Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Tax > Tax > Flashcards

Tax Flashcards

1
Q

Exempt income examples?

A

ISAs- Individual saving accounts

NS&I Certificates

Winnings- eg betting lottery, premium bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Non-savings income examples?

A

Trading income

Employment income

Pension income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Investment income examples?

A

Savings income

Dividend income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How much is PA?

A

£12,570

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

ANI formula?

A

(ANI-£100,000)- 50%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

If ANI> £100,000, PA is reduced by?

A

(ANI-£100,000)- 50%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Effective tax rate between £100,000 and $125,140 is?

A

60%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

If ANI>£125,140 what is the PA?

A

0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How much is marriage allowance?

A

£1260

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the conditions for MA?

A

Provided neither person is a higher or additional rate tax payer

MA reduces the PA of the person making the transfer

Cannot be used to generate a tax repayment- can only reduce recipient’s income tax liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

When is MA applied?

A

Right at the end, after normal income tax rate is applied eg 20% or 40%. I.e. remove PA first

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How do you deal with Qualifying Interest payments?

A

Remove it right at the beginning. Before PA. I.e. removing from total income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are qualifying interest payments?

A

Those made my by people in the respect of the following loans:

To buy plant/machinery for use in a partnership in which the individual is a partner, or employment in which the individual is an employee

To buy shares in an employee controlled trading by a full time employee

To invest in a partnership or to make a loan to the partnership where the individual is a partner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are qualifying interest payments?

A

Those made my by people in the respect of the following loans:

To buy plant/machinery for use in a partnership in which the individual is a partner, or employment in which the individual is an employee

To buy shares in an employee controlled trading by a full time employee

To invest in a partnership or to make a loan to the partnership where the individual is a partner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the two ways in which tax relief is obtained for charitable giving?

A

Payroll giving

Donations under the gift aid scheme

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How does Gift aid work?

A

The amount we pay as a gift is actually just 80% and HMRC pay the 20%.

Only higher rate and additional rate payers get their tax band upped by the gift aid amount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How does child benefit tax charge work?

A

People with kids receive child benefit. If one of them has an ANI>£50,000 then they have to pay a part of child benefit back. If >£60,000, all has to be paid back.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Child benefit tax charge equation?

A

Net income- £50,000= Ans

Ans/£100= %

% x child benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Main examples of savings income?

A

Bank and building society interest

NS&I accounts

Interest from gilted edge securities

Interest from quoted company loan stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How to calculate income tax repayable/repayable tax?

A

N,S,D,total

N and S-
if part of £5000, then 0% applied and what ever left in S that makes the £5000.

The nil rate for S depends if taxable income greater or lower than £37,700. If higher then £500 only available. £1000 for lower.

Nil rate is £2000 for dividend income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Whats the maximum amount ISA’s can hold?

A

£20,000 in a mix of different ISAs

22
Q

When do you remove PAYE?

A

Right at the end

23
Q

What should you know about Interest in relation to residential lettings?

A

Finance costs are not deducted from property income.

Relief is given as a basic rate tax deduction from the individuals income tax liability instead

24
Q

Whta is FHA?

A

Furnished Holiday Accommodation- a property has to meet the following conditions:

Let out for 105 days a tax year

Available for commercial letting to public for not less than 210 days a tax year

The property is furnished

Lets on commercial basis with a realisation of profits.

Not let for long term occupation for more than 155 days (when the same person stays in the house for more than 31 consecutive days)

25
Q

How does assets provided to employees work?

A

Assets for private use:

If owned by employer- 20% x MV

Employer rents asset-

Higher of AV or rent paid by employee

1 mobile phone and bicycles exempt. No benefit if priv use insignificant

26
Q

How does gifting assets to employees work?

A

if the employer buys the gift then immediately gives it to the employee then taxable benefit is cost of asset to employer.

If employer lends at first then gifts then its the greater of MV when gifted or

MV first provided-less Benefit already taxed under priv use rules

27
Q

How does private fuel benefit work?

A

=£25,300 x CO2 emissions % (as per car benefit)

No reductions for employee contributions

Time apportion too

28
Q

How does company vans work?

A

Benefit or private use of company vans- £3600

Benefit for zero emission vans=£nil

No benefit where the private use is insignificant.

If employee share private use then - apportion the benefit on a just basis.

Benefit on private use van fuel=£688- No reduction for employee contributions

29
Q

What are the rules for non-job related taxable benefit?

A

Depends on if employer owns it or not.

OWNS- AV and extra charges if extra improvements and house cost >£75,000.

Formula=(Cost - £75,000)x2%

If employer owned house more than 6 years before the employee moved in, use: MV+ capital improvements at start of tax year

RENTS the property-
Higher of AV or
rent paid by employer

30
Q

What are the accommodation related benefits?

A

Furniture= 20% x cost of the furniture when first provided. Benefit arises each year the employee uses the furniture.

