UK Taxation system characteristics and how it works

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"Taxes are contributions levied on persons, property or businesses, for the support of national or local government." 1

So, basically taxes are paid by tax payers in order to help the community; HM Revenue & Customs collects tax to pay for public service. Each year the Chancellor's Budget sets out how much the cost of these services will be & how much tax is needed to pay for them. Taxation has its limits, but it is justified by the benefits that come from it like better public services and economic efficiency. 2

The UK taxation system has 4 main characteristics, these are:

Equity: It simply means that the taxes should be fair. A person with low income should have to pay less tax than someone with a high income.

Convenience: Minimises the taxpayer's costs in complying with the tax laws and regulations. A tax requiring simple calculations by a taxpayer would be more convenient that a tax requiring complex calculations based on records kept over many years.

Certainty: Means that the taxpayers should be able to establish how the taxes will result from their economic decisions, such as whether to work for income; save or spend; or deal in assets. Tax law & regulations would need to be clearly written & not applied retrospectively.

Efficiency:

Administrative efficiency: means that the cost of collecting tax should be as low as possible in comparison with the revenue raised.

Economic efficiency: means that the tax does not distort the taxpayer's economic decisions, such as; whether to work or take leisure, to save or spend their income & wealth. 2

Types of taxes: there are many types of taxes in the UK Taxation system, here are the main ones:

Income Tax: Income tax is the single largest source of tax revenue, making up to 30% of the total UK revenue. Income tax is paid by reference to the tax year, which runs from 6th of April to the 5th of April of the next year. For example, the tax year 2008/09 ran from 6th April 2008 to 5th April 2009.

Income tax is charged on:

A person's salaries

A person's trading profit from conducting a business,

Interest from banks,

Dividends from companies and

On rent from properties let out.

However, some income is exempt from income tax, these include:

Betting & lottery winnings

Income from ISA

Income from National Savings Certificate

Statutory redundancy pay

Gifts

Compensation for personal injury

Premium bonds winnings

Most social security benefits (however State pension & Jobseeker's Allowances are still taxable). 3 4

Value Added Tax (VAT): VAT was first introduced in the UK on 1st of April 1973 by the Finance Act 1972. VAT is a tax on the supply of goods & services within the UK; on a taxable person.

VAT is paid at 3 different rates:

Zero (0.0 %); applies to food, books, protected buildings, transport, Gold, Bank notes, clothing and footwear.

Lower Rate (5.0 %); mostly applies to Fuel for domestic use, installation of energy-saving materials, children's car seats, renovations of residential property, etc.

Standard Rate (17.5 %); the standard rate of VAT was reduced from 17.5% to 15.0% from December 2008 up until December 2009.

Some goods are classed as Exempt supplies; these are not subject to VAT, some of which are:

Insurance

Postal Services

Betting & lotteries

Education

Burials, etc. 3 4

National Insurance Contributions (NIC): NIC is paid by both, the employers & the employees, on earnings from the employment. Self employed people must also pay NIC, on the profits of their trade, but they pay considerably less than an employed person. 3

Capital Gains Tax (CGT): Capital Gains tax is a tax on the profit you make on a sale or disposal of an asset. The tax is paid on the profit, and not on the actual amount received for the asset, eg:

You sold a painting for £11,500 which you had initially bought for £3,500; so the profit on the painting, therefore, is £8,000 (£11,500 - £3,500). So you would pay Capital gains tax (CGT) on £8,000 and not 11,500.

Most assets are liable to CGT when sold or disposed, however some assets are exempt from CGT, some of which are:

Motor Cars

Personal items sold for £6,000 or less

Betting and lottery winnings

Personal injury compensation

National Savings Certificates & Premium Bonds

Your private residence

Stocks and shares in a tax-free savings accounts (ISAs)

Some Reliefs are available on CGT too. From April 2008 Indexation Allowances & Taper relief have been abolished, these were applied previously. Some of the reliefs available on CGT are:

Private Residence relief (applies to your private residence)

Chattels allowance (applies to moveable property like paintings, jewelry, etc)

The Annual Tax-free allowance (known as Annual Exempt Amount) for the year 2008/09 is £9,600 for each individual. CGT is charged at a flat rate of 18% as of 2008/09. 5

Corporation Tax: Corporation tax is a direct tax on the trading profits (income & capital gains) of limited companies and some organizations including clubs, societies and associations. If your company is in UK, you will have to pay corporation tax on the taxable profits regardless of where in the world the profits come from. The financial year for Corporation tax runs from 1st April to 31st March of the next year, e.g. financial year 2008 runs from 1st April 2008 to 31st March 2009.

