Numbers Game Flashcards
When does the income tax year for individuals run?
6 April to 5 April the following year.
Deadline for self-employed taxpayers to inform HMRC that they have income liable to income tax?
6 months after the end of the relevant tax year.
Deadline for taxpayers to dispute the amount due under HMRC’s SImple Assessment?
60 days
What is the personal allowance for 2023-2025? Define personal allowance.
12,570 GBP.
Only taxable income above the personal allowance is taxed.
What is the personal savings allowance for 2023-2025? Define personal savings allowance.
1,000 GBP for basic-rate taxpayers and 500 GBP for higher-rate taxpayers; 0 for additional-rate taxpayers.
The amount of savings income a taxpayer can earn tax-free.
What is the income tax band for basic rate taxpayers from 2023-2024? Specify the tax rates for: (i) income; (ii) savings; and (iii) dividends in the basic rate tax band.
0 - 37,700 GBP.
(i) Income - 20%
(ii) Savings - 20%
(iii) Dividends - 8.75%
What is the income tax band for higher rate taxpayers from 2023-2024? Specify the tax rates for: (i) income; (ii) savings; and (iii) dividends in the higher rate tax band.
37,701 - 150,000 GBP.
(i) Income - 40%
(ii) Savings - 40%
(iii) Dividends - 33.75%
What is the income tax band for additional rate taxpayers from 2023-2024? Specify the tax rates for: (i) income; (ii) savings; and (iii) dividends in the basic rate tax band.
150,001 + GBP.
(i) Income - 45%
(ii) Savings - 45%
(iii) Dividends - 39.35%
How do higher and additional rate bands change in 2024-2025, compared to 2023-2024?
Higher rate - 37,701-125,140 (compared to 150,000 for 2023-2024)
Additional rate - 125,140 + (compared to 150,000+ for 2023-2024)
What is the dividend allowance for 2023-2024 and 2024-2025?
1,000 GBP for 2023-2024
500 GBP for 2024-2025
How are partnership profits and losses taxed? What about salaries paid by partnerships to: (i) partners and (ii) employees?
Each partner is taxed as a SOLE TRADER on his own share of partnership profits or losses.
Salaries paid to partners are ALWAYS profit distributions.
Salaries paid to employees are deductible expenses.
What are two examples of payments made by partnerships to partners that qualify as deductible expenses?
What about a non-qualifying payment>
Interest on a loan made by the partner to the partnership.
Rent paid to a partner for use of their assets.
Interest on a partner’s capital contributions is ALWAYS treated as allocation of profits, not a deductible expense.
Deadline for partnership tax returns?
31 January following the end of the tax year
Important restriction for individual income tax relies / personal allowances?
If you seek to claim relief of more than 50,000 GBP, you are restricted to the greater of: (i) 50,000 GBP or (ii) 25% of their income for the year in question
What are the deadline(s) for income tax payments?
If not paid under PAYE scheme, can divide into two payments: 31 January and 31 July
What is the small corporation tax rate and threshold for 2023-2025?
19%
Up to 50,000 GBP profit
What is the tapered corporation tax rate and threshold for 2023-2025?
MARGINAL RELIEF of 26.5%
50,000-250,000 GBP profit
What is the main corporation tax rate and threshold for 2023-2025? Important caveat?
25%
250,000
If company earns more than 250,000, it pays main rate of 25% on the ENTIRE profit
Corporation tax is charged on which two items?
- Taxable income
- Chargeable capital gains
Test for tax-deductible business expenses?
WHOLLY and EXCLUSIVELY incurred in the course of business
What are capital allowances?
Where a business has purchased specific items (e.g. equipment), they can apply annual writing down expenditure to spread the cost of the equipment over its useful life
What is trading loss relief?
Where a company makes a loss from trading, the sale or disposal of a capital asset, or on property income, then it may be able to claim relief by offsetting the loss against other business gains or profits in the SAME ACCOUNTING PERIOD.
3 rules for carrying forward forward trading loss relief?
(1) Not used up in the current tax year
(2) Company continues to carry on a trade
(3) Limited to 5 million plus 50% of profits in excess of that amount
Can trading loss relief be carried backward?
Yes, if not utilized in that year, it can be set off against profits from the PRECEDING 12-month period
How does capital loss relief work?
When a company makes a loss on sale or disposal of a capital asset, that loss can be set against chargeable gains arising in the same accounting period or future accounting periods
How does capital loss relief carry forward?
Carried forward INDEFINITELY to be set off against chargeable gains in future accounting periods, limited to 5 million GBP plus 50% of the gain in excess of that amount
How does capital loss relief carry backward?
It CANNOT be carried back against gains of earlier years.
What is roll-over relief? Special condition?
A business property is sold and a new business property, also for use in their trade, is purchased with the proceeds.
Must buy the new asset 1-3 years after disposing of the old asset.
