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Taxation > Poppy > Flashcards

Poppy Flashcards

Tax

1
Q

Are bad debts allowable / disallowable?

A

Allowable

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2
Q

Are dual use items allowable / disallowable?

A

Disallowable

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3
Q

How do you treat R+D when working out TATP

A

Deduct it + 130%

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4
Q

Is a renewal of a short lease(<50yrs) allowable / disallowable?

A

Allowable

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5
Q

Are trade receivables allowable / disallowable?

A

Disallowable

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6
Q

If gifts are for trade purposes, are they allowable / disallowable?

A

Allowable

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7
Q

How to you treat profit on disposal in TATP?

A

It’s deducted (USE INDEXATION ALLOWANCE)

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8
Q

How do you treat pension contributions in working out taxable income

A

It’s deducted - along with the personal allowance

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9
Q

What’s the basic assumption got national insurance computations?

A

Salary is earned evenly through the year

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10
Q

What sort of income doesn’t have national insurance?

A

Interest

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11
Q

What do you do with regards to NI if you have a bonus?

A

Work out the NI in the week of the bonus, then work out the NI of the other 51 weeks in the year and add together.

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12
Q

In what situation would you use AEA? and how much do you get?

A

As a deduction in capital gains tax. £11,700

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13
Q

How to treat part-disposals in capital gains tax?

A

You have to apportion the cost based on how much is disposed of. Formula: A/(A+B). Where A=MV of the part disposed of, and B=MV of remaining.

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14
Q

How do you treat machinery in capital gains tax?

A

Machinery = exempt

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15
Q

How do you treat wasting non-chattels in capital gains tax?

A

It allowable, the cost = the net book value. Assume the asset depreciated on a straight line basis.

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16
Q

Name all of the reliefs in capital gains tax

A

Rollover relief, Holdover relief, Incorporation relief, Gift relief, Entrepreneur’s relief.

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17
Q

When do you use rollover relief?

A

Is associated with capital gains tax computations. Is used if you use the proceeds from a sale to purchase more business assets. Proceeds not reinvested are taxed in current year.

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18
Q

When do you use holdover relief?

A

Is similar to rollover relief - associated with capital gains tax computations. Is used if you use the proceeds from a sale to purchase more business assets. However there is a special rule for depreciable assets - is/will become a ‘wasting asset’ within 10yrs (don’t reduce the base cost of the asset till, sell/stop using replacement asset.

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19
Q

When do you use incorporation relief?

A

Available where a business and all its assets are transferred to a company in exchange for shares. (1-IR)gain = taxed in current year. IR=shares consideration/ total consideration.

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20
Q

When do you use gift relief?

A

Available where a qualifying asset (has to be used for trade/profession/vacation) is disposed of at less than MV, and both the transferor + transferee elect for gain to be nil.

Actual gain = taxed in current year.

(1-GR)gain = also taxed in current year.

Gr=chargeable business assets / chargeable assets.

21
Q

when do use Entrepreneurs relief?

A

If you’re selling all/part of a business. Must be a sole trader or business partner + must’ve owned business for at least 2 yrs. Eg, incorporation/ gift.
Not qualify: factory / AEA

Relief = 10% late rate instead of 20%.

22
Q

How do you treat electricity with VAT?

A

Is a reduced rate of 5%. Along with insulation schemes, fuel + power for domestic/charitable use.

23
Q

Give and example of items that are zero-rated in VAT

A

Food, Sewerage services + water, imports+exports, medicines + appliances.

24
Q

When do you use apportionment in VAT computations?

A

made where a service such as telephone = part business, part private use (no apportionment for motor expenses, provided there is some business use).

25
Q

VAT - do you use MV, List price or actual value?

A

Actual value

26
Q

How do you qualify for the VAT flat-rate scheme? and name an advantage of using it.

A
  • Total turnover (VAT exclusive) for the next 12 months doesn’t >£150,000
  • Total turnover (VAT inclusive) for the next 12 months doesn’t >£230,000

Advantage - simplifies VAT administration.

