Corporation Tax Liabilities

Section A: Objective Test NovaTech Ltd is a loss-making Small and Medium-sized Enterprise (SME) that incurred £100,000 of qualifying Research and Development (R&D) expenditure in the year ended 31 March 2024. The company wishes to surrender its surrenderable loss for an R&D payable tax credit. Assuming the standard SME R&D rules for expenditure incurred after 1 April 2023 apply, what is the maximum R&D payable tax credit NovaTech Ltd can claim?

Section A: Objective Test Orion Ltd prepared accounts for the 15-month period from 1 January 2023 to 31 March 2024. How will this period of account be split into Corporation Tax Accounting Periods (CAPs)?

Section B: Case 3 - Meridian Logistics Plc Scenario: Meridian Logistics Plc is the parent company of a cross-border shipping and warehousing group. Meridian Logistics Plc owns 80% of the ordinary share capital of Alpha Ltd. Alpha Ltd owns 90% of the ordinary share capital of Beta Ltd. Meridian Logistics Plc also directly owns 60% of Gamma Ltd. All companies are UK resident and prepare accounts to 31 March. Question: Which of the companies form a 75% group for Corporation Tax group relief purposes?

Section B: Case 3 - Meridian Logistics Plc Scenario: Meridian Logistics Plc is the parent company of a cross-border shipping and warehousing group. Meridian Logistics Plc owns 80% of the ordinary share capital of Alpha Ltd. Alpha Ltd owns 90% of the ordinary share capital of Beta Ltd. Meridian Logistics Plc also directly owns 60% of Gamma Ltd. All companies are UK resident and prepare accounts to 31 March. Question: Which of the companies form a Chargeable Gains group headed by Meridian Logistics Plc?

Section B: Case 3 - Meridian Logistics Plc Scenario: Meridian Logistics Plc is the parent company of a cross-border shipping and warehousing group. Meridian Logistics Plc owns 80% of the ordinary share capital of Alpha Ltd. Alpha Ltd owns 90% of the ordinary share capital of Beta Ltd. Meridian Logistics Plc also directly owns 60% of Gamma Ltd. All companies are UK resident and prepare accounts to 31 March. Question: For the year ended 31 March 2024, Meridian Logistics Plc has a trading loss of £500,000. Alpha Ltd has Taxable Total Profits (TTP) of £300,000. What is the maximum amount of loss that Meridian Logistics Plc can surrender to Alpha Ltd via group relief?

Section B: Case 3 - Meridian Logistics Plc Scenario: Meridian Logistics Plc is the parent company of a cross-border shipping and warehousing group. Meridian Logistics Plc owns 80% of the ordinary share capital of Alpha Ltd. Alpha Ltd owns 90% of the ordinary share capital of Beta Ltd. Meridian Logistics Plc also directly owns 60% of Gamma Ltd. All companies are UK resident and prepare accounts to 31 March. Question: Alpha Ltd sells a freehold warehouse (a qualifying asset) generating a chargeable gain of £150,000. Within 12 months, Beta Ltd purchases a new freehold warehouse for £800,000. Can Alpha Ltd roll over its gain into the new asset purchased by Beta Ltd?

Section B: Case 3 - Meridian Logistics Plc Scenario: Meridian Logistics Plc is the parent company of a cross-border shipping and warehousing group. Meridian Logistics Plc owns 80% of the ordinary share capital of Alpha Ltd. Alpha Ltd owns 90% of the ordinary share capital of Beta Ltd. Meridian Logistics Plc also directly owns 60% of Gamma Ltd. All companies are UK resident and prepare accounts to 31 March. Question: For the purpose of determining whether Meridian Logistics Plc is a 'large' company required to pay Corporation Tax in quarterly instalments, what is the augmented profits threshold for the year ended 31 March 2024?