When a UK based company receives dividend from a UK company then this is known as the Franked Investment income and is also used in calculating Marginal Relief.

Main organisations which have to pay Corporation tax are:

Companies based in UK

State owned corporations (Bank of England,etc)

Non-resident companies

Building Societies & Insurance Companies

Company Partnerships

Main organisations which are exempt from Corporation tax:

Local Authorities

Approved Pension Schemes

Charities

The Crown

Scientific societies

The British Museums

Partnerships

The main rate of Corporation tax for the financial year 2007/08 (1st April 2007 to 31st March 2008) is 30%. The rate for the financial year 2008/09 (1st April 2008 to 31st March 2009) is 28%.

Marginal Small Companies' Relief (MSCR) is available to a company whose taxable profits are at annual rate that is below the upper limit (£ 1.5 Million) and above the lower limit (£ 300,000) and is usually called Marginal Relief and lowers the amount of Corporation Tax a company would have to pay. The fraction used to derive the Marginal relief depends on the year, for the financial year 2007/08 (1st April 2007 to 31st March 2008) is (1/40) and for the financial year 2008/09 (1st April 2008 to 31st March 2009) is (7/400). 2 6 7

Inheritance Tax: Only some people pay Inheritance Tax. It needs to paid only if your estate (including gifts and any assets held in trust within seven years of death) is valued over the Inheritance Tax threshold. The tax payable is 40% on the amount over the threshold, and the threshold value for 2008-09 is 312,000 pounds. Estates held of value lower than the threshold will not have to pay Inheritance tax. 8

Stamp Duty: December 2003 onwards, stamp duty has been updated to two different taxes. Stamp duty reserve tax is paid when you buy shares and is charged up to 4.0 %. Stamp duty land tax is paid when you buy a land or property if the value of the purchase is over a certain amount and is charged up to 0.5 %. 9

ii.) Differentiate between following terms:

Direct Tax vs. Indirect Tax.

Direct Tax: Tax which is collected directly from the individuals & businesses and paid to the government on regular basis. Everyone who earns an income must pay direct tax. The most common examples of direct taxes are Income tax and Corporation tax. 10

Indirect Tax: Charges that are levied on goods & services rather than on individuals in Direct Tax. Examples of Indirect taxes include VAT (Value Added Tax), excise tax and stamp duty. 11

So basically, the difference between the two is that direct tax is collected directly from individuals on regular basis in terms of their income (Income Tax), while indirect tax is what you pay when you buy goods or services (VAT).

Progressive tax vs. Regressive tax.

Progressive tax: Progressive tax is that where people with higher income pay a higher percentage, while people with lower income pay a lower percentage. The most common example of progressive tax is Income tax. As your income increases the percentage you have to pay increases too.

E.g.: for non-savings income,

people earning £ 0- £ 2,320 pay 0% tax,

people earning £ 0- £ 34,800 pay 20% tax, and

people earning over £ 34,800 pay 40% tax. 12

Regressive tax: Regressive tax is the exact opposite of progressive tax. People with significantly higher incomes pay less percentage of their income than people with lower incomes. The most common example of regressive tax is VAT. In sales tax, everyone pays the same rate of tax no matter what your income is. 13

E.g. for VAT which has a fixed rate of 15.0% (decreased from 17.5% since December 2008):

Person 1 (low income): with income of £ 20,000 buys a car worth £ 10,000. VAT is charged as £1,500, which totals 7.50 % of the person's total income.

Person 2 (high income): with income of £100,000 buys are car worth £30,000. VAT is charged as £4,500, which totals 4.50% of the person's total income.

So the main difference here, shown through the 2 examples, is that the regressive tax is advantageous to high-income taxpayers and disadvantageous to low-income taxpayers. Progressive tax is advantageous to the low-income taxpayers & disadvantageous to high-income taxpayers.

c. Tax avoidance vs. Tax evasion

Tax avoidance: Tax avoidance is when legal ways are used to modify a person's financial situation in order to reduce the amount of tax they have to pay, without breaking the law in any means. Examples of Tax avoidance include Double Taxation; and retirement plans which allow the taxpayer to defer the tax payments to a later date, which can cause their savings to grow at a faster rate. 14

Tax evasion: Tax evasion is completely opposite to tax avoidance, in terms of being legal. Tax evasion involves individuals breaking the laws to reduce the amount of tax they have to pay or avoid paying taxes completely. It is completely illegal, and examples include failing to record income, altering accounting records, etc. 4

The former British Chancellor of the Exchequer, Denis Haley said:

"The difference between tax avoidance and tax evasion is the thickness of a prison wall" 15

Part B

i.) Explain the criteria to consider when deciding whether individuals are employed or self-employed.

