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tax Flashcards

1
Q

Tax year runs from

A

6 April 2022 to 5 April 2023

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2
Q

In a partnership each partner is liable for

A

income tax on share of profit, CGT on share of gains

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3
Q

In a partnership, partners are jointly liable for

A

Income tax of employees, NICs as employers, VAT as supplier

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4
Q

Companies rules for financial year which run

A

1 April 2022 - 31 March 2023

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5
Q

HRMC responsibilities

A

Collect and administer income tax, CGT, NIC, Corporation Tax, VAT
Pay and administer Universal credit tax credits and child benefits
Collect repayment of student loan
ensure employers pay minimum wage
protect us from tax fraud, alcohol and tobacco smuggling, drug importation

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6
Q

Sources of tax law and practice

A

Legislation - in acts of parliament (statutes)
Legislation amended by finance act (based on budget, FA 2022 is for 2022/23)
Statutory instruments (secondary, automatically law in stated period if no objection)
case law

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7
Q

Publications by HMRC

A

Manuals
Statements of practice
extra statutory concessions
Press release
leaflets

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8
Q

Income tax - chargeable income

A

Employment income
Trading income
Property income
Savings income (interest and dividends)
Miscellaneous income

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9
Q

Exempt / taxable
Interest on National Saving certificates

A

Exempt

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10
Q

Income taxed at source (net of tax)

A

Employment income (PAYE)

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11
Q

Income received without deduction at source

A

Trading income
property income
Savings income
Dividend income

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12
Q

Savings income - nil rate band basic tax payer

A

1000 on 0%

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13
Q

Savings income - nil rate band higher rate tax payer

A

500 at 0%

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14
Q

Savings income - nil rate band additional tax payer

A

not entitled to NRB

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15
Q

Direct tax

A

Paid by those who generate the funds to pay the tax

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16
Q

Indirect tax

A

Tax related to consumption

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17
Q

Progressive tax

A

rises as a proportion of income as income risies

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18
Q

Regressive taxes

A

rise as a proportion of income as income falls

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19
Q

Unit taxes

A

calculated flat rate per item regardless of value

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20
Q

value taxes

A

calculated as a % of the value of the imte

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21
Q

capital tax

A

tax based on value of capital assets or wealth

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22
Q

Transaction based taxes

A

Taxes incurred due to a specific transaction taking place

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23
Q

Non savings income

A

employment income, trading profit, property income, miscellaneous income, income not categorised as from specific source taxed as misc

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24
Q

savings income

A

interest from investments

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25
Q

Dividend income

A

Dividends from UK and overseas companies

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26
Q

Gift aid conditions

A

donor must give gift aid declaration in writing by telephone or via internet
donor must pay amount of income/CGT at least equal to the. amount of Gift Aid reclaimed by the charity in respect of donation

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27
Q

General earnings basis of assessments

A

receipts basis

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28
Q

General earnings consisting of money are treated as received on the earlier of

A

when payment is made
when person becomes entitled to payment

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29
Q

Taxable / exempt benefit
Vouchers

A

Taxable

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30
Q

Taxable / exempt benefit
Living accommodation

A

taxable

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31
Q

Taxable / exempt benefit
Expenses connected with provision of living accommodation

A

Taxable

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32
Q

Taxable / exempt benefit
Cars and fuel provided for private use

A

Taxable

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33
Q

Taxable / exempt benefit
Vans provided for private use

A

Taxable

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34
Q

Taxable / exempt benefit
Assets made available for private sue

A

Taxable

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35
Q

Taxable / exempt benefit
Any other non-monetary benefit provided by reason of the employment

A

taxable

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36
Q

When can taxable benefits be reduced to nil?

A

If the employee pays the full monetary value of the benefit to the employer on or before 6 July following the tax year

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37
Q

Cash voucher taxable amount

A

sum of money for which voucher capable of being exchanges

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38
Q

Credit tokens used to obtain money g/s taxable

A

cost to the employer of providing the benefit less amount paid by employee

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39
Q

Voucher exchangeable for g/s taxable

A

cost to the employer of providing the benefit less any amount paid by the employee

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40
Q

Accommodation is job related if

A
  • Necessary for proper performance of duties OR
  • Provided for better performance of duties and employment is of a kind in which it is customary to provide accommodation OR
  • accommodation is provided as part of arrangements in force due to special threat to security
    (director owning 5% or lesson shares can only claim first two and either full time working director or not for profit making or charity company)
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41
Q

Living accommodation taxable/exempt

A

taxable on the provision of living accommodation unless job related accommodation

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42
Q

Accommodation benefit basic rental benefit taxable

A
  • if owned by employer, benefit is rent taht would have been paid if let on annual value
  • if rented by employer amount of benefit is higher of annual value and rent actually paid by employer
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43
Q

Expensive accommodation

A

costs Moore than £75,000 to provide

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44
Q

Expensive accommodation additional benefit

A

(cost of providing accommodation - £75,000) * official rate of interest at the start of the tax year

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45
Q

Use market value of property when first provided + cost of subsequent improvements when

A

Property acquired by employer more than 6 years before first provided to employee

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46
Q

Taxable benefit on:
heating
council tax
water
lighting
cleaning repairs maintenance and decoration

A

Cost to employer less any employee contribution

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47
Q

Taxable/exempt
Pool car

A

Exempt if available for use by any employee and not normally kept overnight at or near employees residence

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48
Q

Taxable benefit on cars and fuel

A

List price * percentage

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49
Q

List price of car

A

List price _ any optional accessories additionally provided and further accessories costing more than £100 provided at a later date

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50
Q

Fuel benefit fixed rate

A

25300

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51
Q

Taxable amount on assets available for private use

A

Higher of annual value of asset or any rent / hire charge payable by employer expenses related to provision of asset are added, reduced by employee contribution and no benefit if private use is insignificant

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52
Q

Asset for private use annual value

A

20% of market value when first provided for private use to any employee

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53
Q

Taxable / exempt
Contribution by employer to registered pension scheme

A

exempt

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54
Q

Taxable / exempt
trivial benefit (<£50) not cash or cash voucher provided for non wok reason (annual cap 300 provided to certain directors)

A

exempt

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55
Q

Taxable / exempt pension advice and associated tax planning available to all employees up to £500 per year

A

Exempt (above 500 full amount taxable)

