Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Principles Of Tax > All > Flashcards

All Flashcards

1
Q

What are capital allowances?

A

Form of depreciation for tax purposes. They are standard rates so less subjective than depreciation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are capital allowances deducted from?

A

Tax adjusted trading profits in place of deoreciation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are capital allowance available on?

A

Plant and machinery- assets with which the business operates
Machinery- machines, motor vehicles, computers
Plant- fixtures and fittings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

From case law what can capital allowances be applied to?

A
  • Building alterations incidental to installation of plant and machinery
  • licences to use computer software
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Would a permenant wall between two room class as plant and machinery for capital allowances?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the 2 pools for capital allowances?

A

Private use asset pool and main/general pool

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is included in the private use pool for capital allowances?

A

For assets that are partly privately used by the business owner I.e. cars
- only business proportion can be claimed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is included in the main/general pool for capital allowances?

A

All other assets not used privately by the business owner. This includes cars with CO2 50g/km and under purchased on for after 6 April 2021

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the balance on each pool for capital allowances called?

A

Tax written down value (TWDV)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the 4 types of capital allowances?

A
  • written down allowance (WDA)
  • annual investment allowance (AIA)
  • first year allowance (FYA)
  • balancing adjustments
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the WDA allowance value and how often is it available?

A

Available annually at 18%
- TWDV x 18%
- needs to be apportioned if it’s a short accounting period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the annual adjustment allowance (AIA) value and how often is it available?

A
  • available on certain assets in the period of acquisition
  • £1 million can be used for new / secondhand machinery
  • cannot be used for cars
  • £1 million would need to be apportioned if less or more than 12 months
  • unused AIA is not carried forwards
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the first year allowance and how often is it available?

A
  • available on certain assets in the period of acquisition
  • 100% on zero emission cars and charging points
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the balancing adjustments capital allowance?

A

A balancing allowance or charge may arise in the period of disposal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What value will the capital allowances calculations give you?

A
  • total allowances and these are deducted from the trading profit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is important to remember when calculating WDAs and AIAS?

A

They are apportioned for short accounting periods
They are not apportioned by the length of ownership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

If an item is sold from the main pool before giving, writing down allowances (WDA) for the period, deduct the lower of:

A
  • disposal proceeds
  • original cost
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the small pool rules? (Capital allowances)

A

Balance in main pool is less than £1000 whole amount can be claimed
- not available for private use assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Who can claim private use assets capital allowances?

A

Sole traders only

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How is the private use assets capital allowance shown in the pro forma?

A

Separate column with the normal capital allowance calculate but only with the business proportion claimed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

When a private asset is sold which value should you deduct?

A

The lower of:
1. Disposal proceeds
2. Original cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What happens when the disposal value of a private asset is equal to the TWDV b/f when calculating capital allowances?

A

Disposal value exceeds TWDV b/f= balancing charge will apply

TWDV b/f exceeds disposal values= balancing allowances is given

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

In terms of capital allowances what happens when a business is permenantly discontinued?

A

No AIA, WDA, FYA is available in the final year of account
Instead of the normal capital allowances computation:
- add in any additions made in final period
- deduct any disposals made in final period
- calculating a balancing adjustment (bring down to 0)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Who pays class 2 and 4 national insurance?

A

Sole traders and partners
- aged 16 to pension age (66)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

How is class 2 national insurance calculated?

A

Flat rate £3.45 per week (in tax tables)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is class 4 national insurance on?

A

Tax adjusted trading profits assessed for income tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

When must a trader register with HMRC for class 2 to NIC?

A

By 31 January following the end of the tax year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

When must a trader register for class 4 NIC?

A

By 5 October following end of tax year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

How do you round the numbers when calculating NIC?

A

To the nearest pound at every stage of workings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Who needs to make payments on account?

A

Self employed need to make payments on account for income tax and class 4 NICS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What are the relevant payments on account dates for the 2023/24 tax year?

A

31 January 2024
31 July 2024
31 January 2025- final payment plus fist POA for 2024/25 (also the filing date)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

How are POA (payment on account) calculated?

A

50% of the previous year payable by self assessment. Eg. 2023/24 POA is based on 2022/23 tax year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

When penalties relate to balancing payments?

A

Penalties can be charged on the late payment of balancing payments under self assessment (but not payments on account)
- interest can also be charged from due date to when payment is made

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What to remember when calculating late payments in February 2024

A

It’s a leap year so 29 days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Who pays class 1 primary national insurance and what is it on?

