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Hi,
I am slightly confused as to what happens with dividends in relation to corporate tax. In illustration 2 it says; “A large company is a company whose “profits” exceed £1.5M. “Profits” are defined as the TTP of the company plus dividends received (excluding dividends from related 51% group companies)”
However, when computing the figure to arrive at total taxable profits, the proforma says dividends are not included in ttp? Please help.
Look back at what you have written here – “dividends are not included in TTP” – correct, dividend income is exempt from corporation tax.
“Profits are defined as the TTP (remember this does not include dividends) PLUS dividends received” and “a large company is a company whose profits exceed £1.5M” – Correct this is the “profits” figure that we then compare with the profit limit of £1.5M.
It is then the TTP that is charged to corporation tax but it is the “profits” figure that will determine whether the company is LARGE and therefore whether it may have to pay its corporation tax using the quarterly instalment payment system! This is the significance of the “profits” figure – it is NOT what is chargeable to CT it is what determines when the company has to PAY its CT.
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