Tax Compliance

Question 1

The five principles for professional accountants are…

Answer 1

Integrity, objectivity, professional competence and due care, confidentiality, professional behavior.

Question 2

Client information may be disclosed when…

Answer 2

Authorised by client, required by law, professional duty (quality review, response to member/ regulatory body enquiry)

Question 3

When an accountant prepared a tax return he act as…

Answer 3

Agent. Client is still responsible

Question 4

When an accountant gives tax advice he acts as…

Answer 4

Principal. The accountant takes full responsibility, more risky for client.

Question 5

For professional indemnity insurance the indemnity amount is…

Answer 5

If gross fee income of firm less than 600,000 then 2.5 times gross. Minimum 100,000. Otherwise 1.5 mill

Question 6

If ceasing practice, indemnity should remain for…

Answer 6

2 years

Question 7

Summarise data protection act.

Answer 7

All organisations processing data must notify information commissioner. Aim to keep data accurate, up to date, secure, lawfully and specifically used.

Question 8

What are some money laundering offences

Answer 8

Privelidged information, unknown money laundering, duress or safety, believed outside of UK

Question 9

Tax exempt income

Answer 9

National savings certificate interest, New individual savings accounts, betting, lottery, premium bond winnings, housing benefit, most child benefit, first 4250 of gross annual rent, scholarships, income tax repayment, universal credit.

Question 10

What can you do to the tax bands after personal pensions contributions and gift aid?

Answer 10

Increase them by gross donation amounts.

Question 11

In pension calculations are contributions made gross?

Answer 11

You need to gross up personal contributions, but not company contributions.

Question 12

How is pension income taxed when drawn?

Answer 12

Apart from tax free lump sums, all other income taken from a pension is taxed as non-savings income.

Question 13

How much of your pension can you take out tax free as a lump sum?

Answer 13

25% subject to maximum of 25% of lifetime allowance. More than this is 55% taxed.

Question 14

If you vest large pension amounts in following years and there are different life time allowances, how do you find how much allowance is left?

Answer 14

must be worked out by scaling the amount vested previously (x new allowance / old allowance) and deducting that from the current allowance.

Question 15

What is the maximum pension contribution you can make?

Answer 15

Higher of your earnings and the basic amount.

Question 16

When someone pays pension into a pension scheme what do you do in their liability calculation?

Answer 16

Only increase the bands by the grossed up value… don’t deduct the pension amount or anything like that. (You only do that for working out adjusted net income).

Question 17

When is an expense, incurred by an employee, deductible from his income in tax workings?

Answer 17

When employee is obliged to incur and pay the expense and the amount is wholly and necessarily in the performance duties of the employment.

Question 18

What is a dispensation, or notice of nil liability.

Answer 18

Employer tells HMRC which expenses are covered by allowable deductions, revenue and customs agrees there is no tax liability arising.

Question 19

Is a dispensation (tax deduction) allowable for round sum expenses?

Answer 19

No

Question 20

What are the mileage rate allowances?

Answer 20

Car: 45p for first 10,000 miles, 25p thereafter. Motorcycle, 24p. Cycle 20p. Passenger is 5p per mile.

Question 21

What is the opposite of a taxable benefit?

Answer 21

Allowable deduction.

Question 22

P9D employees (earning less than 8500p/a who are not directors) have these alone as their taxable benefits:

Answer 22

Benefits convertible into cash, vouchers, living accommodation (but not living expenses).

Question 23

What is the taxable benefit for vans? What if they are zero emission?

Answer 23

£3150 less any contributions paid in the year by the employee. £630 for zero emission vans (20% of ordinary amount).

Question 24

Provision of furniture to employee is taxable benefit at…

Answer 24

20% of market value of asset when first provided.

Question 25

If accommodation not job related, taxable benefit of expenses is limited to…

Answer 25

10% employee net earnings.

Question 26

Your taxable benefit of a car depends on…

Answer 26

The fuel emissions. Then deduct the employee contributions. If car not available for whole year then time apportion. (unless less than 30 day period e.g. repairs)

Question 27

What is the deal with fuel benefit?

Answer 27

Same percentage made by emissions, of 22,100 in 2015/16. No reduction in benefit from contributions unless employer fully reimburses. Time apportioned.

Question 28

How are benefits of loans to employees taxed?

Answer 28

No taxable benefit if less than 10,600, either take average outstanding amount over year multiplied by official interest. On strict method rate calculated on outstanding amount, pro rated with payments. You can deduct interest paid.

Question 29

If an asset is sold to employee after use, what is the benefit?

Answer 29

Greater of current market value or original cost of provision less taxed amounts so far less price paid.

Question 30

What childcare benefits are exempt?

Answer 30

55 on basic band, 28 on higher, 25 on additional

Question 31

What benefits are exempt from tax?

Answer 31

Pension, (and advice up to £150), childcare, mobile, subsidised meals, loans less than 10,000, social events (150p/a), non-cash gifts, parking, awards, incidental expenses, overseas medical when abroad, travel expenses when disrupted, bicycles, own vehicle use, relocation, eye tests, health screening, officially recommended medical treatment.