To differentiate between self-employed or employed, the MICE test is used:

Mutual obligations

Integration

Control

Equipment

M- Mutual obligations: An employer is under an obligation to provide his employee with work, and the employee has a similar obligation to accept the work & the tasks assigned to him by the employer. However, a self-employed person has no guarantee of work & if he is offered work, he is under no obligation to accept it; it's completely their own choice.

I-Integration: An employee is integrated into his employer's business, meaning that the employee will have their own desk, computer, pension schemes. However, a self-employed person will not be integrated into an employer's business or have any other facilities mentioned above.

C- Control: If a person is employed, their employer controls all their activities and tells them what to do & when to do it by. The employed person has very little or no control & has to follow everything the employer says. However, a self employed has much more control on their jobs & when to do it by, they have more freedom.

E- Equipment: An employee is very rarely responsible for providing their equipment; the employer has to provide everything. However, a self employed person will be responsible for providing his own equipment to allow the work to be done.

Tax: A self employed person will pay tax on the profits of his trade, while an employee will pay tax under the employment income earnings from his employment.

NIC (National Insurance Contributions): Employees must pay Class 1 NIC on their earnings. Self-employed workers pay NIC under Class 2 & Class 4, which are considerably cheaper compared to employed individuals. 3

ii.) Income Tax Payable of Vanessa Serve:

Vanessa Serve is 68 years old and a self-employed tennis coach.

Reliefs:

Tax relief is available to self-employed people if they had expenditure for business purposes, but none available over private expenditures.

She can also claim mileage allowances for any business miles, e.g 40p for the first 10,000 miles and 25p for the other additional business miles.

Vanessa Serve is over 65 years old; she is entitled to Personal Age Allowance, PAA (£ 9,030 for 2008/09) which depends on the income level. If the income above the PAA limit (£ 21,800) is too high and reduces PAA to lower than the normal Personal Allowance, then the normal personal allowance will be used (£6,035 for 2008/09). 2

Capital Allowances:

Tax written down value of car at 1 April 2006: £ 10,400

Tax written down value of car at 1 April 2007: £ 8,320 (£10,400 * 0.8)

Tax written down value of car at 1 April 2008: £ 6,656 (£8,320 * 0.8)

The values above have been calculated by assuming that full claims were made for previous years.

Overall CA:

Total

Car

Allowance

Tax written down value b/f

£ 6,656

£ 6,656

-

Written down allowances @ 20%

£ 1,331.2

£ 1,331.2

Tax written down value c/f

£ 5,324.8

£ 5,324.8

Total Allowances: £ 1,331.2

Business Miles allowance:

She drove a total of 20,000 miles, 6,000 of which were for private journeys. This means that 14,000 miles were for business purposes. Hence, the business miles allowance is;

10,000 miles @ 40p per mile: £ 4,000

4,000 miles @ 25p per mile: £ 1,000

Therefore, total Business miles allowance: £ 5,000

Expenditures to the house:

She built another room in the house, which means it's a structural change, which is not applicable for relief. The only allowable deduction possible for property rental income is 'repair and renewals'.

No allowance or relief for change in carpets too.

Overall Tax:

Components of Income £ £

Income from trading profits

Business Income 52,400

Add: Shopping incurred 250

Less: Capital Allowances 1,331.2

Less: Business Miles Allowance 5,000

Total income from Trading: 46,318.8

Savings & Investments Income

Interest received from Bank 1,100

Total income from Savings & Investments: 1,100

Other Income

Property Rental Income 3,850

Total Other Income: 3,850

Total Income: 51,268.8

Net Income: 51,268.8

Less: Personal Allowance

PAA: 9,030 - ½ (51,268.8 - 21,800) = 0

PAA is lower than Personal allowance,

So, normal Personal allowance applies 6,035

Total Taxable Income: 45,233.8

£ £

Income Tax:

at Basic rate: 34,800 @ 20% 6,960

at High rate: (45,233.8-34,800) @ 40% 4,173.52

Total Income Tax: 11,133.52

Less: Payment on Account 8,705

Tax Payable: £ 2,428.52

Vanessa Serve, will therefore have to pay Income Tax of £ 2,428.52 for the tax year 2008/09. 2 4

iii.) Income tax payable for Serene Volley:

Explanations:

Interest from savings certificate from the National Savings & Investments Bank is exempt (£ 1,200).

Laptop was received in January 2007, therefore will not be included in the tax year 2008/09 (£ 1,400).

Loan received was interest free, so only 6.25% of it was assessable. £ 10,200 * 0.0625 = £ 637.5

Percentage (%) of CO2 Emission:

{15% + (192 - 135/5) * 1%} = 26.4 %. Rounded to the nearest 1% is 26%.

Benefits:

Because her income is above £ 8,500, she's treated as non-excluded for benefits purpose. In her case, she's applicable to Car Benefit & Fuel Benefit.

Car Benefit: Car Price * % CO2 emissions;

26% of £ 16,400 = £ 4,264

Fuel Benefit: Base figure * % CO2 emission;

26% of £ 16,900 = £ 4,394

Total Benefit: £ 4,264 + £ 4,394 = £ 8,658.

Overall Tax:

Components of Income £ £

Income from Employment:

Salary 26,400

Car Benefit 4,264

Car Fuel Benefit 4,394

Total Income from Employment: 35,058

Assessable amount of loan

(10,200 @ 6.25%) 637.5

Net Income: 35,695.5

Less: Personal Allowance 6,035

Taxable Income: 29,660.5

Income Tax:

at Basic rate: 29,660.5 @ 20% : 5,932.1

Less: PAYE 4,790

Tax Payable: £ 1,142.1

Serene Volley, will therefore have to pay Income tax of £ 1,142.10 for the tax year 2008/09. 2 4

Part C:

Calculate Capital Gains Tax payable:

Reliefs & Allowances on Individual items:

Antique Organ:

No relief or allowance available on it.

Painting:

This is a tangible movable property (Chattel). There is a special rule for Chattels, the maximum gain chargeable can be calculated and compared with the actual gain, whichever is lower will be the gain chargeable.

The painting was bought for £7,500 and was sold for £8,500.

The actual gain, therefore is = £8,500 - £7,500 = £ 1,000

Maximum gain chargeable= (£ 8,500 - £ 6,000) * 5/3 = £ 4,167

The lower out of the two is the actual gain, which is £ 1,000. So the gains chargeable will still be £ 1,000. 16

Car:

Motor Cars are exempt from CGT, so this will not be included.

Land:

No reliefs or allowances available on it.

Private residence:

Private Residence Relief is available here, but only on the non-business use of the property.

The residence was used 20% for business use & 80% for personal use, so the relief is available for 80% of the gain.

Total gain: £50,000; so Private Residence relief available is; £50,000 *(80/100) = £40,000. 17

Piano:

Piano is also considered as a Chattel. The piano was sold at a loss.

Sold for £5,000 and was bought for £10,000. The loss was £5,000. When the sale of a chattel results in a loss; the loss is restricted by taking the proceeds (sale amount) to be £6,000. So in this case, the loss will be £4,000 instead of £5,000: (£6,000 - £10,000 = -£4,000). 18

OVERALL:

Antique Organ

Painting

Land

Private residence

Piano

Sale Proceeds

£13,000

£8,500

£300,000

-

£6,000 (chattel)

Less:

Cost of assets

£5,000

£7,500

£202,000

-

£10,000

Actual gains:

£8,000

£1,000

£98,000

£50,000

-£4,000

Less: Private Residence Relief

-

-

-

£40,000

-

Maximum gain chargeable on Chattels.

(use only if actual gain is higher than this)

-

£4,167

(it is more than actual gains, so use 1,000)

-

-

-

Less: Capital gains offset

0

0

0

£4,000 (from Piano)

Aggregate Capital gains

£8,000

£1,000

£98,000

£6,000

0

Net Capital gain

£8,000

£1,000

£98,000

£6,000

0

Combined Capital Gains

£113,000

Less: Annual exemption

£9,600

Total Gain Taxable

£103,400

Tax at the rate of 18%

(103,400 * 0.18)

£18,612

Capital gains tax payable

£18,612

So, the total Capital gains tax that Serene Volley will have to pay for the disposal she made in year 2008/09 will be £18,432.

ii.) Explain the difference between bonus issues and right issues;

Bonus Issues:

A bonus issue is the issue of free shares to a company's existing shareholders and the number of free shares issued to an individual is determined on pro-rata basis, for example 1 for 3, which simply means that for every 3 shares you already own, you would receive one free share. A bonus issue may me made instead of issuing a dividend.

For example, a company announced a 1 for 5 bonus issue to celebrate a very special event. If you held 500 shares, then this bonus would entitle you to 100 more shares for free, this would then bring your total number of shares to 600.

After this bonus issue, the price of the shares is most likely to drop because now the company's assets are spread over a larger number of shares. This makes the shares more marketable. Bonus issue is also known as 'capitalisation issue' or a 'scrip issue'. 19

Rights Issue:

A way for a company to raise capital by selling new shares; they are offered to existing shareholders on a pro-rata basis, e.g. 1-for-3, meaning for every 3 shares you own, you are offered 1 share. These shares however are not free of cost, but they are usually at a discount to the current price of the share. If you take up the rights your value will remain the same in terms of percentage, however, if you refuse to take up your rights, your investment will be worth less than the original value. A solution to this can be that the existing shareholder sells the rights to make up the loss. 20

So basically, the difference between Bonus issues and Rights issues is that Bonus issues are free of cost but Rights issues are not free; they are on a discounted price and if Rights issues are not taken, the value of your current holdings will decrease.

ii.) What does Rollover relief mean and what are the characteristics of this relief:

The purpose of a Rollover relief is to postpone (or defer) a Capital gain on the disposal of a certain asset (called 'old assets'), only when the proceeds are reinvested in a new qualifying assets (called 'new assets'). The relief allows you to defer the tax until you dispose of those new qualifying assets.

Full relief can be claimed only if the new assets were acquired for more than or the same amount as the proceeds of the old assets. Partial relief may be available if the new assets are acquired for less than the amount as the proceeds of old assets.

The relief is available to:

Individuals,

Trustees,

Personal representatives

Companies (but different rules apply)

Only a certain types of assets (when disposed of) are applicable to rollover relief:

Certain Land & Buildings used for trade purpose;

Fixed Plant & machinery;

Goodwill; Ships, Aircrafts, Space stations, Hovercrafts, satellites;

Milk, Potato Quota;

Lloyd's syndicate capacity.

There is a time limit for acquiring the new asset. The new asset must be acquired within 12 months before to 36 months after the disposal of the old asset. HM Revenue & Customs, however, may extend this time limit if the intention to acquire new assets within the time limit can be firmly demonstrated.

The amount of tax due is usually only worked out when the new assets is sold or disposed of. The tax due is then worked out by reducing the cost of the new asset by the amount of the deferred gain.

Example:

John sells his office for £ 80,000.

He makes a gain of £ 30,000.

He then reinvests all of the proceeds in a new office costing £ 95,000.

He can now postpone the complete £ 30,000 gain made on the proceeds of this old office, because all of the proceeds have been reinvested into the new office.

When John sells his new office and works out his Capital Gains tax, he'll state the cost of the new office as £ 65,000. This is due to £ 95,000 - £ 30,000 (gain). 21 22 23 24

PART D:

i.) The sisters require explanations & calculations for their father's company. Calculations for Capital Allowances are also required, and describe the due date for corporation tax liability.

Explanations for Corporation Tax:

UK Dividend income is classed as Franked Investment Income (FII) and is not included within profits.

Loss on the non-expensive car is not considered, because it was sold on 1st January 2009, and we are only considering the Corporation tax for the year ending 31st December 2008.

The dividends received must be grossed up to include the 10% tax credit, either by multiplying the amount by 100/90 or simply by dividing the amount by 0.9.

Annual Investments Allowances are also available to the expenditures made on Plant & Machinery items & on the car. AIA is available upto £ 50,000 and came in effect since 1st April 2008 and will only be allowed for expenditures made after that, and not before April 2008.

The gift aid donation will already have been taken as an expense to reach the £ 950,000 trading profit, but it isn't allowable as a trading deduction, so it must be added back. However, it is allowed as a charge on income, so it can be deducted later.

The value of the non-expensive car at December 2006 is: £ 11,000

The tax written down value of the non-expensive car at December 2007 is: £ 8,800 (£ 11,000 * 0.8)

So, for the year ending 31.12.2008, the value of £ 8,800 will be used to calculate the capital allowance.