27
Q

What’re the benefits of being self-employed, rather than an employee?

A

Self employed:
•Pay tax later
•Have a wider range of deductions (“wholly + exclusively”, not “necessarily”, to become allowable in TATP).
•Pay lower NI contributions
Employed:
•Have employment legislation protection (get leave/redundancy entitlements)

28
Q

What’re the benefits of being a sole-trader, rather than being a company?

A

Company:
•No NI on trading profits
•Flexible on how much to distribute + in what form (earnings / interest / dividends)
•More financial responsibilities
•Indexation allowance = available
• R+D credit = available
Sole trader:
•Get PA (some trading profits can be tax free)
•Get AEA (some CG’s can be tax free)
•NI rates = lower than employed NI rates
•Don’t have to file returns with companies house

29
Q

How do you work out indexation allowance? and when do you use it?

A

It’ used in corporation tax computations.

(RPI of mnth of disposal - RPI of mnth of acquisition)/RPI of mnth of acquisition

30
Q

What rate is corporation tax?

A

19%

31
Q

What assumption do you make in corporation tax computations, with regards to trading losses?

A

Assume losses arose from the same trade.

32
Q

Do you get any allowances for inheritance tax?

A

Yes - get an annual exemption of £3000

33
Q

Describe the difference of chargeable lifetime transfers and potential exempt transfers.

A

Chargeable lifetime transfer:
•Is a transfer to a trust ( a relevant property trust)
•IHT may become payable if the donor dies within 7yrs of making the transfer.
Potential exempt transfer:
•Lifetime transfers which aren’t CLT’s or exempt transfers.
•Initially free from IHT and have the potential to remain so
•BUT will become chargeable if the donor dies within 7yrs of the transfer.

34
Q

What is a “failed” PET?

A

When there’s a death within 7yrs of the PET, and therefore it becomes chargeable.

35
Q

When can you use the RNRB?

A

It’s only included if the main residence is left to to the descendants.

36
Q

When do you pay IHT?

A

At the end of the 6 months following the month of the death.

37
Q

How do you treat the NRB in IHT?

A

The NRB applies to the earlier transfers 1st.

38
Q

Give the exempt amounts for wedding gifts from parents / grandparents / any other relationship?

A

Parents: £5,000 max
Grandparents: £2,500 max
Other relationship: £1,000 max

39
Q

Name a few exempt transfers for IHT.

A
  • Transfers between husband and wife / civil partners
  • Normal gifts out of own income
  • Payments to help with another person’s living costs
  • £3,000 annual exemption
  • Gifts to charities, political parties,
40
Q

Name a few exempt transfers for IHT.

A
  • Transfers between husband and wife / civil partners
  • Normal gifts out of own income
  • Payments to help with another person’s living costs
  • £3,000 annual exemption
  • Gifts to charities, political parties, or for the public benefit.
41
Q

What’s the maximum contribution for cars when calculating the BIK?

A

£5,000

42
Q

How do you treat non-wasting assets in CGT?

A

Calculate the usual way - however use the NBV cost (include straight line depreciation)

43
Q

Name the 3 criteria for expenditure to be an allowable deduction for tax purposes

A

1 - must be wholly + exclusively for the purpose of the trade
2- must be a revenue item, not a capital expense
3- must not be specifically disallowed by statute (law)

44
Q

When do you pay the corporation tax bill?

A

If profits £1,500,000 : Pay in quarterly payments beginning 6 months and 14 days fro start of AP

45
Q

When do you pay the IHT bill?

A

Pay @ the end of the 6th month after the month of death.

46
Q

List the % deductions in taper relief

A 
0-3 -
3-4 20%
4-5 40%
5-6 60%
6-7 80%
47
Q

How to treat lease premia in TATP?

A

If >50yrs - exempt
If<=50yrs - income tax will be payable on:

P-(PxL-1)x2%)

48
Q

What class national insurance do Sole traders pay?

A

Class 2 + 4

Taxation (1 decks)

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