ATX Cards Flashcards
What is the deemed salary pro-forma?
95% of fees
Deduct any salary & employers NI
Deduct any employer pension contributions
Deduct any expenses allowable for employee
Leaves amount deemed to include employers NI
Deduct employers NI from amount
Deemed salary
What are the badges of trade
- The subject matter
- Frequency of transactions
- Length of ownership
- Supplementary work
- A profit motive
- How the asset was acquired
What qualifies for gift holdover relief?
Chargeable assets used in a business
Shares in trading company (need a minimum 5% holding if quoted)
Any asset with an immediate IHT charge
Any asset transfer which qualifies for IHT Business Property Relief or Agricultural Property Relief
When are proceeds from part disposals of land deducted from the cost of the land?
Gross proceeds <= 20% of MV of the whole plot
Gross proceeds <= £20k
Aggregate sales of land and buildings in the year <= £20k
What are the conditions for a furnished holiday let?
EEA Property
Available to the public for 210 days in a year
Actually let for 105 days in the year
Property not let for > 31 days
How are losses carried forward for furnished holiday lets?
Only against future furnished holiday let profits
What qualifies for business asset disposal relief?
All/part of an unincorporated business (owned ≥ 2 years)
Assets used in a business (held for 2 years) where trade ceases and assets sold <3 years
Shares in a trading company, owned for ≥ 2 years, ≥ 5% holding (or emi shares) and employee/director
Associated disposals (owned personally and used in your partnership / personal co.) where selling ≥ 5% of share in the bus. at the same time
£1m lifetime limit at 10% rate
IR35 criteria
Individual provides services to a client via a PSC
Individual would be an employee if not for PSC
Individual has ≥ 5% interest in the company
What is the deemed direct payment (DDP) pro-forma?
Payment made to PSC (net of vat)
Less: Direct cost of materials incurred by the PSC.
Less: Deductible employee expenses incurred by the PSC
Deemed direct payment
What are the criteria for SAYE?
All employees can participate but the employer can set a minimum period of employment.
Maximum £500 of net income can be saved per month.
Scheme can run for 3 or 5 years.
Max 20% discount of share price at grant date vs MV at grant
No Tax or NI paid on interest earned on savings
Gain = Proceeds less exercise price
What are the criteria for CSOP?
Employer chooses who can participate.
Employee must be full time/part time while directors must be full time
£30k max value of shares per employee
Employee must own <= 30% of company shares
Exercise period is 3-10 years after grant
Issue price must be >= MV of shares at grant date
Gain = Proceeds less exercise price
What are the criteria for EMI?
Employer chooses who can participate.
Employee must work >= 25 hours per week
Employee must own <= 30% of company shares
£250k max value of shares per employee, £3m overall for scheme
Exercise period is <= 10 years after grant
Issue price must be >= MV of shares at grant date (otherwise chargeable to income tax on exercise)
Gain = Proceeds less exercise price
What are the criteria for SIPs?
Open to all employees, no employer restriction
Max value:
Given free shares: £3.6k p.a
Buy partnership shares: £1.8k p.a (cost deducted from gross salary, capped at 10% of salary)
Given matching shares: Max of 2 per partnership share
Holding period - 5 years
Income Tax
>=5 years - No IT or NICs
3-5 years - IT (& Class 1 NICs if quoted) on lower of grant value (cost for partnership) and MV at withdrawal date
3 years - IT (& Class 1 NICs if quoted) on MV at withdrawal date
CGT
Gain = proceeds less MV at withdrawal date
Dividends received are tax free if re-invested in partnership shares + shares are not withdrawn within 3 years.
What’s the criteria for Investors’ relief?
New shares issues after 17/3/16
Held for at least 3 years
Unquoted trading co
Investor never worked for the company
How are normal trading losses treated for individuals?
Set against total income.
CY or
PY or
CY then PY or
PY then CY
Chargeable gains can be relieved after the total income claim in a particular tax year
How are normal trading losses treated for companies?
Set against total profits
CY then PY (CY must be used first, all or nothing)
How are carried forward trading losses for individuals treated?
Against future profits of the same trade
How are carried forward trading losses for companies treated?
Against future total profits (choose how much)
What is the treatment of losses in the opening years of trade?
Losses in any of the first 4 tax years can be carried back on a FIFO basis and set against total income.
Go back 3 years and work forward
17 -> 18 -> 19 and then the loss in the 20
Note- 50k/25% cap applies
What is a terminal loss and how is it calculated? (Individuals)
A terminal loss is the loss in the last 12 months of trading.
It is calculated in two parts:
6 April (start of tax year) to Cessation date - Trading loss + overlap profits (nil if profit)
PLUS
Remainder of final 12 months up to 5 April
What is the treatment of terminal losses for individuals?
Terminal losses can be set against trading profits on:
year of cessation
and the 3 preceding tax years on a LIFO basis
What is the treatment of terminal losses for companies?
Terminal losses can be set against total profits on:
year of cessation
and the prior 36 months on a LIFO basis
What is the cap on individuals loss relief?
Higher of:
- £50k
- 25% of adjusted total income (total income less gross personal contributions)
Applies to:
Normal loss relief
Opening years of trade loss relief
What is the restriction on relief for trading losses brought forward for companies?
£5m + 50% of excess profits over £5m
How are finance costs on residential properties treated from a personal tax perspective?
They are relieved at 20% from the tax payer’s income tax liability
How is adjusted net income calculated?
Total income
Less:
Loss relief
Qualifying interest
Gross personal pension contributions
Gross gift aid contributions
How is adjusted income calculated for employees?
Net income (TI - loss relief - QLI) + employee contributions to occupational pension + employer contributions to occupational or personal pension
How is adjusted income calculated for self employed calculated?
Net income
How is threshold income calculated?
Net income less gross personal pension contributions
How does the tapered allowance work?
The normal allowance is £40k.
This is reduced by £1 for every £2 when AI is > £240k
Note:
Threshold income has to exceed £200k for tapering to apply
How many years can an unused pension annual allowance be carried forward for?
3 years after the current period
What happens when total gross contributions exceed the available annual pension allowance?
An annual allowance charge.
The charge will be at the margin rate of tax for the tax payer
Note:
This includes both individual and employer contributions
How are pensions upon retirement treated?
Tax free amount - 25% of lower of fund or lifetime allowance of £1,073,100
Additional amounts up to lower of fund or lifetime allowance are treated as NSI
Any excess is liable to a 55% charge if taken as a lump sum
If used to buy an annuity, charge of 25% and income taxed as NSI
What are the deemed occupation criteria under PPR relief and the respective conditions?
Last 9 months of ownership - must have occupied the residence at some point
Up to 3 years of absence for any reason - occupation before and after absence
Up to 4 years of absence whilst working elsewhere (employer or self employed) - occupation before absence (no need to reoccupy if work prevents)
Any period where an employee is required to work overseas - occupation before absence (no need to reoccupy if work prevents)
How is PPR relief calculated?
Gain x (Periods of actual or deemed occupation/total period of ownership)
What are exempt assets from CGT?
Wasting chattels
Non-wasting chattels bought and sold for <£6k
Legal tender e.g cash
Cars
ISA investments & shares
QCBs (Qualifying Corporate Bonds)
Gilts
National Savings Certificates and Premium Bonds
Who are connected persons?
An individual is connected with their direct relatives (and their spouses), business partners (and their spouses) and the companies they control
How are disposals and losses treated for connected persons?
Disposals are at MV
Losses can only be used on gains by the same connected person
What are the £6k non-wasting chattel scenarios?
Proceeds & Cost <£6k - exempt
Proceeds & Cost >6k - Normal gain
Proceeds >6k & Cost <6k - lower of normal gain or 5/3 * (Proceeds - £6k)
Proceeds <6k & Cost >6k - Limit loss to deemed proceeds of 6k less cost
What is the ex-gratia amount and how is it treated for Tax and NI?
The amount is £30k.
Payments within the £30k band are exempt from tax or NIC.
The excess is subject to tax and Class 1A.
How is statutory redundancy pay treated?
It is fully exempt but it also forms part of the £30k ex-gratia
How are payments made on death, injury or disability treated?
Exempt from tax
Letting relief is the:
Lower of:
Gain in let period (exc. actual or deemed occupation)
Gain exempt under PPR relief
£40k
What is the date range, % deduction & any conditions for enhanced capital allowances?
Any new plant and machinery purchased between Apr21 to Mar23
Main pool - 130% FYA
SRP - 50% FYA (AIA must be used first before FYA)
How are net debits for NTLRs treated?
Used against CY total profits (can choose how much)
Used against PY NTLR income (all or nothing)
Group relieved (can choose how much)
Excess is carried forward against total profits (choose how much)
How are property losses different for companies and individuals?
Individuals - losses c/f against property income
Companies - losses c/f against total income
What is the end period for the indexation allowance?
December 2017
How does share matching work for individuals?
Same day acquisitions;
Acquisitions in the 30 days after the sale;
Share pool
How does share matching work for companies?
Same day acquisitions;
Previous 9 days;
Share pool
When does SSE (Substantial Shareholding Exemption) apply? How is the gain or loss on disposal treated?
Owned >= 10% of shares for 12 months (consistently) in the last 6 years
Disposed company must be a trading company, or holding company in the group
The gain is exempt whilst the loss is not allowable
How are non-UK resident companies treated in a gains group?
Non-UK resident companies do not benefit from gains group rules but can link UK companies in a gains group
When does a degrouping charge arise?
If:
A company leaves a gains group <= 6 years of receiving a NGNL asset transfer, AND
It still owns the asset at the date it leaves the group
How is the degrouping charge treated if the company leaves the group as a result of the parent selling its shares?
The DGC is added to the share sales proceeds (same if the charge is a loss)
When is a degrouping charge exempt?
When the sale of the shares qualifies for SSE
When does transfer pricing apply? How is the adjustment made?
When transactions between group or connected companies do not occur at an arm’s length basis.
The company which gains a UK tax advantage must adjust its CT computation.
The other party, if a UK company, may make a corresponding adjustment.
Note - SMEs do not apply, unless they are in a territory without a DTR agreement with a non-discrimination clause
What qualifies for rollover relief?
Land and buildings
Ships, aircraft, hovercraft,
Fixed plant and fixed machinery
Goodwill (only individuals)
How is the gain that qualifies for rollover relief treated?
If re-investment is non-depreciating - deduct from base cost of replacement
If re-investment is depreciating(<= 60yrs UEL) - gain is frozen and become chargeable at the earliest of:
10 years from date of purchase
Date replacement is not longer used in trade
Disposal of replacement asset
What are the rules for intangible rollover relief?
Profit on disposal is deferred against the base cost of the replacement IFA
Any profit due to past amortisation (TWDV vs Cost) cannot be deferred
Amounts not re-invested in new asset are chargeable immediately
Replacement bought 12 months before - 36 months after disposal (doesn’t have to be like for like)
How is goodwill treated from a corporation tax perspective?
Tax, Profit, Loss & CB/CY/CF
No tax deduction for amortisation or impairment
Profit - treated as trading profit
Loss - treated as non-trading debit on IFAs
CY and carried forward against total profits as well as group relief
Cannot be carried back
What is the R&D super deduction for SMEs?
Normal Expenditure:
An additional 130% (230% total) deduction from trading profits for qualifying R&D revenue expenditure (staff costs, materials, utilities etc)
65% restriction for subcontractors
Capital Expenditure (not land):
100% FYA
How does the cash repayment on R&D super deduction for SMEs work?
State how to qualify and what the rate of the repayment is
In order to get a repayment, the loss must be surrendered.
This is the lower of:
The trading loss
230% of the R&D expenditure
The repayment is equal to 14.5% of the surrendered loss (lower than the 19% tax rate)
Note: Helpful for cashflow
What are the partial exemption de-minimis tests?
Simplified Test 1:
Total input tax is no more than £625 per month on average
AND
The value of its exempt supplies is no more than 50% of the value of all of its supplies
Simplified Test 2:
Total input tax less input tax directly attributable to taxable supplies is no more than £625 per month on average
AND
The value of exempt supplies is no more than 50% of the value of all of supplies
Standard Test (applied after the split of unattributable input VAT from 1.2):
Input tax relating to exempt supplies is no more than £625 per month on average
AND
No more than 50% of total input tax
If the partial exemption applies, how is input VAT recovered?
Directly attributable input VAT - fully recoverable
Unattributable - Amount x (taxable supplies/total supplies)
What’s the criteria for consortium relief?
A conco is owned by a consortium if:
≥ 75% of its share capital is owned by consortium members, each of whom own ≥ 5% and < 75%.
Consortium members must be companies, UK or overseas (only UK members can participate in the relief)