Plant & machinery items and the non-expensive car can be considered in the General Pool.

Capital Allowances:

Total

General Pool (P&M + non-expensive car)

Car

Allowances

Tax written down value b/f

£ 47,600

£ 28,800

£ 18,800

-

Written down allowances @ 20%

-£ 5,760

£ 5,760

-

£ 5,760

Written down allowances @ 20% (restricted to £ 3,000 per annum)

- £ 3,000

-

£ 3,000

£ 3,000

Tax written down value c/f

£ 38,840

£ 23,040

£ 15,800

Total expenditure: P&M + Car = £ 20,000 + £ 18,800 = £ 38,800

AIA available upto £ 50,000 expenditure, so here, AIA available for the year: £ 38,800.

But from 1st April 2008 to 31st December 2008 = 9 months or 275/366 (to be more exact);

so, AIA available: £ 38,800 * 275/366 = £ 29,153.00

Total Allowances: £ 5,760 + £ 3,000 + £ 29,153 = £ 37,913

Overall Corporation Tax:

Components of Income £ £

Income

Trading Profits

Adjusted Profits 950,000

Add back: Gift aid donation 5,700

Less: Capital Allowances 37,913

Total Income from trading 917,787

Other Income

Gross Overseas Dividend Income 30,000

(27,000 / 0.9)

UK Property Income 24,000

Non-Trading Interest 17,000

Total Profits 988,787

Less: Charge on Income (gift aid donations) 5,700

Taxable Profits: 983,087

£ £

Corporation Tax chargeable:

1/01/2008 to 31/03/2008: (91/366) * 983,087 @ 30% 73,328.62

1/04/2008 to 31/12/2008: (275/366) * 983,087 @ 28% 206,824.31

Total Corporation Tax chargeable: 280,152.93

Less: Marginal Relief

(see calculations below)

From 1/01/2008 to 31/03/2008: 2,995.01

From 1/04/2008 to 31/12/2008: 6,382.20

Total Marginal Relief 9,377.21

Corporation Tax Due: £270,775.72

Marginal Relief Calculations:

The full equation used is this:

( {M - P} * B/P * a fraction )

where M = Upper maximum amount

B = Profits Taxable

P = Profits Taxable + Franked Interest income (FII)

The fraction is dependent on the financial year.

Gross Franked Interest Income: £21,111 (£19,000 / 0.9)

For the first 3 months (1/01/2008 to 31/03/2008)

Profits taxable for the year: £ 983,087

Profits taxable for the 1st 3 months: £ 983,087 * (91/366) = £ 244,428.73

Upper limit for the year: £ 1,500,000

Upper limit for the 1st 3 months: £ 1,500,000 * (91/366) = £ 372,950.82

Franked Investment Income (FII) : 21,111 * (91/366) = £ 5,248.91

so, M = £ 372,050.82; B= £ 244,428.73; FII= £5,248.91; P= £ 249,677.64 (B+ FII)

so from the equation above and using 1/40 for the fraction:

Marginal Relief for the 1st 3 months:

= ( {£ 372,050.82 - £ 249,677.64} * {£244,428.73/ £ 249,677.64} * {1/40} )

= £ 2,995.01

For the remaining 9 months:

Profits taxable for the year: £ 983,087

Profits taxable for the 9 months: £ 983,087 * (275/366) = £ 738,658.26

Upper limit for the year: £ 1,500,000

Upper limit for the 9 months: £ 1,500,000 * (275/366) = £ 1,127,049.18

Franked Investment Income (FII) : 21,111 * (275/366) = £ 15,862.09

so, M= £ 1,127,049.13; B= £ 738,658.26; FII: £ 15,862.09; P= £ 754,520.35

so from using the equation above and using 7/400 for the fraction:

Marginal Relief for the last 9 months:

= ( { £ 1,127,049.18 - £ 754,520.35} * { £ 738,658.26/ £ 754,520.35} * {7/400} )

= £ 6,382.20

Due date for the Corporation Tax:

The due date for Corporation tax is nine months and one day after the end period, assuming that quarterly instalments aren't due. Instalment payments are only required for companies paying full Corporation tax rate, without the Marginal Relief, so they aren't relevant here.

The end period is 31st December 2008, so therefore, the due date for the corporation tax liability would be:

1st October 2009 (1/10/09)

25 26 27 28

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