Chapter 26 - Taxation

Abstract

This chapter focuses on the various tax laws affecting the operations of a company. The tax laws are set out in a variety of Acts of Parliament, many of them longstanding, and the HM Revenue and Customs issues various statements to clarify the application and interpretation of the legislation and to identify areas where some relaxation of the provisions may be permitted. Corporation tax is chargeable on the profits and gains of a UK-resident company, regardless of where they arise and companies not resident in the UK are chargeable to corporation tax on profits arising in the UK from a business or trade carried on through a branch or agency. Corporation tax is chargeable at a fixed rate for each financial year, which runs from 1 April to 31 March and it is assessed on profits and gains arising in a corporation tax accounting period, which cannot exceed 12 months. Under the Corporation Tax Self-Assessment (CTSA) regime, each company is required to calculate its own tax liability and notify this to HM Revenue and Customs, which, in turn, has a fixed period in which to enquire into the details submitted. The payment of advance corporation tax (ACT) on distributions has been abolished, but companies are still permitted to offset any unused ACT against their corporation tax liabilities. VAT is charged on taxable supplies of goods and services made by a taxable person in the ordinary course of business and on certain imports of goods and services. The time of supply determines the period in which the related VAT must be accounted for, and a business which makes both taxable and non-taxable supplies is partially exempt and must apply an apportionment process to calculate recoverable input tax.