Question 32

If you are at a client, how long must you be there for work expenses to not be deductible?

Answer 32

24 months.

Question 33

What are the badges of trade?

Answer 33

Profit seeking, number of transactions, nature of assets, similar transactions, changes to asset, method of sale, source of finance, time between purchase and sale, method of acquisition.

Question 34

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Capital Expenditure

Answer 34

Yes, add it back, but repairs are ok.

Question 35

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Depreciation

Answer 35

Yes add it back

Question 36

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Appropriation of profit.

Answer 36

Yes add it back, including payment of salary to sole trader etc.

Question 37

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Provisions.

Answer 37

Specific provisions are ok. General ones no.

Question 38

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Debts

Answer 38

Non-trade bad debts, specific provisions or written off ones are disallowable. Trade bad debts are ok.

Question 39

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Entertaining?

Answer 39

Only for staff is allowable

Question 40

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Gifts.

Answer 40

Only gifts to employees, trade samples, gifts to customers that include advert for business, not food, drink or tobacco or exchangeable for goods, total cost less than £50. These are all allowable

Question 41

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Donations and Subscriptions?

Answer 41

Only small donations to local charities, or plant gifted to charities or UK education or subscriptions to trade associations are allowable.

Question 42

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Fines

Answer 42

Disallowable, add back, except for employee parking fines.

Question 43

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Legal and professional fees.

Answer 43

Only allowable if Relating to renewal of short lease (50 yrs), registration of patent or copyright, costs of raising long term finance.

Question 44

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Irrecoverable VAT

Answer 44

Only allowed if it relates to allowable expense.

Question 45

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Employment payments and pensions?

Answer 45

Allowable, but on cessation of trade only payments in addition to redundancy that are up to 3 x statutory pay.

Question 46

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Leased cars?

Answer 46

If less than 130g/km then allowable, if more then 15% of hire charge is disallowance.

Question 47

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Trading income, e.g. goods taken by owner for personal use.

Answer 47

Add back selling price of goods. (If cost price used then add back the profit that would have been made).

Question 48

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Non-trading income.

Answer 48

Disallowable, deduct it, only trade related stuff.

Question 49

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Royalties

Answer 49

It is allowable deduction: The gross amount.

Question 50

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? Lease premium paid by trader on grant of short lease.

Answer 50

Whole premium is not allowable but can get allowable deduction on income portion = premium taxed on landlord as property income divided by number of years of lease.

Question 51

Is the following a disallowable expenditure that must be added back onto the accounting profit when calculating tax? National Insurance Contributions.

Answer 51

I think they are deductible.

Question 52

When is pre-trading expenditure deductible?

Answer 52

If incurred within 7 years of starting date of trade and it would have been deductible if it had been incurred in the trade. Generally not allowable.

Question 53

What deductions can a sole trader make in using a vehicle?

Answer 53

The same as for an employee income using his own vehicle. 45p for first 10,000 miles, then 25p. 24p for motorcycle. Can’t be claimed if trader previously claimed capital allowances. If a fixed rate is used then that must be use throughout and in future calculations.

Question 54

If the trader works at home, what are the deductible costs in tax calculation.

Answer 54

25-50 hours £10. 51-100 = £18. 101+ = £26. (Monthly adjustment)

Question 55

If you are living in your business premises (e.g. hotel) what are the monthly adjustments?

Answer 55

£350 for 1 occupant, 500 for 2. 650 for more.

Question 56

What is the basis for the last tax year when the business closes?

Answer 56

From the end of the last basis period to closing time. If closes within a year, just take period of trade. If closed within second year take from April 6th to date of cessation.

Question 57

What do you do with overlap profits in tax calculation?

Answer 57

Deduct them in the last year of trade. (Reducing tax).

Question 58

If you change your accounting period and have a long period account as a sole trader, what extra thing can you do?

Answer 58

Overlap profits from earlier can also be deducted now.

Question 59

If you are restructuring your accounting dates and you have a time when there is no period of account in the tax year…

Answer 59

You must make a notional one that ends 12 months before your new year end.

Question 60

If you restructure basis periods and end up with two periods ending in the same tax year…

Answer 60

Stick them together, you can deduct overlap profits.

Question 61

When can you change your period of accounting?

Answer 61

Within first 3 years always. Otherwise must be notified by 31st Jan, can’t be period greater than 18 months, no previous change of account in last 5 years.

Question 62

If a patent royalty has been deducted from trading income and you are working out taxable income, what must you do…

Answer 62

Only the net will be deducted and you can deduct the gross amount so do 20/80 and deduct that to give new trading income. Use this in working out taxable income.

Question 63

After deducting the 20/80 (because this is patent tax and the patent royalty was already deducted) what must you remember in working out tax payable?

Answer 63

Add the tax of the patent royalty into the tax payable otherwise you get double relief.