A

Employees aged 16-66
Paid on cash earning before deductions, plus vouchers exchangeable for cash, good or services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Who pays class 1 secondary national insurance and what is it on?

A

Employers aged 16 onwards
Paid on cash earnings (before deductions) plus vouchers exchangeable for cash, goods or services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

When is class 1 NIC payable?

A
  • payable under PAYE 19th of each month
  • this is extended to 22nd for electronic payments
  • 250 + employers must pay electronically
  • can be paid quarterly if average monthly total PAYE is less than 1500
38
Q

What is the employment allowance and who is it available to?

A

Employers receive 5000 to reduce their class 1 secondary NIC liability
This is per employer not per employee

39
Q

Who is the employment allowance not allowed to? (NIC)

A
  • companies with a single director
  • those with a class 1 secondary NIC liability greater than £100,000 in the previous tax year
40
Q

What is Class 1A NIC paid on?

A

By employers only on value of taxable benefits excluding vouchers exchangeable for goods and services (which are liable for class 1)

41
Q

What are the 3 tax year basis rules for taxing a sole trader?

A
  • commencement of trade
  • ongoing business
  • cessation of trade
42
Q

When a sole trader begins trading when are they taxed?

A
  • tax year in which the trade starts
  • tax adjusted profits are apportioned from date business starts trading to end of tax year
  • if they trade starts close to start of next tax year (1-5 April) trade is treated as starting in following year
43
Q

When calculating when taxable trading profits for a sole trader what do you need to remember

A

Calculate it using the tax year 6 April 2023- 5 April 2024 and adjust the trading profits accordingly

44
Q

From what dates will a sole trader be taxed in the year they stop trading?

A

From 6 April in the tax year to when they stop trading

45
Q

When adjusting sole traders accounting periods to calculate the tax year what dates can be used?

A

Usually from 6 April to 5th April
But if accounting period ends between 31 march - 4 April this is allowed without having to adjust

46
Q

How should you think of partnerships when taxing them

A

Treat them like sole traders but each of them must be taxed indivually

47
Q

Do companies pay class 4 NIC

A

No

48
Q

Are secondary class 1 NIC paid on cars

A

No

49
Q

What makes a company a resident in the UK

A

Incorporated in the UK or centrally managed and controlled in the UK

50
Q

What is the total income and gains of a company known as

A

Taxable total profits (TTP)

51
Q

What is the accounting period for corporation tax purposes

A

Usually companies period of accounts (cannot exceed 12 months)

52
Q

When does an accounting period start for corporation tax purposes?

A

When company starts to trade (or received income chargeable to corporation tax) OR
When the previous accounting period ends

53
Q

When does an accounting period end for corporation tax purposes?

A

12 months after beginning of the accounting period or if sooner
- end of company’s period of account or
-when the company stops trading

54
Q

how are dividends treated when calculating corporation tax?

A

not allowable deductions form profit

55
Q

how do you calculate adjusted trading profit for corporate tax purposes?

A

1 net profit per accounts
add back- disallowed expenditure (i.e. depreciation)
take off- capital allowances and income in accounts not taxable as trading income

56
Q

what adjustment would be made when calculating corporation tax on appropriatetion of profits to directors?

A

no adjustments need to be made

57
Q

When calculating adjusted trading profits for corporation tax what would need to be added back in this situation:
-Legal charges which include:
- debt collection
- staff service agreements
- in connection with lease of new office premises

A

in connection with lease of new office premesis would need to be added back

58
Q

When calculating adjusted trading profits for corporation tax what would need to be added back in this situation:
Impaired debts which includes:
- loan to form employees written off
increase in provision of impaired debts

A

Loan to former employee written off would need to be added back as this is not a trade debt

59
Q

When calculating adjusted trading profits for corporation tax what would need to be added back in this situation:
in relation to Repairs:
- repainitng
- new office furniture

A

new office furniture would need to be added back as capital allowances is claimed instead

60
Q

what are capital allowances?

A

capital allowances are deducted from tax adjusted trading profits to give trading income which is included in the corporation tax computation
- depreciation add back
- capital allowances deducted

61
Q

is there a private use adjustment for capital allowances?

