Calculate snowdrop ltds corporation tax liability

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Reference no: EM132980655

Question: Snowdrop Ltd makes quarterly instalment payments in respect of its corporation tax liability. For the year ended 31 December 2020, Snowdrop Ltd has taxable total profits of £740,000 and dividends from a non-group company of £60,000. The company had the same level of profits for the year ended 31 December 2019. Snowdrop Ltd has held 80% of the shares in Crystal Ltd for many years. (There are no other companies in the Snowdrop Group).

Note: You should assume that Snowdrop Ltd's profits accrued evenly throughout the year.

Included in the taxable profits for the year ended 31 December 2020 is the following transaction:

On 21st October 2020 Snowdrop Ltd sold a freehold office building for £369,000. The freehold office building had cost £156,000 on 3rd January 1990. Snowdrop Ltd made a claim to roll over the gain on the freehold office building against the replacement cost of a new freehold office building. The new freehold office building was purchased on 14th November 2020 for £204,000. Both buildings are used entirely for business purposes. The indexation allowance is £22,500. Snowdrop Ltd made a claim for rollover relief on the building.

-Explain whether Snowdrop Ltd is classified as a large company for the year ended 31 December 2020.

-Calculate Snowdrop Ltd's corporation tax liability for the year ended 31 December 2020 and explain when this will have to be paid.

-Calculate the chargeable gain included in Snowdrop Ltd's corporation tax liability for the year ended 31 December 2020 and the amount of corporation tax that is attributable to the capital gain.

-Calculate the amount of gain arising from the building sale that is rolled over and describe the qualifying criteria for a successful roll-over relief claim.

Reference no: EM132980655

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