25. TC - Summary notes Flashcards
Ethics: Describe tax avoidance
Organise tax affairs to minimise tax bill Legal Examples: efficient use of losses Investment in ISA Use of spouse exemption for IHT
Ethics: Describe tax evasion
- Understating income/gains
- Overstating expenses
- False claims for allowances
- Failure to disclose changeability to tax
Illegal
Ethics: What happens with a HMRC error?
A professional accountant may discover an error made by HMRC
Acc are advised to include in the letters to eng authority to advise HMRC of errors
Otherwise consent is required
If consent withheld, consider
- Seeking legal advice
- Seeking to act for the client
Ethics: What is the professional conduct in relation to taxation (PCRT) standards
Client specific Lawful Disclosure and transparency Tax planning arrangements Professional judgement and appropriate documentation
Ethics: What are the fundamental principles?
Integrity Objectivity Competence and due care Confidentiality Professional behaviour
Ethics: What is the capacity as an agent?
- Acting on clients behalf: client retains responsibility for accuracy so this is a low risk activity
- Submission of self assessment return
- Confidentiality
- > not disclosure unless authorised by taxpayer
- > only overridden if
- client suspected of money laundering
- HMRC exercises stat powers to obtain info
- Court order forces acc to make disclosure
- Conflict of interest
- > Acc aware that client not making full disclosure
- > Advise client of possible consequences
- > If no action taken by client
- Cease to act for client
- inform client and HMRC of cessation
Ethics: What is the capacity as principal
Provision of tax advice
May be liable to the taxpayer if advice is incorrect or inappropriate so this is considered to be a high risk activity
Ethics: What are the procedures for AML procedures?
- Training
- Due diligence
- Reporting (internal/external)
Ethics: What are the main defences against failing to report AML
- Lack of training (but offence for employer)
- Privilege reporting exemption
- Reasonable excuse
- Outside UK and not illegal where occurring
Ethics: Describe Professional Indemnity Insurance
If gross income < £600k, minimum= high of £100k or 2.5x gross fee income
Otherwise min = £1.5m
Income tax: describe the income tax comp
Along top: Total, NSI, SI, DI Down side: Trading income (W) Employment income (W) Bank interest Div Property income (W) REIT Income (100/80) Total income Less Gifts of asset to charity/ qualifying loan Interest net income Personal allowance Taxable income
Income tax
NSI @ 20/40/45
SI @ 20/40/45
DI @ 7.5/ 32.5/ 38.1
Less Marriage allowance @ £1,250 x 20% DTR (lower of overseas/ UK) Add Child benefit tax charge
Income tax liability
Less tax credits/ tax deducted at source
PAYE
REIT @ 20%
Income tax payable/repayable
Give some examples of exempt income for income tax
NSC ISA (interest and divs) Lottery winnings/betting Premium bond prizes Statutory redundancy pay up to 3x limit Scholarships
What kinds of interest are classed as qualifying loan interest?
- Buy P&M for use in ship / e’ment
- Buy interest in a close company/ e’ee controlled company/ co-operative
- Invest in / make loan to partnership
- Pay IHT
What is the basic personal allowance for income tax?
£12,500 for 19/20
When is the basic personal allowance reduced for income tax?
If adjusted net income is over £100k
(ANI - £100k)/2 = abatement
