Tax Flashcards
1
Q
Two types of profits businesses can make
A
Capital - 🗽one-off go up in value. used to help business trade. e.g. office building
Income - recurring or incurred so can sell at profit e.g. rent
(Capital = money invested or available to be. Income = flow of money.)
(think of it like income is safe capital not as much)
2
Q
First step in tax calculation for unincorporated and incorporated?
A
Calculate total income (trading profits)
in same way for both
3
Q
What are trading profits and how are they taxed?
A
Money business gets from trading
Goes towards income profits
(which is taxed at income rate for unincorporated unless corp partner, or otherwise corporation tax)
Calculate pretty much same way for both
4
Q
How are trading profit/loss calculated?
A
Chargeable receipts (ie sales)
MINUS
deductible expenditure (ie expenses occur on regular basis - salaries, stock, rent etc))
MINUS
capital allowances
Chargeable receipts = money received for goods/services. must be income (recurring).
Deductible expenditure (i.e. not capital, legal, wholly and exclusively)
Capital allowances = stuff need to carry out business (not sell) minus WDA
5
Q
What is deductible expenditure - including examples?
Would food count?
A
Income nature. Incurred ‘wholly and exclusively’ for the trade and legal to deduce (not some lease cars and client entertainment).
Wholly and exclusively:
- strict interpretation, must not have dual purpose
- e.g. not food cos need to eat regardless
Can deduce expenses where can have identifiable deductible proportion:
- e.g. lighting tax payer WFH
Examples:
- Salaries (as long as not excessive)
- Comm prop rent
- Utility bills
- Stock
- Contributions to pension scheme
- Interest payments on borrowing
6
Q
What counts as capital allowance?
what is pooling?
A
Plant and machinery - i.e. essential capital for carrying out business
(e.g. computers)
MINUS WDA
i.e. 18% of the value of all the POOLED plant & machinery
- valued at start of f/year.
(nb u do overall calc at end of f/y)
(once minus WDA from it, that is written down value)
Since pooled:
- if sell one, deduct proceeds of sale from value
minus the small number not the big one ! deduct 18% not the reduced value.
7
Q
AIA - what is it and who can use it?
A
Annual Investment Allowance
Deduct from chargeable receipts
Max of £1m each year
Group companies receive one for whole group
Incorporated and unincorporated
New, old and refurbed
MUST HAVE PURCHASED IN THIS ACCOUNTING PERIOD
8
Q
Full expensing - what is it, who can use and its limits?
A
Companies
Offset full cost of plant and machinery from chargeable receipts
Uncapped
Brand new items only
Still get back WDA 18%
Remember this particular period
9
Q
When would you use AIA instead of full expensing?
A
Unincorporated business
Or incorporated business but second-hand or refurbished items
10
Q
What order do you figure out capital allowance for plant and machinery?
A
Existing pool (if is one) gets 18% WDA
If there is full expensing allowance, all covered and no need for 18%
If there is AIA of £1m and some remaining, the balance receives 18% WDA
If neither AIA or full expensing applies, just 18% knocked off all of it
(remember to subtract the 18% - dont think this is right!)
(may need to add together new and old then re-do WDA if there is - depending on what the Q is)
come back to examples of this
11
Q
If unincorporated and suffer trading loss, what can remedies do and what can you do if entitled to multiple?
A
As long as taxpayer, reliefs allow to deduct trading loss from other income - meaning less income tax overall
Can choose which relief to apply
If exhausted one relief and still losses, can use another
12
Q
What are the different reliefs available to unincorporated?
A
- Start-up loss relief
- Carry-across/one-year carry-back relief
- Set-off against capital gains
- Carry-forward relief
- Carry-back on terminal trading loss
- Carry-forward relief on incorporation of business
13
Q
Are there caps on reliefs?
A
Start-up and carry-across/carry-back: cap of 50k or 25% of taxpayer’s income in relevant tax year
Only applies to income from sources other than the trade which produced the loss
14
Q
When is start-up loss relief available?
A
Whenever suffer loss in first 4 tax years
Set loss against their total income in three years before the tax year of loss (e.g. salary and rental property - set against combined income)
Can use against income from former job
to claim back tax if paid at higher rate cos it reduces the amount deemed to have had as income
15
Q
What is carry-across/carry-back relief?
Conditions attached.
As applies to unincorporated.
A
Total income only. May lose personal allowance. Options to how apply.
Applies to tax year (not accounting period).
4 options:
If trading loss, can:
1. Set the loss against total INCOME from that tax year; or
2. Set against total INCOME from tax year BEFORE year of loss (carry-back).
If income low enough:
3. set against total income from SAME tax year until that is reduced to zero, and set balance against total income for tax year preceding year of loss; OR
4. set against total income from tax year PROCEEDING year of loss until that is reduced to zero, and set balance against total income from tax year of loss
If total income reaches zero, can’t claim personal allowance.
16
Q
What is set-off against capital gains?
when can u use?
A
Relief unincorporated
Set off losses against chargeable capital gains in same tax year (diff to others which are about income)
Can use if not all loss absorbed from carry-across relief
17
Q
What is carry-forward relief?
As applies to unincorporated.
A
Carry losses against subsequent profits which they will get in subsequent years.
Earlier years first but carry forward indefinitely until loss exhausted.
Carries forward indefinitely so doesn’t matter if few years until makes the profit.
But if more than four years go by and still carrying it forward, need to tell HMRC
4 letters in carry. 4 letters HMRC.
18
Q
Advantages and disadvantage of carry-forward relief?
A
:) Retain personal allowance benefits
- as applies against company profits only, not total income
:) if can carry across in future, would reduce total income = lower tax band
:( pointless if doesn’t make any profits in future
19
Q
Disadvantage of start-up, carry-across and carry-back relief?
A
Lose personal allowance benefits because losses are set against total income
Where this is reduced to zero, lose personal allowance
(this is bcos you have to offset against your total income - inc your personal allowance- til it reaches zero)
ur offsetting personal allowance
so only one retain personal allowance for is carry-forward. only an issue for others if losses set to zero.
20
Q
What is carry-back of terminal trading loss?
Why would you do it and what are the limits?
NB: as applies to UNINCORPORATED
A
Any loss incurred (unincorporated) in final (insolvent) 12 months can be carried across and set against trading profits from final tax year
can carry-across despite being loss because can apply against other soruces of income which are connected to trade but not profits of trade
And then carried back and set against trading profits in the 3 years preceding the year of loss (start with year before loss) until absorbed or 3 year limit reached
No limit on amount recover
May get a tax rebate because profits from previous years reduced
Only applies to trading income
not capital gains or non-trading income - e.g. holiday cottage
21
Q
What is carry-forward relief on incorporation of business? When can you get it?