Question 64

What can the AIA be used for?

Answer 64

Plant and machinery, integral features, long life assets, private use assets, not cars. 500,000. (200,000 in Jan 2016). Straddling periods are pro rated. Max expenditure post Jan 2016 must be limited to that amount for the section.

Question 65

What happens to AIA in periods of accounts not 12 months?

Answer 65

Pro rated

Question 66

What things are in the special rate pool?

Answer 66

Long life assets, integral features, thermal insulation, solar panels, cars with emissions over 130g/km after April 2013, before is 160.

Question 67

What is the WDA rate on special rate items?

Answer 67

8%

Question 68

When is an asset classed as “long life”?

Answer 68

25 years economic life, expenditure on asset is over £100,000 for 12 month period. (pro rate for shorter). Not including cars, retail shop stuff or showroom, office, hotel, dwelling houses. Or Ships. (Crane is a good example of a long life asset).

Question 69

If a second hand asset was originally classed as long life, will it be classed as such by new owner?

Answer 69

Yes

Question 70

If expenditure on integral features is more than 50% of full replacement cost…

Answer 70

Can’t be revenue deduction.

Question 71

Is expenditure on thermal insulation of existing buildings an allowable expense?

Answer 71

Yes, it is a capital allowance.

Question 72

The small pool limit (can claim full amount) is

Answer 72

1000

Question 73

What assets aren’t brought into the main pool and have a separate pool for each asset?

Answer 73

Assets with some private use (by sole trader or partner only)(only business element claimed), short life assets.

Question 74

What happens if a short life asset isn’t disposed of by 4 years from prior April 2011 or 8 years from post April 2011?

Answer 74

Transferred to main pool and written down as normal.

Question 75

Is capital expenditure incurred before business starts eligible?

Answer 75

Yes (deemed to occur on first day)

Question 76

If an asset is sold for more than tax written down value what happens?

Answer 76

Balancing charge taxed to reduce capital allowances or added to adjusted trading income.

Question 77

If the asset is sold for less than tax written down value…

Answer 77

Then a balancing allowance may arise. (only in main pool or special rate pool if business ceases). (single pool whenever).

Question 78

In cessation of trade, what happens to assets with regards to TWDV

Answer 78

All items in final period added to TWDV b.f, no WDA FYA or AIA given, Disposal value of assets in each pool is deducted giving balancing allowances or charges. (Taken by owner - treated as sold for market value).

Question 79

Using a cash basis a business is taxed on its….

Answer 79

Cash receipts less cash payments of allowable expenses. (unincorporated)

Question 80

A trader must leave the cash basis if…

Answer 80

His receipts in the previous tax year exceed twice the VAT registration threshold for the previous year. (proportionally reduced for less than 12 months).

Question 81

Is plant and machinery deductible in calculating taxable trading profits?

Answer 81

Only in cash basis (cars excepted) - then capital allowances not available. (same with capital receipts).

Question 82

If in the cash basis a trader takes out stock without paying an arm’s length price what should happen?

Answer 82

a just an reasonable amount (cost of stock) should be added to taxable profit. (In accrual basis the goods are treated as sold for their market value).

Question 83

Which capital receipts should you deduct in the cash basis?

Answer 83

Sale of assets that aren’t plant and machinery (cars, land and buildings).

Question 84

Where a trader in the cash basis ceases to use a capital asset for the trade purpose…

Answer 84

the market value of the asset at that date is treated as a taxable receipt.

Question 85

When a cash basis trader ceases to trade, the value of the stock and WIP is…

Answer 85

treated as a taxable receipt in the final period.

Question 86

Are business expenses including capital expenditure on plant and machinery deductible in the cash basis?

Answer 86

Yes but not for cars.

Question 87

Are bad debts an allowable deduction for the cash basis?

Answer 87

No as income is only taxed when received.

Question 88

What is the deal with lease cars and the cash basis accounting?

Answer 88

The 15% restriction does not apply such that the amounts paid are allowable in full. (I think the 15% thing is about emissions?)

Question 89

Is interest paid on a loan a deductible cash basis expense?

Answer 89

Yes (even if not wholly for trade) £500 maximum for 12 months. (Not applicable on interest on leased assets, hiring, credit cards)

Question 90

Can you claim your receipts of cash from sale of a car in the cash basis?

Answer 90

If you are using the fixed rate mileage allowance then no. (so service expenditure is disallowed too).

Question 91

Can you deduct expenditure in purchase of a car (not car trade) in cash basis?

Answer 91

No as it’s capital expenditure.

Question 92

In the cash basis, if the trader takes goods out, what do you do?

Answer 92

Add them on to the profits (in tax calculation) at the cost bought at.

Question 93

Can a cash basis trader offset losses against other gains?

Answer 93

No, And a net cash deficit can only be relieved against future gains.

Question 94

The eligibility limit for the cash basis (2016) is…

Answer 94

82,000

Question 95

What happens to any unrelieved expenditure on Plant and Machinery when a trader leaves the cash basis?

