interest and other returns on money lent) are taxed as income under CTA 2009 on an accruals basis — recognised as they accrue regardless of when cash is received.

Question 2

Group relief in UK corporation tax allows:

Accepted Answer

A company to surrender trading losses to a fellow 75% group member to reduce that member's CT liability

Answer

Group relief allows a company with a current year trading loss to surrender that loss to another company in the same 75% group, which can use it to reduce its own CT liability in the current year.

Question 3

A company incurred a trading loss of £60,000. The options for relieving this loss include:

Accepted Answer

Current year offset against total profits, carry back one year to the previous 12 months, or carry forward against future trading profits

Answer

Under CTA 2010, trading losses can be: offset against total profits of the current period; carried back 12 months to the prior CT period; or carried forward against future trading profits.

Question 4

Which of the following transactions is subject to UK corporation tax on chargeable gains?

Accepted Answer

The disposal of a capital asset (e.g., an investment property) by a company

Answer

Companies pay corporation tax on chargeable gains arising from the disposal of capital assets. The gain is calculated using the same indexation and base cost principles as pre-2017 rules, though indexation allowance is frozen from January 2018.

Question 5

For a company, the indexation allowance used in calculating a chargeable gain:

Accepted Answer

Was frozen from January 2018 — only indexation to that date can be deducted

Answer

Indexation allowance, which reduces the chargeable gain by adjusting the base cost for inflation, was frozen for disposals on or after 1 January 2018. The allowance calculated up to January 2018 is still available.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Business Tax (UK Corporation Tax) 3