A
if u are unincorp business owner and transfer your business to a company
and in return you get 80%+ of shares in the company
you can set any trading losses u made whilst unincorporated against income received from the company
^ usually dividends / salary
No cap.
Carry forward indefinitely but 4 years need to tell HMRC
22
Q
Input vs output tax and what does HMRC get?
A
Output = charged
Input = paid
HMRC gets output minus input
(e.g.I paid 10k VAT and charged 5k VAT - I would pay HMRC £5,000 and £5,000 would come from input tax i think)
(and then if i paid more input tax than charged output tax, i would get a rebate)
i.e. if input greater than output, rebate.
23
Q
What’s a taxable person?
A
The person who makes or intends to charge tax because supplying goods/services where it is chargeable
85k plus
24
Q
What is the value of supply?
A
What it would be worth without VAT
25
If registered for VAT, what must you do and what must you pay/when?
Register for VAT and submit tax return
Pay VAT owed to HMRC **within one month** from end of each quarter
(owe the output minus input)
26
What if you have paid (input) more than you have charged (output)?
Rebate
27
Why better to be zero-rated than exempt-supplier?
Exempt-supplier CANNOT register so CANNOT reclaim VAT
Zero-rated can reclaim (e.g. book and water)
check children's books
(zo lucky g syndrome) (she can RECLAIM her power from SP!)
so i don't charge VAT and if i incur it, i can reclaim
but if i'm exempt, i don't charge it but if i incur it, i don't get a rebate from HMRC
28
Who must register for and charge VAT?
Why would you register even if don't need to?
Disadvantages of registering?
Must if value of taxable supplies in last 12 months exceeded 85k
Because only registered can reclaim input tax paid
But competitors who aren't registered don't need to charge VAT
29
Does a partnership need to register for VAT in name of individuals?
No - can do in partnership name (unlike for most other taxes)
30
What should your invoice look like if charging taxable supplies?
Tax invoice containing:
- VAT number
- Value of supply (without VAT)
- Rate of tax charged
31
Penalties for failure to comply with VAT legislation?
Criminal and civil penalties
AND requirement to pay unpaid plus interest
32
Who pays income tax?
Individuals (over certain threshold, sole traders considering trading profits)
Personal representatives (deceased's)
Trustees (income of trust)
Partners (by applying trading profit calculation on their share of profits unincorporated partnership)
33
Three categories of income and are they all taxable
1. NSNDI (non-savings, non-dividend income - everything else)
2. Savings income (e.g. interest on bank account)
3. Dividend income
Yes
34
How to calculate income tax payable?
(individual's tax due)
1. Calculate total income
(adding diff ones together/considering any trading loss relief/deductions at source)
2. Deduct any tax relief (e.g. interest on qualified loans)
(1 minus 2 = net income)
3. Deduct any personal allowances (minus £12,570)
= Taxable income
Then minus savings and dividend income
4. Work out what is NSDNDI, savings and dividend income and work out what tax is owed on them each
5. Add together tax from step 4
= income tax owed
35
What forms of income can you be made to pay income tax on/go towards total income?
1. Trading income (profits from trading)
2. Property income (rental)
3. Savings / investment income (e.g. interest received and dividends)
4. Employment and pensions (inc sick/maternity pay etc) (salary should be treated as gross - i.e. before employer sorts tax)
36
Examples of income which not charged tax on/doesn't constitute total income?
Interest on damages for personal injury or death
Interest on savings certificates
Some state benefits
Premium bond winnings lol
Income from an ISA
37
Why should rental income be treated differently when working out total income?
Only charged on profit as permitted to deduct expenses (e.g. repairs)
38
When is tax deducted from source (income) and when is it not?
Employment stuff = deduction at source
Savings interest and dividends (and rent etc.) = paid gross tax later
39
What are qualifying loans?
Examples of what isn't a relief?
(step 2)
**Interest** payments on qualifying loans, inc:
- buy share/loan/contribute to **partnership**
- invest in **close trading compan**y
- a **loan** to PRs to pay inheritance tax
(PRs can deduct that interest from income)
Usually minus interest owed from total income (e.g. interest in overdraft or credit card interest)
(close trading = controllled by 5 or less shareholders or controlled by all director-shareholders)
(cap on partnership one for whichever highest - £50k or 25% of their total income minus pension contribution but only if that income comes not from relevant trade)
40
Order for personal allowance / how it's set against income?
1. NSNDI
2. (anything left so under threshold), savings income
3. (anything still left) dividend income
41
Can you carry forward unused personal allowance (i.e. that far underneath the limit) to next tax year?
No, unless marriage allowance applies
42
How does personal allowance operate for those earning over £100k?
£125,140 or more: no personal allowance
Over £100,000 and below £125,140:
Personal Allowance = £12,570 – [__]
^ [ (net income – £100,000) / 2 ]
Round up to nearest £1
43
What are the other types of allowance applicable at step 3?
1. Marriage Allowance
- transfer up to ***£1,260*** of remaining personal allowance to partner unless they are higher / additional rate taxpayer
(1 son, 2 of them, 60 y/o).
2. Blind Person's Allowance
(works like a PA. £2,870)
3. Property and trading allowances
- if receive gross property or gross trading income below £1k, no income tax or tax return required
(if over £1k, can take £1k allowance against gross income instead of deducting actual expenses to arrive at taxable income figure)
4. Personal savings and dividend allowances
(dividend = first £1k of dividend income tax-free)
(personal savings - e.g. interest in bank account - = £1000 if basic rate/£500 if higher rate/none if additional rate)
44
Personal saving allowances - eligibility and rates
Basic rate taxpayer: first £1k of savings income tax free
Higher rate (£37,701 - £125,140): First £500
Additional rate (£125,140) = not eligible
(this is why interest on bank account don't usually pay tax unless rich)
45
What forms of allowances are and are not nil-rated? What does this mean?
PSA and dividend allowance - 0% tax due (nil rate)
Personal allowance - is an exemption
One is an exempt from tax and one is just 0%
Means zero rated ones you have to pay more tax on
(cos you are still paying the base amount, just not paying tax on it, whereas if it's exempt it's completely knocked off)
46
Order of taxation (income)
1. NSNDI
2. Savings
3. Dividends
(makes sense - encouraging investment in companies so tax that last)
(we still care about savings but not as much as investment)
Nelly Silly Dra
NSD
47
Tax RATES for dividends, interest and NSNDI
(inc income for each rate)
*** luce ! imp *
NSNDI:
Basic rate (> 37.7k): 20%
Higher rate (^ - £125,140): 40%
Additional rate (£125,140+): 45%
SAVINGS:
Starting rate (> 5k): 0%
Basic rate (^ - £37.7k): 20%
Higher rate (^ - £125,140): 40%
Additional rate (£125,140+): 45%
DIVIDENDS:
Ordinary rate (>37.7k): 8.75%
Upper (^ - £125,140): 33.75%
Additional (^+): 39.35%
48
How to calculate tax on PSA and savings income?