Answer 95

Allocated to a capital allowances pool.

Question 96

How is an income dealt with when the trader moves out of the cash basis?

Answer 96

An income adjustment is spread over 6 years equally. (But can be accelerated).

Question 97

If plant and machinery is sold in the cash basis…

Answer 97

That is a taxable receipt. (Excluded from the charge to capital gains tax)

Question 98

What is a discretionary trust?

Answer 98

A trust where no beneficiary is entitled to any income or capital, left up to discretion of trustees. (Trustee looks after the stuff).

Question 99

What is a CLT (in trusts)?

Answer 99

A chargeable lifetime transfer

Question 100

If the cumulative total of the settlers CLT’s in any 7 year period does not exceed the nil rate band…

Answer 100

There will be no lifetime tax to pay on creation of the trust.

Question 101

How is income taxed to trustees?

Answer 101

Taxed on first instance, trustees do not have a personal allowance or different bands to be taxed in, all taxed at basic rate of tax applicable to the type of income.

Question 102

Is there a deduction for trust management expenses in trust income?

Answer 102

No

Question 103

What are the rates of tax for trust income?

Answer 103

Non savings (Property) 20%. Savings (interest) 20%, Dividends 10%. (interest and dividends usually received with this deduction as a tax credit).

Question 104

What is an annuity?

Answer 104

The trustees make a fixed income payment each year to the annuitant net of 20% tax credit.

Question 105

Once expenses (i.e. rental expenses deducted from rent, trust admin from dividends) are deducted, Interest in posession and discretionary trusts have a basic rate band of …

Answer 105

1000, first 1000 is taxed at basic rates (20, 20, 10). Further income is taxed at the 45% and 37.5% rate.

Question 106

Income used to pay expenses in discretionary trusts is taxed at rate of…

Answer 106

basic rate (whichever bracket - savings, non savings, dividend).

Question 107

When the beneficiary receives payment from trust, how should it be treated?

Answer 107

Grossed up by 100/55. Payment net of 45% tax credit (even if dividend). A non-savings income.

Question 108

If the trustees have paid more tax then they need to cover the tax credits then…

Answer 108

This is carried forward in a tax pool. (if the reverse then the balance must be paid over). (10% tax credit on dividends cannot enter the tax pool as not real tax paid by trustees).

Question 109

The rate of capital gains tax for all trusts (except bare trusts and disabled persons) is…

Answer 109

28%

Question 110

In a bare trust, the assets aren’t treated as settled property, they’re treated as…

Answer 110

belonging to the beneficiary personally so any gain or loss is assessed on the beneficiary.

Question 111

When can a capital gains tax be paid by instalments?

Answer 111

Gift of land or shares in a company out of a controlling holding. Or any number of shares in an unquoted company.

Question 112

Disposal of capital between married couples…

Answer 112

is on a no gain/loss basis.

Question 113

What is a connected person?

Answer 113

Spouse, relative, business partners, trustee of a settlement and the trust settler. (relative only means, brothers, sisters and direct ancestors/descendants).

Question 114

A disposal to a connected person for capital gains taxed is judged at…

Answer 114

market value at date of disposal.

Question 115

A loss incurred in disposal to a connected person can only be set off against…

Answer 115

Gains in disposals to same person.

Question 116

A wasting chattel is…

Answer 116

Something with useful life less than 50 years, or with moving parts. Exempt from CGT unless it has been used solely in business. Then it is “non wasting”.

Question 117

If a non-wasting chattel is disposed of for 6,000 or less and there is a gain…

Answer 117

Gain is exempt

Question 118

If a non-wasting chattel is disposed of for more than 6000…

Answer 118

There is marginal relief for gain which cannot exceed 5/3 x (proceeds less 6000.)

Question 119

If a non-wasting chattel is sold for less than 6000 and there is loss…

Answer 119

The loss is restricted by assuming the proceeds were 6000.

Question 120

If capital allowances have been claimed on non-wasting chattel and a loss would arise on disposal…

Answer 120

Allowable cost for chargeable gains purposes must be reduced by lower of the loss and net amount of capital allowances. (rule also applies to non-chattels).

Question 121

If two or more assets from a set are disposed of to the same or connected persons…

Answer 121

Treated as one disposal for the 6000 exemption and marginal relief. If in different tax years an apportionment of the total gain will be required. (Split according to market value on selling).

Question 122

Disposals of shares are matched against acquisition of the same class of shares in the same company in the following order…

Answer 122

Any acquisitions made on the same day as the date of disposal, any acquisitions within the following 30 days on a FIFO basis, Any shares in the s.104 pool (all acquisitions prior to date of disposal).

Question 123

For taxation, how are bonus shares deemed to have ben acquired?

Answer 123

On the same date as the acquisition of the other shares and attached pro rata.

Question 124

How is a rights issue treated for taxation purposes?

Answer 124

New rights shares deemed to be acquired on same date as original shares, attached pro rata, costs of right shares increases cost of pool holdings.

