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Tax > General > Flashcards

General Flashcards

1
Q

Capital taxes

A

Taxes on assets owned rather than earned

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2
Q

Revenue taxes

A

Taxes on income and profits

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3
Q

Plant and machinery

A

Apparatus, fixed or movable, permanently employed in a trade (i.e. for more than a year) that performs a function as opposed to being part of the setting (i.e. the building or structure) in which the activity is carried out.

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4
Q

Central management and control

A

Central management and control means the highest level of control of the company or the parent company of a subsidiary - normally, but not necessarily, the board of directors. Central management and control is the primary test of residence for companies not incorporated in the UK.

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5
Q

Tax evasion

A

Tax evasion is the illegal underpayment of tax achieved by negligence or fraud.

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6
Q

Tax avoidance

A

Tax avoidance (in the form of tax planning) seeks to minimise tax liabilities through the organisation of a taxpayers financial affairs within the limits of tax law.

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7
Q

Non-savings income

A

Non-savings income comprises earned income (employment income, trading income and pension income) and property income.

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8
Q

Qualifying loan interest

A

Qualifying loan interest is interest on a fixed loan (not a bank overdraft) taken out for a qualifying purpose.

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9
Q

Occupational pension

A

Occupational pension is a pension scheme run for the employers own staff and partly or wholly funded by the employer.

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10
Q

Personal pension

A

Personal pension is a pension scheme funded by an individual for their own benefit.

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11
Q

Cash basis

A

The cash basis means that income and expenses are accounted for when the cash is received or paid.

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12
Q

Accruals basis

A

Under the accrual basis, assessable income is the rent receivable in respect of the tax year, and deductible expenses are expenses payable in respect of the tax year.

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13
Q

Replacement of domestic items relief

A

Replacement of domestic items relief can be claimed as an allowable deduction on the replacement, but not initial purchase, of items such as furniture.

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14
Q

Accrued income scheme

A

The accrued income scheme operates to counteract the practice of “bond washing” where otherwise income arising on certain loans could be converted to capital gains by selling the securities at a price including accrued interest.

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15
Q

Earnings

A

Earnings are primarily wages and salaries, but also include commissions, bonuses, gratuities, or other profit or monetary (or convertible into monetary) reward of employment.

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16
Q

Temporary employment

A

A place of temporary employment is one in which an employee is expected to work for a continuous period of course equal to or more than 24 months.

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17
Q

Wholly and exclusively incurred

A

Wholly and exclusively incurred implies that the entire expense is related to the performance of the duties.

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18
Q

Necessarily incurred

A

Necessarily incurred means that the expense must be incurred to perform the duties of the employment and would be incurred by any person carrying out those duties.

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19
Q

Badges of trade tests

A

Badges of trade tests are tests which HMRC applies to determine whether a profit should be assessed as trading income or as a capital gain.

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20
Q

Capital allowances

A

Capital allowances provide tax relief for businesses for capital expenditure on qualifying assets, in place of accounting depreciation which is not allowable for tax purposes.

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21
Q

Short life asset

A

A short life asset is an asset that has an expected life to the business of less than eight years.

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22
Q

Balancing charge

A

A balancing charge arises when disposal proceeds exceed the tax written down value.

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23
Q

Balancing allowance

A

A balancing allowance arises when the tax written down value exceeds disposal proceeds.

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24
Q

Terminal loss relief (for individuals)

A

Terminal loss relief allows the loss of the last 12 months of trading to be set off against the trading profits of the tax year of permanent discontinuance and the three tax years preceding that year on a last, first out (LIFO) basis.

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25
Q

Profit-sharing arrangements

A

Profit-sharing arrangements include the partners’ salaries, interest on contributions to the firms capital and the profit-sharing ratio that is used to allocate surplus profits.

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26
Q

Chargeable asset

A

A chargeable asset is any asset that is not specifically exempt.