Section C: Constructed Response Quantum Bio-Solutions Ltd is a UK resident company specializing in bio-tech manufacturing. The company prepares accounts to 31 March each year. For the year ended 31 March 2024, the draft statement of profit or loss shows a net profit before tax of £850,000. The following items have been included in arriving at the net profit of £850,000: 1. Depreciation of £120,000. 2. Entertaining clients: £15,000. 3. Entertaining staff (annual Christmas party, cost £120 per head): £6,000. 4. Legal fees for the acquisition of a new freehold factory: £8,500. 5. Qualifying charitable donations: £10,000. 6. Property rental income: £25,000 (This is the net amount received. Gross rent was £30,000, and £5,000 of allowable property expenses were deducted in the accounts). Capital Allowances Information: - The tax written down value of the main pool at 1 April 2023 was £45,000. - On 10 May 2023, the company purchased new lab equipment for £150,000. - On 15 August 2023, the company purchased a second-hand delivery van for £18,000. - On 1 November 2023, the company completed the construction of a new factory building at a cost of £600,000 (excluding land). It was brought into use on the same day. Required: Calculate Quantum Bio-Solutions Ltd's Corporation Tax liability for the year ended 31 March 2024. Show all workings, including the adjustment of trading profits, calculation of capital allowances (including Structures and Buildings Allowance), and the final tax calculation.

Section A Titanium Forge Ltd, a heavy manufacturing company, prepared its financial accounts for the 14-month period from 1 January 2023 to 28 February 2024. How will this period of account be divided into accounting periods for Corporation Tax purposes?

Section A BioGenix Ltd is a qualifying Small and Medium-sized Enterprise (SME) for Research and Development (R&D) purposes. During the year ended 31 March 2024, it incurred £100,000 of qualifying R&D revenue expenditure. What is the total deduction BioGenix Ltd can claim against its trading profits for this expenditure?

Section A Alpha Ltd owns 80% of Beta Ltd. Beta Ltd owns 80% of Gamma Ltd. All companies are UK resident. Do Alpha Ltd and Gamma Ltd form a Capital Gains Group?

Section B - Case 1 (NovaStream Ltd) Prior to commencing trade on 1 January 2023, NovaStream Ltd incurred £12,000 on market research and £8,000 on domain registration in November 2022. How are these pre-trading expenses treated for Corporation Tax purposes?

Section B - Case 1 (NovaStream Ltd) In May 2023, NovaStream Ltd purchased new, unused computer servers for £1.2 million to expand its cloud capacity. Assuming the Annual Investment Allowance (AIA) limit is £1,000,000, what is the maximum capital allowance NovaStream Ltd can claim on these servers in the 12-month accounting period to 31 December 2023? (Ignore First Year Allowances for this calculation).

Section B - Case 1 (NovaStream Ltd) NovaStream Ltd has two associated companies. For the 12-month accounting period to 31 December 2023, its augmented profits were £600,000. Is NovaStream Ltd required to pay its Corporation Tax in quarterly instalments as a 'large' company?

Section C **Scenario: AeroDynamics Heavy Industries Ltd** AeroDynamics Heavy Industries Ltd manufactures aircraft components. For the year ended 31 March 2024, the company’s draft statement of profit or loss shows a net profit before tax of £850,000. The following information is relevant: **1. Trading Profit Adjustments:** The net profit includes: - Depreciation: £120,000 - Client entertainment: £8,500 - Staff Christmas party (costing £120 per head): £6,000 - Qualifying charitable donations: £15,000 - Rental income from a surplus warehouse: £24,000 **2. Capital Allowances:** The tax written down value of the main pool at 1 April 2023 was £45,000. During the year, the company purchased new robotic assembly machinery for £1,200,000. The company also completed construction of a new factory building on 1 May 2023 at a cost of £2,000,000 (excluding land). It was brought into use immediately. **3. Chargeable Gains:** On 15 August 2023, the company sold a piece of land for £300,000, realizing a chargeable gain of £80,000. The company immediately purchased a new warehouse for £350,000 and has elected to claim rollover relief. **Required:** Calculate AeroDynamics Heavy Industries Ltd’s Corporation Tax liability for the year ended 31 March 2024. *Note: You should clearly show the adjustment of trading profits, calculation of capital allowances (including Structures and Buildings Allowance), total taxable total profits (TTP), and the final tax liability.*

Section A 'Algae-Plast Ltd', an SME biotech firm, incurred £100,000 of qualifying Research & Development (R&D) expenditure during the year ended 31 March 2024. What is the total deduction Algae-Plast Ltd can claim against its trading profits for this R&D expenditure?

Section A 'Zephyr Winds Ltd', a wind farm operator, prepared accounts for the 15-month period from 1 January 2023 to 31 March 2024. How will this long period of account be split for Corporation Tax purposes?

Section A 'Sky-High Farms Ltd' constructed a new vertical farming facility. The total cost was £2,000,000, which included £500,000 for the land. The facility was brought into use on 1 July 2023. What is the Structures and Buildings Allowance (SBA) that can be claimed for the year ended 31 March 2024?