Question 125

When quoted shares are gifted, how are they treated for tax purposes?

Answer 125

Lower quote plus 0.5 x (higher quoted price - lower quoted price). (Ignore “Marked bargains”)

Question 126

What is entrepreneurs relief?

Answer 126

On disposal of certain business assets by individuals - 10%. Available if individual is part of trading business (at least one year), assets disposed in cessation, shares in personal trading company. Qualifying period is year of cessation, assets disposed of within 3 years.

Question 127

A personal trading company is one where…

Answer 127

The individual making the disposal owns at least 5% of the ordinary share capital with 5% of voting rights.

Question 128

Will gains on disposals of shares/assets held as investments by sole traders/partners qualify for entrepreneurs relief?

Answer 128

No (Only for trading stuff)

Question 129

How is entrepreneurs relief calculated?

Answer 129

Netting off gains and losses in business disposal. Taxing gain at 10% (after deduction of losses and annual exempt amount).

Question 130

What is the lifetime limit for entrepreneurs relief?

Answer 130

£10 million. Gains in excess charge normal CGT at 28%.

Question 131

Would you put the annual exempt amount against the entrepreneurs relief or the non entrepreneurs relief?

Answer 131

Non entrepreneurs. Save move money over all with 10%, 28% tax difference.

Question 132

If you claim gift relief and entrepreneurs relief, which one do you claim first?

Answer 132

Gift. Then you can charge 10% as entrepreneurs relief.

Question 133

What is the gift relief (eg of shares given) as a value?

Answer 133

Take the difference from a market value sale and the gift sale. (remember, if necessary, proportion it to the business assets to give amount eligible for relief). This should then be deducted from the gain that would have been made if they were sold at market value. So essentially deduct the amount you lost in doing it as a gift from your gains. Gift relief is amount you would have made if MV sale.

Question 134

What is PPR?

Answer 134

Principal Private Residence. Basically your main residence. If you get married and then have two you should decide which is your within 2 years.

Question 135

An accommodation is job related if…

Answer 135

Provided for better performance of employees.

Question 136

What is PPR relief?

Answer 136

You look at the total number of months owned a house, and the total number of months it was PPR. Reduce the gain by this proportion.

Question 137

What months are considered PPR.

Answer 137

The time lived in the house as PPR plus last 18 months of ownership if it was at sometime the PPR. For disabled with long term residence in care homes, last 36 months are treated as period of occupation.

Question 138

Periods of occupation are deemed as…

Answer 138

Periods (inc. added together) of up to three years of temporary absence. Period in which employment required individual to live abroad. Counted as deemed occupation if the individual does not have another PPR. Also if he couldn’t live there because it was being altered. (Renting it out doesn’t affect deemed occupation). Up to 4 years working away in UK.

Question 139

If part of the property is used for business, will the gain on this part get PPR relief?

Answer 139

No. If the business part has been used for business throughout the period then the last 18 month exemption cannot apply to that part.

Question 140

If a marriage breaks down and someone leaves the PPR, what happens to the occupation?

Answer 140

Still considered in occupation if other member continues to live there, and the one who has left hasn’t found another PPR.

Question 141

Times of note when letting relief on PPR can apply…

Answer 141

The entire property is let out during the period of absence which would otherwise be chargeable, or part is let out and the owner lives in the remainder. (In the last case the 18 month exemption will apply to the let part if it has been used by the owner are PPR).

Question 142

Letting relief is (as value)…

Answer 142

The lowest of: Capital gain made for the apportioned let period (non PPR period) , PPR relief, £40,000.

Question 143

If you let out part of the house (say one storey out of 3)… what do you do in the PPR calculation?

Answer 143

The chargeable months are 1/3 of the month in question.

Question 144

What is the deal with PPR relief for trusts?

Answer 144

If beneficiary has lived in it for whole of residence then gain is exempt. Otherwise trustee and beneficiary can make joint claim for relief… Proportion of exempt gain is then: total gain x (period of beneficiary occupation / total period of trustees ownership). Again last 18 months exempt if the beneficiary used it as main residence at some point.

Question 145

Personal allowances may only be claimed by non-uk residents if they are…

Answer 145

Citizens of EEA, resident of Isle of Man or channel islands, Current or former crown servants, residents in a country with a UK tax double agreement, former resident left UK for health reasons.

Question 146

What happens if a double tax treaty relief exists?

Answer 146

Income will be exempt in one country.

Question 147

What is unilateral relief?

Answer 147

If double tax treaty doesn’t exist, allows double taxation relief as a credit against the UK corporation tax liability on the foreign income. (for companies - use this one in the exam)

Question 148

How do you work out Unilateral credit? (This includes the book’s explanation of DTR)

Answer 148

Overseas income included in UK income tax computation gross of overseas taxes suffered. Double tax relief on a source by source basis is given as lower of Overseas tax suffered and UK tax on overseas income.

Question 149

How does Jason Explain double tax relief workings?

