Random facts you should know Flashcards
How are professional fees and subscriptions dealt with in income tax?
They are deductible payments so long as it is paid to an approved body.
How are reimbursements by the employer dealt with in income tax
It is exempt income
How are vouchers treated?
The benefit is the cost to the employer
Living accommadation - How to calculate the benefit for accommadation that the employer rents? (2)
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
How to treat a ‘non qualifying’ life policy? (3)
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)
Name the three tests for the Statutory Residence Test in correct order
- Automatic Overseas Test
- Automatic UK Test
- Sufficient Ties Test
How to do sale of short lease (doesn’t have to be in depth, vague idea)
Use lease % table to find the correct cost
Apportion correctly if it is not in whole years
How to do grant of short lease (doesn’t have to be in depth, vague idea)
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
How to treat a QCB? (what about if in a takeover)
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.
How to calculate benefit for use of an asset?
20% x Market Value when first provided to employee
Property allowance threshold?
£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
First amount of termination payments are tax free, what is the amount?
The first £30,000 of a genuine termination payment is tax free.
ISA age limits and annual maximum amount
18, EXCEPT Cash ISA is 16
Maximum annual amount is £20,000 per tax year for all ISAs.
Child benefit amounts?
£21.05 first child
£13.95 for every child after
What is the special rules about bonuses and directors?
AKA dates of when a bonus is decided
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.
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)
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.
How should you treat the expense of entertaining co-workers?
It is NOT an allowable expense
How are round sum allowances treated? (There are two ways)
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)
Is client entertaining deductible from round sum allowances?
No
Are office to client-site visits a deductible expense?
Yes
If Bob travels to work to the office via the tube, is this an allowable deduction?
No, because it is a normal commute to a permanent workplace
What does the first £30,000 tax free relate to in termination payments?
The first £30,000 of ‘genuine termination payments’ which are those under s.401.
If there is a takeover involving cash, what gain should you always calculate first?
CASH! The cash is always immediately chargeable, even if the question doesn’t mention it.
what do you do with ‘withholding tax’? (3)
Gross it up by the % it was withheld
Add into income tax computation
Deduct the % withholding tax