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56
Q

Taxable / exempt
one mobile telephone available for private use by employee including all calls

A

exempt

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57
Q

Taxable / exempt
Free / subsidised meals in canteen where meals available to all staff

A

exempt

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58
Q

Taxable / exempt
annual social events paid for by employer up to £150 per head per tax year

A

Exempt
if > £150 whole amount is taxable if one event,
if multiple aggregate > 150 then up to £150 exempt and others
staff party not annual event taxable irrespective of cost

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59
Q

Taxable / exempt
Entertainment provided by third party

A

Exempt

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60
Q

Taxable / exempt
Non cash gift from third party up to £250 per year from the same donor

A

exempt

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61
Q

Taxable / exempt
Provision of parking space at or near place of work

A

exempt

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62
Q

Taxable / exempt
Awards of up to £5000 made under staff suggestion scheme

A

exempt

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63
Q

Taxable / exempt
Work related training courses

A

exempt

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64
Q

Taxable / exempt
Sports and recreation facilities available to employees generally but not to general public

A

Exempt

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65
Q

Taxable / exempt
Childcare facilities run by or on behalf of employer

A

exempt

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66
Q

Taxable / exempt
Payment towards additional cost of employee wfh (up to £6pw no supporting evidence more than £6 per week need documentary evidence)

A

exempt

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67
Q

Taxable / exempt
Personal incidental expenses while required to stay overnight on business (£5/night UK £10/night abroad)

A

exempt

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68
Q

Taxable / exempt
Work buses and subsidies for employees to use public bus services

A

Exempt

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69
Q

Taxable / exempt
Travel expenses when public transport disrupted, late night journeys and where car sharing arrangements break down

A

exempt

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70
Q

Taxable / exempt
Use of bicycles or cyclists safety equipment if available to all employees

A

Exempt

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71
Q

Taxable / exempt
Reasonable removal expenses (up to £8000) paid for by employer on new employment position or on relocation

A

exempt

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72
Q

Taxable / exempt
Non-cash long service awards in respect of at least 20 years of service not exceeding £50 / year of service

A

exempt

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73
Q

Taxable / exempt
Eye tests required under health and safety legislation and specially prescribed glasses for employees using VDU equipment

A

exempt

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74
Q

Taxable / exempt
Health screening assessment or medical checkup provided for an employee by employer

A

exempt

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75
Q

Taxable / exempt
Up to £500 pa for recommended medical treatment to assist return to work

A

exempt

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76
Q

Taxable / exempt
Vehicle battery charging facilities at or near place of work where vehicle used by employee and is not taxable car nor van

A

exempt

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77
Q

PAYE code calculation

A

Personal allowance + allowable expenses + adj for overpaid tax - taxable benefits if not taxed through voluntary payrolling - adjustment for underpaid tax

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78
Q

PAYE code
if total allowances - total deductions give positive figure

A

remove last digit and add L at the end

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79
Q

PAYE code
If transfer part of allowance the letter

A

N
M
respectively

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80
Q

PAYE code
if allowances less total deceptions negative

A

Letter K at the beginning - taxable pay will be increased rather than decreased

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81
Q

PAYE unpaid tax

A

Gross up unpaid tax by estimated marginal rate (100/20 for basic rate)

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82
Q

Badge of trade
Profit seeking motive

A

Trading requires profit motive to exist when asset is acquired - if can establish asset bought with intention to resell at profit indication of trading activity

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83
Q

allowable expenditure

A

expenditure incurred wholly and exclusively for purpose of trade not specifically disallowed by legislation

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84
Q

If expenditure is disallowable it must…

A

be added back to accounting profit or loss

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85
Q

Allowable/disallowable
Capital expenditure

A

Disallowable e.g. improvement or enhancement,

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86
Q

Allowable/Disallowable
Maintenance and repairs (returning to original condition)

A

Allowable

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87
Q

Allowable/Disallowable
Depreciation of capital assets

A

Disallowable

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88
Q

Allowable/Disallowable
Profit/loss on sale of fixed assets

A

Disallowable

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89
Q

Allowable/Disallowable
Appropriation of profit (salary to sole trader/partner, payment to family not reasonable remuneration, owners personal income and NIC and other personal expenses)

A

Disallowable

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90
Q

Allowable/Disallowable
General provision for bad debt

A

Disallowable

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91
Q

Allowable/Disallowable
Specific provision for bad debt

A

Allowable

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92
Q

Allowable/Disallowable
Bad debt

A

Trade bad debts are allowable
Non-trade bad debts are disallowable

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93
Q

Allowable/Disallowable
Gifts of trade samples given away in ordinary course of business to advertise to public
gifts to customers if incorporate conspicuous advertisement for business, are not food drink tobacco or vouchers and total cost not more than £50
Gifts to employees

A

Allowable
all other gifts are disallowable

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94
Q

Allowable/Disallowable
Donations and subscriptions
to local charities if gift enhances public image of trade, gifting trade stock or used plant and machinery to charities or UK educational establishments, subscription to trade and professional association

A

Allowable
donation to national charities, gift aid, and political donations are generally disallowable

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95
Q

Allowable/Disallowable
Fines and penalties

A

Disallowable
exception is parking fine incurred by employee on business activity

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96
Q

Allowable/Disallowable
Interest on money borrowed for business purposes

A

allowable,
disallowable interest on late payment of tax

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97
Q

Allowable/Disallowable
Legal and professional fees
legal costs relating to renewing short lease (50 years or less), costs of registering patent or copyright for trade use, incidental costs of raising LT finance

A

Allowable

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98
Q

Allowable/Disallowable
Legal and professional fees relating to income

A

allowable

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99
Q

Allowable/Disallowable
Legal and professional fees dealing with HMRC enquiry / appeal to HMRC
related to capital expenditure

A

Disallowable

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100
Q

Allowable/Disallowable
Irrecoverable VAT

A

allowable if item of expenditure is allowable

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101
Q

Allowable/Disallowable
Employment payment and pension
earnings to employees, redundancy payments and compensation for loss of office, cost of educational courses for trade purposes, contribution to pension scheme in period of paymentt, payment of NIC

A

allowable

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102
Q

Allowable/Disallowable
Car leasing and rental costs

A

Leases on cars 15% flat rate disallowance on payments related to polluting cars
from 6/4/21 above 50g/km
6/4/18-4/3/21 - 110g/km
before 6/4/18 130g/km