Answer 149

Include overseas income and work out how much you should be taxed as normal (include personal allowance). Then deduct the relief. To work out the relief subtract the amount of tax you would have paid without the overseas income from your tax liability… It seems that in the end, you are just saying your tax liability is what it would have been ignoring overseas income???? Lower of this and overseas tax paid.

Question 150

If the overseas tax rate is much lower than the UK tax rate then the DTR would be the…

Answer 150

Overseas tax suffered. (Can state this without doing workings in exam)

Question 151

When doing the Double tax rate calculation, what do you do if there are several overseas incomes?

Answer 151

Work out the amount that would have been taxed if each one had been excluded one by one, then deduct this tax liability from the full tax liability you worked out. This is DTR1. Do this for all the foreign incomes and add them together to get the full DTR.

Question 152

Is a non-uk resident subject to capital gains tax on a residential property disposal in UK?

Answer 152

Yes, the part of the gain arising after 5th April 2015. PPR will be considered for periods after April 2015 (taxpayer or spouse must have lived in the UK in the tax year or stayed overnight a least 90 times). (PPR for last 18 months will always be available, count the months from 5th April 2015… do the proportional fraction as always).

Question 153

If doing AEA and the Double tax relief, which order should you do it?

Answer 153

Set the 11,100 AEA against the UK gains first. Then tax at 18% for remaining Uk amount and 28% for remaining foreign amount (I think) and deduct the double tax relief. (Do this all in two columns and add together at last moment - UK gains and foreign gains). Check this? pg 323. SM

Question 154

If you make a claim to reduce your POA (payment on account) for NIC (class 4) how will interest be charged if your actual liability is higher?

Answer 154

You pay half of your liability (I think). So interest charged on lower of: reduced POA plus the half of the balancing payment, and the original POA that would have been paid had no claim or adjustment been made. The interest is then on the excessive reduction… so the lower of these two less the amount actually paid.

Question 155

When are the payments on account due POA? On class 4 NIC?

Answer 155

31st Jan and 31st July - two half payments,

Question 156

What is the maximum penalty for excessive POA reduction?

Answer 156

The difference between the amount that would have been paid but for the incorrect statement and the payments on account actually made.

Question 157

What is freehold interest?

Answer 157

If you have the absolute right to occupy, use and dispose of the property.

Question 158

What is leasehold interest?

Answer 158

Owner of leasehold has right to occupy and use property for a specified period.

Question 159

What is a lease premium?

Answer 159

Lump sum paid at start of lease?

Question 160

What is a reverse premium?

Answer 160

Landlord pays leaseholder a sum as an incentive.

Question 161

When a short lease is granted, the lease premium is treated as…

Answer 161

partly capital, partly property income (this part taxable on lessor in year of gain as property income.).

Question 162

Will a disposal of a lease qualify for PPR?

Answer 162

Yes as disposal of property interest.

Question 163

If a lease is disposed of, is it treated as an outright disposal for capital tax purposes?

Answer 163

Yes… but if short lease then treated as wasting asset disposal. Look at the percentage tables in Hardmans pg. 103. (%left at end/ % left at begining) x cost. This is disposal proceeds.

Question 164

On the grant of a long lease… how do you work out the chargeable gain?

Answer 164

Take the consideration received… then deduct the deemed cost of the lease (consideration received/ consideration plus revisionary interest) x cost. Then deduct the indexation allowance.

Question 165

When working out the chargeable gain for grant of a short lease how do you work out “disposal”?

Answer 165

(capital proceeds i.e. capital element of lease premium / total lease premium plus market value of revisionary interest) x cost.

Question 166

In a short term lease, how do you compute the amount of premium to see as property income.

Answer 166

(51 - lease length)/50

Question 167

How do you work out chargeable gain on grant of a short lease?

Answer 167

Find the consideration (so deducting the amount seen as property income: the portion of premium and rent) then deduct the deemed cost calculation, then deduct the indexation allowance.

Question 168

In a marriage transfer, it is IHT exempt if…

Answer 168

it is in consideration for the marriage and, £5000 if a parent, £2500 if a remoter ancestor, £1000 in another case.

Question 169

What is the small gift exemption?

Answer 169

Can only be used for a small gift against IHT. (Not part of a bigger gift) £250pa

Question 170

What are the rules on IHT with transfers out of income?

Answer 170

If a transfer is made out of income it is exempt and the transferor is left with enough to maintain normal standard of living.

Question 171

What is a PET (in terms of inheritance tax)?

Answer 171

Potentially exempt transfer, if the transferor lives for 7 years from making the transfer then exempt, otherwise it is a CLT (chargeable lifetime transfer).

Question 172

In what order do you use the annual exemption amount for inheritance tax?

Answer 172

Chronological.

Question 173

If a transferor dies more than 7 years after making a PET (potentially exempt transfer), what happens?

Answer 173

It is an exempt transfer. When looking back at the 7 year accumulation period, the PET will only use up the nil band rate if it became chargeable. If dies within 7 years then it is chargeable.

