Corporation Tax and Groups
Corporation tax computation
Learn the adjusted trading profit computation: accounting profit, add back disallowables (depreciation, entertaining, capital, fines), deduct capital allowances, then adjust for other income and chargeable gains. Understand capital allowances: plant and machinery, the annual investment allowance, writing-down allowances, and the super-deduction/full expensing rules. Know the marginal relief structure for companies with profits between the lower and upper limits, and the associated-company rules that divide the limits.
Groups and reliefs
Understand group relief (trading losses surrendered between 75% group members), group capital gains elections, and consortium relief (5%+ holdings). Know the difference between a 75% subsidiary (group relief, group gains) and a 51% subsidiary (consortium). Learn the loss relief rules: carry forward against total profits (with the £5m deduction allowance), carry back 12 months, and terminal loss relief. Understand transfer pricing and thin capitalisation for connected parties.
Traps
Questions test the accounting period versus chargeable accounting period, the straddling period when rates change, and the interaction of the AIA with connected companies. Watch the associated companies count for marginal relief and the treatment of intangible assets under the corporate intangibles regime.
Rule of thumb: Group relief requires a 75% ordinary share capital relationship; the surrendering company must have a loss and the claimant must be in the same group throughout the period.
Worked example: A company with augmented profits of £200,000 and no associates pays tax at the main rate on the whole profit, with marginal relief calculated on the excess over the lower limit.