4

Question 1

What are the badges of trade

Answer 1

To establish whether a person’s activity is trading or investment in nature and decides if you are taxing a profit or a gain.
Subject matter
Length of ownership
Frequency of transactions
Supplementary work
Reason for sale
Motive

Question 2

What is allowable

Answer 2

Deductible

Question 3

What is disallowable

Answer 3

Non deductible

Question 4

What is deductible expenditure

Answer 4

Wholly and exclusively for purpose of trade, disallowed if duality of purpose, but apportionment is allowed if practical

Question 5

What is income vs capital receipts

Answer 5

Sale of capital items vs Sale of current assets

One off sales vs recurring activities

Question 6

What is specifically disallowed

Answer 6

Capital expenditure – which brings an enduring benefit
Appropriations of profit – drawings for self-employed and dividends for company
Entertaining and gifts
Political donations
Payments of a criminal nature
Fines and penalties
Criminal payments
General provisions/allowances – including irrecoverable receivables
Nontrade irrecoverable receivables

Question 7

What are allowable expenses

Answer 7

Interest – for trade purposes
Legal and professional fees
Premium on a short lease
Patent royalties for trade purposes
Employees remuneration
Pre-trading expenditure
Travel expenses
Car leasing

Question 8

With goods for own use what do you do to profit

Answer 8

Add full profit to accounting profits

Question 9

How do you deal with non trading income

Answer 9

Deduct and tax as normal in owners personal tax account

Question 10

What is real time information

Answer 10

Employers are required to submit details of payments (PAYE) made to employees at, or before time of payment. If there are no payments to employees, report needs to be submitted each month. Submissions must be done electronically

Question 11

With real-time information, what is the employer required to deduct

Answer 11

Income tax and national insurance from employees. Amounts are deducted monthly/weekly from income to pay tax

Question 12

What is pay-rolling of benefits

Answer 12

Inclusion of benefits in kind within PAYE code

Question 13

What are the different tax forms

Answer 13

P60
P11D
P45

Question 14

What is P60

Answer 14

Details of employment income, tax deducted and national insurance contributions for full tax year – available to employee by 31st May

Question 15

What is P11D

Answer 15

Details of benefits and cash equivalent for year – by 6th July

Question 16

What is P45

Answer 16

Details of pay to date for employee leaving during tax year. Given to employee to enable them to complete their tax return and a copy given to new employer. Details included in employer’s full payment submission to revenue

Question 17

By what date do you need to inform revenue that a tax return is necessary

Answer 17

5th October following end of tax year

Question 18

When do tax returns need to be submitted by

Answer 18

31st October following end of tax year – paper

31st January following end of tax year – electronically

Question 19

Can tax returns be amended

Answer 19

HMRC within 9 months of return being submitted
Taxpayer within 12 months of normal filing date
Overpayments relief within 4 years of end of tax year to which tax return relates

Question 20

What is the date to pay personal tax

Answer 20

Payments on account 1 - 31st January in tax year
Payments on account 2 - 31st July following end of tax year
Balance – 31st January following end of tax year

Question 21

What is payments on account (POA)

Answer 21

Half total of income tax and class 4 national insurance contribution paid under self assessment (Directly to HMRC) for previous year

Question 22

Why does revenue want to make tax digital

Answer 22

Revenue wants instead of annual tax return, self-employed and those of rental income to make quarterly digital tax returns by mandatory use of an accounting software program. Governments argument is that it will save taxpayers time and money but most accountants disagree