C1-4

Question 1

What is the neutrality principle?

Answer 1

Tax shouldn’t distort choice

Question 2

What is the direct and indirect principle

Answer 2

direct is paid by those who generate funds (income, capital gains, corporation) whereas indirect is transaction based

Question 3

When is FY and tax year

Answer 3

FY= 1 apr - 31 mar
Tax = 6 apr - 5 apr

Question 4

What are the two types of compliance checks?

Answer 4

Pre return check
Enquiry into returns submitted

Question 5

What is discovery assessment and what is the time limit for this?

Answer 5

When HMRC come into possession of tax payer affairs after compliance checks

Time limit is 4 years from end of relevant period

Question 6

What is discovery assessment and what is the time limit for this?

Answer 6

When HMRC come into possession of tax payer affairs after compliance checks

Time limit is 4 years from end of relevant period

Question 7

What is direct recovery

Answer 7

When HMRC takes money from taxpayer. Must be min £1000 and taxpayer must have £5000 remaining

Question 8

How do you get Taxable income

Answer 8

Chargeable income - PA

Question 9

What is tax liability and tax payable

Answer 9

TL- how much is owed
TP- how much is paid

Question 10

3 main exempt income

Answer 10

ISA
Interest from NSC
Winnings (lottery, betting, bond)

Question 11

5 examples of Chargeable income (proforma)

Answer 11

TEPID
Trading, employment, property, interest, dividend

Question 12

What is net income formula

Answer 12

Chargeable income - Relief

Question 13

What is the order for a proforma?

Answer 13

1. Calc net income (TEPID)
2. Remove PA to give taxable income
3. Calc tax using tables
4. Remove marriage allowance to give tax liability
5. Remove tax deducted at source to give income tax payable

Question 14

Formula for ANI (adj net income) and how much income gives £0 PA

Answer 14

(ANI - 100,000) / 2

PA = £0 when income s £125,140

Question 15

What is SINRB

Answer 15

Savings income nil rate band allows you to earn interest without tax. If SI is £5000+ then £1000 for BRTP and £500 for HRTP

Question 16

Formula for Gift Aid

Answer 16

Amount x 100/80

however for HRTP max relief is 40%
and for ARTP max relief is 45%

Question 17

What is marriage allowance?

Answer 17

When spouse transfers £1260 of PA if they have no liability (usually £252)

Question 18

What is a tax return and what is the deadline?

Answer 18

something you fill out which includes incomes and expenses- it helps determine how much tax is owed. Deadline for submission is 31 Jan after end of following tax year

Question 19

formula for taxable benefit

Answer 19

marginal cost- contribution

marginal cost is not fixed or profit related

Question 20

What is a trivial benefit

Answer 20

Something which is below £50 and is not cash for example a small gift. They are exempt

Question 20

List some exempt benefits (7)

Answer 20

o Free/subsidised canteen
o Sports facility only available to employees
o Up to £500 medical treatment
o Provision of carpark
o Employer contribution to pension scheme
o Phone for private use
o Up to £150 per annum per head for social events
 Cannot exceed- if so full amt is taxable
 Party must be annual

Question 21

How do you treat accomadation

Answer 21

If job related then it is exempt. If it is not then it depends if owned or rented by business.

If rented- Benefit is higher of annual value and rent paid. First calc higher of options then remove contributions

if owned- basic benefit is rateable value. There is additional benefit if it exceeds £75000. (Cost-75000) x IR at start [2.25%]. if owned for more than 6 years use MV instead of initial cost. Cost of improvements are included in cost calculation. Employee contributions removed

Question 21

How do you treat an accom if owned

Answer 21

Cost= (cost-75000) x IR
this includes cost of improvements. Also add annual value

this gives Taxable benefit

Question 21

What is the benefit for furniture and living expenses

Answer 21

Furniture= 20% of MV
Living expenses= paid by employer- contribution

Question 22

What is the benefit for private fuel

Answer 22

if paid by employer it is flat rate= 27800 x CO2 emission %

only consider contribution if paid in full by employee

Question 22

How do you calculate benefit for cars

Answer 22

list price x CO2 emissions

remove contributions

Question 22

Formula for assets lent for private use

Answer 22

if owned by employer= 20% x MV when first provided
if rented by employer= higher of AV or rent paid

time apportion and remove contribution. Phones and bikes are exempt

Question 23

How do you calc emissions for petrol and diesal

Answer 23

Round down for petrol

for diesel add 4% unless you meet RDE2

Question 23

What does P60, P11D, P45, P2 and P9 show

Answer 23

P60= total amount paid, tax paid and NIC
P11D= benefits provided to employer
P45= form for when leaving job
P2= given to employee to show how PAYE calc
P9= sent to employer giving PAYE code

Question 23

how to calc Tax adj trading profit

Answer 23

adjust profit for trading accounting period - capital allowance

Question 24

When is income tax and NIC due

Answer 24

19th of every month or 22nd for electronic payments. E-payments needed if more than 250 employees