Computation adjustments

Question 1

What do we need to think about if we have been told that we have made an excessively large pension payment compared to to the prior year

Answer 1

In this case, we would need to think about the fact that if the current years period exceeds 210% of the prior years amount - then we need to make an adjustment for it.

This is done by taking the current years contribution and (deducting the prior periods contributions x 1.1)

If this figure exceeds £500k then this balance is spread over two accounting periods and an adjustment would need to be made for this.

we also want to be mindful that in the event the excess is between £1m - £2m this is spread over 3 years and for amounts over £2m this is spread over 4 years

Also remembering if we are talking about the year the excessive payment was made we will add back, if we are talking about a prior period this means the adjustment has been made and we will get the deduction in the current year

Question 2

What do we need to consider if we have been told that dividends have been received from a company in which we hold a small percentage (below 10%)

Answer 2

We will benefit from the portfolio exemption which allows us for the dividends to not be taxed in the event that we hold less than 10% in the company - under a Section 931G

Question 3

What do we need to be mindful about if we have multiple losses in a current year in respect of non-trade loan relationships

Answer 3

These need to be deducted from any TTP remaining before trading losses - thinking about if we wanted to carry back the NTLR deficits for the prior period, we would need to consider this aspect

Question 4

What do we need to consider if we have been told that a compensation payment has been made in a computation

Answer 4

We want to be careful that it relates to amounts which have been conducted in the course of the trade of the business and not for something outside of the natural course of the business

Question 5

What would need to consider if we have been told that a company has gifted an asset to an employee

Answer 5

There would still be a deemed disposal and this would be done at market value (making sure that we include deductions for indexation allowances etc)

Question 6

What are some of the things we need to consider in respect of capital allowances for the following:

R&D Expenditure
Paint & decorating

Answer 6

R&D - regardless of whether the asset was purchased new or second hand - full 100% R&D FYAs are available

Painting & decorating - This will be a revenue deduction an relief is given in line with the depreciation charge

Question 7

What would we need to consider in the event that the following has taken place:

1. the company has 2 UK subs & 3 overseas subs
2. The company has costs per head for a Christmas party exceeding £150

Answer 7

1. We want to be mindful that for associated companies for tax payment purposes, we need to consider both UK and overseas companies
2. This rule is a personal tax rule and not applicable for UK corporation tax

Question 8

What is some of the expenditure we can include for SBAs

Answer 8

1. Any costs for the actual construction of the building
2. any cost for the alteration of the land, so long as it was actually connected with the structure being built

Question 9

what would we need to consider if we have been told that:

1. we have Capital expenditure incurred on thermal installation works to a building
2. We have capital expenditure on lease items which has been accounted for as a finance lease

Answer 9

1. In this case it will be eligible for plant & machinery relief but uniquely it will only receive relief as Special Rate Pools
2. In this case, if we have treated the item as a finance lease this will be an indication that we have bought it under hire purchase and can therefore claim capital expenditure on the full capitalised amount (meaning we don’t need to consider s.5 rules)

Question 10

What do we need to be careful about when we are thinking about the s.5 CA2001 rules (4 month rule)

Answer 10

We want to be careful in the event that we have been given multiple dates such as date expenditure incurred / date of obligation /date of payment - that in the event that the 4 month rule doesn’t apply i.e. all made within 4 months then we just go with the date the expenditure is incurred.

There is an additional point to be careful about and this is if the certification is more than 1 month from the end of the AP date, it will be treated as incurred on the date of certification.

Finally we want to be mindful that if we have been told there was payment dates per the purchase agreement and we have paid it early, we need to effectively ignore this as it is irrelevant

Question 11

What do we need to consider if we have been told that we have incurred repairs expenditure on bringing an asset up to working condition shortly after purchasing it

Answer 11

This will not constitute a revenue deduction and relief will instead be given under capital allowances

Question 12

What do we need to consider when thinking about the theft from the company from staff members and directors

Answer 12

Companies are generally able to receive revenue relief for theft costs relating to staff members but any amounts relating to business principles (i.e. directors/partners etc) is not allowable