Add any PSA to the taxable NSNDI - tax that at the relevant rate
Then charge any remaining taxable savings income at the relevant rate
(add PSA to NSNDI instead of savings income cos pushes to higher tax bracket)
49
How to work out tax rates for dividends?
Minus whatever dividend allowance is (usually £1k) from the dividend income and then tax whatever's left
50
How to work out tax rates for savings income?
Add the PSA to the taxable NSNDI, but it won't have any tax it's zero percent - so may as well assume it's not there (even though it is, but it's being taxed at zero, so not actually part of the NSNDI's taxable income)
51
When does income tax year run?
Will this be same as sole trader's accounting period?
6 April - 5 April
Sole traders can choose one to suit their business - won't necessarily be same
52
What to do if a business's accounting period doesn't coincide with the tax year? What types of businesses does this apply to?
* check w Dad*
Ok i get it. Sole traders - when assessing how much income tax they owe - their profits and losses are based on the tax year (6 April - 5 April). NOT their accounting period.
Profits and losses apportioned between the different tax years.
All businesses (inc sole traders/partnerships)
Means when a sole trader is paying income tax, assess it based on the proportion of profits and losses for that tax year - regardless of when their accounting period is.
53
How to calculate income payable by partner in an unincorporated partnership? (actually not too bad)
1. Work out trading profit / loss
2. Share based on agreement / PA (what is paid first and percentages for each)
3. Put that on tax return (if profit)
54
How is income tax calculated for partners in partnership who are retiring or joining?
*check with Dad*
Apportion profits and losses across the diff tax years if business' accounting period doesn't coincide
e.g.
George's tax liability will be limited to profits which he has received from the partnership from the date he joined until 5 April 202X, which is the final date in the income tax year.
55
How is LLP treated for purposes of income tax?
Same way as ordinary partnership
Availability for relief of trading loss restricted sometimes
56
Tax implications for shareholders
1. Share buyback:
- probably pay as income tax on the money received
- may need to pay CGT if made profit
2. Income tax relief
A) buy ordinary shares in a close trading company
B) EIS: can deduct a sum equal to 30% of amount invested in qualifying unquoted companies
- max of £2m spent investing
- must not be connected to company.
(so say spent £50k on those investments, can deduct 30% of 50k from income tax liability)
3. Close company makes a loan to shareholder and company writes it off
(see later)
*close company is a company controlled by:
- 5 or less participators, or
- any number of participators if they are all directors or shadow directors. (all director-shareholders)
- participator is cose relative or business partner. control is over 50% VRs.*
57
What tax do lenders pay on interest received for a loan?
Non-company lender: income tax
(even though it's interest)
Company: corporation
58
Employees - what is taxed and what isn't
Most things:
CHARGEABLE:
- non-cash benefits
e.g. company car/gym membership
- bonuses
Not chargeable:
- employer's pension contributions, if to HMRC approved scheme
- deductible expenditure
*necessary except travelling expenses and pension contributions*
**own pension contributions are deductible**
- low rent / rent free accom if necessary perform job / customary
- special rate loans
- share schees
- First 30k dismissal
59
When and how would you do self-assessment of tax?
How long to notify HMRC that got income which is liable to tax? Implications if don't.
Not deducted at source (e.g. rental)
Declare on tax return.
State any income tax already deducted from source.
MUST NOTIFY HMRC by 5 October and file tax return.
- Penalty = fine.
(following end of tax yr)
60
When must tax returns be filed?
What payments should be made/when?
How to calculate those payments?
Online tax return: 31 January following the relevant tax years end
Paper return: No later than 31 October
Make two payments on account:
1. By 31 January within the tax year
2. By 31 July after the tax year
Any balance on next 31 January
What estimate would be half of tax liability based on previous year's accounts
(can claim reduced payment if think this would be overpaying)
Reduced of any tax deduced at source (e.g. salaries)
No payment on account required if that takes it below a certain limit (so most employees/pensioners don't have to)
61
Penalties for unpaid tax on due date (inc part-payment on account)
Interest charged
Fines
62
when will GAAR care?
what will happen?
abusive tax arrangements
(tax avoidance fine)
^ if one of main purposes of it was tax advantage
not reas regard reas course action
contrived / abnormal steps
HMRC require just and reas tax adjustments
^ if dispute = PANEL
(not tribunal)
enabler can be liable to pay penalty
(not individual employee but firm)
63
What are qualifying loans and examples?
one where the capital amount has been used for a qualifying purpose
- to buy share in/loan/contribute to partnership
- to invest in close trading company
- to personal representatives so they can pay inheritance tax
64
Tax rates
12,571 - 37,700: 20%
37,701 - 125,140 - 40%
125,140.01+ - 45%
65
What is chargeable gains tax payable on?
CHARGEABLE GAINS made by a chargeable PERSON on the disposal of chargeable ASSETS in tax year
(6 April - 5 April)
66
Who are 'chargeable persons'?
(for chargeable gains tax)
- All individuals (regardless personal capacity or sole trader)
- PRs when dispose of a deceased's assets
- Partners when dispose of chargeable asset
(each partner charged seperately and for their proportion of their gain)
- Trustees when dispose of chargeable trust property
CHARITIES ARE EXEMPT
Companies do not pay CGT!
67
What is a chargeable asset?
'All forms of property'
Includes:
- debts
- options (e.g. to purchase land)
- incorporeal property (INtangible - e.g. INtellectual property)
Does not include cash if in GBP
68
What are the 5 steps for calculating chargeable gains tax?
1. Identify disposal of a chargeable asset
(by chargeable person)
2. Calculate the gain made
(i.e. sale price less its purchase price less any deductions)
3. Any reliefs?
4. Add together all gains and losses, deduct annual exemption
5. Apply the correct tax rate
69
Annual exemption for chargeable gains tax?
£6,000
70
What are the standard tax rates for chargeable gains?
Basic rate - 10. Higher rate 20%. Add 8% if resi.
