Hyssop Ltd requires advice on the corporation tax implications of the purchase of a short lease and the value added tax (VAT) implications of the sale of a warehouse.

Hyssop Ltd:
– Is a UK resident trading company.
– Prepares accounts to 31 December each year.
– Pays corporation tax at the small profits rate.
– Is registered for VAT.
– Leased a factory on 1 February 2015.

Acquisition of a factory:
– Hyssop Ltd acquired a 40-year lease on a factory on 1 February 2015 for which it paid a premium of £260,000.
– The factory is used in Hyssop Ltd’s trade.

Disposal of a warehouse:
– Hyssop Ltd has agreed to sell a warehouse on 31 December 2015 for £315,000, which will give rise to a chargeable gain of £16,520.
– Hyssop Ltd had purchased the warehouse when it was newly constructed on 1 January 2012 for £270,000 (excluding VAT).
– The warehouse was used by Hyssop Ltd in its trade until 31 December 2014, since when it has been rented to an unconnected party.
– Until 1 January 2015, Hyssop Ltd made only standard-rated supplies for VAT purposes.
– Hyssop Ltd has not opted to tax the warehouse for VAT purposes.
– The capital goods scheme for VAT applies to the warehouse.

Required:
Note: You should ignore value added tax (VAT) for parts (a) and (b).

(b) Explain, with the aid of calculations, the corporation tax implications for Hyssop Ltd of the acquisition of the leasehold premises on 1 February 2015, in relation to the company’s tax adjusted trading profits for the year ended 31 December 2015 and its ability to roll over the gain on the sale of the warehouse. (8 marks)