NI CH10

Question 1

Summary of class 1 primary nic (employees)?

Answer 1

1.Paid by employees
2. On - earnings (gross pay, bonuses m, vouchers, excess mileage allowance)
3. Limits + rate
0-12570-0%
12571-50270-12%
50271+- 2%

Is it deductible from trading profits - No

Question 2

Are class 1 secondary and 1A deductible from trading profits and rate for class 1A?

Answer 2

Yes

Class 1Ab- non cash benefits - no limits but at 13.8%

Question 3

What is the employment allowance?

Answer 3

1. There is an annual employment allowance which all businesses can deduct from the total employers class 1 NIC due
   - the allowance is £5k per year per employer and is deducted from the total class 1 secondary NIC payable. There is no deduction from class 1A or from employee contributions

• not available for companies where a director is the sole employee (EG PSC) or employers with >= £100k of class 1 secondary contributions in the prior year

Question 4

Due dates for class 1 Nic?

Answer 4

All class 1 NI is payable with paye after the end of the tax month in which liability arises, for most businesses this is 22nd of each month

Class 1A payable by 22 July following the end of the tax year

Question 5

Summary of class 2&4 NICs?

Answer 5

Class 2
Paid by - sole traders and partners (until they reach state pension age 65)
On - flat rate
Limits - if taxable profits > 12570 (LPL)
Rate - 3.45 per week

Class 4
Paid by - sole traders and partners
On - trading profit assessment (after basis periods) less trading loss relief
Limit + %
0-12570. -0%
12571-50270 - 9%
50271 - 2%

Both not deductible from trading profits

Question 6

Due dates for class 2 and 4 NIC

Answer 6

Class 4 - paid as part of self assessment system (POA ON 31 jan and July with bal in 31 jan)

Class 2 - nic payment are due by 31 jan following the tax year along with bal payment for income tax and class 4 nic

Question 7

Definition of a chargeable gain

Answer 7

A chargeable gain arises if a chargeable person makes a chargeable disposal of a chargeable asset

Question 8

4 types of assets which are chargeable

Answer 8

Goodwill
Land and buildings
Shares
Chantels - art etc

Question 9

What is a chargeable person and chargeable disposal?

Answer 9

Chargeable person -
Individuals
Business partners
Trustees
Companies which pay ct on gains not cgt

Chargeable disposals
- sale of whole or part of an asset
- the gift of whole or part of an asset -IHT

Question 10

Formula for part disposal?

Answer 10

Cost x A/ A+B

Where A is MV of the part disposed of and B is the mv of the part that is retained

Question 11

Criteria and benefit of small part disposals

Answer 11

No disposal immediately chargeable if:
1. Gross proceeds <= 20% of MV of the whole plot AND
2. Gross proceeds <= £20k AND
3.aggregate sales of land and building in the year <=£20k

Deduct net proceeds from cost for the purposes of subsequent disposals (ie defer the gain)

Question 12

Formula for MV proceeds of quoted shares for cgt?

Answer 12

Proceeds for gifts of quoted shares - the lower quoted price + 1/2(higher quoted price - lower quoted price)

Question 13

Rates for cgt

Answer 13

10% then 20% for HRB

18% then 28% for residential property

Trusts only ever pay the higher rates of 20%/28%

10% for BADR

Question 14

Cgt losses in the year of death impact?

Answer 14

1. Carry excess losses back 3 years on LIFO basis
2. Losses carried back to years before the year of death are offset v taxable gains (after the AEA)
3. Hmrc will repay any cgt paid for those earlier years
4. But any tax repaid will be added to the death estate for IHT

Question 15

Payment date for cgt

Answer 15

Normally payable by 31 jan after the tax year of disposal

However the cut payable on the disposal of a residential property is due within 60 days of disposal date