Summary Notes Flashcards
What’s the first thing to do with a conflict of interest?
Identify safeguards
If irregularity led to underpayment of tax accountant should
1 Check engagement letter to check if gives authority to disclose
2 If no authority, advise client of the need to disclose and possibility of
penalties
3 Consider obligations under money laundering legislation
4 Keep records of discussions and advice.
5 If client refuses to disclose, consider resignation.
Fallback for aggressive tax strategies?
GAAR (General anti abuse rule)
(Advisory panel - POTAS threshold)
What does a tax scheme promoter have to do?
Register for DOTAS or maybe DASVOIT too
(‘hallmarks’)
Corp tax basic pro forma
Trading profit
Property income
NTLR
Non-exempt distributions
Chargeable gains
TOTAL PROFITS
Less QCDs
TTP
The 2 things that affect the marginal rate limits of CT (50k and 250k)?
- SHORT PERIODS
- GROUPS
The effective tax rate for companies paying marginal corp tax?
26.5
New: company acquires new plant and machinery?
Main rate pool? FULL EXPENSING
Special rate pool? 50% FYA
Tax treatment of IFA (incl goodwill) amortisation and what else to look at with IFAs?
IFAs except goodwill:
Amortisation allowable (follows accounts)
OR can claim 4% WDA
Goodwill:
After 2019? (Tax year), then can claim 6.5% relief (Unconected company, alongside IFAs, up to 6x IFA)
If sell and buy another IFA, you can claim rollover relief
When is corp tax paid?
Not large: 9m 1d after end of AP
Large (Augmented profits 1.5m): QIPs: 14th day of month 7, 10, 13, 16
Very large (Augmented profits 20m): Advanced QIPs: 4m earlier
How long does a company have after filing its CT return to amend it?
12 months
CT losses: Can you do a carry back claim without a current year claim?
NO
You have to do a current year claim first for corp tax losses
When else does MCINOCOT apply?
Significant revival of profits
What to pay attention to with MCINICOT?
It can be a change on trade BEFORE TAKEOVER
3y before 5y after, 8y for non-trade
Definition of associated company?
CONTROL (i.e. 50%)
(Determines e.g. CT rate and QIPS, tho at different dates)
What to remember if surrendering b/f losses to another company in the group?
Have to use AS MUCH AS YOU CAN, FIRST
There is also a SINGLE DEDUCTIONS ALLOWANCE (5m) per group (trade and cpaital losses)
Selling a company? When can you get group relief until?
Date arrangements made to sell
Buying a company? When can you get group relief?
Date actually purchased
Can you acquire a company then use it’s losses b/f in other group companies
YES, BUT
Only after 5 years
Consortium definition
75% shares held by companies
Each C holds 5%
What is the time limit for the DGC (this affects gains groups)
SIX YEARS
What specifically do you do with the DGC if it is for a qualifying share disposal
ADD TO SALES PROCEEDS
Can you transfer pre-entry capital losses?
NO
Have to be in individual company
(But you can with trade losses, after 5y)
Do you get SSE on the acquisition or disposal of shares?
DISPOSAL
(That’s when there is a gain)
When does a NON-UK RES company pay UK CT?
(3 main times)
- PE
- Property income & gains on land or property rich assets
- Income remitted to UK parent (though divs usually exempt)
(Doesn’t get CAs or loss relief)
What happens when a company moves residency from the UK?
Migration: Moving CM&C away
- End accounting period
- Capital allowances balancing allows/deds
- Can’t carry forward losses further
- EXIT CHARGE (capital)
UK C O/S PE: Do you get capital allowances?
YES
You get UK CAs on plant and machinery
How does loss relief work for o/s PEs of a UK company?
CONTROLLED by the UK? -> FULL LOSS RELIEF
CONTROLLED OVERSEAS? -> ONLY RELIEF AGAINST PE PROFITS
Incorporation relief main conditions
- ALL TRADE AND ASSETS transferred
- UK C owns at least 25% shares (consideration must be partially shares)
Incorporation relief: Time limit for selling assets?
SIX YEARS
What to remember about diverted profits tax?
It is at a HIGHER RATE (31%)
(There are actually more detailed rules esp for lack of economic substance - ‘mismatch condition’ (80%), ‘insufficient economic substance condition’)
(Doesn’t apply if both parties are SMEs, for avoided PE if UK sales less than 10m / expenses 1m)
Div paid before selling company?
VALUE SHIFTING
- (‘just and reasonable’ adj)
- Exempt if SSE
Transfer in a gains group to increase the loss on the sale of shares?
DEPRECIATORY TRANSACTIONS
(restricts the loss - can’t create a gain)
Capital allowances summary
AIA: Not cars
FYA: 100% on zero emmissions
WDA @ 18% on MP, 6% SRP
Selling a business - what can be done with plant and machinery?
