C1-4 Flashcards
What is the neutrality principle?
Tax shouldn’t distort choice
What is the direct and indirect principle
direct is paid by those who generate funds (income, capital gains, corporation) whereas indirect is transaction based
When is FY and tax year
FY= 1 apr - 31 mar
Tax = 6 apr - 5 apr
What are the two types of compliance checks?
Pre return check
Enquiry into returns submitted
What is discovery assessment and what is the time limit for this?
When HMRC come into possession of tax payer affairs after compliance checks
Time limit is 4 years from end of relevant period
What is discovery assessment and what is the time limit for this?
When HMRC come into possession of tax payer affairs after compliance checks
Time limit is 4 years from end of relevant period
What is direct recovery
When HMRC takes money from taxpayer. Must be min £1000 and taxpayer must have £5000 remaining
How do you get Taxable income
Chargeable income - PA
What is tax liability and tax payable
TL- how much is owed
TP- how much is paid
3 main exempt income
ISA
Interest from NSC
Winnings (lottery, betting, bond)
5 examples of Chargeable income (proforma)
TEPID
Trading, employment, property, interest, dividend
What is net income formula
Chargeable income - Relief
What is the order for a proforma?
- Calc net income (TEPID)
- Remove PA to give taxable income
- Calc tax using tables
- Remove marriage allowance to give tax liability
- Remove tax deducted at source to give income tax payable
Formula for ANI (adj net income) and how much income gives £0 PA
(ANI - 100,000) / 2
PA = £0 when income s £125,140
What is SINRB
Savings income nil rate band allows you to earn interest without tax. If SI is £5000+ then £1000 for BRTP and £500 for HRTP
Formula for Gift Aid
Amount x 100/80
however for HRTP max relief is 40%
and for ARTP max relief is 45%
What is marriage allowance?
When spouse transfers £1260 of PA if they have no liability (usually £252)
What is a tax return and what is the deadline?
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
formula for taxable benefit
marginal cost- contribution
marginal cost is not fixed or profit related
What is a trivial benefit
Something which is below £50 and is not cash for example a small gift. They are exempt
List some exempt benefits (7)
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
How do you treat accomadation
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
How do you treat an accom if owned
Cost= (cost-75000) x IR
this includes cost of improvements. Also add annual value
this gives Taxable benefit
What is the benefit for furniture and living expenses
Furniture= 20% of MV
Living expenses= paid by employer- contribution
What is the benefit for private fuel
if paid by employer it is flat rate= 27800 x CO2 emission %
only consider contribution if paid in full by employee
How do you calculate benefit for cars
list price x CO2 emissions
remove contributions
Formula for assets lent for private use
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
How do you calc emissions for petrol and diesal
Round down for petrol
for diesel add 4% unless you meet RDE2
What does P60, P11D, P45, P2 and P9 show
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
how to calc Tax adj trading profit
adjust profit for trading accounting period - capital allowance
When is income tax and NIC due
19th of every month or 22nd for electronic payments. E-payments needed if more than 250 employees
