Chapter 6 - Deductible Payments Flashcards
How do we arrive at taxable income?
Total income LESS deductible payments gives us net income.
From net income we deduct any available personal allowance to arrive at taxable income.
What is the most important type of deductible payment?
Interest paid on qualifying loans
What are the main reliefs available?
Reliefs for losses & reliefs for interest paid
How do you work out the total amount which can be deducted?
Either the greater of £50,000 or 25% of adjusted total income
True or false
There is a £109,000 limit on the amount of the loan that qualifies for tax relief
False
There is no limit on the amount of the loan that qualifies for tax relief
True or false
Interest paid in the year of the loan of plant and machinery paid the year prior to the loan will qualify for tax relief
False
Only interest paid in the year of the loan and the next three years will qualify for tax relief
Does tax relief apply to loans to purchase cars?
No
True or false
If an employee takes out a loan to buy a computer that is party for leisure use, only part of the interest will qualify for relief
True
What is a ‘close’ company?
A UK company controlled by 5 or fewer shareholders
How would a person be able to claim tax relief for shares in a close company?
They must either work for the company (and own some shares) or hold more than 5% of shares
Will relief be available for the interest paid if the individual has made a claim for income tax or capital gains tax relief through the Enterprise Investment Scheme?
No
True or false
A loan taken out by an individual to buy into a partnership does not qualify for tax relief
False
It does quality for tax relief