SUCCESSION ELECTION
Must be between connected persons
Transfer TWDV (No BA/BC)
Joint election
Gain on disposal of SBA building?
All SBAs claimed up to then ADDED TO PROCEEDS
What tax year has the transitional profit rules for sole traders?
2023/4
Summary of sole trader loss reliefs?
Carry forward: Trading profits
Current year/Carry back: Net income (then chargeable gains)
Opening year: First 4 years carry back 3 years FIFO: Net income
Termination: Last 12m carry back 3y LIFO: Trading profit
Incorporation: Losses brought forward on incorporation can be carried forward against income from the company (sole trader must receive 80% of consideration as shares)
What to remember when sole trader relieving losses against non-trading income?
THERE IS A CAP
25% income min 50k
(‘adjusted total income’)
(If work less than 10h, then can restrict this)
(Disposing of sole trader business) when is a gain overridden to use market values?
Between CONNECTED PARTIES
What not to forget when selling something that had SBA?
ADD BACK the SBAs claimed to the proceeds
4 main ways of extracting profits from a company for owner?
- Salary/bonus
- Dividend
- Pension
- Loan
Terminology if group pays CT together?
‘Group payment arrangement’
Easy point to bear in mind if assessing a sole trader business (and use of assets…)
Any private use of P&M won’t qualify for capital allowances
Terminology for tax implications of a company giving an employee a benefit?
Ee pays tax on benefit value
Er gets deduction for actual cost
If there is private use of any assets, he will need to pay tax on the relevant benefit value. The cost of providing such benefits (which will be unlikely to be the same as the benefit value) will constitute tax deductible expenditure for the company.
What is relevant if a small company paying one/few employees?
NIC EMPLOYMENT ALLOWANCE (First 5k)
Close company definition
- Five or fewer participators
- Any no. director participators
How much is s.455 loan to participator (‘deposit’) tax?
33.75%
What happens if a loan to participator is written off who is an employee?
Treated in usual way
What to pay attention to if close company and doesn’t trade?
CLOSE INVESTMENT HOLDING COMPANIES
(All CT @ 25%, don;t get IT relief for interest on a loan to CIHC)
ROR summary
12m before to 36m after
1, Land and buildings used in trade
2. Fixed plant and machinery used in trade
3. Unincorporated goodwill
GAIN from COST
What assets do you get gift relief on?
Shares
1. Unquoted trading shares
2. Personal trading shares (own 5%)
Assets
3. Assets using in donor’s trade
What to also check with S4S relief?
Can choose not to automatically apply if e.g. BADR
What to pay attention to if investing in EIS shares?
If they have sold something else (12/36m) then can ROLL OVER GAIN into EIS shares
What to pay attention to if investing in SEIS shares?
If you have sold something else you can EXEMPT PART OF THE GAIN:
50% of lower of gain and SEIS invsted
Selling your private residence?
PRIVATE RESIDENCE RELIEF (CGT)
(Rules if occupied part of the time)
Owner shares with a tenant? LETTING RELIEF
If still bigger gain from shared occup, capped at 40k (I.e. lower of 40k, PRR given & shared occup gain still in charge)
BADR summary
Assets allowed:
1. Unincorporated trading businesses:
Whole/part (separate trade)
Assets within 36m of cessation
2. Shares AND EMPLOYEE
Personal trading company (≥ 5%)
EMI
3. Associated disposal (with withdrawal of participation in business)
Holding period
HELD TWO YEARS BEFORE DISPOSAL
Exception
Not available on GOODWILL TRANSFERRED TO CLOSE COMPANY ON INCORPORATION if you will own more than 5% shares
What other CGT relief to pay attention to with shares?
INVESTORS RELIEF
Got NEW ordinary SHARES IN UNLISTED TRADING COMPANY?
Held 3y from 2016?
NOT officer or employee?
10% with 10m limit
CGT reliefs to consider: Disposal of shares
- GIFT RELIEF
- BADR (5% and employee)
- IR (unlisted)
CGT reliefs to consider: Disposing of unincorporated business
- BADR
- INCORP RELIEF or GIFT RELIEF (if to a ltd company)
- GIFT RELIEF (to family member)
Simple (VAT) point when dealing with selling a sole trader/business
Can take the VAT number
Selling an unincorporated business: When do/don’t you get balancing allowances and charges?
BA/BC for P&M (unless succession election)
No BA/BC on L&B qualifying for SBAs
What can a ltd company start doing if it acquires a sole trader business?
Claiming amortization on IFAs!
(Not connected GW)
Do you pay SDLT when you buy or sell a property?
BUY!
Simple point for something a sole trader can stop paying if ceases to trade
STOPS PAYING NIC
Is incorporation relief automatic or an election?
