3. Tax Flashcards
When do you deduct an individual’s personal allowance
After net income (after subtracting reliefs)
What is the TWDV in the first year of capital allowance
AIA + any tax paid at 18%
What happens if loan + close company waived/repaid
Refund of CT paid
How can you reduce an individual’s TTP
Pay into pension, give shares to spouse or put money into ISA
What does EVERY person have deducted from CGT
Annual exemption
Example of an ‘item’ exempt from paying VAT
Sale of buildings, unless new or Seller opts to tax
What kinds of expenditure are capital
One-off
What do you not include when working out chargeable gains (type of expenditure)
Capital expenditure - like purchase of a building
What is the effect of hold-over relief for the donee
Deemed MV received reduced by donor’s deemed gain (TCG)
Why are items w/ 0% VAT payable so attractive
Bc can still recover input VAT paid
What should you do if transactions in securities rules apply
HMRC for advance clearance
Why consider chargeable gain first for company loss relief
Bc capital loss can only be claimed against chargeable gain
What does close company pay on loan
CT within 9 months and 1 day
What do you need to know to work out CGT, unless relief applies
Taxable Income, to know what rate of tax they pay
When will transactions in securities rules apply
If transaction w/ close company changes income to capital, e.g. winding up instead of dividend
Three kinds of expenditure that can be deducted from sale proceeds in CGT
Disposal, initial and subsequent
What non-income expenditure can be deducted from an individual’s income to reduce tax
Depreciation (capital allowance for companies)
Two kinds of tax rate reliefs available to individuals on CGT
Investors and entrepreneur relief
What happens if net income is £100k or more for personal allowance
Reduce by £1 for every £2 over £100k
What is the tax effect for the recipient of loan from close company
If written off, deemed to receive equivalent dividend
What kinds of items only have 5% VAT on them
Domestic heating, children’s car seats
Rules on claiming capital loss relief
Only against chargeable gain, starting in the same year and then going FORWARD ONLY
What kind of profits do you consider first for loss relief for company
Chargeable gain
What will CT be for loan from close company
32.5%
When is VAT payable
Taxable supply of UK made goods by taxable person for business
What is the rule on capital allowances
AIA of £200k in one year, then 18% on remainder over that, reducing balance each year
How many steps to income tax calculation
7
What is the value of the good for CGT if consideration given between connected at undervalue/gift, or unconnected at undervalue
MV
Two kinds of business reliefs applicable to CGT
Holdover and rollover
What is the first possible tax deduction available for savings
If within first £5k of taxable, 0%
What is a ‘wasted tangible’
Not expected to last for longer than 50 years
What kinds of subsequent expenditure can be deducted for CGT
Either protecting title OR increasing value of the item
What do you ALWAYS ignore for corporation tax (receipt/payment by company)
Dividends received or paid - ALWAYS EXEMPT
What is the tax rate if investors or entrepreneurs relief applies
10%
When does entrepreneurs relief apply to disposal of shares in a business
Trading, 1 year prior, 5% OS and employee/officer OR ceased + 3 years after + 1 year prior + 5% OS + employee/officer
What is allowable expenditure for chargeable gains under corporation tax
Same as for individual (initial, subsequent, disposal) but no AE/ER
Second step in income tax calculation
Subtract tax reliefs
What is the rate of VAT in the UK
20%
When does hold-over relief apply
Gift/UV
Kinds of items with only 0% VAT payable
kid’s clothes, books
What kinds of tax do both companies and individuals pay
VAT
When do you consider relief for companies
After deducting possible deductions (losses reduce tax payable)
What does ‘control’ mean for a close company
+50% voting altogether
When must rollover relief be claimed
12 months before and up to 3 years after
When does entrepreneurs relief apply to disposal of a business asset
1 year prior, 3 years since ceasing, used in the business
Three things you can deduct from income profits for corporation tax
Deductible expenditure, capital allowances and trading losses
What happens for CGT if spouse gives item to spouse
No gain/loss, so spouse takes on the base cost of the item
What is the effect of rollover
total chargeable gain reduces base cost of replacement indefinitely
What kind of business relief only applies for business assets
Rollover
If TTP of company is more than £1.5m, when pay?
4 instalments in relevant period and following.
Three things on which an individual does NOT pay CGT when they dispose of it
Wasted tangible, private cares and one principal private residence
Three things you can deduct from chargeable gains for corporation tax
Allowable expenditure, indexation allowance and capital/trading losses
How to split NS, S and D
Deduct S and D from taxable income = NS
First step in income tax calculation
Add all income together
What is the value of the good for CGT if consideration given at arm’s length
Price paid
When is personal allowance no longer available
If £123,700 or more
What kind of income has a different rate of tax applicable to it
Dividend
If TTP of company is £1.5m or less, when pay
Within 9 months and 1 day
What kinds of tax do individuals pay (x2)
Capital gains and income
When do you get Taxable income
After deducting individual’s personal allowance
By when must VAT invoice be sent to client
30 days
Need the replacement asset be the same as the original asset to claim rollover?
No
Qualifying assets for rollover relief
land/goodwill/P&M/ships/aircraft/potatoes
Two expenditures not deductible from income profits for corporation tax, bc prohibited by statute
Business entertainment or provision for doubtful debts
Rules on claiming trading loss relief
Start same period against income profits and chargeable gain, then back one year CG + TT if SAME TRADE, then future TT ONLY if SAME TRADE
When must an individual register to pay VAT
If exceed VAT threshold
What do ‘capital allowances’ apply to
Plant and machinery
When is tax NOT payable by close company on loan to individual
In ordinary course of business or less than £15k to full-time employee
What is the corporation tax rate for companies 18/19
19%
What is ‘deductible expenditure’ for income profits under corporation tax
Expenditure incurred wholly and exclusively for the purpose of a business of income nature, and not prohibited by statute
What kind of tax do companies pay
Corporate
Examples of tax reliefs from individual’s income
Interest on qualifying loans and pension contributions
Examples of expenditure of an income nature for ‘deductible expenditure’
Wages, advertisement, interest on loan, IP/goodwill
What kinds of expenditure are income
Regular business expenses
Why is corporation tax essentially double tax
Company pays tax, then dividend to shareholders - they also pay tax
Does annual exemption reduce either hold-over or rollover relief
No - although donee can use it when disposing of the asset for hold-over
What does the individual account to HMRC for in VAT
Difference between input and output
What liability does the donor have for hold-over relief
None
What is a close company?
Under control of either 5 or less Ms, or any number of Ms who are also Ds
When can company claim rollover relief
Qualifying asset disposal + purchase means capital gain on disposal reduces cost of replacement
When does hold-over relief not apply
To business assets, or quoted shares
When does entrepreneurs relief apply to disposal of a business
1 year prior and trading
When does investors relief apply
Not officer/employee, not listed when bought, 3 years since 17 March 2016, fully paid OS
When do you calculate if personal savings allowance is available
From Taxable Income