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103
Q

Exempt / Taxable income
Income from ISAs

A

Exempt

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104
Q

Exempt / Taxable income
betting, competition and premium bonds

A

Exempt

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105
Q

Exempt / Taxable income
some social security benefits (housing benefit)

A

Exempt

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106
Q

Exempt / Taxable income
scholarships

A

Exempt

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107
Q

Exempt / Taxable income
income tax repayment interest

A

Exempt

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108
Q

Exempt / Taxable income
apprentice bursaries paid to individuals leaving care of local authority

A

Exempt

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109
Q

Exempt / Taxable income
compensation payments made under ‘qualifying payment’ schemes (windrush)

A

Exempt

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110
Q

Badge of trade
Number of transactions

A

Transaction which alone may be regarded as of capital nature may be treated as trading activity if a number of similar transactions are entered into

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111
Q

Badge of trade
Nature of asset

A

Subject matter of transaction may indicate whether trade carried on
three reasons to purchase an asset:
- Personal use
- investment for aesthetic value
= to resell at profit

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112
Q

Badge of trade
existence of similar trading transactions and interests

A

Consider other activities of taxpayer to see whether any similarities exist

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113
Q

Badge of trade
Changes to the asset

A

If purchased and subjected to process to enhance marketability, sale more likely to be regarded as a trading activity

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114
Q

Badge of trade
how the sale was carried out

A

If sale carried out in way typical of trading organisation (through agent) more likely to be considered as trading

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115
Q

Badge of trade
Source of finance

A

Money borrowed short term to buy or improve asset, likely to be trade, especially if loan could only be repaid by selling the asset

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116
Q

Badge of trade
Interval of time between purchase and sale

A

Asset bought and resold shortly after indicates trading activity

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117
Q

Badge of trade
Method of acquisition

A

Asset acquired by inheritance or as a gift less likely to be the subject of trade

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118
Q

WDA % on cars for employee personal use

A

Full 18% no deductions for personal use

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119
Q

Current year basis

A

Basis period for tax year is taxable profit for 12 month period of account ending in that tax year

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120
Q

Opening Tax year basis

A

Actual basis - taxable trading profit from date of commencement to following 5 April

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121
Q

Second year tax basis
Less than 12 months long

A

basis period = first 12 months of trading

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122
Q

Second year tax basis
12 months long

A

that 12 month period of account

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123
Q

Second year tax basis
More than 12 months long

A

12 months to the end of the period of account ending in the second tax year

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124
Q

Period of account ending in tax year
No such period of account

A

Actual basis 6 April to 5 april

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125
Q

Class 1 NIC

A

Paid by employees and employers

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126
Q

Class 1 A NIC

A

Paid by employers on taxable benefits at 15.05%

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127
Q

Class 2 NIC

A

Paid by self employed nidividuals

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128
Q

Class 4 NIC

A

Paid by self employed individuals

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129
Q

Newly self employed individual is required to register with HMRC by

A

5 October following end of tax year self employment commences

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130
Q

Requirement to register for class 2 NIC is immediately on being self employed but there is no late registration penalty provided they are paid by

A

31 January in tax year following commencement of trade

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131
Q

Class 1A NIC (benefits) paid by employer on

A

22 July after end of Tax year

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132
Q

Who is the independent standard setting body aiming to serve public interest by setting robust, internationally appropriate ethics standards for professional accountants worldwide

A

International Ethics Standards Board for Accountants (IESBA)

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133
Q

Five fundamental ethical principals are

A

Professional Behaviour
Integrity
Professional Competence and Due care
Confidentiality
Objectivity

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134
Q

Being straight forward and honest in all professional and business relationships

A

Integrity

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135
Q

Not allow bias, conflict of interest or undue influence of others to override professional or business judgements

A

Objectivity

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136
Q

Maintain professional knowledge and skill at level required to ensure client or employer receives competent professional service based on current developments in practice, legislation and techniques
act diligently and in accordance with applicable technical and professional standards

A

Professional competence and due care

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137
Q

Respect the confidentiality of information acquired as a result of professional and business relationships and therefore not disclose such information without proper and specific authority unless there is a legal or professional right or duty to disclose, nor use the information for their personal advantage or advantage of third parties

A

Confidentiality

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138
Q

Comply with relevant laws and regulations and avoid any action that discredits the profession

A

Professional behaviour

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139
Q

Threat due to financial or other interest of professional accountant or of an immediate or close family member

A

Self interest threat

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140
Q

Threat may occur when previous judgement needs to be re evaluated by the professional accountant responsible for that judgement

A

Self review threat

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141
Q

Threat may occur when professional accountant promotes a position or opinion to the point that objectivity may be compromised

A

Advocacy

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142
Q

Threat may occur due to close relationship where professional accountant becomes too sympathetic to interests of others

A

Familiarity threat

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143
Q

Threat may occur when professional accountant may be deterred from acting objectively by actual or perceived pressures including attempts to exercise undue influence over the professional accountant

A

Intimidation threat

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144
Q

What to consider when initiating an ethical conflict resolution process

A

Relevant facts
relevant parties
ethical issues involved
fundamental principles related to matter
established internal procedures
alternative courses of action

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145
Q

Tax avoidance

A

any legal method of reducing a tax payer’s liability
Certain schemes must be disclosed to HMRC, loop holes being closed, planning scheme

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146
Q

Tax evasion

A

illegal - seeking to pay less tax than due by deliberately misleading HMRC

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147
Q

methods of tax evasion

A

surpassing information to which HMRC is entitled
Providing HMRC with false information

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148
Q

Managing the economy - government seeks to encourage

A

saving
donation to charities
investing in business
entrepreneurs

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149
Q

Managing the economy - Government seeks to discourage

A

smoking
drinking alcohol
Motoring

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150
Q

Direct/indirect principle

A

Direct taxes only paid by those who generate funds to pay
Indirect taxes relate to consumption and up to individuals whether they spend money on such goods

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151
Q

Progressive/regressive principle

A

Progressive taxes rise as a proportion of income as income rises - income tax
Regressive tax rise as a proportion of income as income falls - cigarettes

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152
Q

Unit/value principle

A

Unit tax is flat rate per item
Value tax based on percentage of value of item (VAT)

