POT - principles Of Tax

Question 1

Is NS&I Direct Saver Account and Investment Account exempt from tax?

Answer 1

No -‘it’s gross so it’s taxable as-is

Question 2

Is income from government securities (government stock, bond, gilt, war loan) gross or exempt?

Answer 2

Gross. Tax it

Question 3

What interest is received gross without deduction of tax at source?

Answer 3

Interest on loan between friends

Question 4

Is Interest on National Savings Certificate exempt? NSC

Answer 4

Yes
NSC = yes
NS&I = no

Question 5

Is income from NISAs (and Junior ISAS) exempt?

Answer 5

Yup

Question 6

Is income from betting, competition, lottery and premium bond winnings exempt?

Answer 6

Yes

Question 7

Which social security benefits are exempt from tax?

Answer 7

Housing and child benefit

Question 8

Are scholarships taxable or exempt ?

Answer 8

They are exempt home girl

Question 9

What type of income should be deducted from trading profits? Provide 3 examples

Answer 9

Non-trade income

• rental income
• profits on disposal of fixed assets
• investment income

Question 10

What happens with goods taken for your own use?

Answer 10

Income must reflect normal sales price ie market value

If it’s been included in drawings at cost, add in the difference ie profit

Question 11

Taxable benefits

How do you know if living accommodation is exempt ?

Answer 11

Needs to either be
Necessary eg school caretaker
Customary eg vicar
Security eg prime minister

Question 12

What is the formula for taxing living accommodation (benefits)?

Answer 12

If houses’ original cost is more than 75000
3% x (cost - 75000)

Cost = original cost and capital improvements
ALSO ALWAYS DEDUCT EMPLOYEE CONTRIBUTION BESIDES PRIVATE FUEL

Question 13

When do you use market value for living accommodation?

Answer 13

When there’s 6 years difference between when it’s acquired and when the employee moves in

Question 14

What does the list price include for cars? (P11D employees only)

What does private use include?

Answer 14

Optional accessories provided with car
Further accessories bought later of £100 or more

Private use includes home to work

Question 15

What is the tax for assets used for private use?

Answer 15

Higher of 20% x MV (annual value)

Rent paid by employer for asset, if applicable

Question 16

Leasing a car of 130g/km emissions

Answer 16

Flat rate disallowance = 15% x hire charge

Question 17

What is the difference between tax evasion and avoidance?

Answer 17

Tax evasion - misleading HMRC and money laundering
Tax avoidance - legally reducing tax burden. Intro of a general anti-abuse rule (GAAR) where HMRC can challenge tax avoidance measures

Question 18

When do you use market value of asset for acquisition and disposal?

Answer 18

MV for asset if sole trader/partner brings an asset into business
MV if asset is given away

Question 19

What capital allowances are time apportioned and what are not?

Answer 19

NOT
FYA

ARE - PRO RATA ON ACCOUNTING PERIOD
AIA 100% 500,000 pa
Small pool limit 1000 pa (write off balance if TWDV is that low)
WDA

Question 20

Does it matter when the asset was bought? For capital allowances

Answer 20

No. Time doesn’t affect capital allowances

Question 21

What allowances does cars get?

Answer 21

CARS DONT GET AIA ONLY FYA (if money spent and cars under certain emissions) and WDA