Random facts you should know

Question 1

How are professional fees and subscriptions dealt with in income tax?

Answer 1

They are deductible payments so long as it is paid to an approved body.

Question 2

How are reimbursements by the employer dealt with in income tax

Answer 2

It is exempt income

Question 3

How are vouchers treated?

Answer 3

The benefit is the cost to the employer

Question 4

Living accommadation - How to calculate the benefit for accommadation that the employer rents? (2)

Answer 4

The higher of:

• Rents paid by the employer
• Annual value

where the lease premium is less than 10 years, the premium will be divided by the number of years the lease is, and included as rent. Therefore, the annual rent will be calculated as:

Lease premium/ Length of lease + Actual rent paid

Question 5

How to treat a ‘non qualifying’ life policy? (3)

Answer 5

Chargeable on a chargeable event such as them cashing it in

20% tax credit - At the end of tax comp,

Less: 20% of life policy gain

Treated as SAVINGS income

(watch out for partial surrenders too)

Question 6

Name the three tests for the Statutory Residence Test in correct order

Answer 6

1. Automatic Overseas Test
2. Automatic UK Test
3. Sufficient Ties Test

Question 7

How to do sale of short lease (doesn’t have to be in depth, vague idea)

Answer 7

Use lease % table to find the correct cost

Apportion correctly if it is not in whole years

Question 8

How to do grant of short lease (doesn’t have to be in depth, vague idea)

Answer 8

Calculate (proceeds) capital element using:

2% x (N-1) x P

Calulate cost using part disposal of:

a/A+B

a = capital element
A = premium
B = Reversionary interest

Question 9

How to treat a QCB? (what about if in a takeover)

Answer 9

QCB is exempt from CGT

In a takeover, the same way cash is received but the gain is only charged when it is encashed. The gain is frozen and crystalises when the QCB is sold.

Question 10

How to calculate benefit for use of an asset?

Answer 10

20% x Market Value when first provided to employee

Question 11

Property allowance threshold?

Answer 11

£1000 per tax year

But only remember this for small amounts - as it is not applicable to normal rental income Q’s. Just keep in mind if property income is small. E.G.

Property income 1250
Less: Property allowance (1000)
Income tax liable 250

Question 12

First amount of termination payments are tax free, what is the amount?

Answer 12

The first £30,000 of a genuine termination payment is tax free.

Question 13

ISA age limits and annual maximum amount

Answer 13

18, EXCEPT Cash ISA is 16

Maximum annual amount is £20,000 per tax year for all ISAs.

Question 14

Child benefit amounts?

Answer 14

£21.05 first child

£13.95 for every child after

Question 15

What is the special rules about bonuses and directors?

AKA dates of when a bonus is decided

Answer 15

Normally, if a bonus is not paid until the next tax year, it will not be taxed until the year it is paid

However, for directors, it is by the end of that accounting period, if the amount has been determined.

Question 16

If there is a grant of a short lease of 40 years but the landlord can terminate the lease after 30 years, how long is the lease? (for tax purposes)

Answer 16

30 YEARS.

For tax purposes a lease expires on the first date on which the landlord can terminate the lease, so in this case 30 years.

Question 17

How should you treat the expense of entertaining co-workers?

Answer 17

It is NOT an allowable expense

Question 18

How are round sum allowances treated? (There are two ways)

Answer 18

If the round sum allowance is no more than reimburse qualifying business expenses, it will be exempt from tax.

Otherwise, it is taxable…

but a deduction can be made on what is spent on allowable expenses (except client entertaining)

aka (‘£300 per month’ - 300 x 12 = 3600 - add to income tax comp)

Question 19

Is client entertaining deductible from round sum allowances?

Answer 19

No

Question 20

Are office to client-site visits a deductible expense?

Answer 20

Yes

Question 21

If Bob travels to work to the office via the tube, is this an allowable deduction?

Answer 21

No, because it is a normal commute to a permanent workplace

Question 22

What does the first £30,000 tax free relate to in termination payments?

Answer 22

The first £30,000 of ‘genuine termination payments’ which are those under s.401.

Question 23

If there is a takeover involving cash, what gain should you always calculate first?

Answer 23

CASH! The cash is always immediately chargeable, even if the question doesn’t mention it.

Question 24

what do you do with ‘withholding tax’? (3)

Answer 24

Gross it up by the % it was withheld

Add into income tax computation

Deduct the % withholding tax

Question 25

What must you remember about written questions? Simple answers that can apply to all Q’s

Answer 25

• Include dates
• Include %’s payable, for example, NSI rates at 20% and 40%

or

BADR with tax payable on a flat rate of 10%

Question 26

Calculating POA charge for a property?

Answer 26

Annual rental value

Less: Rents paid by donor

Question 27

Calculating POA charge for a chattel? (Hint: different to property)

Answer 27

Market value x HMRC ORI
Less: Rents (amounts) paid by donor
Notional gain

Question 28

If a 40 year lease is granted but can be terminated after 30 years, how many years is the lease (for tax purposes)?

Answer 28

30, For tax purposes a lease expires on the first date on which the landlord can terminate the lease, so in this case 30 years.

Question 29

Are wasting chattels exempt from CGT?

Answer 29

Yes

Question 30

State four main examples of wasting chattels

Answer 30

• Racehorses
• Computers
• Watches
• Clocks (Grandfather clock)

Question 31

What should you do with Loan Notes in a takeover? (4)

Answer 31

• Calculate % of allocation
• Find base cost
• Calculate amount chargeable and frozen gain
• State that it is a frozen gain and crystalises upon a chargeable event (such as encashment)

Question 32

The gain on the sale of EIS shares are exempt, if what 2 conditions are met?

Answer 32

• Shares held for greater than 3 years

- Claimed Income Tax relief on subscription

Question 33

Tax relief for Personal pension contributions? (2)

Answer 33

• Gross up pension contribution

- Extend BRB and HRB

Question 34

Tax relief on Occupational pension contributions

Answer 34

Deduct in allowable deductions

Question 35

Tax relief on Employer pension contributions?

Answer 35

Tax free benefit, no need to do anything, just mention it.

May be required to calculate AA and AA charge etc

Question 36

Do non-UK residents have to pay CGT on disposals of UK residential property?

Answer 36

Yes, only gains after 5 April 2015 are chargeable.

But if they purchased it before 5 April 2015, the property will be valued at what it is at 5 April 2015.