C9-11

Question 1

Proforma for Disposal

Answer 1

1. Proceeds (at MV) - (Less) cost of disposal = Net
2. (less) allowable cost- cost of acquisition, incidental cost, enhancement expenditure

Proceeds- cost of disposal- allowable cost= CG/CL

Allowable (removed from tax Calc to reduce taxable profit)

Question 2

What are the two types of Chattels

Answer 2

Wasting= Exp life below 50 and exempt from CGT (boats, caravan, moveable P&M)

Non-wasting= Exp life more than 50 including antique or jewelry

Cars always exempt from CGT

Question 3

What are the special rules for non-wasting chattels

Answer 3

o Below £6000= exempt
o Above £6000= taxable

If proceed less than £6000 but cost more= proceed is £6000
Loss= Proceed £6000

If proceed more than £6000 but cost less= gain is lower of:

Profit or 5/3 x (proceed - 6000)

cost includes cost of purchase

Question 4

What is a set of non-wasting chattels? How do you calculate disposal?

Answer 4

Group of similar items worth more together than separated (group of vases)

When part of set disposed:

Cost x a/(a+b)

A= mv of disposed part
B= mv of part retained

Question 5

difference between tax avoidance/evasion

Answer 5

Avoidance- legal method to reduce burden for example tax planning (method to lower bills but pay correct amount)

Evasion- illegal method through suppression or false info

Question 6

Who pays corporation tax

Answer 6

UK Resident Companies on worldwide income.

UK resident companies are companies incorporated in the UK or centrally managed here

Question 7

When is accounting period

Answer 7

When trade begins

Question 8

Proforma for Corporation Tax

Answer 8

Trading income
property income
non trading loan relationships
chargeable gain
misc income

= This gives total

minus charitable donation total taxable profit