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153
Q

Income/Capital/expenditure principle

A

Income tax paid by those who generate income
Capital taxes are just as people should not be able to live of the sale of capital assets
Taxes on expenditure paid by those who incur expenditure - transaction based

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154
Q

Ability to pay/benefit principle

A

Taxes should be based on ability of taxpayer to pay
taxes should be based at least in part on the benefit recieved

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155
Q

Neutrality principal

A

Tax should be neutral to not distort choice

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156
Q

Equity principle

A

tax should be equitable or just

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157
Q

Efficiency principle

A

cost of collecting tax should be low in relation to tax paid

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158
Q

Capital allowance

A

Tax allowances for certain types of capital allowances (depreciation not allowed, so give tax relief by allowing part of the cost each year)

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159
Q

Qualify for capital expenditure
Building alternations incidental to installation of plant and machinery

A

Qualify

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160
Q

Qualify for capital expenditure
License to use computer software

A

Qualify

161
Q

what assets are included in the main pool

A

Machinery, fixtures fittings and equipment
vans, forklift trucks, lorries, motorcycles
Cars with CO2 emissions < 50g/km purchased after 6/4/21

162
Q

First year allowance qualifying assets

A

New zero emissions goods vehicles
charging points for electric vehicles 23/11/17 and 5/4/23
low emissions cars (0g/km)

163
Q

AIA can be used against

A

most plant and machinery except cars

164
Q

Balancing charge on capital allowances occurs when

A

too many capital allowances given on asset over lifetime (sold for amount in excess of TWDV)

165
Q

Balancing allowance on capital allowance occurs when

A

Too few capital allowances given on an asset over lifetime (sold for amount less than TWDV)

166
Q

Exempt/Chargeable person
Individuals

A

Chargeable

167
Q

Exempt/Chargeable person
Business partners

A

Chargeable

168
Q

Exempt/Chargeable person
Companies

A

Chargeable

169
Q

Exempt/Chargeable person
Registered charities

A

Exempt

170
Q

Exempt/Chargeable person
Friendly Societies

A

Exempt

171
Q

Exempt/Chargeable person
Local Authorities

A

Exempt

172
Q

Exempt/Chargeable person
registered pension schemes

A

Exempt

173
Q

Exempt/Chargeable person
Investment trusts

A

Exempt

174
Q

Exempt/Chargeable person
Approved scientific research associations

A

Exempt

175
Q

Exempt/chargeable disposals
Sale of whole/part of asset

A

Chargeable

176
Q

Exempt/Chargeable disposal
Gift of whole/part of asset

A

Chargeable

177
Q

Exempt/Chargeable disposal
Loss/destruction of the whole or part of an asset

A

Chargeable

178
Q

Exempt/Chargeable disposal
Gifts to registered charities

A

Exempt

179
Q

Exempt/Chargeable disposal
Gifts to art galleries/museums and similar institutions

A

Exempt (so long as asset is used for purposes of institutions

180
Q

Exempt/Chargeable disposal
Death

A

Not a disposal - assets acquired at probate value (MV at date of death) - tax free uplift on death

181
Q

Date of disposal is the date…

A

When contract for sale is made
if conditional, then date is the date when all conditions are satisfied

182
Q

Chargeable/exempt assets
Land, furniture workings of art

A

chargeable

183
Q

Chargeable/exempt assets
Goodwill, shares, leases

A

chargeable

184
Q

Chargeable/exempt assets
Legal tender (cash)

A

Exempt

185
Q

Chargeable/exempt assets
Motor cars

A

Exempt

186
Q

Chargeable/exempt assets
Most wasting chattels

A

exempt

187
Q

Chargeable/exempt assets
non wasting chattels if acquisition and gross disposal are < 6000

A

exempt

188
Q

Chargeable/exempt assets
Gilt edged securities (exchequer or treasury stock)

A

Exempt

189
Q

Chargeable/exempt assets
National savings certificates and premium bonds

A

Exempt

190
Q

Chargeable/exempt assets
Shares and investments in an ISA

A

Exempt

191
Q

Capital gain
if asset sold in commercial arms length transaction disposal consideration is…

A

Gross sale proceeds

192
Q

Capital gain
if asset is not sold at arms length (e.g. gifted) the disposal consideration is…

A

Market value

193
Q

Allowable costs for CGT

A

Acquisition costs (purchase price/MV/Probate value)
incidental costs of acquisition (legal fees, surveyor/valuers fees, stamp duty, land duty)
Enhancement expenditure - capital costs of additions and improvements to the asset (extensions, planning permissions)

194
Q

Annual exempt amount for which no CGT is payable

A

12,300

195
Q

Chattel

A

item of tangible moveable property that specifically does not include goodwill, shares or leases

196
Q

Wasting chattel

A

predictable life at date of disposal not exceeding 50 years. (caravans, boars, computers, mechanical objects animals) Plant and machinery always have UL < 50 years

197
Q

Non-wasting chattel

A

predictable life at the date of disposal of more than 50 years (antiques, jewellery and works of art)

198
Q

Exempt/subject to CGT
Wasting chattels are…

A

usually exempt from CGT but if used solely used for business and capital allowances claimed/could be claimed then treated as non-wasting

199
Q

Exempt/subject to CGT
Non wasting chattels

A

Chargeable to CGT, unless gross disposal proceeds and cost < 6000

200
Q

If non-wasting chattel disposed for gross disposal proceeds of more than 6000 but acquired for less than 6000 then marginal relief for gain as gain cannot exceed….

A

5/3(gross proceeds - 6000)

201
Q

Special rules if more than two assets from a set of chattels owned by the same person are disposed to….

