A very clear answer is given in HMRC Agent tool kit – Capital Vs Revenue: Page 15
||Capital Expenditure. No deduction in computation of trading profits.
Deduction available under Capital Gains Tax on sale.
||Special Corporate intangible assets regime applicable.
Deduction available as per accounting treatment – amortisation over the lifetime of the franchise agreement is normally allowable.
This again demonstrates how useful agent toolkits are and should be used regularly.
Link to Took kit
Moral of the story:
When taking a franchise always take it under a limited company.
As per Corporation Act 2009 section 14 any company incorporated in the UK is normally classified as UK resident company and thus subject to UK corporation tax and has to file a Tax return.
HMRC guidance clearly states it, see link below:
For background on Company residence see HMRC international manual, link below:
Thus the company needs to file tax return here in the UK.
If the company is also liable to taxation in another country as well example Norway the company will need to file tax return in Norway and get credit for tax paid in the UK under Article 25 of UK-Norway DTA.
In case turnover increases as a `one off` and the business does not wish to register for VAT.
We have to write to the HMRC with evidence to convince them that turnover will not go over £83k (current de-registration threshold) in next 12 months.
HMRC Link below (see bottom of the page):
Primary legislation (see Clause 3):
Dormant according to Companies House
Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.
Significant transactions don’t include:
- filing fees paid to Companies House
- penalties for filing the accounts late
- money paid for shares when the company was incorporated
- More information can be found here.
Dormant for Corporation Tax purposes
HMRC views a dormant company as a company that’s not active, not liable for Corporation Tax or not within the charge to Corporation Tax. More information can be found here.