----
Add together taxpayer's capital gains and taxable income:
- up to and including £37,700: 10%
- £37,701+ - 20%
(e.g.
annual income of 32k. would do 37,700 - 32,000 = £570. tax that amount at 10% and remainder of capital gains at 20%)
(if were told they are basic rate - just do 10%)
(if told higher rate - just do 20% - it's not like you have a certain amount up to 10% - would all be 20%)
71
What is the difference in tax rate for chargeable gains on residential property?
If the residential property is not main residence, surcharge of 8%
(e.g. any gains below basic rate threshold would be 18% - normal rate of 10% plus 8% surcharge)
72
Difference in tax rate where business asset disposal relief applies, and for what form of tax?
Chargeable gains tax
Tax rate capped at 10%, regardless of taxpayer's income
73
What happens if a taxpayer has some capital gains which are subject to business asset disposal relief and others which aren't?
Business relief at 10% added to income first
Other gains will be treated as top slice of their income and therefore more likely to be taxed at higher rate
*example would be helpful
yep i get u so if you have some in higher and some in basic. the BADR would take up some of that.
74
What is the chargeable gains tax rate for trustees and PRs?
All at 20%
Or 28% for residential property (because of the surcharge)
75
Does chargeable gains tax apply to gifts? Explain how it would/who would pay.
Yes.
Chargeable to the person who gifts.
Consider the market value of the asset at the time of the gift.
E.g.
- market value of £500,000
- purchased for £313,000
Gain of £187,700
76
Is a disposal of only part of an asset chargeable to CGT?
Yes
77
What is probate value?
Value of an asset at time of death
78
When someone dies, is there a charge to CGT on any gains made?
No
PRs deemed to acquire at probate value (i.e. market value at time of death)
e.g. die owning office building worth £180,000, bought for 100k, the gain is wiped out and no CGT)
79
How to calculate the CGT gain?/step 2.
What do you need to subtract from what?
Subtract the following (in any order) from sale price (or market/probate value):
1. Initial expenditure
- on acquiring the asset
(e.g. legal fees/conveyancing/stamp duty)
- cost price obvs (or its market/probate value if gifted or inherited)
- wholly exclusively incurred in providing the asset
e.g. cost of building (Mac!)
2. Subsequent expenditure
- wholly and exclusively incurred in defending the title
e.g. boundary disputes
- wholly and exclusively incurred in improving value
e.g. extension/renovations
NOT normal maintenance/repairs/insurance
3. Incidental expenditure
- costs associated with SALE
e.g. legal/estate agent fees
80
What is indexation allowance for purposes of CGT? When does it apply and how much for?
Only used if a CGT payment was deferred by using rollover or hold-over reliefs before April 2008 and assets owned between 1982 and 1998
*(changed the law so u don't get it now for CGT but do for corp tax)*
To calculate:
- apply to initial and subsequent expenditure the percentage increase in Retail Prices Index from the date the expenditure was incurred to the date of disposal of the assets (or, if earlier, April 1998)
*hard - see OneNote instead
*tbhi think ignore and just use corp indexation notes
81
What are the main CGT reliefs and who are they most relevant to?
Smaller businesses
1. Rollover relief on replacement of business assets
2. Rollover relief on incorporation of a business
3. Hold-over relief on gifts
4. Business asset disposal relief
5. Tangible moveable property
6. Private residence relief
7. Damages for personal injury
82
Explain rollover relief on replacement of business assets?
(who can use it, how does it work, conditions and what is the benefit of it?)
Allows sole traders and partners to sell certain assets (qualifying business assets) without paying CGT, provided they reinvest the proceeds of sale into other qualifying business assets
Will have to pay tax eventually, but the charge to CGT is postponed until disposes of new asset
83
What counts as qualifying business assets for purposes of rollover relief on replacement of business assets?
What is it usually and what doesn't count?
Mainly land, building and goodwill. Not shares.
**nb not goodwill for incorp**
Must be used for trade rather than investment.
Fixed plant and machinery
(but sale usually results in a loss anyway as they are wasting assets)
if asset is **moveable**, unlikely to be fixed.
84
Who can claim rollover relief on replacement of business assets/in what circumstance?
Qualifying asset **disposed** of and was **owned** by AND
used in trade of:
- sole trader
- partnership
- individual partner (partnership used in its trade); or
- individual **shareholder** with at least **5%** of voting shares
(and asset used in trade of company got shares in)
85
Rollover relief on replacement of business assets - can you claim the rollover to buy a different category of assets than the one sold?
Yes
e.g. sell qualifying goodwill and rollover gain to purchase of qualifying buildings
86
Time limits on use of rollover relief for replacement of business assets?
Must have acquired replacement asset within 1 year before or 3 years after disposal of the original asset
Unless HMRC allows extended time period.
e.g. I sell property in November 2023. Can use relief if I bought the replacement in November 2022 - November 2026
87
How is rollover relief on replacement of business assets applied?
(inc time limit for acquiring the relief)
(CGT)
Must claim 4 years from end of tax year in which acquire REPLACEMENT
- or if later, within 4 years from end of tax year in which the original asset is sold
Gain is deducted from the acquisition cost of the replacement asset when doing CGT calculation.
Lose annual exemption.
e.g.
- sell workshop for £77,000
- makes gain of £33,000
- replaces with new workshop for £95,000
- rollover means will not pay CGT because the gain will be postponed
- replacement workshop will be deemed to have been acquired for £62,000
- won't be able to use annual exemption
(not an exemption, but a delay on paying the CGT)
:) if gonna come into £$$
88
Disadvantage of using rollover relief on replacement of business assets?
- lose annual exemption
- later disposal of replacement asset is likely to produce a gain, which includes both the rolled-over gain and any gain on the replacement asset itself
(OneNote makes sense of this second point for defo - 6: Examples - Step 3: Reliefs)
89
What is rollover relief on incorporation of a business?
- in what situation does it apply?
- basic effect of it?
e.g. Hayley owns unincorporated business, she incorporates a company which purchases Hayley's business at its market value of £150k in return for 150k shares
(SLP)
individual sells their interest in an unincorporated business in exchange for shares to a company
(even if they intend to then retire/quit - just as long as exchanged for shares)
Gain rolled over into shares which seller receives as consideration for the sale of assets to the company.
CGT charge is postponed.
- Payable by that individual when dispose of the shares.
Encourages people to expand their businesses - as remember SLP - could change business to a company and then pay the CGT when sell the shares (and the business is potentially more profitable).
90
Conditions for rollover relief on incorporation of a business to apply?
- Business must be transferred as a *going concern*
i.e. same business. different owner
- Only relates to aspect of transaction where **CONSIDERATION** is for shares
(if only part of the consideration was shares, only that percentage of the gain could be rolled over)
- person claiming relief (who transferred shares) must not retain any **ASSETS**
(e.g. can't keep the business premises)
91
How is rollover relief on incorporation applied? And do you have to apply for it? How does annual exemption apply?
Deemed to acquire at artificially low cost so as if no gain. Then when you later sell, you deduct that cost. So as if there is a bigger gain during that period than acc is.
Rolled over - would be deducted from cost of acquisition of new shares (applies same as for rollover business assets)
HMRC automatically apply unless you choose not to.
Lose annual exemption.
e.g.
- I am sole trader.
- Decide to incorporate a company (set up a company), which incorporates my sole tradership in return for shares for £150k
- make chargeable gain on disposal of £88k by that sale.
- in some point in the future, when I dispose of shares, only able to deduct 62k (150k - 88k), so I have higher amount to pay CGT on.
92
What is hold-over relief on gifts?
(inc what it is a relief for, who can use it)
Allows INDIVIDUALS to make a GIFT of certain types of business asset o r to sell them at an UNDERVALUE
without paying CGT.
93
Conditions for hold-over relief on gifts to apply?
1. only applies to gifts or gift element of undervalue
2. must relate to business assets:
- assets used in donor's trade
(or interest in if partnership assets)
- shares unquoted trading company
- shares in personal trading company (even if quoted)
(5% of shares)
- assets owned by shareholder and used by their personal trading company
3. if donee is a company, gift can't be shares
4. donee and donor consent to using
5. 4 years from end of tax year of gift to claim
94
How does hold-over gift relief apply?
For donor = deduct gain so no CGT
For donee = reduce gain from market value when received. then calculate gain based on that.
See below if care. Just view the example.
Use market value as (pretend) consideration
Deemed gain is deducted from market value to produce artificially low acquisition cost
When donee later disposes, that acquisition cost (and any qualifying expenditure) is deducted from the sale price or market value (if gifted)
That will be donee's gain & so they will be paying CGT on held-over gain and any gain during their period of ownership
(if donee dies, escapes CGT)
**hard
EXAMPLE:
- MBM gifts Jim to LMM
- At the time, Jim's chargeable assets are worth 212k
- his gain since he bought is 100k
- LMM later sells for 300k
- LMM adjusted acquisition cost is £112k (212k - 100k)
- So pays CGT on 188k
95
Can you still use annual exemption on held-over gift relief?
Yes !
makes sense
- donor has no CGT anyway
- donee has waited to pay it so why not
96
What counts as chargeable business assets for purposes of hold-over relief on gifts? (CGT)
^ Business assets include:
- assets used in donor's trade or their interests in such assets if they are a sole trader or partner whose assets being used by partnership
- shares in a personal trading company (own at least 5% voting shares), which aren't listed on a recognised stock exchange
(AIM is not recognised)
- assets owned by shareholder and used in their personal ( 5% ^) trading company
97
What is the effect of business asset disposal relief?
Lifetime cap?
Rate of tax will be reduced to a flat rate of 10%
(i.e. will not pay more than 10% tax)
Subject to a lifetime cap of £1 million of qualifying gains.
- Once made £1 million of them, any gains over and above will not benefit from business asset disposal relief.
(e.g. sell business for £1.1m, can only claim relief on £1m - pay 20% on rest as higher rate taxpayer)
98
Who can claim business asset disposal relief?
What can they claim it over?
INDIVIDUALS who have made gains on disposal (sale or gift) of certain assets (qualifying business disposals).
Qualifying business disposals include:
1. sale of whole or part of an unincorporated business
2. company shares, inc securities
(nb there are conditions for each type of those interests ^)
99
Explain conditions for business asset disposal relief to apply in relation to sole traders or partnerships?
Where likely use it, conditions and when CAN'T use it?
*imp*
Dispose whole or part of business:
1. Sold business as going concern
2. Business ceased and sold assets AND in use at time ceased.
Individual must have owned interest in business, NOT the assets:
1. 2 years before disposal; or
2. 2 years before cessation, provided disposal within 3 years of cessation.
Assets must be used for business purposes
NOT SHARES, SECURITIES OR OTHER ASSETS HELD AS INVESTMENTS
100
Conditions for business asset disposal relief if disposing shares?
(CGT relief)
Individual must have
1. **5% o**f voting rights (i.e. their 'personal company)
(and entitled at least 5% assets/proceeds on winding up)
2. in a **trading** company
(trading company = not got loads of cash reserves or investments - mainly get money from trading); and
3. **employee or officer**
(shareholder not an officer but director/company secretary would be)
^ all those applied for **2 years** before disposal/ceased trading.
101
Time limit to claim business asset disposal relief?
The taxpayer must claim business asset disposal relief on or before the first anniversary of the 31 January following the tax year in which the qualifying disposal was made
e.g.
- disposed nov 2023 which is now
(this tax year ends 5 April 2024)
- one year after that is 5 April 2025)
^ that tax year ends 31 January 2026.
yeah makes sense
102
______ assets are usually exempt from CGT.
(explain what these are and when they will not be exempt)
**This relates to tangible moveable property. mentally divide into wasting and not wasting.**
Wasting
^ predictable life of under 50 years
most consumer goods e.g. TVs
(good cos maybe loads of people who have things which didn't realise would be CGT e.g. records)
Doesn't include chattels which expect inc in value
e.g. antiques
- exempt if consideration 6k or elss
(not same as allowance)
E.g. antique vase, sell for £5k, exempt (even tho gone up in value)
103
Explain private residence relief for CGT purposes?
(when it will apply/what will be considered/is it a full exemption?)
Exempt
Up to half an acre - after that pay on it (unless can show necessary reas use or something)
Provided main or only residence throughout their period ownership
^ last 9 months of ownership are ignored
104
What type of damages are exempt from CGT?
Personal injury
(other damages or compensation could be)
(think of it as being a very consumer-orientated form of damages so bit tight to charge CGT)
105
Does taxpayer have a choice as to order at which the annual exemption is applied?
Why may they want to do this?
Yes
Use against property
Or other stuff which has high tax rate.
(e.g. choosing to apply the annual exemption to gains that attract the higher tax rates if have gains on multiple disposals which are subject to tax at different rates - maybe bcos different reliefs etc?)
106
Can unused parts of annual exemption for CGT be carried forward?
No never
107
CGT - what reliefs prevent the annual exemption from applying/lose benefit of it from?
**THIS IS WHY WE LOVE BADR**
Rollover relief on replacement of qualifying assets
Hold-over relief on gifts
Rollover relief on incorporation of a business
(but can use for business asset disposal relief)
108
Which CGT reliefs cannot be used in conjunction with each other?
