Tax Flashcards
What are the 4 types of tax?
1) Income tax
2) VAT
3) NIC
4) Capital Gains Tax
What are the dates of the tax year for individuals?
6th April 201X to 5th April 201Y
What are the dates of the tax year for companies?
1st April 2016 to 31st March 2017
What are the 4 responsibilities of HMRC (apart from collecting Tax)?
1) Pay and administer universal credit/tax credit/child benefit
2) Collect repayment of student loans
3) Ensure employers meet minimum wage rules
4) Customs
What legislation is responsible for taxation?
Finance Act
What are statutory instruments?
Laws that do not need to be debated in parliament
What is case law?
Law that has been set by precedent
What are the 5 types of chargeable income?
1) Employment income
2) Trading income
3) Property income
4) Savings income
5) Miscellaneous Income
What 6 types of income are exempt income?
1) Interest on National Savings Certificates
2) Income from ISAs
3) Lottery etc
4) Housing and Child benefit
5) Scholarship
6) Income tax repayment interest
How much is the basic personal allowance
£11,000
What is the Basic Rate Band amount?
£5000 - £32,000
What is the Basic Rate Band tax for non saving income %
20%
What is the Higher Rate Band amount?
£32,000 - £150,000
What is the Higher Rate Band tax for non saving income%
40%
What is the additional rate band?
Above 150k
What is the additional rate band tax % for non saving income?
45%
What is the Basic Rate Band tax % for dividend income?
7.5%
What is the Higher Rate Band tax % for dividend income?
32.5%
What is the Additional Rate Band tax % for dividend income?
38.1%
If you want to carry back a gift aid payment to last year (15/16), when is the deadline?
31st January 2017.
In order for a living accommodation to be treated as job related, it needs to meet one of at least what 3 conditions?
1) Necessary
2) Customary
3) Security
For Car expenses, what is the tax benefit formula?
Benefit = List Price x C02 %
What day of the month is Income tax and NICs paid to HMRC?
19th of each month
Over what number of employees must you pay PAYE electronically?
250
With regards to PAYE Codes, what goes under the allowance heading?
1) Personal Allowance
2) Allowable expenses
2) Adjustment for overpaid tax
With regards to PAYE Codes, what goes under the deduction heading?
1) Taxable benefit
2) Adjustment for underpaid tax
Is Capital expenditure allowable?
No
Are repairs and maintenance allowable?
Yes
Are improvements and enhancements allowable?
No
Is depreciation allowable?
No.
With regards to a disposal of a fixed asset, if there is a loss, what should you do?
If there is a loss, add this back onto the profit.
With regards to a disposal of a fixed asset, if there is a profit, what should you do?
Deduct from profit
Are appropriations of profit allowable?
No
Is the salary to a sole trader or partner allowable?
No-remember that a sole trader is the owner, and thus does not have a salary. He would take drawings out.
If a sole traders income tax/NIC is paid by the business, is this allowable?
No
Are private expenses put through the P&L allowable?
No
In a sole trader, are payments to family members allowable?
If they are reasonable, then yes.
If there is an increase in a general provision , is this allowable?
No, it needs to be allowable.
If there is a decrease in a general provision , is this allowable?
No, it needs to be deducted.
Are trade debts allowable?
Yes
Are non trade debts allowable?
No
Are loans to former employees that are written off allowable?
No
Is staff entertaining allowable?
Yes
Is customer entertaining allowable?
No
What gifts are allowable?
If they are to employees or trade samples
If you give a gift to a client, under what circumstances is it allowable?
It has to have the business name on it and be under £50. It also can’t be food, drink, tobacco or vouchers.
Are donations to small local charities allowable?
Yes.
Are donations to national charities allowable?
No
What type of donations are allowed?
Trading stock/used P&M to charities/educational establishments
Are political donations allowable?
No
Are subscriptions to trade and professional associations allowable?
Only if they relate to the business
Are fines and penalties allowable?
No
What is the exception to fines and penalties being disallowable?
Parking fine of employee on business
Is interest on business loans allowable?
Yes
Are Interest on late payment of tax and non business loans allowable?
No
Are legal and professional fees relating to dealings with HMRC allowable?
No
What legal fees are specifically allowable?
1) Renewal of short lease (50 years)
2) Registering trade patent or copyright
3) Raising long term finance
What class of NIC is for employed people?
Class 1
What class of NIC is for self employed people?
Class 2 and 4
What class of NIC relates to benefits?
Class 1A
What are the 3 PAYE forms?
1) P11D
2) P60
3) P45
What is the P11D form?
A list of all the benefits that an employee has had throughout the year.
When is the P11D form due in?
6th July
What is the P60 form?
A list that contains the gross pay, how much tax has been paid and how much NIC has been paid. It’s used to fill out a tax return.
When is the P60 form due in?
31st May
What is the P45 form?
The form you get when you leave a job
If PAYE and NIC are paid electronically, by how many days is the deadline postponed?
3 days. From the 19th to the 22nd of the month
What is the deadline for telling HMRC that you need to do a tax return?
5th October of the tax year
What is the deadline for submitting the tax return?
If done by paper: 31/10/17
If done electronically: 31/1/18
If there is a delay in HMRC issuing you with a tax return, how much extra time do you get (ELEC)?
3 months from the date of issue
If there is a delay in HMRC issuing you with a tax return, how much extra time do you get (PAPER)?
If you are actually doing the tax calculation, you get 3 months. If HMRC are doing it, you have 2 months.
If HMRC find an error in the tax return, how long do they have to amend the return?
9 months within the original filing date
If a taxpayer has been overcharged by HMRC, how long do they have to amend it?
Within 4 years of the end of the tax year.
If a taxpayer wants to amend his return (not an error by HMRC) how long do they have to amend it?
Within 12 months of the normal submission date (31 Jan)
How many Period of Accounts (POA) are there in a year?
2
When is the the 1st POA?
31/1/17
When is the 2nd POA?
31/7/17
When are balancing payments due?
31st January following the end of the tax year
What does balancing payments consist of?
1) Balance of income tax and class 4 NIC
2) Capital Gains Tax Due
3) Class 2 NIC due
What criteria must someone fulfill if they wish to have the balancing payment to be collected in next years PAYE?
1) Balance needs to be less £3000
2) Need to be employed
If an employed person wants to have their balancing payment collected next year, when is the deadline to file this?
30 December (electronic) 31 October (paper)
If you have extra income of what amount, can you choose between this being collected via PAYE or self-assessment?
Less than or equal to £10,000
Which are the 2 penalties specific to income tax?
1) Late filing of income tax/CGT returns
2) Late payment of income tax/CGT returns
For corporation tax, how long do records need to be kept?
6 years from the end of the accounting period
For income and capital gains tax, how long do records need to be kept, if in business?
5th anniversary of 31 January following end of tax year
For income and capital gains tax, how long do records need to be kept, if not in business?
1st anniversary of 31 January following end of tax year
For VAT, how long do records need to be kept?
6 years
With regards to CGT, which assets are not chargeable?
1) Cash
2) Motorcars
3) Wasting Chattel (most)
4) National Savings Certificate and premium bonds
5) Shares/investments in ISAs
6) Gilt edged securities (e.g. Exchequer stock or Treasury Stock)
7) Non wasting chattels below or equal to £6,000
What is capital expenditure?
Money spent on either:
1) Buying a long term asset
2) Improving/enhancing an asset
What is revenue expenditure?
Money spent on either:
1) Trade purposes
2) Repairs and maintenance
What are the allowable costs for CGT purposes?
1) Acquisition cost
2) Legal fees
3) Surveyors fee
4) Valuers fee
5) Stamp duty
6) Land tax
7) Capital expenditure relating to enhancement
What is the AE for Capital gains?
The Annual Exemption is a form of allowance, worth £11,100
What is a chattel?
A tangible movable asset
What is a wasting chattel?
A wasting chattel is an asset that has a life of maximum 50 years.
What is a non wasting chattel?
A non wasting chattel is an asset that has a life greater than 50 years.
When is a wasting chattel not exempt?
If you have claimed capital allowance on it.
When is a non wasting chattel exempt?
If it cost less than £6000 and the sales proceeds from it were less than £6000
If on disposal of a non wasting chattel, the cost was less than £6000, but the sales proceeds were greater then £6,000, what is the rule?
You have to restrict the gain to the following formula:
5/3 x (Gross Proceeds-6000)
What are the 2 rules to determine if a company is UK residence?
1) Incorporated in the UK
OR
2) Managed and controlled from the UK (where the board meetings are)
What is the difference between the accounting period (AP) and the period of account (POA)?
The AP is the period used for the tax computation. The POA is the period used for the P/L, for financial reporting purposes. Usually they are the same.
For corporation tax, what are the sources of interest income?
1) Bank accounts
2) Debentures
3) Overpaid CT
For corporation tax, what are the sources of non trade loans?
1) To purchase let properties
2) To purchase shares in another company
3) Interest on overdue CT
How do you calculate augmented profits?
Taxable total profits + dividends from non 51% companies
What is the Augmented Profits Limit?
£1,500,000
How are “large” corporations defined?
If their Augmented profits are greater than 1.5 million
When is a large company exempt from having to pay installments?
1) Tax liability is less than 10k
2) Company wasn’t large in the previous period and AP £10m or less in the current accounting period.
What are the quarterly installment payment dates for large corporations?
The 7th month, the 10th month, 13th month and the 16th month. Paid on the 14th day on each of these.
For non large companies, when do they need to pay their tax?
9 months and 1 day after the end of the accounting period.
If a company has just started trading, how long does it have to tell HMRC?
3 months. If you take longer, there is a £300 penalty.
With regards to VAT, what is a taxable supply?
Taxable supply are all goods and services except those which are exempt from VAT/
What is a taxable person?
Anyone (individual or company) who makes taxable supplies (who is registered for VAT).
What types of goods are not taxable by VAT?
1) Trade samples
2) Gifts below £50
What taxable supplies are zero rated (0%) VAT?
1) Certain foods/animal feed
2) Printed books and newspapers
3) Prescription medicines
What taxable supplies are reduced rate (5% VAT)?
1) Domestic fuel
2) Childrens car seat
What is the VAT statutory threshold from 1/4/16?
£83,000
What is the historic test?
This is checking that in the last 12 months, the taxable turnover has not exceeded the statutory threshold of £83,000. If it has you have 30 days to notify HMRC.
Under what circumstance are you exempt from having to register fro VAT?
If you zero rated taxable supply
What is the deregistration threshold?
£81,000
What is the value of supply on the gift of business assets?
VAT exclusive replacement costs
With regards to bad debt, what are the 2 conditions needed in order to reclaim the input VAT?
1) Debt needs to be more than 6 months overdue
2) Debt needs to be written off in the books
When is the deadline for VAT returns?
7 days after the last day of the month following the end of the return period.
e.g. quarter ended 31/3/17 ———->7/5/17
What is the VAT threshold for substantial payments?
Above £2.3m
What are the details for the VAT payments on account?
VAT is usually paid quarterly. On the last day of the 2nd and 3rd month of that quarter, 1/24th of last years VAT liability must be paid. The end of the month after the quarter ends the balancing payment is made.
How long do VAT records need to be kept?
6 years
When can you issue a simplified VAT invoice?
For supplies under £250
When can you issue a modified VAT invoice?
Retailers (only) can issue a modified invoice for supplies over £250
In order to qualify for the VAT Annual Accounting Scheme (AAS), what is the threshold for expected taxable supplies?
Cannot be greater than £1.35m
What is the deadline for the VAT return for companies that are part of the AAS?
2 months after the year end (compared to the 1 month and 7 days after the quarter end for larger companies)
What are the details for firms that are on the Annual Accounting Scheme?
Between months 4 and 12 of the year, they need to make payments of 1/10 of their entire PY VAT liability. They then have to make the balancing payment by the 2nd month after the year end.
What is the alternative method for AAS qualifying firms to pay?
3 quarterly interim payments (alternative to the 9) of 25% last years VAT, to be paid at the end of the 4th, 7th and 10th months.
What is the flat rate scheme?
This is for really small businesses with a annual taxable supply of less than or equal to 150k. This 150k does not include VAT.
For a flat rate scheme what is the VAT equation?
VAT due = % (given in exam) x VAT inc. turnover
What is a surcharge liability notice (SLN)?
This is given after the first late payment/vat return. There is no penalty, but the SLN means that for the next 12 months if you are late again there is a penalty and the SLN resets.
When must an appeal against a discovery assessment be made?
Must be made in writing within 30 days of the date of the assessment.
Up until which date can HMRC raise a discovery assessment if full disclosure has not been made, and it is deemed deliberate?
Until 20 years after the end of the tax year.
What are the 6 conflict resolution processes?
1) Relevant facts
2) Relevant parties
3) Ethical issues involved
4) Fundamental principles related to the matter in question
5) Established internal procedures
6) Alternative courses of action