Incorporation relief is AUTOMATIC
Easy point to note that you could disapply depending on their future plans (BADR)
What can’t you claim BADR on in incoropration?
GOODWILL if close & 5%
Consequences of a new company incorporating (easy mark points!)
- New AP, start paying CT
- Receives assets – allowable cost market value
- SDLT due on buildings based on total market value
Incorporation: Working out profit in last AP (capital elements)
- Profit on inventory (can claim to transfer at lower of cost/price paid)
- BA/BC on P&M (can make succession election)
- Gains on chargeable assets
- Trading profit on IFAs
What is the capital gain on the sole trader when a company disincorporates?
Sale proceeds = distributable assets
Cost = MV of assets transferred on incorporation (less incorporation
relief if not disapplied)
IHT: Deciding if chargeable or non-chargeable, what else to bear in mind?
DEEMED DOMICILE
Which trusts specifically are CLTs?
- Discretionary
- Non-qualifying IIP
2 things to remember with the RNRB?
- You can get spouse % (100% if die before 17)
- High value estate? (2m) RESTRICTED (by 50%)
Easy mark re. CGT and IHT
Death transfers are exempt from CGT
What else is an exempt CGT asset (not cash, chattels…)?
QCBs
When aren’t termination payments fully allowable for a company?
CESSATION OF TRADE
(Capped at 4x statutory redundancy)
Pensions basic terminology
‘Tax relief given for contributions made into a registered pension scheme.’
Difference for employee between earnings and benefits?
NO NIC ON BENEFITS (paid by er)
When can you use the remittance basis?
RESIDENT but NOT DOMICILE
Tax efficient way for family to plan for future (i.e. IHT) but retain control of assets?
Family Investment Company (FIC)
(Personal tax - add. aspects)
A VAT group has to have 50% ownership and what?
UK COMPANIES
Can a sole trader/partnership be in a VAT group?
YES
A sole trader or partnership can also be included within a VAT group
comprising companies that it controls
3 effects of being in a VAT group?
- ONE VAT RETURN
- INTRA-GROUP TRANSFERS OUTSIDE SCOPE
- All Cs JOINTLY AND SEVERALLY LIABLE
Can you chose who to put in a VAT group?
YES
Exclude exempt companies (avoid group becoming partially exempt)
Exclude zero-rated companies (to improve cash flow from repayments)
How long does OTT last for?
Irrevocable for 20 years
Easy point for TOGC admin?
Transferee must be/become VAT registered
Difference between stamp duty and SDRT?
Stock Transfer Form
Just to confirm, when do you pay SDLT; buying or selling?
When you BUY A BUILDING
Do you pay SDLT on incpropration?
YES
And the rate is based on the TOTAL VALUE of L&B
Liquidation: Do you pay stamp duty on shares if cancelled?
NO
Liquidation: Do you pay SDLT on land and buildings during liquidation
NO
Unless consideration provided
What other tax does a company have to pay if is has expensive reisdential proeprties?
ATED (Stamp taxed)
Basically CHECK THE STAMP TAXES because there are lots of them (and other property taxes - the gov does not like companies dealing with residential properties aha)
Individual with more than one residential property?
EXTRA (3%) STAMP TAX
Basic concept for individual shareholder when company purchases its own shares
CAPITAL ROUTE, and INCOME ROUTE
Basic concept for corporate shareholder when company purchases its own shares
Just a gain
Likely SSE
What’s the difference between administration and liquidation?
With administration, you are aiming for the C to continue as a going concern (still new AP though)
What is the other method of winding up a company (than administration and liquidation) that could be considered?
STRIKING OFF
(Remove from companies register 3m after cessation . Distribs under 25k considered capital)
When ceasing to trade, what 2 things have trading profits/losses
- INVENTORY (ofc)
- IFAs
What to look out for with a post liquidator (so capital) distribution to an individual shareholder?
LOOK OUT FOR BADR
Alternative way to avoid taking on contingent liabilities than hive down?
Warranties/Indemnities
If you are leaving a group (sale of shares), when do you stop being an associated company? And when do you start being an associated company of the new group?
Both for the full year
VAT implications of sale of shares of company?
SHARES ARE EXEMPT FROM VAT
If you are an individual shareholder and are selling a large amount of shares, how can you reduce the CGT due? (As well as BADR)
- Spread over multiple years
- Pre-sale dividend
What’s the SDLT subtlety in hivedowns when transferring the T&A to the newco?
No SDLT payable by new company unless arrangements to sell it at date
of transfer
SSE Anti-Avoidance rule re. hivedowns
Is the assets transferred to NewCo were used before for less than 12m then no SSE
Can you elect to treat a non-domiciled spouse as domiciled for IHT?
YES
Can make an election