A

No

62
Q

how are capital allowances given to companies

A

given for an accounting period
- if longer than 12 months needs to be apportioned WDA and AIA for period after 12 months

63
Q

when calculating capital allowances what would qualify for AIA?

A
  • second hand machinary
64
Q

when calculating capital allowances what would qualify for FYA

A

zero emission car
new and unused plant and machinery from 1 April 2023 to 31 March 2026

65
Q

what happens when a company is disposing of an asset which was subject to full expensing?

A

a balancing charge will arise equal to the disposal value of the asset

66
Q

(non trading income and trades)
How is rental income on UK properties taxed?

A

taxable on an accrual basis (period it relates to rather than when it is paid)

67
Q

is interest payable on a load to acquire a new or improve a proerty allowable expenditure?

A

No- so needs to be added back
- it follows the loan relationship rules instead

68
Q

what is the loan relationship rule

A

determines whether interest payable/ receivable is classified as trading or non trading

69
Q

how do you treat allowable expenditure

A

deduct it (this is usually deduced unlesss the question says nothing has been deducted)

70
Q

how do you treat disallowable expenditure

A

add back

71
Q

how is interest which is trading or non treading treated?

A

Trading= allowable expenditure (part of trading income)
Non-trading= allowable or taxable as part of NTLR (non trade loan relationships)

72
Q
A
73
Q

What are the three steps to calculating corporation tax?

A
  1. Calculate TTP
  2. calculate argumented profits
  3. decide what rate to tax at
74
Q

How do you calculate argumented profits?

A

TTP + exempt ABGH distributions= argumented profits

75
Q

When applying corporation tax what number are you taxing?

A

TTP (total taxable profit)

76
Q

What are exempt ABGH distributions?

A

Dividends received from other companies (UK and overseas). Dividends received from 51% subsidiaries are not included

77
Q

What we the rules with charity donations and corporation tax?

A

Deduct them
Called qualifitinv charitable dontations (QCD)
no grossing up is required.

78
Q

What happens when calculating corporation tax and argumented profits are between the upper (250,000 @ 25%) and lower (50,000 @ 19%) limit?

A

Marginal relief calculation
(250,000 - AP) X (N/AP) X SF
AP= augmented profits
N = taxable total profits
SF = standard fraction for marginal relief ( 3/200)

79
Q

What must you remember for the corporation tax upper and lower limits.?

A

They need to be adjusted for accounting period longer or shorter than 12 months

80
Q

What do I need to remember about associated companies when calculating corporation tax?

A

When a company is under control of another (control equal 50% or more shares)
- if a company is brought or sold in an accounting period it is associated for the whole 12 months for tax purposes
- uk and overseas companies are included (dormant aren’t)
- when calculating corporation tax divide upper and lower limited by number of associated companies

81
Q

What is the argumented profits limited when calculating corporation tax payment dates?

A

1.5 mil- need to remember to divide this number by number of associated companies

82
Q

When must a company register with HMRC for corporation tax?

A

Within 3 months of the start of its first accounting period

83
Q

Corporation tax: HMRC have the right to amend obvious errors within how long of actual filing date?

A

9 months

84
Q

Corporation tax: how long do HMRC have to submit an enquiry?

A
  • 12 months after actual filing date if on time
  • 12 months plus quarter day following submission if late
  • quarters are 31 jan, 30 April, 31 July and 31 oct.
85
Q

Corporation tax: how long does a company have to amend a return?

A

12months of due filing date

86
Q

Corporation tax how long does a company have to claim overpayment relief

A

4 years of end of accounting period

87
Q

How long must corporation tax records be kept?

A

6 years from end of accounting period

88
Q

How long must income tax and capital gains tax records be kept for?

A

5 years from 31 January following the end of the tax year for business records

89
Q

How long must income tax and capital gains tax records be kept for (personal)?

A

1 year from 31 January following the end of the tax year

90
Q

How long must VAT records be held for

A

6 years

91
Q

Who is responsible in large companies for certifying each year that the companies accounting systems can produce accurate tax information?

A

Senior accounting officer (SAO)
Penalty of £5000

92
Q

What the remember with interest overpaid corporation tax and late corporation tax?

A

Repayment interest (paid by HMRC on overpaid CT)
- interest runs from later of due date, actual payment to date of repayment
- taxable as non trading loan relationship income
Late payment interest
- automatically charge
- deduct table as non trading loan relationship
- runs from day after due day to day paid

Principles Of Tax (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions