Business Tax Flashcards
What are the 7 steps of IT calculation?
- Add up income = TOTAL INCOME
- Subtract available tax reliefs = NET INCOME
- Deduct PA* = TAXABLE INCOME
- Split non-savings, savings dividend
- Calculate personal savings allowance
- Apply relevant rates
- Add tax together = TOTAL TAX LIABILITY
What are the 7 points on how companies are taxed?
- Pay CT on Taxable Total Profits (income and capital at flat rate of 19% for 2020/21
- Must operate PAYE system
- Account for employees’ IT and NICs via PAYE
- Pay employers’ NICs
- Double taxation on extraction of profits
- Must submit a Corporation 7. Tax self-assessment return
- Must pay tax by the prescribed deadlines
What is a qualifying disposal for a business asset disposal relief?
- All or part of a trading business;
- Assets in a business that used to trade
- Shares in a trading company
- Shares in a company that used to trace
What are the 2 conditions where someone disposes of all or part of a business for the Business Asset Disposal Relief?
- The business must be a trading business;
2. The business must have been owned for at least two years prior to the date of disposal
What are the 3 conditions where someone disposes of assets used in a business that used to trade for the Business Asset Disposal Relief?
- The business must have been owned for at least two years before it ceased to trade
- The assets must have been used in the business when it ceased to trade
- The assets must have been disposed of within three years of the business ceasing to trade
What are the three types of allowable expenditure in CGT?
- Initial expenditure
- Subsequent expenditure
- Disposal expenditure
What does initial expenditure cover?
- the cost price of the asset (the ‘base cost’)
2. The incidental costs of acquisition (surveyors’ fee/ lawyers’ fees)
What does subsequent expenditure cover?
- Subsequent expenditure on the asset which enhances its value
- Expenditure incurred in establishing, preserving or defending title to the asset
What does disposal expenditure cover?
Incidental costs of disposal (e.g. agents’ commission)
What are the 3 conditions where someone disposes of shares in a company for the Business Asset Disposal Relief?
- The company must be, and have been held for at least two years before to the date of disposal, a trading company
- The shares must (generally) have been held for at least tow years before the date of disposal.
- The person disposing of the shares must have been an officer or employee of the company who holds at least 5% of the ordinary voting shares, and is entitled to at least 5% of the profits available for distribution and 5% of the net assets on a winding up, for at least two years before the date of disposal.
What are the 3 conditions where someone disposes of shares in a company that used to trade for the Business Asset Disposal Relief?
- the shares must 9generally) have been owned for at least two years before the company ceased to trade
- The person disposing of the shares must have been an officer or employee of the company who held at least 5% of the ordinary voting shares, and was entitled to at least 5% of the profits available for distribution and 5% of the net assets on a winding up, for at least two years before it ceased to trade
- The shares must be disposed of within three years of the company ceasing to trade.
How does the Business Asset Disposal Relief work?
It’s a lifetime allowance, set at £1 million.
This means that the first £1 million of qualifying gains that an individual makes in his lifetime can be charged to CGT at a reduced rate of 10%.
An individual can make as many qualifying claims as they like during their lifetime until their cumulative gains reach the £1 million lifetime limit.
How do you apply for a Business Asset Disposal Relief?
It’s not automatic. The taxpayer must make a claim on or before the first anniversary of 31 January following the tax year in which the relevant disposal is made.
What is the Taxable Chargeable Gain?
The gain after all allowable deductions, losses and the annual exemption.
What type of businesses & companies qualify for a Business Disposal Relief?
And what does not?
Trading businesses and companies.
Investment business or companies are not qualified.
The disposal of a buy-to-let property investment or other non-trading business will not qualify for BADR.