A

the same person
persons acting in concert
connected persons

202
Q

TTP Allowable/not allowable
interest in respect of trading loan

A

Allowable

203
Q

TTP Allowable/not allowable
Dividends paid by company

A

not allowable in calculating trading income

204
Q

Exempt ABGH distributions

A

other than those received from companies which are 51% of the receiving company or 51% subsidiaries of a company of which the receiving company is a 51% subsidiary are added to TTP

205
Q

Due date for corporation atx

A

9 months and 1 day after the end of the accounting period

206
Q

Corporation tax
Large companies

A

1.5 million < Augmented profit < 20 million

207
Q

Corporation tax company is not treated as large if

A

tax liability < 10,000 OR
not a large company in preceding 12 months and augmented profits are 10million or less in this period

208
Q

Large company must pay corporation tax in …

A

Four equal instalments on the 14th day of the 7th, 10th 13th and 16th month after the start of a 12 month accounting period (based on estimated liability)

209
Q

Very large companies have augmented profit

A

exceeding 20 million

210
Q

Very large companies must pay corporation tax in

A

Four equal instalments on the 14th day of months 3,6,9 and 12 of the accounting period

211
Q

Output VAT

A

As goods / service go through production and distribution each VAT registered business charges VAT on value of goods / services supplied

212
Q

Input VAT

A

Each VAT registered business receives credit for any VAT paid

213
Q

Supplies outside the scope of vat

A

supplies that do not have any effect for VAT (payment of wages and dividends)

214
Q

Exempt supplies from VAT

A

supply on which output VAT cannot be charged (land, insurance and postal services)

215
Q

VAT registration is compulsory when…

A

total value of taxable supplies (taxable turnover) made by person making taxable supplies exceeds £85,000

216
Q

Future prospects test for VAT

A

Person must register for VAT if at any time there are reasonable grounds to believe the taxable turnover in the next 30 days alone will exceed the threshold
Notify HMRC by the end of the period
registration takes effect from beginning of same 30 day period

217
Q

Historic test for VAT

A

Person must register for VAT if at the end of any month the taxable turnover in the prior period exceeds the threshold.
notify HMRC within 30 days of the end of the month in which threshold was exceeded and registration takes effect from first day after the end fo the month following the relevant month (when threshold first exceeded§

218
Q

Deregistration is compulsory when

A

person ceases to make taxable supplies and has no intention of making taxable supplies
notify HMRC within 30 days and deregistration takes effect on date taxable supplies ceased

219
Q

Voluntary deregistration when

A

Estimated taxable turnover for next 12 months will not exceed statutory deregistration threshold (83,000) takes effect from date on which request is made / on agreed later date

220
Q

On deregistration, VAT charge is made…

A

on the deemed supply of trading stock and capital assets on which input VAT has been recovered. Output tax is then paid, but if less than 1000 don’t have to pay

221
Q

Basic tax point for VAT

A

Date on which goods are removed or made available to customer or services completed

222
Q

Actual tax point for VAT
1. Payment received before basic tax point
2. Invoice issued before basic tax point
3. Invoice issued within 14 days of basic tax point

A
  • actual tax point is date of payment
  • Invoice issued before basic tax point - date of invoice
  • actual tax point is date of invoice
223
Q

Irrecoverable / recoverable VAT
Motor cars unless used exclusively for business

A

irrecoverable

224
Q

Irrecoverable/recoverable VAT
G/S used for business entertaining
usually recovered for staff entertainment and entertaining foreign customers

A

Irrecoverable

225
Q

Irrecoverable/recoverable VAT
Non business items

A

irrecoverable

226
Q

Irrecoverable/recoverable VAT
items for which no VAT receipt is held

A

irrecoverable

227
Q

VAT return must be submitted to HMRC not later than

A

7 calendar days after the last day of the month following the end of the return period (also usually due date for payment)

228
Q

Substantial traders who make payments on account are taxable persons with annual VAT liability in excess of

A

2.3 million

229
Q

Payments on account for substantial traders are made

A

at the end of the second and third months of a quarter and the amount is 1/24 of the total liability from PY
balancing payment for the quarter si due with VAT return at end of month following the end of the quarter

230
Q

Scheme available to small businesses allowing them to make payments on account of VAT during the year based on PY VAT. Single VAT return filed within two months of year end with balancing VAT due

A

Annual accounting scheme

231
Q

annual accounting scheme is available to businesses if the value of taxable supplies in the following year is not expected to exceed

A

1.35 million

232
Q

annual accounting scheme requires payments on account either as

A

nine interim payments monthly intervals throughout the year or
three quarterly interim payments throughout the year

233
Q

Annual accounting scheme
9 equal monthly payments each payment must be electronic and will be

A

10% total VAT liability PY or estimate for CY
Registered less than 12 months, first payment due at end of forth month, no 7 day extension and every month thereafter

234
Q

Annual accounting scheme
three quarterly instalments each payment must be electronic and will be

A

25% of PY VAT liability or estimated year for CY
payment due by end of month 4,7 10

235
Q

advantages of annual accounting scheme

A

reduce VAT returns required
two months to complete annual return and make balancing payment

236
Q

cash accounting scheme

A

allows businesses to account for VAT on cash basis rather than invoices received and issued basis

237
Q

Businesses may join cash accounting scheme if

A

Value of taxable supplies in following year not expected to exceed 1.35m
all VAT returns to date submitted and outstanding VAT paid
not convicted of VAT offence / penalty in previous 12 months

238
Q

Main advantages of cash accounting scheme

A

Output VAT doesn’t need to be accounted for until payment received
automatic bad debt relief since no output VAT payable if payment not recieved

239
Q

Flat rate scheme for VAT

A

Business can calculate net VAT due to HMRC by applying flat rate percentage to vat inclusive turnover
1% reduction in first year of trading

240
Q

Business may join flat rate scheme for VAT if

A

value of annual taxable supplies < 150,000

241
Q

Main advantages of flat rate scheme

A

reduction in a admin preparing VAT return
less VAT payable

242
Q

Main VAT records to be kept

A

Sales invoices
order/delivery notes
purchase invoice/copy sales invoice/credit note
Purchase/sales day book
records of daily takings
cash book
bank statements and paying in slip
annual accounts

243
Q

VAT invoice must show

A

unique ID number
business name address and contact info
name and address of customer
clear description of G/S
date of invoice and tax point
price quantity and VAT rate
discount offered
amount excluding VAT
VAT

244
Q

Simplified VAT invoice can be issued for

A

supplies under £250

245
Q

Modified VAT invoice can be issued

A

for retail supplies over £250

246
Q

Type of inaccuracy
Keeping inaccurate books and records taht are incomplete in some respects

A

careless

247
Q

Type of inaccuracy
Omitting occasional items of income/gains

A

careless

248
Q

Type of inaccuracy
Filling to heck return consistent with underlying records

A

Careless

249
Q

Type of inaccuracy
making arithmetical errors that are too large / many to be isolated mistakes

A

careless

250
Q

Type of inaccuracy
systematically paying wages without operating PAYE

A

deliberate

251
Q

Type of inaccuracy
not keeping books and records at all

A

deliberate

252
Q

Type of inaccuracy
including personal expenditure on business expenditure

A

deliberate

253
Q

Type of inaccuracy
omitting significant amount of income related to overall liability

A

deliberate

254
Q

Type of inaccuracy
Creating false invoices

A

Deliberate and concealed

255
Q

Type of inaccuracy
Back/post dating invoices

A

Deliberate and concealed

256
Q

Type of inaccuracy
altering invoices or other docuemnts

A

deliberate and concealed

257
Q

Type of inaccuracy
Destroying books, records and documents so they are not available

A

deliberate and concealed

258
Q

Type of inaccuracy
creating fictitious minutes of meetings or minutes of fictitious meetings

A

deliberate and concealed

259
Q

Reasonable excuses to not meet an obligation

A

death of close relative
unexpected stay in hospital life threatening illness or delays relating to disability
computer software failure or server issues
fire flood theft and postal delays

260
Q

Time limit for keeping corporation tax records

A

6 Years from end of accounting period

261
Q

Time limit for keeping income and capital gains tax records

A

5th anniversary of 31 January following end of the tax year if still in business or 1st anniversary of 31 January following end of tax year if not in business

262
Q

Time limits for keeping VAT records

A

six years

263
Q

If a tax return or notice to file for self assessment is not automatically issued, the individual must notify HMRC by

A

5 October following end of tax year unless certain not required

264
Q

If HMRC has issued a tax return to a self employed person and subsequently withdraws it, the individual must notify HMRC by

A

later of
5 October following end of tax year
30 days from day after notice withdrawn if required

265
Q

Due date for submission of tax return online

A

later of 31 January followign end of tax year or three months after issued

266
Q

due date for submitting paper tax return

A

later of 31 October following end of tax year
three months after return was issued

267
Q

Deadline for submission of short tax return

A

31 October following end of tax year paper
31 January for online return
three months after the issue of the tax return if later than these dats

268
Q

HMRC can correct return for obvious errors within

A

9 months of teh date the return is actually filed

269
Q

taxpayer has right to amend tax return for any reason

A

within 12 months of normal due submission date (later of 31 January following end of tax year or 3 months after issued)

270
Q

Taxpayer may claim for ‘overpayment relief’ within

A

four years of the end of the tax year to which the tax return relates

271
Q

Income tax and class 4 NIC are due

A

Payment on account
1 - 31 Jan in the tax year
2 - 31 July following end of tax year
Balancing payment - by 31 Jan followign end of tax year
Class 2 NIC also paid within self assessment system on 31 January following end of tax year

272
Q

Payments on account are not required when the amount paid under self assessment in PY was

A

less than
1000 or
20% of total liability

273
Q

Companies have to notify HMRC when their first accounting period begins within

A

3 months of the start of the first accounitng peirod

274
Q

Where a notice/return is not issued a company is required to notify HMRC where it has TTP for an accounting period , notification must be made

A

within 12 months of the accounting period

275
Q

Full corporation tax return must be submitted

A

within 12 months of the end of the period of account

276
Q

HMRC has the power to conduct a compliance check - two main types of check

A
  • pre return compliance check
    formal enquiries into returns, claims or elections already submitted
277
Q

Pre return compliance check may be carried out

A

to assist with clearances or rulign requests
where previous check identified poor record keeping
check computer systems will produce info to support return
to find out about plannign and avoidance
fraud suspected
person regularly discloses error after submission of VAT return

278
Q

Notice must be given by HMRC of intention to enquire into submitted return by

A

first anniversary of actual submission date
or
if return is filed after due submission date, the quarter day following the first anniversary of the actual submission date (31 jan, 30 April, 31 July, 31 October)

279
Q

How many opportunities does HMRC have to open a formal enquiry into a tax return

A

once

280
Q

Discovery assessment

A

Gives HMRC the power where discovers loss of tax to collect extra tax even if normal time period when could open compliance check has passed

281
Q

Discovery assessment limit
not due to careless or deliberate behaviour

A

4 years

282
Q

Discovery assessment limit
due to careless behaviour

A

6 years

283
Q

Discovery assessment limit
Due to deliberate behaviour

A

20 years

284
Q

Taxpayer can appeal against

A

request by HMRC to submit documents / records
amendments made to self assessment resulting from compliance check
HMRC right to raise discovery assessment
discovery assessment
VAT assessment
Imposition of penalty

285
Q

Tax payer must appeal within

A

30 days of relevant event
in writing
specify grounds for appeal

286
Q

HMRC has 2 types of power

A

information and inspection powers

287
Q

HMRC information powers

A

General provisions
taxpayer notices
third party notices
unknown identity notices

288
Q

Right of appeal against HMRC information powers

A

allowed unless
- first tier tribunal has approved issue of the notice or
- information / documents relate to taxpayer statutory records

289
Q

HMRC inspection powers - can enter business premises of taxpayer whose liability is being checked at any reasonable time if either

A
  • tax payer given at least 7 days written notice
    or
    inspection carried out by or with approval of authorised HMRC officer
    no right of appeal
290
Q

HMRC powers regarding dishonest conduct by tax agents

A

issue conduct notice if determined agent engaged in dishonest conduct
issue a file access notice to obtain working papers of tax agent found to have engaged in dishonest conduct
publish information about tax agent (name and address) if paenalty > 5000

291
Q

Safeguards - ICAEW

A

educational, training and experience to enter a professional body
CPD
ICAEW Code of ethics
complaints within firm and ICAEW

292
Q

Professional conduct in relation to taxation (PCRT)

A

Guidance written by professional bodies for members working in tax setting out fundamental principals and standards of behaviour which members are expected to follow

293
Q

PCRT Standards

A

Client specific
lawful
disclosure and transparency
advising on tax planning arrangement
professional judgement and appropriate documentation

294
Q

Client specific

A

tax planning must be specific to client’s fact and circumstances, clients must be alerted to the wider risks and implications of courses of actions

295
Q

Lawful

A

All times members must act lawfully and with integrity and expect same from clients, tax planning should be based on realistic assessments of facts and on credible view of law. Members should draw attention to where law is materially uncertain
members should consider taking further advice appropriate to risks and circumstances of the particular case

296
Q

Disclosure and transparency

A

Tax advice must not rely for its effectiveness on HMRC having less than relevant facts. disclosure must fairly represent all the relevant facts