I think just remember that CAN use:
BADR and RELIEF ON INCORP if:
- pay part cash and part shares consideration
- use relief on incorp for shares
- use BADR for cash
------
Usually have to pick
1. Business asset disposal relief can't be claimed with any hold-over or rollover reliefs except incorp sometimes (see above)
2. Annual exemption BADR only
3. Would be no way to use either of the rollovers or hold over together
HOLD OVER. ROLL OVER. SEPARATE.
4. but could use business asset disposal and relief on incorp if:
- newly incorp and part of consideration is cash and part is shares
- use relief on incorp for shares
- use business asset disposal relief and annual exemption on cash
109
Advantages and disadvantages of hold over relief
:) may not have any money to pay CGT since have given a gift
:) recipient may be able to use reliefs when they come to sell
:( lose annual exemption
110
How would you use annual exemption with business asset disposal relief?
Use annual exemption BEFORE applying business asset disposal relief
e.g. reduce by 6k and then tax remainder 10%
111
How to calculate CGT where there is more than one disposal? / What order?
Calculate different categories separate
(as diff rates apply - E.G. resi)
Best practice:
deduct losses and annual exemptions from gains subject to highest tax rates
- so deduct from resi gains first
- then gains on assets which don't qualify for business asset relief
- then gains which do qualify business asset disposal relief
(see OneNote)
112
What happens if taxpayers losses exceed their CGT gains?
Implication of this on annual exemption?
Set losses against gains so have no CGT to pay
Lose use of annual exemption, which cannot carry forward
(but wouldn't lose annual allowance if there is an overall gain but loss on one thing)
e.g. holiday home at surcharge 28% but something else made capital loss on, can reduce the amount of CGT payable on hol home and still use annual exemption)
see one note 6: consolidate
113
What happens if after setting CGT losses against gains, there are still unabsorbed losses?
Any rules around extent you can do this?
Set them against future years gains
Can carry forward indefinitely.
Approach:
1. work out gain or loss on EACH disposal made during tax year
2. deduct any losses from current year
3. deduct any losses brought forward from previous years to reduce to annual exemption
4. deduct annual exemption from remaining gains
114
Do you set losses or annual exemption against capital gains first?
Losses
115
would u use annual exemption for CGT if losses covered it?
Yes
Because you only get one shot for annual exemption, but can carry forward losses indefinitely.
116
If only part of an asset is disposed of, how should initial and subsequent expenditure be factored into calculation of the gain?
(nb expenditure would be on whole of asset - but only selling part)
Apportion it
e.g.
- buy land for 200k
- divide into 4 and sell 1 plot for 100k few years later
(the remainder therefore has value of 300k / it is 100k out of 400k)
- you must use a quarter of the original cost (i.e. 50k) as the figure for the acquisition cost of the part of the land that was sold.
117
What happens if a spouse disposes of an asset to the other for a gain or loss?
And future implications of this?
As long as they live together, deemed to be no gain or loss when dispose to each other
But transferee takes on all the CGT liability
118
When may it be a particularly good idea for spouses to transfer property to each other for CGT purposes?
Bcos they are deferring payment of CGT, if one has not yet used up their annual exemption, transfer to them and they can sell it.
(means essentially have 12k instead of 6k exemption)
Also good idea if one is a higher rate tax payer
(10% instead of 20%)
119
When partnerships (unincorporated) dispose of a chargeable asset, how are they treated as having made the disposal? In terms of each individual partner? Who disposes/pays CGT?
(in terms of which partner owes what)
Treated as if each partner is making a separate disposal of part of the asset
Each partner pays proportion of CGT based on their **percentage ownership of partnership assets**
Unless they have agreed to share CAPITAL ASSETS in a specific way
e.g.
- share capital 25%, 50%, 25% - then one pays half the CGT and others pay a quarter
120
How do you calculate the capital gain made by individual partners in an unincorporated partnership?
Apportion the disposal proceeds and allowable expenditure amongst the partners based on their share of the asset
e.g.
share of ownership:
- partner 1 50%, partner 2 25% and partner 3 25%
- sell office for 300k
- partner 1 taxed on half proceeds (150k), but also entitled to half of any allowable expenditure and half of the acquisition cost
121
How do you decide which CGT reliefs to apply in partnership (unincorporated)?
Choice of individual partner
Might be that one can claim certain reliefs whilst others can't
122
How will LLP be treated for CGT?
Same way as unincorporated partnership
(i.e. share gains/reliefs in proportion to ownership percentages)
HOWEVER
when ceases to trade, may treat as body corporate rather than partnership
123
What situs may partners dispose of assets and CGT become chargeable?
(non-obviously)
1. one partner leaves
- disposal of their individual share
- gain made on that share will be split between partners
(according to how share capital or other agreement)
2. new partner joins
- disposing part of their existing share to new partner.
- and receiving money for it.
e.g. each own one third, new partner joins, now own a quarter, could involve CGT charge as other 3 receive money when new partner joins since paid company for the share.
124
125
when will shareholder be charged CGT for a company buyback of their shares?
will they be eligible for any reliefs (clue; one is diff to what considered before)
Usually income tax on profit.
Charged CGT **INSTEAD** if:
1. Bought by unquoted trading **company**;
2. **Purpose** buyback = raise cash to pay **IHT** or to **benefit** the company's trade (e.g. shareholders); and
3. owned shares for **5 years;** and
4. selling all or reducing shareholding by at least 25% so own a **max of 30%** after transfer
Note:
- if charged CGT: may claim reliefs
- if charged income: can use lower dividend tax rate and dividend allowance
126
When is CGT usually payable?
(as in date)
31 January following end of tax year; or
30 days from making of an assessment, if later.
However if sale of resi, must submit provisional calculation of any gains made from sale and pay any tax due within 30 days of completion
127
How can CGT payment be staggered and what conditions?
Across 10 annual instalments
1. GIFT 🎁
of
2.
a) land
b) controlling shareholding quoted
c) any shareholding unquoted
and
3. conditions for hold over relief don't apply
(then u would be getting grdy already got one!)
If can pay by instalments, first will be due by 31 Jan following end of tax year disposal made in.
128
When should BPR be applied (after death when working out IHT) in relation to spousal / civil partner / charity exemptions?
After
No need if already covered
129
For BRP to apply (nb after death), does the transfer need to have been of the transferor's entire interest in the business or shareholding?
No - transfer could have been for a part of their interest.
NB: BRP is not BDAR - business property relief (thing we did in wills)
130
Will BRP be available if a deceased's shares or interest in a business have been sold?
No
Where entered into contract to sell their business or company, their interest is taken to be in PROCEEDS of sale (which is cash)
And cash is not classed as 'relevant business property' for BPR to apply
(has to be shares or assets etc - remember wills)
So if you've got a shareholders agreement which states if shareholder dies, their PRs WILL sell to remaining shareholds who WILL buy those shares - that is a contract - buying cash - can't use BPR
INSTEAD avoid by giving shareholder an OPTION to sell or purchase
e.g.:
- partners who owned business premises as tenants in common died, no partnership agreement, so it went to their residue
- premises qualified for BPR at 50% and interest at 100%
(but no relief available if partnership agreement requiring them to sell the interests)
131
If property is inherited from a deceased spouse, from when is surviving spouse deemed to have owned property?
When it was originally acquired by deceased (not date of death)
But this rule does not apply to lifetime transfers between spouses and civil partners
132
When does CORPORATION tax financial year run?
Contrast to income tax year?
1 April to 31 March
corp tax is. a joke like 1 april
(remember Jenny has to use up leave by end of March)
6 April - 5 April
133
What are the corporation tax rates?
*IMPORTANT*
Taxable profits / tax rate:
- up to 50k - 19% (standard small profits rate)
- over 50k but not exceeding 250k - tapered between 19% - 25% (marginal rate)
- over 250k - 25% (main rate)
134
How to work out the corporation tax payable if the 'marginal rate' applies?
Corporation tax rate is tapered so that charged at an overall corporation tax rate of between 19% and 25%.
19% to first £50,000
**26.5%** on anything over that
e.g. 50,000 x 0.19 = 9.500
£53,034 x 0.265 = £14,054
9,500 + 14,054 is the amount due
(not super imp and statutory formula beyond book)
135
What are the stages of a corporation tax calculation?
1. Calculate income profits
2. Calculate chargeable gains
3. Calculate total profits and any applicable reliefs
4. Tax at the appropriate rates
I C T T
(income, chargeable, total, tax)
Izzy, Clem, To, Town
136
Explain step 1 in corporation tax calculation?
And what will not count in calculation (clue: which is relevant to companies)?
Calculate income profits (for our purposes, income profit = trading profit)
Chargeable receipts
(received for goods/services)
MINUS
deductible expenditure
(e.g. stock/salaries/pensions)
MINUS
capital allowances
(plant and machinery / relevant allowances)
(same as for unincorporated)
Dividends and payments to shareholders for buyback are NOT deductible expenditure
137
Explain the STAGES of step 2 in corporation tax calculation?
Calculate chargeable gains by:
1. Identify the chargeable disposal
2. Calculate the gain or loss
3. Apply reliefs
4. Aggregate remaining gains or losses
(see OneNote explanation)
138
Explain what can be a chargeable asset for corporation tax purposes?
- same as CGT: usually land, building and shares in other companies
- Must not be part of company's INCOME stream
- Different rules apply for disposal of goodwill and IP
139
How to calculate the chargeable gain or loss for corporation tax purposes?
(stage 2 of step 2 of corporation tax calculation re chargeable gains)
Proceeds of disposal or market value if gift or sale at undervalue
minus
Costs of disposal
= Net proceeds of disposal
minus
Other allowable expenditure (initial and subsequent)
= Gain (before indexation) or loss
Minus
Indexation allowance
= Gain (after indexation)
(try to expand and see OneNote explanation)
140
When calculating gain for corporation tax purposes, what are the rules surrounding sales at an undervalue?
(nb equivalent of a capital gain but for companies)
- If bad bargain and undercharged, actual sale price will be the correct figure (so don't bother with market value)
- If gift element which is why sold at undervalue, market value will be used as the figure
- If sale was to a connected person, use market value
(Connected person = controls the company, either alone or with others)
141
Rules if disposal causes loss for corporation tax gains purposes?
deduct the loss from company's chargeable gains not the income profits
(same as CGT - less to pay on the gain if also made a loss)
142
How does indexation allowance apply for corporation tax?
Does it apply to losses?
Apply SEPARATELY to initial and subsequent expenditure ...
(brings it up to speed as if aws done now!)
the percentage increase in Retail Prices Index from date expenditure was incurred
Then minus that from the gain before indexation to give the gain after indexation
(one note example is genius on this)
Does not apply to losses
Does not apply to costs of disposal either
143
reliefs available to companies on CGT?
explain diff for individuals
Rollover relief on qualifying business assets only
**NOT SHARES/GOODWILL/IP/INVESTMENT ASSETS**
Yes
- Fixed plant and machinery (not movable)
- land
- buildings
acquire 1 year before or 3 years after
144
What tax rate does a company pay if its own financial year is different to the corporation financial year and the corporation tax rate changes from one year to the next?
(corp tax year is 1 April - 31 March)
- if company's financial year is different and the tax rate changes, will pay one tax rate on proportion and new tax rate on rest
(so have to proportion it for the diff tax rates)
145
Reliefs available to COMPANIES for a trading loss?
(nb rollover relief on replacement qualifying assets is for a company re capital gains - here we are wantingrelief in relation to total trading profits)
1. Carry-across / carry-back
2. Terminal carry-back
3. Carry-forward
146
Can corporation tax reliefs be used in conjunction with each other?
Yes - if you use one but still have unabsorbed losses
147
Explain how terminal carry-back relief for trading profits applies for companies?
Use against accounting perido or tax year?
- accounting period
- when cease trading, can carry back trading losses and set against profits from any accounting period 3 years before the final accounting period
- take later periods first
e.g. trading loss in 2023, accounting period ends 31 December 2023, can set against profits made in 2023 and if some remaining, set against profits from 2022, 2021 and 202 only)
148
When must companies apply for carry-across, carry-back or terminal carry-back relief?
2 years from end of accounting period which suffered loss in
149
Explain how carry-forward relief applies for companies?
Tax years vs accounting period? Conditions? Deadline to apply? Maximum can carry forward?
- accounting period
- must continue to trade
- if doesn't meet conditions, can set against profits of same trade
- claim within 2 years end of acc period suffered loss
- can carry fwd INDEFINITELY
- maximum amount claim **£5 million and 50%** remaining total profits after deduction
150
Explain carry-across/carry-back relief as applies to COMPANIES?
Does it differ??
Accounting period:
- Carry across trading loss against total profits in that accounting period
- If loss remains, get this year's profits down to zero and carry-back remainder to the previous accounting period
- If no profits this yr, carry-back only
Conditions:
**Can only carry back to accounting period falling in previous 12 months**
If carrying-back, must be carrying out same trade.
Note: total profits include rental income
151
How does corporation tax apply to goodwill and IP?
What happens if dispose?
Goodwill and IP are intangible fixed assets - capital in nature **BUT treated as income for tax purposes**
Deductible expenditure for income calculation
Disposal - can use rollover on replacement of intangible fixed assets
(defer)
152
What are close companies?
Company either:
- controlled (i.e . over 50% shares held by) by five or fewer participators; or
- controlled by any number of participators who are all directors or shadow directors
Participators are people who own shares or have right to acquire shares
They control if they own more than 50% shares or more than 50% voting power or right to acquire more than 50% shares
(eg have 7 shareholders but 5 people with more than 50% voting rights - controlled company)
(or have 10 but they are all directors)
153
explain loans in close companies
if loan to participator (shareholder) or their associate (close relative / business partner)
must pay HMRC 33.75% of loan
(not tax. that amount of loan. a lot)
deposit - get it all back once loan repaid or written off.
No tax if:
1. ordinary course of money-lending business
e.g. close company is a bank and makes a normal bank loan
2. loan is:
(a) 15k or less
(b) borrower works full-time for co
(c) has 5% max shares
shareholder who uses loan to purchase shares or lend money to the company may be able to claim income tax relief on interest
(from previous chapter)
154
Does participator or associate of close company who receives a loan from it have to pay tax on it?
Only if company writes off the debt
(so the company pays the 33.75%, and the borrower would only pay it if the ocmpnay cancels the loan and says u can have it and dont have to pay us back)
155
What is 'group' relief for companies?
(in brief - what does it do)
- allows company to transfer certain losses and expenses to another company within same qualifying group
- transferee then uses loss or expense to reduce its taxable profit
(set against profits, less tax to pay)
156
What companies are eligible for group relief?
75% subsidiary
directly or indirectly own **75%** shares
E.g.
company A owns 80% of B's shares.
company B owns 80% of C's shares.
- A and B are same group
- B and C are same group
- A indirectly 64% of C's shares
(80 x 80 = 64)
- needs to be 75% so not enough
157
GROUP RELIEF
- what can be transferred?
- conditions?
transfer certain items - income not capital:
- **trading losses**
- management expenses
must have incurred loss in **accounting period which overlaps**
(remember - 75% must have directly or indirectly shareholding)
158
What is a group company for chargeable gains relief?
principal company must be entitled to over 50% profits and assets of subsidiary.
e.g.
B, C and D would be subsidiary of A if:
A owned 80% shares in B
B owned 80% shares in C
Multiply to work out
80 x 80 = 64%
-----------
group must consist of:
- a company
- its direct 75% subsidiaries
- the direct 75% subsidiaries of those subsidiaries
and so on
e.g.
- A owns 80% of B, B owns 80% of C, C owns 75% of D
- A, B and C are all in same group
(A owns at least 75% of B who owns at least 75% of C)
- A effectively owns 65% of C because 80% x 80% = 64%
- However D does not because 80% x 80% x 75% = 48%
(if prefer visual see OneNote)
159
What relief can qualifying group companies use on chargeable gains?
- One company can transfer a chargeable asset to other on a tax neutral basis
- Transferor makes no gain or loss
- If there is a loss, transferee can use to set off against chargeable gains
Means that the company overall pays less tax
160
If a group companies qualifies as a group for capital gains purposes, what other relief is it eligible to use?
Explain
(i.e. principal owns over 50% in subsidiary)
ROLLOVER RELIEF ON QUALIFYING ASSETS
If satisfies rollover requirements, can rollover gain into an asset which ANOTHER company in group has acquired
e.g.
SELL land. 50k CGT.
another company ACQUIRES property for 100k.
They are treated as acquiring at 50k.
( i think )
161
How does the fallowing apply in group companies?
1. VAT
2. stamp duty on transfers of assets between the group companies
- may be able to register for VAT as a group under single registration
- no stamp duty
162
If company has shares in another UK company, does it pay tax on dividends?
- in theory yes
- but in most cases exempt
- otherwise double taxation
(not deductible expense so other company will have paid)
163
If company buys back own shares, how is corporation tax paid?
(nb: if buyback, are essentially paying themselves)
if buyback satisfies CGT rules, profit will be taxed as part of its chargeable gains
if it does not, will be taxed as income
164
Companies notification requirements with HMRC when first start?
**NOTIFY** HMRC of date that accounting period starts
^ do that within 3 months of the acc period starting
After that, every year HMRC will issue a notice to the company requiring it to deliver a self-assessment corporation tax return
165
Deadlines for companies to file self-assessment return with HMRC?
12 months from end of relevant accounting period
166
When must companies pay corporation tax?
For most companies - within **9 months** and 1 day from end of relevant accounting period
Required to pay before files tax return
(ie 12 months after relevant accounting period)
So pay based on estimated tax liability
Then make a balancing payment for remainder or receive a rebate if overpaid
167
What are considered large companies and when must they pay tax?
(nb: most companies pay 9 months and 1 day from end of accounting period)
Annual taxable profits of £1,500,000 or more
4 instalments:
1. 6 months and 13 days after start of the accounting period;
2. 3 months after first instalments due;
3. 3 months after second instalment due; and
4. 3 months and 14 days after end of accounting period.
168
'Very large companies' (lol) - what are they and when must they pay tax?
Annual taxable profits of over **£20,000,000 **
1. **2 months** and 13 days after start of accounting period
2. **3 months** after first instalment due;
3. **3 months** after second instalment due; and
4. **3 months** after final instalment due.
169
compare the diff dates when company must pay tax
all file return 12 months AFTER relevant acc period ends.
*ALL pay before return. make a guess*
1. (most companies)
9 months and 1 day from END of accounting period
2. Over 1.5m profits per year
6 m and 13 days after START ac period,
3 m,
3 m,
3 m and 14 days
3. Over 20 m per year
2 m and 13 days from start ac period
3 m , 3 m , 3 m
170
what type of tax is charged on dividends ?
if individual receives - income tax
(also their share of partnership profits is income tax)
if company receives - corporation tax
(like if a company has shares in a company)
171
when do you get WDA?
Valued as 18% of plant and machinery's value at START of f/year
And you get at END of f/year
172
should you calculate tax together for CGT?
yeah you should aggregate
even tho work out tax seperately
apply exemption to one of the individual transactions
(if there was resi surcharge, would use exemption against that transaction to Bring down overall liability)
Also because if there is a loss to one transaction, even though there is an overall capital gain, you can set that loss against that gain
(again would do against one w highest tax rate - and if there was still a profit, use annual exemption)
rly good example one note 6: consolidate
173
do companies get annual exemption 6k capital gains
no
174