Section B - Case 2: Aero-Dynamics Ltd 'Aero-Dynamics Ltd' is a UK resident company manufacturing commercial drones. It owns 100% of 'Hover-Tech Ltd' (UK resident) and 80% of 'Sky-Net Inc' (resident overseas). All companies prepare accounts to 31 March. For the year ended 31 March 2024, Aero-Dynamics Ltd has a trading loss of £400,000. Hover-Tech Ltd has taxable total profits (TTP) of £150,000. Sky-Net Inc has equivalent profits of £200,000. Which companies form a Group Relief group for trading losses with Aero-Dynamics Ltd?

Section B - Case 2: Aero-Dynamics Ltd 'Aero-Dynamics Ltd' is a UK resident company manufacturing commercial drones. It owns 100% of 'Hover-Tech Ltd' (UK resident) and 80% of 'Sky-Net Inc' (resident overseas). All companies prepare accounts to 31 March. For the year ended 31 March 2024, Aero-Dynamics Ltd has a trading loss of £400,000. Hover-Tech Ltd has taxable total profits (TTP) of £150,000. Sky-Net Inc has equivalent profits of £200,000. During the year, Aero-Dynamics Ltd transferred a drone testing facility (a capital asset) to Hover-Tech Ltd. The asset cost £500,000, had a market value of £800,000 at transfer, and a tax written down value of £400,000. At what value is the transfer deemed to take place for chargeable gains purposes?

Section B - Case 2: Aero-Dynamics Ltd 'Aero-Dynamics Ltd' is a UK resident company manufacturing commercial drones. It owns 100% of 'Hover-Tech Ltd' (UK resident) and 80% of 'Sky-Net Inc' (resident overseas). All companies prepare accounts to 31 March. For the year ended 31 March 2024, Aero-Dynamics Ltd has a trading loss of £400,000. Hover-Tech Ltd has taxable total profits (TTP) of £150,000. Sky-Net Inc has equivalent profits of £200,000. Aero-Dynamics Ltd is considering selling its 80% shareholding in Sky-Net Inc. It has held these shares for 3 years. Sky-Net Inc is a trading company. Will the gain on the sale of these shares be exempt under the Substantial Shareholding Exemption (SSE)?

Section B - Case 2: Aero-Dynamics Ltd 'Aero-Dynamics Ltd' is a UK resident company manufacturing commercial drones. It owns 100% of 'Hover-Tech Ltd' (UK resident) and 80% of 'Sky-Net Inc' (resident overseas). All companies prepare accounts to 31 March. For the year ended 31 March 2024, Aero-Dynamics Ltd has a trading loss of £400,000. Hover-Tech Ltd has taxable total profits (TTP) of £150,000. Sky-Net Inc has equivalent profits of £200,000. For the purpose of determining if Hover-Tech Ltd is a 'large' company and must pay its corporation tax in quarterly instalments, what is its profit threshold for the year ended 31 March 2024?

Section B - Case 2: Aero-Dynamics Ltd 'Aero-Dynamics Ltd' is a UK resident company manufacturing commercial drones. It owns 100% of 'Hover-Tech Ltd' (UK resident) and 80% of 'Sky-Net Inc' (resident overseas). All companies prepare accounts to 31 March. For the year ended 31 March 2024, Aero-Dynamics Ltd has a trading loss of £400,000. Hover-Tech Ltd has taxable total profits (TTP) of £150,000. Sky-Net Inc has equivalent profits of £200,000. Hover-Tech Ltd sold a freehold factory on 1 May 2023, realizing a chargeable gain of £120,000. Aero-Dynamics Ltd purchased a new freehold factory on 1 August 2023. Can the gain made by Hover-Tech Ltd be rolled over against the acquisition made by Aero-Dynamics Ltd?