297
Q

Advising on tax planning arrangements

A

members must not create, encourage or promote arrangements / structures that set out to achieve results contrary to the clear intention of Parliament in enacting legislation or are highly artificial or contrived and seek to exploit shortcomoings

298
Q

Professional judgement and appropriate documentation

A

Applying to particular client advisory situations require members to exercise prof judgement on a number of matters. members keep notes on timely basis of rationale for judgements exercised in seeking to adhere to these requirements

299
Q

Ethical conflict resolution process (6 factors)

A

Relevant facts
relevant parties
ethical issues involved
fundamental principles
established internal procedures
alternative courses of actions

300
Q

If conflict cannot be resolved…

A

obtain professional advice from ICAEW/Legal advisors and obtain guidance without breaching confidentiality
document issue and details of discussions held
May need to resign

301
Q

Confidentiality requires…

A

Accountant respect confidentiality of information acquired as a result of professional and business relationships and therefore not disclose any such info to third parties without proper and specific authority unless legal or professional right or duty to disclose nor use information for personal advantage of member / third parties

302
Q

When can disclose confidential info

A

Authorised by client/employer
required by law (evidence in court, AML)
Professional duty / right when not prohibited by law (comply with quality review of prof body, respond to an inquiry or investigation by member body / regulatory body, protect professional interests of professional accountant in legal proceeding, comply with technical standards and ethics requirement)

303
Q

Conflict of interest can threaten the principal of

A

objectivity

304
Q

Conflict of interest where:
- client has specific interest which conflict with those of the firm?

A

Yes

305
Q

Conflict of interest where
Financial involvement between client and firm (e.g. loan)

A

Yes

306
Q

Conflict of interest acting for both husband and wife in divorce settlement?

A

Yes

307
Q

Conflict of interest acting for company and directors in their personal capacity?

A

Yes

308
Q

Conflict of interest acting for parternship and partners in personal capacity

A

Yes

309
Q

Conflict of interest in acting fro two competing business?

A

Yes

310
Q

Safeguard for conflict of interest

A

Notify client of the business interest / activity that may represent conflict of interest
notify all known relevant parties that the professional accountant is actign for two or more parties
notify client that the professional accountant does not act exclusively for any one client in provision of proposed services
obtain consent to act
if consent refused have to give one client up

311
Q

additional safeguard to consider for conflict of interest

A

Use separate engagement teams
procedures to prevent access to information (separate physical and confidential and secure data filing)
clear guidelines for engagement team on issues of security and confidentiality
use of actual and perceived confidentiality agreements signed by employees and partners of firm to ensure actual and perceived confidentiality
regular review of application of safeguards by independent senior individual

312
Q

Safeguards against conflict of interest when seconded to HMRC

A

not involved in matters related to secondign organisation or clients it is representing while working for HMRC
Following end of secondment, second should not be involved in affairs of any taxpayer they were involved with at HMRC for a significant period

313
Q

Contractual relationship with a client should be governed by

A

an appropriate engagement letter, making client and accountant responsibilities clear

314
Q

Who is responsible for submitting correct and complete return to best of knowledge and belief and makes final decision to disclose any issues

A

client

315
Q

Who is responsible for preparing return and for the accuracy of the return based on info provided

A

Accountant, acting as agent for client where acting as tax agent, not required to audit figures but must take reasonable care and appropriate prof step when making statements/asserting facts on client behalf

316
Q

Professional Indemnity insurance

A

gives protection against claims made by clients for loss/damages due to negligent advice or services provided

317
Q

ICAEW PII Requirement if gross fee income of firm less than £600,000

A

minimum limit PII = 2.5*gross fee income, minimum 100k

318
Q

ICAEW requirement gross fee income > 600k

A

1.5million

319
Q

Members ceasing to be in public practice should ensure PII cover remains in place for

A

at least 2 years
recommended consider maintaining 6 years

320
Q

GDPR

A

LEgislation to enforce anyone who handles personal info regarding UK and EU citizens to protect them from privacy and data breaches

321
Q

Penalty for main ML offences

A

Up to 14 years

322
Q

Penalty for tipping off

A

up to 2 y in prison

323
Q

penalty for not disclosing ML

A

up to5 years in prison

324
Q

ML contravention of systems requirements of regulations

A

up to 2 year in prison

325
Q

AML Procedures

A

Register with appropriate supervisory authority
appoint MLRO
Train staff to ensure aware of relevant legislation, know how to recognise and deal with ML and report MLRO and identify clients
establish appropriate internal procedures related to risk assessment and management to deter and prevent ML and make relevant individuals aware of procedures
carry out customer DD on new client and monitor existing client
Verify identify of new client and maintain evidence
Report suspicions to NCA using suspcisoiu activity report

326
Q

from 1 April 2023, AML levy payable, for regulated entities (accountants, solicitors, banks and insurers) fixed fee.
small firm size and amount

A

small < 10.2m
amount = exempt

327
Q

from 1 April 2023, AML levy payable, for regulated entities (accountants, solicitors, banks and insurers) fixed fee.
Medium firm

A

10.2 mil - 36 mil
10,000

328
Q

from 1 April 2023, AML levy payable, for regulated entities (accountants, solicitors, banks and insurers) fixed fee.
Large

A

36 mil - 1 bil
36000

329
Q

from 1 April 2023, AML levy payable, for regulated entities (accountants, solicitors, banks and insurers) fixed fee.
v large

A

> 1 bil
250k

330
Q

Benefits of MTDfB

A

Record keeping software- keep on top of business finance on move
digital tax account - use info from record keeping software
digital tax - tax info in real time
set up employees and register new services digital tax account
HMRC helps with interactive guidance
Can choose to make single quarterly payment to cover self assessment and VAT

331
Q

Income to child from gift from parent > £100

A

treated as parent income

332
Q

Exempt income?
Interest on national saving certificates?