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27
Q

Chargeable person

A

Chargeable person are individuals and companies

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28
Q

Annual exempt amount

A

The AEA is the amount of chargeable gain that an individual won’t pay capital gains tax on. The 2023-24 amount is £6000

29
Q

Chattels (tangible movable property)

A

Chattels are assets such as furniture, works of art, vehicles, jewellery and animals. They are distinguished from land and buildings because they are moveable, and from securities becuase they are tangible assets.

30
Q

Wasting assets

A

Assets with a predictable useful life of 50 years or less.

31
Q

Letting relief

A

Letting relief is lower of:

  • the gain attributable to the relevant period of letting
  • the gain already exempt under the PRE rules
  • £40,000
32
Q

Scrip issues

A

Scrip issues are new shares issued instead of a cash dividend.

33
Q

Share-for-share exchange

A

A share for share exchange is where shares are exchanges for shares:

  • there is a no gain/no loss disposal of the old shares at that date and the new shares assume the cost, (indexed cost if a corporate shareholder) and date of acquisition of the old shares.
  • when the new shares are subsequently disposed of, any gain or loss is calculated by reference to the deemed cost of the old shares.
34
Q

Rollover relief

A

Where the assessment of a gain on the sale of a qualifying business asset is deferred because the sale proceeds are suitably reinvested.

35
Q

Gift holdover relief

A

Gift holdover relief (or sales at undervalue) of qualifying assets - where the assessment of the transferors gain in the gift or sale at undervalue of a qualifying asset is deferred until the same asset is sold for full consideration by the transferee.

36
Q

Business asset disposal relief

A

Business asset disposal relief – where up to £1 million of gains arising on a qualifying disposal of all or part of an unincorporated business or qualifying shares are taxed at a special rate of 10% instead of the normal rates of 10% or 20% (18% or 28% for residential property).

37
Q

Terminal loss

A

The terminal loss for corporation tax purposes is the trading loss of the last 12 months of trading.

38
Q

75% group

A

A 75% group (sometimes known as a group relief group) comprises a parent company and its 75% subsidiaries. Any of the companies may be UK resident or resident overseas.

39
Q

75% subsidiary

A

A 75% subsidiary is one in which the parent company:

  • owns directly or indirectly at least 75% of the ordinary share capital; and
  • is entitled to at least 75% of the distributable profits and assets of that company on a winding up.
40
Q

75% chargeable gains group

A

A 75% chargeable gains group comprises a parent company and its 75% subsidiaries. Provided there is a 75% holding at each level, this also includes sub-subsidiaries in which the parent company has an effective interest of over 50%.

41
Q

Chargeable lifetime transfer (CLT)

A

A chargeable lifetime transfer (CLT) is one which is liable to IHT when the gift is made, at the lifetime rate (which is half the rate applying on death) and to additional IHT if the transferor (i.e. donor) dies within the next seven years. The additional IHT is at the higher death rate less the lifetime tax already paid.

41
Q

Potentially exempt transfer (PET)

A

A potentially exempt transfer (PET) is one on which no lifetime tax charge applies and a charge, at the higher death rate, only applies if the transferor dies within seven years of the date of the gift.

42
Q

Diminution in value

A

Diminution in value is the measure of the transfer of value, which is the amount by which the transferor’s estate is reduced by the gift.

43
Q

Nil rate band (for IHT)

A

The IHT nil rate band is the amount on which individuals will not pay IHT. For the tax year 2023-24, the NRB is £325,000.

44
Q

Residence nil rate band

A

The residence nil rate band is an additional threshold amount available in respect of a qualifying residential property inherited by direct descendants. In the tax year 2023-24, the amount is £175,000, or if lower, the value of the main residence after deducting any repayment mortgage or interest only mortgage secured on the property. This can be further increased by any unused amount from a pre-deceased spouse.

45
Q

Personal representatives

A

Personal representatives are either:

  • The executor of the person’s will; or
  • The administrators of a person’s estate who died intestate (i.e. without a valid will and having not appointed an executor).
46
Q

Determination

A

A determination of tax may be made by HMRC where a self-assessment tax return is not filed by the filing date.

