Greenbridge Limited is a trading company incorporated in the UK. The tax adjusted trading profit of Greenbridge Limited for the year to 31 December 2021 is £1,750,000 before any R&D expenditure is included. The company incurred the following qualifying expenditure in respect of a new research and development project:

Capital expenditure: £110,000

Revenue expenses: £320,000

a) Calculate the Corporation tax liability of Greenbridge Limited assuming that a claim for SME R&D relief is accepted. (3 marks) Greenbridge Limited also has a 65% owned subsidiary trading company, Bluetower Limited. For the year to 31 December 2022, Bluetower Limited is expected to make a trading loss of £75,000. Both companies are UK resident. Greenbridge is considering the purchase of the remaining shares of Bluetower Limited.

b) Explain any Corporation tax implications to Greenbridge Limited due to its shareholding in Bluetower Limited and any difference that the potential further share purchase would make. (3 marks) Shortly after the year end, Greenbridge Limited is to purchase a new item of plant and machinery costing £400,000 including VAT. Greenbridge Limited is VAT registered.

c) With calculations, explain how this purchase will impact the corporation tax liability of Greenbridge Limited to 31 December 2022. (4 marks) On 1 January 2022, George Green, the managing director and controlling shareholder of Greenbridge Limited borrowed £500,000 from the company, agreeing to pay interest of 1% on the loan. The loan is to be repaid in full in December 2024. George Green is an additional rate taxpayer.

d) Calculate any tax and NIC liabilities that may arise to 5th April 2022 as a result of the loan. It should be assumed that the current year’s tax rates etc. will continue to apply. (6 marks)

e) Calculate any further tax charge on Greenbridge Limited as a result of the loan to George Green. (2 marks) Greenbridge Limited is to establish a new subsidiary to manage its sales in the country of Rovania.

f) Explain how it will be established if this new company will be treated as UK resident for corporation tax. (2 marks)