Section C 'BioSynthetix Ltd' manufactures biodegradable packaging. You are required to calculate the company's Corporation Tax Liability for the year ended 31 March 2024. The draft statement of profit or loss shows a profit before tax of £450,000. This profit has been arrived at after deducting/including the following items: 1. Depreciation: £45,000 2. Client entertaining: £3,500 3. Staff Christmas party: £2,500 (there are 15 staff members, all attended) 4. Legal fees regarding the acquisition of a new factory: £8,000 5. Legal fees for debt collection (trade debts): £1,200 6. Bank interest received: £4,000 7. Interest paid on a loan used to buy a non-trading investment property: £9,000 Capital Allowances Information: - The Tax Written Down Value (TWDV) on the main pool at 1 April 2023 was £30,000. - On 1 June 2023, the company purchased new, unused manufacturing machinery for £150,000. (Assume the company claims Full Expensing on this). - On 15 August 2023, the company purchased a second-hand delivery van for £15,000. - On 10 November 2023, the company sold some old machinery (originally in the main pool) for £12,000 (original cost £20,000). Other Information: - The company has a brought forward trading loss from the previous year of £25,000. - The company does not have any associated companies. Required: Calculate BioSynthetix Ltd's Corporation Tax Liability for the year ended 31 March 2024. Show all workings, including the adjustment of trading profit, the capital allowances computation, and the treatment of the non-trading loan relationship.

Section A Omega Ltd, a trading company, made a loan to another company to earn interest. During the year, Omega Ltd received £5,000 in interest and paid £1,000 in administrative fees related to managing this loan. How should this net amount of £4,000 be treated in Omega Ltd's corporation tax computation?

Section A Innovate Ltd is an SME that incurred £100,000 of qualifying Research and Development (R&D) expenditure. Assuming the SME enhanced deduction rate is 86%, what is the total deduction Innovate Ltd can claim against its trading profits for this expenditure?

Section A Delta Ltd sold a freehold factory, realizing a chargeable gain of £150,000. The company reinvested the entire proceeds into fixed plant and machinery (a depreciating asset) within the qualifying time period. How is the rollover relief applied in this scenario?

Section B - Case 3: Titanium Forging PLC Titanium Forging PLC is a heavy manufacturing company. It recently changed its accounting date, resulting in a 15-month period of account from 1 January 2023 to 31 March 2024. How must this 15-month period of account be split for Corporation Tax purposes?

Section B - Case 3: Titanium Forging PLC Titanium Forging PLC is a heavy manufacturing company. It recently changed its accounting date, resulting in a 15-month period of account from 1 January 2023 to 31 March 2024. During the period, the company purchased new, unused manufacturing equipment for £2,000,000. Assuming the 'full expensing' rules apply, what is the capital allowance available on this equipment in the year of purchase?

Section B - Case 3: Titanium Forging PLC Titanium Forging PLC is a heavy manufacturing company. It recently changed its accounting date, resulting in a 15-month period of account from 1 January 2023 to 31 March 2024. The company also installed a new air conditioning system (an integral feature) costing £500,000. It has already fully utilized its Annual Investment Allowance (AIA) on other assets. Under the current rules for corporate entities, what first-year allowance can be claimed on this integral feature?

Section B - Case 3: Titanium Forging PLC Titanium Forging PLC is a heavy manufacturing company. It recently changed its accounting date, resulting in a 15-month period of account from 1 January 2023 to 31 March 2024. The company constructed a new factory building. The total cost was £3,000,000, which included £500,000 for the land. The factory was brought into use on 1 July 2023. What is the Structures and Buildings Allowance (SBA) available for the 12-month accounting period ended 31 December 2023?

Section C Eco-Dynamics Ltd is a UK resident company manufacturing green technology. For the 12-month accounting period ended 31 March 2024, the company has the following results: - Trading Loss: (£450,000) - Property Business Income: £30,000 - Chargeable Gain on sale of a warehouse: £80,000 - Qualifying Charitable Donations paid: £10,000 Eco-Dynamics Ltd owns 80% of the ordinary share capital of Solar-Tech Ltd, a UK resident company. For the same accounting period ended 31 March 2024, Solar-Tech Ltd has Taxable Total Profits (TTP) of £200,000. Eco-Dynamics Ltd wishes to utilize its trading loss as quickly as possible and minimize the overall tax burden for the group. In the previous accounting period (ended 31 March 2023), Eco-Dynamics Ltd had Taxable Total Profits of £150,000. **Required:** Explain and calculate the optimal use of Eco-Dynamics Ltd's trading loss of £450,000. Your answer should show the revised Taxable Total Profits for both Eco-Dynamics Ltd and Solar-Tech Ltd for the year ended 31 March 2024, and state the amount of loss (if any) carried forward. *Note: Assume the current Corporation Tax main rate is 25%. You must justify the order of loss reliefs chosen.*

Section A: Objective Test DeltaTech Ltd has a 12-month accounting period ending 31 March 2024. It has two associated companies worldwide. What are the lower and upper limits for Corporation Tax marginal relief for DeltaTech Ltd for this accounting period?