47
Q

Discovery assessment

A

A discovery assessment is an additional assessment raised by HMRC within four years of the end of the tax year (or accounting period for companies). The time limit is extended in the case of careless behaviour by the taxpayer, or deliberate understatement or concealment.

48
Q

VAT group

A

A VAT group comprises two or more companies established in, or having a fixed establishment in, the UK, and subject to common control by a single company, an individual or individuals in partnership for business purposes.

Control is defined as possession of more than 50% of the issued share capital or voting rights (i.e. as it is for 51% group companies for corporation tax purposes).

A VAT group can comprise both UK-resident companies and companies resident overseas but operating in the UK. Companies may be either taxable or exempt suppliers.

49
Q

Place of supply

A

The general rule for place of supply is:

  • for goods, the country in which the trader making the supply is registered for VAT;
  • for services, the country where the customer receiving the supply is registered for VAT.
50
Q

Time of supply

A

The time of supply is the tax point, which is the date of supply. This can either be the basic tax point or the actual tax point. It is used to decide in which return period a transaction falls and the rate of VAT applicable.

51
Q

Basic tax point

A

The basic tax point is the legally correct tax point and applies as follows:

  • for supplies of goods generally – when the goods are dispatched to the customer;
  • for supplies of services – when the service is complete;
  • for goods supplied on sale or return – the earlier of when goods are adopted or 12 months after dispatch;
  • for goods supplied through vending machines – when the machine is emptied.
52
Q

Actual tax point

A

The invoice date (or payment date, if earlier) is used in place of the basic tax point provided it either precedes or falls within 14 days after the relevant basic tax point.

53
Q

Income tax

A

Income tax is a tax levied on individuals by reference to their taxable income for a tax year.

54
Q

Taxable Income

A

Taxable income is an individual’s total income liable to income tax less certain deductible amounts.

55
Q

Taxable supply

A

A taxable supply is any supply except an exempt supply or one which is outside the scope of VAT.

56
Q

Exempt supplies

A

Supplies made “outside the scope” of VAT

57
Q

Taxable person

A

A taxable person is any individual, partnership or company making or intending to make taxable supplies and required to be registered for VAT.

58
Q

Personal allowance

A

Personal allowance is the amount which a taxpayer does not pay tax on. The standard personal allowance for the tax year 2023-24 is £12,570.

59
Q

Adjusted net income

A

Adjusted net income is net income less gross pension contributions less gross gift aid donations.

60
Q

Contract of service

A

A contract of service is in indication of employment.

61
Q

Contract for services

A

A contract for services is an indication of self-employment.

62
Q

Job-related accommodation

A

Job-related accommodation - is accommodation provided by reason of employment that is:

(a) necessary for the proper performance of the duties of employment; or

(b) customarily provided for the better performance of the duties of employment; or

(c) provided for special security reasons.

63
Q

iXBRL

A

iXBRL is a world-wide standard electronic language which applies computer readable tags to business data. iXBRL means that the accounts and tax computations are prepared with “embedded” (i.e. not visible to the human eye, unless uncovered) computer readable “tags” which permit secure, fast and rigorous computer analysis of the data contained in these documents.

64
Q

Indexation allowance

A

Indexation allowance provides relief for the effect of inflation on chargeable gains for companies.

65
Q

Bonus issues

A

Bonus issues are new shares issued at nil cost to shareholders in proportion to their existing holding.

66
Q

Rights issues

A

Rights issues are new shares issued at a discount to existing shareholders in proportion to the shares already held.

67
Q

Taxable total profits

A

Taxable total profits is the company’s chargeable income and chargeable gains arising in the UK, reduced by relief for qualifying charitable donations.

68
Q

The accounting period

A

The accounting period for a company is the period for which the charge to corporation tax is determined and is often the same as the period of account (i.e. the period for which it prepares accounts), but not always.

Tax (4 decks)

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