1 - Income Tax (D)

Question 1

How is adjusted total income calculated?

Answer 1

Total income + charitable donations through payroll giving - all types of pension contribution

Question 2

The main qualifying purposes for allowable deductions from total income for interest payments are?

Answer 2

• the purchase of shares in the borrower’s company or to finance loans to the company;
• investment in a partnership;
• the purchase of plant and machinery for use in a partnership; and
• the payment of inheritance tax (IHT).

Question 3

What is the amount of interest plus allowable business losses that can be deducted?

Answer 3

Capped at the higher of £50,000 or 25% of a person’s adjusted total income.

Question 4

Is the interest on a loan to purchase or develop land or buildings deductible for total income?

Answer 4

No

Question 5

When is a company a close company?

Answer 5

Controlled by five or fewer shareholders, or by its
directors, regardless of their number

Question 6

When is relief available for interest paid on a loan for the purposes of acquiring shares in, or making a
loan to, a close trading company?

Answer 6

Borrower has more than 5% of the shares at the time of paying
the interest.

Borrowers who own 5% or less of the company if they
work for the greater part of their time in the management or conduct of the company’s business.

Question 7

Relief is given for interest paid on a loan for the purpose of acquiring shares in, or making a
loan to, a close trading company.

Is relief available if the loan is used to buy shares on which EIS relief is already claimed?

Answer 7

No

Question 8

If a loan is made to a close company, what should it’s purpose be to qualify for relief?

Answer 8

Purpose of its business

Question 9

Tax relief is not available to a partner in a partnership who pays interest on a loan. True of false?

Answer 9

False, it is available