Corporation Tax Quiz

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Questions and Answers

What is the taxable chargeable gain calculated after?

Adding carried forward losses to total chargeable gain

Multiplying total chargeable gain by annual exemption

Subtracting annual exemption from total chargeable gain (correct)

Subtracting initial and subsequent expenditures from net sale proceeds

Which of the following statements is correct regarding corporation tax rates?

Only companies with profits under £50,000 pay 19% corporation tax

Corporation tax is assessed only on chargeable gains of the company

Companies with profits between £50,000 and £250,000 pay a marginal tax rate between 19% and 25% (correct)

Corporation tax is always charged at 25% regardless of profits

What components are included in the calculation of taxable total profits (TTP)?

Only income profits and their capital allowances

Only chargeable gains and income receipts

Chargeable gains, profits from investments, and initial expenditures

Chargeable gains, income profits, and allowable deductions (correct)

Which expenditure is not subtracted when calculating the chargeable gain from the sale of an asset?

Capital allowances Signup and view all the answers

How are companies assessed for corporation tax?

By reference to their accounting period Signup and view all the answers

What must be done if a debt is secured by a floating charge?

It should be registered within 21 days from its creation. Signup and view all the answers

Which statement about the loan repayment priority is accurate?

Fixed charges take precedence over floating charges, regardless of registration. Signup and view all the answers

What action does the Board take after deciding to register a new member?

They issue a new share certificate to the transferee. Signup and view all the answers

Which type of security allows the creditor to retain possession of an asset until the debt is repaid?

Lien Signup and view all the answers

If a fixed charge is created after a floating charge, what is true regarding their priority?

The fixed charge has priority over the floating charge, regardless of registration. Signup and view all the answers

What steps are involved in transferring shares to a new member?

The Board must consider if it has the power to refuse registration. Signup and view all the answers

Which statement is true regarding directors borrowing money for the company?

Directors can borrow money under the Model Articles on behalf of the company. Signup and view all the answers

What is true about the registration of charges at Companies House?

Charges registered after 21 days may be void against creditors. Signup and view all the answers

What is the primary calculation to determine taxable income?

Total income minus exemptions Signup and view all the answers

How should income be treated if it crosses more than one tax bracket?

Apply the appropriate tax rate to each portion in its respective bracket Signup and view all the answers

Which of the following assets is NOT considered a chargeable asset for Capital Gains Tax?

A principal private residence Signup and view all the answers

What determines the chargeable gain in a disposal transaction?

Consideration received minus allowable expenditures Signup and view all the answers

In which scenario is a disposal treated as no gain/no loss?

Disposing of an asset to a charity Signup and view all the answers

Which of the following deductions can be classified as allowable expenditure when calculating gains?

Incidental costs of acquisition Signup and view all the answers

What action constitutes a chargeable disposal under Capital Gains Tax provisions?

Selling an asset Signup and view all the answers

How is savings income taxed if it qualifies for the Personal Savings Allowance (PSA)?

At the nil rate up to a certain threshold Signup and view all the answers

What is the consequence of making gifts of income-producing items to children?

The income is treated as remaining with the original taxpayer Signup and view all the answers

Which of the following best describes the 'cake' method in assessing tax rates?

Applying specific rates to portions of income at different tiers Signup and view all the answers

What is NOT a requirement for statutory accounts of a company?

A statement of shareholder voting power Signup and view all the answers

Which type of director is specifically known for influencing the actions of formally appointed directors without being registered?

Shadow director Signup and view all the answers

What must shareholders do to ensure they can inspect the register of members?

Submit a written request with personal details Signup and view all the answers

What is the primary purpose of the Duomatic Principle in shareholder resolutions?

To allow all unanimous decisions of shareholders to be binding Signup and view all the answers

Which of the following is NOT a duty of company directors?

Promoting the success of other companies Signup and view all the answers

What can directors NOT do when they have an interest in a proposed transaction?

Count towards the quorum Signup and view all the answers

Which of the following is a requirement for a PLC regarding meetings?

Call a meeting if requested by 5% of shareholders Signup and view all the answers

What type of account shows a company’s sales, running costs, and profit or loss for a financial year?

Profit and loss account Signup and view all the answers

Which of the following is true regarding the dividends for preference shares?

They are paid before ordinary shares Signup and view all the answers

What happens if a company pays an unlawful dividend?

Both directors and shareholders are liable for repayment Signup and view all the answers

What is NOT a responsibility of a private company regarding directors?

Publicly disclose directors' service contracts Signup and view all the answers

Under what condition can shareholders block an ordinary resolution?

If they hold at least 50% of shares Signup and view all the answers

Which of the following about director's service contracts that have a guaranteed term of more than two years is correct?

Requires shareholder approval by ordinary resolution Signup and view all the answers

What happens if a partnership is formed without an express intention to do so but meets other requirements?

It is presumed to be a partnership. Signup and view all the answers

What is a primary consequence of partners sharing profits without an agreement to share losses?

It does not establish a partnership by itself. Signup and view all the answers

Which statement regarding partnership liability is correct?

Creditors may pursue any combination of partners for debts. Signup and view all the answers

Which of the following is NOT a valid reason for terminating a partnership?

A partner's continued financial success. Signup and view all the answers

How does limited liability in a limited liability partnership (LLP) differ from a traditional partnership?

LLP members are not liable for company debts. Signup and view all the answers

Which condition must exist for an LLP to be dissolved?

Reduction in membership below two. Signup and view all the answers

What must an LLP file at Companies House to initiate trading?