Question 174

What is the difference between how IHT is calculated on PET and how it is calculated on CLT?

Answer 174

No lifetime tax to deduct.

Question 175

For the additional taxes if the donator survived a number of years between 3 and 7, what is that amount of tax charge on?

Answer 175

The percentage is placed on the inheritance tax charged so far… I think.

Question 176

If the transferor dies within 7 years of property transfer and the market value, or the sale of property is less than value at original transfer then…

Answer 176

You can claim IHT payable on the lower value. (So deduct the fall in value from the gross transfer amount in working out remaining band). For CLT no alteration is made to the value of the original computation, claim cannot result in tax repayment. For both PET and CLT, the claim doesn’t alter the value of the transfer in the cumulative total used for calculating the nil band for subsequent transfers or the death estate. Relief doesn’t apply to plant and machinery or chattels with life less than 50 years.

Question 177

Who pays tax on settled property (property that is the subject of qualifying interest in possession in which the deceased was a life tenant?)

Answer 177

The trustees

Question 178

Who pays tax on free estate on death (everything except the settled property less any debts and funeral expenses)

Answer 178

The personal representatives.

Question 179

What is the death estate?

Answer 179

All the items the deceased was entitled to at death less debts and funeral expenses.

Question 180

How would you work out the amount paid on death estate?

Answer 180

Deduct allowable debts and funeral expenses, deduct the exemptions (like spouse exemptions, charity exemptions…), deduct what is remaining of the nil rate band for lifetime transfers, charge the rest at 40%.

Question 181

What is the chargeable free estate?

Answer 181

Gross assets, less the trust assets of qualifying interest, less exemptions (charity and spouse etc.).

Question 182

How do you divide up the amounts to be paid on death estate?

Answer 182

Work out the amount to be paid first, then divided it into the ratios of the free estate (for the personal representatives) and the trust assets (for the trustees).

Question 183

If the transferor (of a BPR or APR asset) dies within 7 years of transfer and BPR or APR was made…

Answer 183

BPR or APR no longer apply to lifetime transfer if the transferee doesn’t still own the property in the same means. If lifetime transfer is CLT, add back BPR and APR on death (but value of transfer retains the original value on which lifetime tax was chargeable). If it was PET then BPR/APR not available on transfer. Death tax calculated on unreduced value (which enters into the cumulating).

Question 184

What are the only kind of assets exempt from liability for inheritance tax?

Answer 184

Overseas assets of a Non-UK domiciled person.

Question 185

Deemed UK domicile for IHT purposes if…

Answer 185

Resident in UK for 17 of last 20 tax years or for the 36 months after ceasing to be UK domiciled under general law.

Question 186

For transfers from a UK domiciled person to a non-UK domiciled spouse, what transfers are exempt?

Answer 186

Only those up to the value of the nil rate. (Although can make election to be treated as UK domiciled for IHT purposes only but then the non-UK spouse assets would be fully within charge to UK IHT).

Question 187

What happens if the assets included in the death estate are situated abroad, any deductible expenses?

Answer 187

Up to 5% of value of asset.

Question 188

If relief isn’t given for double taxation (because of overseas assets)… (in terms of IHT)

Answer 188

Double taxation relief is given as a tax credit against the IHT payable on the overseas asset. Amount available is lower of foreign tax liability and the IHT at the average rate on the asset (what fraction of death estate was paid in IHT, put that fraction on asset value).

Question 189

When and by who should CLT - lifetime IHT deliver account?

Answer 189

By transferor, by 12 months after end of month of gift.

Question 190

When and by who should PET deliver account?

Answer 190

Transferee - 12 months after end of month in which death occurred.

Question 191

When and by who should Death Estate deliver account?

Answer 191

Personal representatives appointed in Will, or administrators. 12 months after end of month of death.

Question 192

Who should pay CLT lifetime IHT and by when?

Answer 192

Transferor, later of 6 months after end of CLT month and 30 April in tax year following CLT year.

Question 193

Who should pay CLT death IHT and by when?

Answer 193

Transferee - by 6 months after death month.

Question 194

Who should pay PET IHT and by when?

Answer 194

Transferee - by 6 months after end of month in which death occurred.

Question 195

Who should pay Death Estate IHT and by when?

Answer 195

Personal Representatives on delivery of IHT account.

Question 196

When can you pay IHT in ten instalments? (Unpaid amounts subject to interest)

Answer 196

Lifetime IHT on a CLT where transferee pays the IHT, Additional IHT on death on a CLT and IHT on death on a PET (if property still owned), IHT on death estate. For Land and buildings, most unquoted shares and securities, business or business interest. If instalment sold, immediately all payable.

Question 197

What are the penalties for late IHT account submissions to HMRC?

Answer 197

£100 regardless of amount or if paid or not. Up to £10 per day for 90 days if 3 months late. From 6 to 12 months then 5% of due tax. /gt 12 months then 100%, 75% and 5% of tax due dependent on if deliberate concealed, not concealed, neither. (reduced to 50% and 35% if prompted disclosure, 30% and 20% with unprompted disclosure)

Question 198

Is capital gains tax payable on a death estate?