What is the effect of incorporation relief? 2 special conditions?
transferred Effect is to DELAY CHARGEABLE TAXABLE GAINS at the time of the transfer until the sale or disposal of the shares.
- Transferor is a SOLE TRADER or in a business PARTNERSHIP
- All business assets EXCLUDING CASH in consideration for shares in the acquiring company
What is the effect of group relief?
2 ways to qualify for group relief?
A company that is a member of a group may SURRENDER LOSSES to another group company to deduct the loss from the second company’s own profits.
(1) one company is a 75% subsidiary of the other
(2) both are 75% subsidiaries of a third company
What is diverted profits tax? 3 conditions?
25% tax levied on large foreign companies.
(1) No permanent establishment in the UK
(2) Annual revenues of more than 10 million GBP from the supply of goods and services
(3) Taxed at 25%
How long can a trader backdate claims for VAT paid before registration?
Up to 4 years for goods, and 6 months for services
What is the implication of the rule that VAT should be charged on the “full value of supply”?
Business must charge VAT on the full sale price, not accounting for any barter, set-off or part-exchange
What is the two-stage test for “economic activity” constituting a taxable supply in the VAT context?
- Consideration (i.e., some value) given for the supply
- Supply made for remuneration (i.e., purpose of obtaining income on a continuing basis)
What is the standard due date for businesses to pay VAT? Caveat?
ONE MONTH after the end of the VAT period (usually quarterly)
Paying ELECTRONICALLY gives up to SEVEN CALENDAR DAYS extra
What is the actual tax point?
The earlier of: (i) the date when the invoice is issued and (ii) the date payment is received
What is the basic tax point?
When the customer receives the goods or the services are performed
What is the 14-day rule?
If no invoice is issued within 14 days after the basic tax point, then the BASIC tax point applies
When can a single transaction have two tax points?
When a deposit / part-payment is received, then VAT may be levied at the time of receipt, for the value of the part-payment
What is the threshold for VAT registration (2 independent tests)?
- Turnover of taxable supplies exceeds 90,000 GBP for the previous 12 months
- Reasonable grounds to believe the value of their taxable supply will exceed 90,000 GBP in the next 30 days alone
What is the nil-rate band for IHT purposes?
Where the value of the estate and chargeable transfers does not exceed 325,000 GBP
What is business property relief?
Where the transferor has owned the business property for at least 2 years immediately prior to transfer, then the asset can be deducted from the estate value at a rate of either 50% or 100%
When is a 100% business property relief applicable (2 conditions)?
- Person who died after 6 April 1996 and
- The transfer is of: (i) unquoted shares or (ii) an interest in a business
When is a 50% business property relief applicable (2 conditions)?
- Person who died after 6 April 1996 and
- Transfer is of (i) quoted shares and securities in a company CONTROLLED by the transferor immediately before the transfer or (ii) land, buildings or equipment belonging to the transferor but used for his business
What are 2 common exceptions where business property will not qualify for tax relief?
- Was not used mainly for business in the two years immediately before the transfer
- Not required for future use in the business
5-step process to calculate corporation tax?
- Calculate pre-tax income (profit + deprciation charge - capital allowances)
- Add chargeable capital gains (subtract capital losses)
- Calculate chargeable profits (taxable income + chargeable gains - deductions and reliefs)
- Multiply chargeable profits by corporation tax rate
- Apply tax credits
What are 3 notable transfers of property that do not constitute a “disposal” for CGT purposes?
- Death of an individual - devolves estate property to PRs who then make the disposal
- Disposal to spouse
- Disposal to charity
What is the universal rule for determining the date of disposal for CGT purposes?
The date on which the parties become legally bound to transfer the relevant property.
4-step process to calculate CGT?
2nd step has three subtractions!
- Determine date of disposal.
- Calculate chargeable gain / allowable loss (remember to subtract: (i) initial expenditure (ii) capital expenditure and (iii) costs of disposal)
- Apply exemptions and reliefs
- Apply 10% basic rate or 20% higher rate)
Deadline for UK residents who sell a UK residential property to report and pay CGT?
Within 60 days of the disposal.
What is the annual personal exempt capital gain allowance for 2023-2024 and 2024-2025?
2023-2024 - 6,000 GBP
2024-2025 - 3,000 GBP
How much annual exempt capital gain allowance can be carried over to the next year?
None. CGT ALLOWANCE CANNOT BE CARRIED FORWARD
When are disposals of chattels exempt from CGT?
If the proceeds do not exceed 6,000 GBP.
When are sales of residential property CGT-exempt (3 conditions)?
- Private residence
- Principal dwelling
- Ground of up to half a hectare
What is the purpose of roll-over business relief?
Allow businesses to reinvest the proceeds of sale of business assets without being liable for CGT - CGT is postponed until new asset is sold.
What is business asset disposal relief?
An individual has a 10% tax rate on the first 1 million GBP of gains from disposal of a business.