An application for incorporation. Signup and view all the answers

Which of the following statements best describes the nature of shares in a company formed after 2009?

Directors have automatic power to allot shares. Signup and view all the answers

What triggers the requirement for companies to submit a strategic report?

Being classified as a medium or large company. Signup and view all the answers

In a company, what is required for a valid alteration to the Articles of Association?

75% approval of members via a special resolution. Signup and view all the answers

What is the principal duty of promoters when forming a company?

To ensure good faith in dealings with the company. Signup and view all the answers

In which scenario can a partner be held liable for debts incurred before they joined the partnership?

Partners are never liable for prior debts. Signup and view all the answers

Under which circumstance can a company change its name?

If a special resolution is adopted. Signup and view all the answers

What can lead to a member being personally liable during an LLP's insolvency?

Acting fraudulently or wrongfully. Signup and view all the answers

What is the tax payment requirement for companies with total tax profits (TTP) over £1,500,000?

Pay tax bills in four instalments over two accounting periods Signup and view all the answers

Dividends paid to UK companies are generally exempt from which type of tax?

Corporation tax Signup and view all the answers

What is the VAT registration threshold currently set at?

£85,000 Signup and view all the answers

Which of the following supplies would be considered zero-rated for VAT purposes?

Children's clothing Signup and view all the answers

Which condition is true for a company to claim Business Property Relief?

The transferor must hold the business assets for at least 2 years prior to transfer. Signup and view all the answers

What is the deadline for submitting a VAT return for taxable businesses?

Within 1 month and 7 calendar days after the VAT period end Signup and view all the answers

Which of the following statements about input tax is true?

Input tax can offset against output tax on chargeable supplies. Signup and view all the answers

What constitutes a deemed distribution to shareholders in a UK company?

A dividend paid out of profits that have already been taxed Signup and view all the answers

Which supplies are categorized as exempt from VAT?

Insurance services Signup and view all the answers

What types of income are not included in a company's taxable profits (TTP)?

Dividend income received from other companies Signup and view all the answers

What is the rate of VAT for reduced-rated supplies?

5% Signup and view all the answers

Under anti-avoidance legislation, which situation disallows the carrying forward of trading losses?

The company has been sold and the nature of trade has substantially changed. Signup and view all the answers

Which type of relief is available only for shares in a quoted company if the shareholder has control?

50% relief Signup and view all the answers

Study Notes

Business and Organisational Characteristics

Partnerships involve two or more persons carrying on a business in common with the intention to make a profit. Individuals or companies can be involved.
Absence of profit intent negates partnership.
A written agreement isn't compulsory, but recommended.
No filing requirements are necessary at Companies' House.

Partnership Liability

Partners are jointly liable for partnership debts and torts.
Creditors can pursue any combination of partners.
Incoming partners aren't liable for actions preceding their joining.
Outgoing partners remain liable for pre-departure debts/obligations.

Partnership Property

Partnership property constitutes partnership assets.
Property contributed by partners becomes part of the partnership.
Partners can monitor their contributions, profits and losses.
Creditors pursuing an individual partner cannot directly seize partnership assets for that separate debt, but the court can order a charge on the partner's interest in the firm.

Partnership Management

Partners have equal managerial rights in absence of an agreement.
Crucial decisions, like new partner admittance or business alterations, often require unanimous consent.
Partners owe fiduciary duties to each other.
Full disclosure of information affecting the partnership and profits made outside the partnership must be discussed by partners.

Termination of a Partnership

Partnership termination occurs if the agreement dictates it, upon partner death/bankruptcy, or by partner notification.
A court may dissolve a partnership if: it's unlawful to continue, a partner is incapable, a partner breaches the agreement, or if dissolution is just and equitable.

Limited Liability Partnership (LLP)

LLPs have a separate legal personality distinct from its members.
LLPs can contract and own property independently.
Perpetual succession is possible.
Admitting new partners requires unanimous consent (without an agreement in place) and must comply with legal requirements, which is usually notified to Companies House within 14 days.
Members can withdraw with proper notice to other members.
Creditors are not able to pursue individual members.

Company Formation

Private and public companies have different requirements.

Private Company

Minimum of 1 director is required.
No need for a secretary.
Shares can be sold privately.

Public Company

Minimum of 2 directors is required.
A company secretary is required.
Shares can be sold publicly.

Company Trading

Promoters owe a good faith duty for pre-incorporation contracts.

Companies House Filing Requirements

LLPs must file annual accounts.
LLPs require an annual confirmation statement.
Companies are required to file annual accounts and reports with details of director changes, registered office or name changes.

Funding Options and Debt Finance

Companies can raise capital through debt, such as loans (fixed and floating charges).
Debt holders have no ownership in a company.

Management Power and Duties

Management decisions can be by majority consent, or unanimity.
Directors and officers have specific duties, like acting within their powers, promoting the company's success, avoiding conflicts of interest, exercising reasonable care, and diligence.
Directors have fiduciary duties to the company and its stakeholders.
Actions can be delegated to directors by vote.

Tax Treatment of Partnerships and Companies

LLPs don't pay corporation tax; members are taxed individually.
Companies are taxed on their profits, with different rates based on profit level.
Partnerships don't pay corporation tax.
Individual profits are taxed differently.

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Description

Test your knowledge on corporation tax concepts, including taxable chargeable gains, taxation rates, and the components of taxable total profits (TTP). This quiz will challenge you on the nuances of corporation tax and how companies are assessed. Perfect for students and professionals looking to refresh their understanding of tax regulations.