IF accommodation is job related then the max is 10% of employees net earnings (Taxable employment income- living accommodation benefits)

31
Q

How does Restriction on reliefs against other income work?

A

We are able to deduct an income from other incomes that arent trading income. This is by either £50,000 or 25% of ATI- whichever is higher.

ATI= total income -gross personal pension contributions.

32
Q

How is terminal loss relief calculated?

A

6th April before date to date of cessation added to 12 months before ceasing to 5th April before ceasing

33
Q

Short lease premium equation?

A

P x (51-n)/50

less than or equal to 50 years

34
Q

Job-related accomodation must be…

A

*Necessary

*Better performance of duties

*To enable better performance of duties and customary to be provided

*Provided for security reasons

35
Q

Non Job-related accommodation-

A

OWNS the property-
AV + (Cost-£75,000) x 2%
Use MV if employer owned property for more than 6 years +
any cap improvements up to start of the tax year

RENTS-
higher of AV
or
Rent paid by employer

36
Q

Living expenses for accommodation - Job related equations?

A

Benefit= Cost to the employer - employee contributions

Furniture= 20% x Cost of furniture when first provided

Maximum benefit= 10% of employees net earnings which is taxable employment income minus living accommodation benefits

37
Q

What are beneficial loans ?

A

The taxable benefit made on a loan from an employer to employee.

No taxable benefit where less than or equal to £10,000 or when interest paid on the loan would qualify for tax relief- eg a loan to buy plant or machinery.

38
Q

How are beneficial loans tax calculated?

A

Average method and strict method.

Av-
Av amount- Loss amount x rate given x time apportion

Strict-
2% ORI used and minus Av loss given etc

39
Q

What is the private fuel equation?

A

£25,300 x CO2 emissions %

No deduction for employee contributions towards cost of fuel.

Time apportion but not for temporary ceassation.

40
Q

Whats the benefit for the private use of company vans?

A

£3600 and fot zero emission vans its £0.

Time apportion if it was unavailable for more than 30 days

41
Q

Whats the benefit on fuel provided for private use in company vans?

A

£688
No reduction for employee contributions towards private fuel costs

42
Q

How does the trading losses of a sole trader work?

A

Cy and prior year claims are usually set against total income.

This total income includes trading income and property income for example. There is a limit of how much other income can be used against a a loss which is the higher of £50k and 25% of ATI.
ATI is Total income- gross personal pension contribution.

Unless ATI is greater than £200k, then the max is £50k

C/f is set against trading income.

There are two special circumstances

43
Q

Explain how opening year loss relief against total income works?

A

Carry back three years FIFO basis against total income.

Within the first four years of trade

Claim within 12 months of end

44
Q

Explain terminal loss relief?

A

Can carry back 3 years on LIFO basis against trading profit.

Happens if loss made in final 12 months to cessation.

6th April bc to C
Add overlap profits

12 months before C
to 5th April before C

Added together gives Terminal loss

Claim within 4 years of end

45
Q

Government securities are chargeable to…

A

income tax but is exempt from capital gains tax

46
Q

Premium bonds are…

A

Exempt from both income tax and capital gains tax

47
Q

Small businesses can elect to use the cash basis accounting system rather than the accrual basis. What are the requirements for this?

A

Cash receipts for the tax year are less than or equal to £150,000 and must stop using the basis once the its greater than £300,000

47
Q

Tax adjusting trading profit?

A

Net profit per accounts
Add:
Disallowable expenditure
Expenditure allowable for tax purposes
Taxable trading income not credited in the accounts

Less:
Expenditure not charged in the accounts but allowable for tax
Income included in the accounts that is not taxable trading
Capital allowances

=Tax adjusted trading profit

48
Q

What is an appropriation?

A

Withdrawal of funds from a business’s profits by its owner. These are disallowable expenditure.

Common examples are:
- Business owner’s salary
- drawings made by a sole trader/partner
-any private element of expenditure (e.g. private use of a car or mobile phone by the sole trader)
- excess payments made to the sole trader’s family member employees.

Interest on late paid tax disallowable but interest on borrowing for purposes for trade is allowable.

49
Q

What’s added back to capital expenditure?

A

-depreciation
-loss on sale of non-current assets
-cost of capital assets included within repairs and maintenance
-capital related expenditure included within legal and professional fees

50
Q

What is allowed or not allowed with repairs and maintenance?

A

-repairs and maintenance are allowed costs.
-improvements/enhancements are capital expenditure and therefore disallowed
-expenditure required to bring an asset into a useable state is capital expenditure and therefore disallowable
-if the whole asset is replaced the expenditure will be treated as capital rather than a repair

51
Q

What assets are exempt from capital gains tax?

A

Cash
Cars
Gift edged securities and qualifying corporate bonds
NS&I Certificates
Premium bonds
Prize & betting winnings
Assets held in ISAs
Trading inventory
Receivables
Wasting chattels

Tax (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions