April 2008 Q 1 V Calculate, stating your reasons for making the various calculations, ABC Ltd’s UK tax owing for fiscal year 2007 based on the above information. Part of the response: Corporation tax before foreign tax offsets = 0.3 * (90 - 25) = 19.5m Australian corporation tax credit = 10 * (1/0.7 - 1) = 4.285 Singapore corporation tax credit = 5 * (1/0.9 -1) = 0.555 Singapore withholding tax credit = 5 * 0.15 = 0.75 UK 2007 tax charge = 19.5 - 4.285 - 0.555 - 0.75 = £13.91m The 65 m should have been subjected to the slabs prevailing in 2008. Isn't it? eg For 2013-14 Taxable Profits 0-300,000 20% 300,000-1,500,000 Marginal relief >1,500,000 23% They have just assumed it to be 30%. Also, what rate does 'marginal relief' imply?If I were to apply the slabs, what rate should I consider for 'marginal relief'? Regards,
The 65 m should have been subjected to the slabs prevailing in 2008. Isn't it? Yes - use the rates applicable at the time. eg For 2013-14 Taxable Profits 0-300,000 20% 300,000-1,500,000 Marginal relief >1,500,000 23% The current rate is 21%, but I think the one in the latest notes is still 23%. If you use either and state that you are using either the core reading rate, or explain that you are using the current rate, you will get full marks. They have just assumed it to be 30%. Indeed, which was the rate in the notes that were circulating in the lead up to March 2008. Also, what rate does 'marginal relief' imply?If I were to apply the slabs, what rate should I consider for 'marginal relief'? I cant find this in the question or solution. But marginal relief usually means that the individual or company gets tax relief at the rate that applies to the latest "marginal" piece of income. So if I pay 20% on the first 30,000 and then 40% on the next 20,000 of income, and pension contributions earned relief at the "marginal" rate of tax, then I would get 40% back on any contrbutions. (not 20%) Regards,
Thanks! I think I misinterpreted the core reading. I incorrectly presumed that 30% (or 23% now) was charged only for the excess above 1.5 million. I realise that it is on the whole of profits if they are above 1.5 million. By the way, What corporate tax rate should be considered if taxable profits are between 300,000 and 1,500,000? Say, the taxable profit is 500,000. 20% will be charged on the first 300,000 as per the core reading. Any tax on the remaining 200,000? Regards,
Not sure. I assume a sliding scale to run between the 20% on the lower profits and the 21 % on higher profits. Both rates are so similar now that it makes little difference.
Would you pls explain how the Australian and Singapore tax credits have been calculated?? Thanks!! I Got it!!