What is investors’ roll over relief? Important caveat?
Individual shareholders who dispose of ordinary shares in unlisted companies enjoy a 10% tax rate on gains, with a lifetime limit of 10 million GBP.
Investor cannot be involved in the RUNNING OF THE BUSINESS (director, employee, etc.)
What are the CGT rates for disposals of residential property not exempt as a principal private residence and carried interest?
18% for basic rate taxpayers and 24% for higher rate taxpayers
What are the two key tests imposed by the GAAR for a tax arrangement falling within its scope?
- Main Purpose - Is it reasonable in the circumstances to conclude that the main purpose of the arrangement was to OBTAIN A TAX ADVANTAGE
- Abusive - Can the event reasonably be regarded as a REASONABLE course of action in relation to the relevant tax provisions?
In GAAR proceedings, what 2 points must the HMRC prove?
- Tax arrangement was ABUSIVE
- Adjustments made to counteract the tax arrangements are JUST AND REASONABLE
What are the two options open to a taxpayer where the court determines the existence of an abusive tax advantage under the GAAR?
- Pay penalty equivalent to 60 of the counteract tax
- Take action to fully counteract the abusive tax advantage (e.g. by amending a tax return)
What is the most important offence relating to CGT avoidance?
- CAPITAL LOSS accrues to a person directly or indirectly
- At least one of the MAIN PURPOSES of those arrangements is to SECURE A TAX ADVANTAGE
5 conditions to treat a distribution in a winding up as a dividend under the TAAR?
- Recipient was an individual
- Recipient had at least a** 5% interest** in the company
- Company was** privately owned** by fewer than 5 individuals at any point in the two years ending with the start of the winding-up
- Recipient continues to be involved with a similar trade at any time within **two years **of the distribution
- It is reasonable to assume that one of the main purposes of the winding up is to reduce income tax
When can a personal injury or negligence case be brought in the High Court?
If the claim is:
1. 50,000 GBP or more AND
2. (i) high monetary value (ii) of public importance or (iii) complex
If claim < 50,000 GBP it MUST be brought in the County Court
When can a claim for damages or a special sum be brought in the High Court?
If the claim is:
1. More than 100,000 AND
2. (i) high monetary value (ii) of public importance or (iii) complex
If claim < 100,000 GBP it MUST be brought in the County Court
How long is a claim form valid: (i) within the UK and (ii) outside the UK?
Inside the UK - 4 months
Outside the UK - 6 months
When must Particulars of Claim be served?
Either at the same time as the Claim Form or within 14 days
When must the Acknowledgment of Service be filed? What is the advantage of doing so?
Within 14 days. Filing the AoS extends the deadline for the Defence from 14 days to 28 days.
When is the Defence to Counterclaim due?
14 days from receipt of the counterclaim.
What are the monetary thresholds for
1. Small track
2. Fast track
3. Intermediate track
4. Multi-track
- Small track - 10,000 GBP
- Fast track - 10,000 - 25,000 GBP
- Intermediate track - 25,000 - 100,000 GBP
- Multi-track - 100,000 and above
What is the difference between a CFA with a success fee and a discounted CFA?
Success fee - usually only liable to pay costs and disbursements if they are successful at the conclusion of the matter (plus an additional success fee)
Discounted CFA - costs are paid at a discounted hourly rate and if successful, client will be liable to pay the balance due by reference to the full hourly rate
What caps apply to Damages Based Agreements for:
1. Personal injury cases
2. Employment cases
3. Non-personal injury cases
- Personal injury cases - 25% of sum recovered EXCLUDING damages for future care and loss
- Employment cases - 35% of sum recovered
- Non-personal injury cases - 50% of sum recovered
When can a court lawfully stay proceedings to order the parties to pursue ADR (2 conditions)?
- Does not impair essence of claimant’s right to proceed to a judicial hearing
- Proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost
What is the significance of the date 1 January 2021 for purposes of determining court jurisdiction?
For claims instigated from 1 January 2021, common law rules apply (service IS jurisdiction). Before that, European rules apply (sue D in his country of domicile).
When does a limitation period stop running?
When C delivers the claim FORM and corresponding FEE to the court office for issue (even if the court office is closed)
What are 3 notable claims when a 3, rather than six-year limitation period, applies?
- PI claims
- Fatal Accident Act 1976 claims
- CPA claims
What is the time limit for a negligence action where facts relevant to the cause of action are not known at the date of accrual?
3 years from the date C first had BOTH:
1. The KNOWLEDGE required to bring the damages action AND
2. The RIGHT to bring such an action
Limitation period for a civil contribution claim?
2 years from the date of assessment of damages regarding the underlying liability
What is the scope of the Claims Portal?
PERSONAL INJURY claims up to a value of 25,000 GBP, where
1. Liability is admitted
2. Issues are straightforward
3. Claim is about RTA, EL or PL