Osborne 7 - Income tax further issues

Question 1

How to remember change of accounting details method.

Answer 1

Year of change is the TY the new EOY date falls in.

I think the ‘relevant period’ should be clear from the question… by being given the profits for the ‘x’ month period to the new end date.

Should also be given overlap profit b/f.

Just remember opposites attract:
If LONG relevant period - REDUCE £overlap
If SHORT rel. period - INCREASE £overlap

Question 2

Ceasing trading

Profits

1. Identify final tax year (cease date)
2. Identify penultimate tax year & tax CYB
3. Tax the rest and deduct any OLP

Capital allowances:
Will all be written off with ‘balancing allowances’ but remember any asset bought by owner must be included as a disposal at MV.
And you DO still do the % for personal use in this case

Answer 2

.

Question 3

Change of accounting date …

1. Rule about first accounts ending on new date?
2. when do you have to tell HMRC by?
3. Rule 3 ?

Answer 3

1. First accounts to new date Must not exceed 18m.
2. Notify by 31/1 following the Tax Year of Change.
   YoC is Earlier of:
   1st TY accounts not ending on OLD Accounting date.
   1st TY accounts DO end on NEW accounting date.
   (Often but not always the same)
3. Not normally permitted to change more than once every 5 years. unless HMRC satisfied its for commercial reasons

Question 4

Income tax - interest & penalties on late payments

Answer 4

Interest currently 2.6% due on late payments including POAs

(no PENALTY on late payment of POAs)

Penalties are for late Returns and Balancing payments and these are in addition to interest.

Question 5

Incorrect returns.

Notify HMRC asap

Can amend tax return 12 month from FILING DUE DATE (31 Jan)
If owe tax will have to pay interest.

Can still tell HMRC about errors after the above date but its done in writing … called overpayment relief or something like that. Deadline is 4 years from END OF TAX year of error (just to be difficult!!)

..so really only adds 2 years 2 months:
TY 2020/21
Amend deadline 31/01/2023
Final deadline 05/04/2025

Answer 5

.

Question 6

when do POAs not need to be made?

Answer 6

IF EITHER

1. If the tax payable the previous year was less than £1k
   (excluding tax deducted at source)
2. If more than 80% of tax due the previous year was deducted at source.

Can also be reduced if taxpayer make claim tax will be less that previous year

Question 7

SA100 - main Self Assessment tax return (not in exam)
SA103 F & S - self employment supplement
SA104 F & S - partnership supplement (not in exam?)

SA800 Partnership return (record profits of p’ship as a whole as well as the profit allocated to each partner)

Answer 7

.

Question 8

SA800 Partnership return

Exam - page 6 of short version
first page of allocation ie shows first partner.

Answer 8

Box 11 - This is the ADJUSTED profit (after adjusting for disallowable AND Capital allowances)

Box 13 - Amount of interest received from banks

Box 24 CIS deductions

Box 24A Other tax taken off Trading income (not in exam)

Box 29 P’ship charges - amounts paid out by p’ship that individual partners can claim relief for (nnot in exam)

Question 9

POAs of class 2 NICs are NOT required… only class 4

Answer 9

..

Question 10

Max penalty for notifying chargeability depends on behaviour of taxpayer

up to 100% of tax due but unpaid.

Calculated broadly in same way as penalty for incorrect return

Answer 10

0 despite rc
30 failure to take rc
70 deliberate but not concealed
100 deliberate and concealed