Section A: Objective Test Omega Manufacturing Ltd prepares accounts to 30 September each year. During the year ended 30 September 2023, the company purchased a new ventilation system for its factory for £150,000. This qualifies as an integral feature. What is the maximum capital allowance Omega Manufacturing Ltd can claim on this expenditure in the year ended 30 September 2023?

Section A: Objective Test During the year ended 31 March 2024, a manufacturing company received £5,000 in bank interest and paid £2,000 in interest on a loan used to purchase a let investment property. How are these amounts treated in the Corporation Tax computation?

Section C: Constructed Response BioSynthetix Ltd is a biotech manufacturing company. The company previously prepared accounts to 31 December. It changed its accounting date and prepared accounts for the 9-month period from 1 January 2023 to 30 September 2023. For this 9-month period, the company had the following results: - Tax-adjusted trading profit (before capital allowances and R&D enhancements): £180,000. - UK Property Business Income: £15,000. - Qualifying Charitable Donations paid: £5,000. Additional Information: 1. Capital Allowances: The tax written down value of the main pool at 1 January 2023 was £40,000. During the 9-month period, the company purchased new lab equipment (main pool) for £120,000. 2. Research & Development (R&D): BioSynthetix Ltd qualifies as an SME. Included in the trading profit above is £50,000 of qualifying R&D expenditure. The company wishes to claim the SME R&D enhanced deduction (assume the 86% enhancement rate applies for this period). 3. Associated Companies: BioSynthetix Ltd has one associated company. Required: Calculate BioSynthetix Ltd's Corporation Tax liability for the 9-month period ended 30 September 2023. Note: You must show your calculation of Capital Allowances, the R&D enhancement, Total Taxable Profits (TTP), and the Marginal Relief calculation (time-apportioning limits where necessary).

An SME incurs £100,000 of qualifying R&D expenditure. Under the SME R&D scheme (using the 86% enhancement rate applicable from 1 April 2023), what is the total deduction from trading profits for this expenditure?

A company prepares accounts for the 9-month period to 30 September 2024. When is the normal due date for the payment of its Corporation Tax liability, assuming it is not a 'large' company?

SCENARIO: Titanium Forge Ltd (TFL) is a heavy manufacturing company producing industrial valves. For the year ended 31 March 2024, TFL had augmented profits of £2.2 million. TFL owns 100% of the ordinary share capital of IronWorks Ltd, a UK resident company. During the year, TFL imported £500,000 of specialized machinery from Germany and purchased £1.2 million of new heavy plant machinery in the UK. QUESTION: What is the maximum capital allowance TFL can claim on the £1.2 million new heavy plant machinery purchased in the year ended 31 March 2024?

SCENARIO: Titanium Forge Ltd (TFL) is a heavy manufacturing company producing industrial valves. For the year ended 31 March 2024, TFL had augmented profits of £2.2 million. TFL owns 100% of the ordinary share capital of IronWorks Ltd, a UK resident company. During the year, TFL imported £500,000 of specialized machinery from Germany and purchased £1.2 million of new heavy plant machinery in the UK. QUESTION: Which of the following losses can IronWorks Ltd surrender to TFL as group relief?

SCENARIO: Titanium Forge Ltd (TFL) is a heavy manufacturing company producing industrial valves. For the year ended 31 March 2024, TFL had augmented profits of £2.2 million. TFL owns 100% of the ordinary share capital of IronWorks Ltd, a UK resident company. During the year, TFL imported £500,000 of specialized machinery from Germany and purchased £1.2 million of new heavy plant machinery in the UK. QUESTION: Given TFL's augmented profits of £2.2 million, when is the first quarterly instalment payment of Corporation Tax due for the year ended 31 March 2024?

SCENARIO: EcoGrid PLC is a public utility company specializing in green energy. For the year ended 31 March 2024, its draft net profit before tax is £2,500,000. This includes: £40,000 client entertainment, £15,000 political donations, £120,000 dividend received from a UK subsidiary, and £50,000 interest received on a non-trade bank deposit. EcoGrid PLC purchased a new zero-emission goods vehicle for £60,000 and constructed a new commercial factory building for £1,000,000 (completed and brought into use on 1 October 2023). The main pool tax written down value brought forward was £200,000. REQUIREMENT: Calculate EcoGrid PLC's Corporation Tax Liability for the year ended 31 March 2024. Show all adjustments to trading profit, capital allowances (including Structures and Buildings Allowance), and the final tax calculation.