PLC - Basic Principles of Income Tax

Question 0

Is there a specific definition of income in the UK tax code?

Answer 0

No - items are taxed as income only if they fall within certain heads of charge.

Question 1

What is the ‘fruit tree’ analogy that is commonly used to describe the different between revenue and capital?

Answer 1

Capital items are akin to the tree which produces revenue items (ie the fruit).

Question 2

What is the circulating/ fixed capital test from the case of Van den Berghs Ltd v Clark [1935] that is sometimes used to determine whether an item is capital or revenue?

Answer 2

Circulating capital is turned over and yields profit or loss; fixed capital is not turned over and is unaffected by the turning over of circulating capital.

Question 3

HMRC’s Guidance on the revenue/ capital distinction is set out where in their Manuals?

Answer 3

BIM35000

Question 4

Post-cessation receipts are deemed to be what for tax purposes in terms of the revenue/ capital distinction?

Answer 4

Revenue.

Question 5

Premiums on short leases are deemed to be what for tax purposes in terms of the revenue/ capital distinction?

Answer 5

Revenue

Question 6

Releases of loans to participators of close companies are deemed to be what for tax purposes in terms of the revenue/ capital divide?

Answer 6

Revenue

Question 7

A tax year for an individual runs from when to when?

Answer 7

6 April to the following 5 April.

Question 8

When did the new statutory test for residence for individuals take effect from?

Answer 8

6 April 2013.

Question 9

If you are UK domiciled and resident, you are subject to income tax on what?

Answer 9

Your worldwide income as it arises.

Question 10

If you are resident but not domiciled in the UK, how is the taxation of your income different from someone who is UK domiciled?

Answer 10

The remittance basis applies in respect of the non-UK domiciled person’s foreign income

Question 11

If you are not UK resident, what are you principally subject to income tax on?

Answer 11

Income from UK sources.

Question 12

To avoid a penalty, when must an individual file their online UK tax return by?

Answer 12

31 January in the year following the end of the tax year to which the return relates.

Question 13

When would an individual’s online tax return for the year 2012-13 need to be filed by?

Answer 13

31 January 2014.

Question 14

When would a paper tax return for an individual need to be filed by in order to avoid a penalty

Answer 14

31 October in the same year as the end of the tax year to which the return relates.

Question 15

When is payment of tax due from an individual who files a tax return (paper or online)?

Answer 15

31 January in the year following the end of the tax year to which the tax return relates.

Question 16

If payments on account of tax are required to be made, what dates are payment required by?

Answer 16

31 January during the tax year in question, 31 July after the tax year has ended, and balancing adjustments are pair or claimed by 31 January in the year after the tax year in question.

Question 17

What is the de minimis level of self-assessed tax below which a payment on account is not required?

Answer 17

£1000.

Question 18

What is the minimum amount of self-assessed tax which needs to be withheld at source for a particular tax year in order to avoid the need to make payments on account?

Answer 18

80%.

Question 19

Under sections 2-5 and 19 CTA 2009, in what circumstances are companies liable to corporation tax on their income?

Answer 19

If (1) they are resident in the UK or (2) to the extent the income is attributable to a UK permanent establishment.

Question 20

If a non-UK resident company does not have a UK permanent establishment, can it in principle still be subject to UK income tax?

Answer 20

In principle, yes.

Question 21

What is the current “basic rate”of income tax?

Answer 21

20%

Question 22

What is the current “higher rate” of income tax?

Answer 22

40%

Question 23

What is the current “additional rate” of income tax on income above £150,000 in a tax year?

Answer 23

45%

Question 24

What is the “dividend ordinary rate” of taxation on dividends?

Answer 24

10%

Question 25

What is the current “dividend upper rate” on dividend income?

Answer 25

32.5%

Question 26

What is the “dividend additional rate” on dividend income?

Answer 26

37.5%

Question 27

Do the normal dividend rates of tax apply to “relevant foreign income” charged on the remittance basis?

Answer 27

No.

Question 28

What are the starting/ basic/ higher and additional rates of income tax on savings income?

Answer 28

10%, 20%, 40% and 45%.

Question 29

Where companies are subject to income tax on profits, at what rate are they taxed on non-dividend income?

Answer 29

The basic rate (20%).

Question 30

What type of tax assessment was introduced in the Finance Bill 2016?

Answer 30

With effect from 2016-17, Schedule 23 to the Finance Bill 2016 introduces new sections in TMA 1970 to provide for the issue of “simple” assessments to persons whose tax affairs are straightforward.