A

Yes

333
Q

Exempt income?
ISA income

A

Yes

334
Q

Exempt income?
Betting, lottery and premium bond

A

Yes

335
Q

Exempt income?
Social security benefit (housing, child)

A

Yes

336
Q

Exempt income?
First 7,500 from gross annual rent from letting under rent a room scheme

A

Yes

337
Q

Exempt income?
Scholarships

A

Yes

338
Q

Exempt income?
Income tax repayment interest

A

Yes

339
Q

Exempt income?
Universal credit

A

Yes

340
Q

Exempt income?
Apprenticeship bursaries paid to care leavers

A

Yes

341
Q

Exempt income
Payments made under compensation schemes

A

Yes

342
Q

Gifting assets - amount deducted is

A

MV of shares/securities at date of disposal+
incidental costs of disposing -
consideration given in return -
value of other benefits received by donor

343
Q

Qualifying shares ?
-listed/dealt on recognised stock exchange?

A

Yes

344
Q

Qualifying shares
Units in authorised unit trust?

A

Yfes

345
Q

Qualifying shares
shares in open-ended investment company

A

Yes

346
Q

Qualifying shares
Holdings in certain foreign collective investment schemes

A

Yes

347
Q

Interest payments deductable from total income when

A
  • buy plant/machinery for partnership or employment
  • to buy interest in close company (ordinary shares) or lending
  • To buy shares in employee controlled company
  • to invest in partnership (borrower be partner)
  • Buy shares /lend to cooperative (work for them)
  • to pay inheritance tax
348
Q

What is a money purchases scheme

A

value of pension depneds on value of the investments in the pension scheme at the date you set aside funds to produce these benefits.

349
Q

Disallow for rental car

A

15% lease amount if emission > 50g/km

350
Q

Disallow/allow
Donation to big charities

A

disallow

351
Q

Disallow/allow interest on overdue tax

A

not deductable

352
Q

Disallow/allow
entertianing customer

A

not deductible

353
Q

Deductible/not deductible
pre trading expendtiure

A

Yes - deemed to be incurred on first day if incurred within 7 years of starting date of trade and would have been deductible if incurred in trade

354
Q

Fixed rate deduction - deduction for car / goods vehicle

A

45p . mile 10k miles 25p after

355
Q

Fixed rate deduction for motorcycle

A

24p/mile

356
Q

Monthly fixed rate deduction for home for business

A

25 - 50 hours = 10
51 - 100 = 18
101 + hours = 26

357
Q

Business premises partly as home, add back based on occupant:

A

1 = 350
2 = 500
3+ = 650

358
Q

When is change of accuonting date accepted

A

first 3 years of business
Notify HMRC of change by 31 jan after tax year, POA not greater than 18 months, no previous change in last 5 tax years unless genuine groudns

359
Q

Special rate pool WDA for 12 months

A

6%

360
Q

Special rate pool includes
Long life assets?

A

Yes

361
Q

Special rate pool includes thermal insulation of buildings

A

Yes - not residential property

362
Q

Special rate pool includes integral features

A

Yes

363
Q

Special rate pool includes solar panels

A

Yes

364
Q

Special rate pool includes cars

A

Yes if CO2 > 50g/km

365
Q

Integral feature
Electric systems?

A

yes

366
Q

Integral features
cold water system?

A

Yes

367
Q

integral feature
space/water heating system, powered ventilation system, air cooling/purification, ceiling comprised in system

A

Yes

368
Q

Integrall feature
lift/escalator/moving walkway

A

Yes

369
Q

Integral feature
external solar shading

A

Yes

370
Q

SBA Qualifying structure
Offices

A

Yes

371
Q

SBA Qualifying structure
Retail and wholesale premises

A

Yes

372
Q

SBA Qualifying structure
Factories

A

Yes

373
Q

SBA Qualifying structure
Warehouses

A

Yes

374
Q

SBA Qualifying structure
Hotels

A

Yes

375
Q

SBA Qualifying structure
Care homes

A

Yes

376
Q

SBA Qualifying structure
Roads, walls, bridges and tunnels

A

Yes

377
Q

SBA Qualifying structure
Residential property or building functioning ass dwelling (student/military accommodation/prison)

A

No

378
Q

SBA Qualifying expenditure
Construction cost/acquistion cost (if bought from developer)

A

Yes

379
Q

SBA Qualifying expenditure
Cost of land

A

No

380
Q

SBA Qualifying expenditure
Cost of planning permission

A

No

381
Q

SBA Qualifying expenditure
Fees

A

no

382
Q

SBA Qualifying expenditure
Stamp duty

A

No

383
Q

S83 Losses - carry forward

A

Carry forward
set against future trading profit from same trade
carries forward until used/cease to trade
automatic, cannot restrict use to preserve PA
agree amount of loss within 4 years of end of tax year in which loss arose

384
Q

S64 Loss - current year and or prior year

A

Current year and or prior year
Set against total income (SI, SI and Div)
limited to current and prior year
optional, but all or nothing can be claimed in one or both years, and set off in any order

385
Q

S261B Losses - TCGA - relief against gains

A

Set against gain before other capital losses,
limited to current and or prior year (offset using s64 in first year of gain)
Max loss v gain is lower of unrelieved trading loss/CY gains - CY capital losses and B/F Capital losses

386
Q

S261B TCGA Conditions

A

Maximum loss v gains is lower of
unrelieved trading loss or
CY gain - CY capital losses and BF capital losses

387
Q

S72 loss in first four tax years

A

Set against total income
carry back to prior 3 years on FIFO basis
optional, but all or nothing

388
Q

S.89 terminal loss relief on cessation

A

Set against trading profit from same trade
carry back to prior 3 years on LIFO basis
optional but all or nothing

389
Q

S64 claim dates

A

within 12 months from 31 jan followign end of tax year in which loss arose

390
Q

s261b claim dates

A

within 31 months from 31 January followign end of tax year in which loss arose

391
Q

S71 claim dates

A

within 12 months from 31 January following end of tax year in which loss arose

392
Q

s89 claim dates

A

within 4 years of endow last tax year in which business operated

393
Q

S64 income restriction

A

higher of £50,000 or 25% of ani

394
Q

S72 income restriction

A

higher of 5000 or 25% of ANI

395
Q

S64 non-active trader restriction

A

Max 25000

396
Q

S261b TCGA non active trader restriction

A

max 25000

397
Q

S72 non active trader restriction

A

Max 25,000

398
Q

Long life asset if

A

When new working life > 25 years, and total expenditure on this kind of asset is greater than £100,000 in the 12 month accounting period, pro rate shorter periods and 51% related companies

399
Q

Tax evasion definition

A

Illegal suppression of information or deliberate provision of false information

AA (6 decks)

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