data_analysis/data/00000025/introduction.txt

INTRODUCTION
You work for a company that wants to forecast its tax obligations and payments over the coming ten 
years, from 1 January 2016 until 31 December 2025. They have already worked out their forecast taxable 
profit amount in each month from 1 January 2015 until 31 December 2025, but need you to calculate the 
forecast tax obligations and payments for each relevant period. The company has no trading history in this 
country and therefore no tax payments are due from pre-2015 operations. Tax payments will commence 
from the 2016 calendar year, based on the taxable profit from the previous calendar year and the 
company tax rates and tax rules as set out below. 
The monthly taxable profit figures and all the inputs below are provided in the workbook for this case 
study. 
The government has announced that the company tax rate will change frequently over the next 10 years 
as follows: 

Date start          Date end                   Company tax rate applicable
1 January 2015      31 March 2015              15%
1 April 2015        17 May 2016                14%
18 May 2016         22 September 2016          17%
23 September 2016   31 March 2019              18%
1 April 2019        15 August 2020             19%
16 August 2020      11 November 2020           18%
12 November 2020    2 February 2021            14%
3 February 2021     30 June 2021               18%
1 July 2021         2 February 2022            14%
3 February 2022     22 February 2022           15%
23 February 2022    31 March 2024              12%
1 April 2024        15 May 2025                11%
16 May 2025         Onwards                    12%
 
For months where more than one tax rate is applicable, you should determine an average rate to apply 
weighted by the number of days which the relevant tax rate applies to that month.

The tax charge in each period is calculated by multiplying the applicable tax rate to the taxable profit 
profile given in the inputs booklet

The tax payable is calculated by adjusting the tax charge for losses, which are added a tax loss pool 
which works as follows: 
 If the tax charge in a month is positive and there are no losses available in the pool, tax payable in
that month is equal to the tax charge. 
 If the tax charge in a month is positive and there are losses available in the pool, the tax payable
in the month is the tax charge reduced by the lesser of the amount of the charge and the balance 
of the tax loss pool.  Any losses used in this way must be removed from the tax loss pool. 
 If the tax charge in a month is negative it should be added to the tax loss pool and the tax payable
in that month is zero. 
Assume that the balance in the tax loss pool at the start of the modeled timeline is zero. 
Once you have calculated the tax payable in each month, you must annualize it to calculate the 
company’s tax liability for a year.  The company’s tax year is the calendar year. 
The annual tax liability is then paid in the subsequent calendar year in the following proportions: 
 60% in April
 25% in August
 15% in December
The following section is only relevant to questions 39-41. 
The government is considering a change to tax legislation as follows: 
If a tax loss is not used within two years after it was created it expires and must be removed from the tax 
loss pool.  For example, if a loss is created in April 2015 and has not been used by the end of April 2017 it 
will expire at the end of April 2017.  Assume that losses are used and expired in order or age (oldest first). 
You have been asked to determine what the impact of this would be on the company’s tax payments.