Answer 198

No, receive at market value so receive free capital gains tax uplift. (IHT may be payable)

Question 199

When may a gift be a CLT?

Answer 199

Chargeable lifetime transfer. If made to a relevant property trust. May also be CGT.

Question 200

When may a gift be a PET?

Answer 200

Potentially exempt transfer. If made to another individual or bare/disabled person’s trust. May also be CGT.

Question 201

When may a gift be completely exempt from IHT?

Answer 201

To a spouse or partner or charity or political party. May also be CGT.

Question 202

Do PET’s have any immediate IHT charge?

Answer 202

No. Capital gains position is calculated with market value if chargeable. If to spouse then exempt.

Question 203

What are the taxable total profits of trading income? (How are they made up)

Answer 203

Trading income, property income, non-trading loan relationships, miscellaneous income, chargeable gains, less qualifying donations.

Question 204

What is a large company?

Answer 204

Augmented profits exceed £1.5 mill. This is the limit for a single company (I think you have to divide this by the number of 51% members (Inc. yourself) to see if one entity qualifies). With 12 month accounting period.

Question 205

What are augmented profits?

Answer 205

Taxable total profits plus franked investment income (FII). FII is exempt dividends and tax credits. Other than those which are 51% subsidiaries of the receiving company or company which is your brother to a parent (51%).

Question 206

Are dividends from a company exempt from corporation tax?

Answer 206

Usually. Apparently for the exam assume all dividends from companies are exempt. I think it’s just the 51% members…

Question 207

What is a 51% group company?

Answer 207

Both at least 51% members of same parent or of each other, even if at different times in same accounting period. If haven’t carried on trade while it was 51% member.

Question 208

What are the exceptions for a being a large company?

Answer 208

Tax liability less than £10,000. Or wasn’t large company in proceeding 12 months and has augmented profits less than £10mill (divided between 51% companies - end of previous acc period) in current accounting period.

Question 209

When a company is paying corporation tax by instalments, what do they pay and when due?

Answer 209

First instalment is lower of 3 x CT/(n months). And corp tax liability for accounting period. Continued until paid liability. Due on 14th day of 7th month following start of acc period, then 3 month intervals.

Question 210

When could a spreading provision apply (a pension contribution for example treated as paid in a later period by a company)

Answer 210

Amount of the pension contribution exceeds 210% of that paid in the previous period. Amount exceeding 110% of that paid in previous period is at least 500,000 (the excess).

Question 211

How does spreading work (e.g. for company pension contributions) for different values of excess contributions (The amount exceeding 110% of the previous period).

Answer 211

Contribution must be over 210% of previous year. Less than £500,000 - no spreading. 0.5mil to 1mil then split fairly between this period and next. £1mil to £2mil, spread over 3 periods. /gt £2mil spread over 4..

Question 212

If a company issues loan stock, is this a trading or non-trading loan relationship?

Answer 212

Trading

Question 213

What are intangible fixed assets?

Answer 213

Intellectual property, patents, copyright, goodwill, agricultural quotas - As they are trade related their activities are part of trading income, related expenses are allowable.

Question 214

Is expenditure on RandD allowed as a trading expense?

Answer 214

Yes (including relevant capital expenditure).

Question 215

What is a small or medium sized enterprises (SME) for RandD?

Answer 215

Less than 500 employees, annual balance sheet less than 86 mill EUR.

Question 216

How much additional deduction may an SME (small medium enterprise) make for RandD expenditure incurred after March 2015? And large?

Answer 216

Additional 130% (so 230 total), unless subcontracted, then 30%. Relief on expenditure capped at 7.5 mill EUR for a project. Large company may take additional 30% against trading income (so 130 total).

Question 217

What is the charge on lifetime transfers (made on the creation of relevant property trust, I.e.. Discretionary trust or non qualifying interest in possession after 22 March 2006)

Answer 217

Nil rate Band (to 325000 fee 16) 0%. 20% after that. Remember to deduct 3000 allowances. Cumulative 7 years

Question 218

Who pays inheritance tax?

Answer 218

Transferor unless stated otherwise

Question 219

How do you work out the gross chargeable transfer of value?

Answer 219

Take the net transfer of value (deducting the 3000 allowances) and add the inheritance tax paid. This is what you would deduct from the lifetime allowance to work out how much is left.

Question 220

What is expense relief for double taxation in companies?

Answer 220

If the company has a very small UK tax liability, it can treat the overseas tax as an expense and include the income in corporation tax computation net of overseas tax.

Question 221

Are dividends exempt from corporation tax?

Answer 221

If they fall into a prescribed list, this is so big so usually the answer is yes. (Included in franked investment income - gross up 100.90).

Question 222

Overseas company income is received net of foreign tax, how will the UK assess it?

Answer 222

Gross of tax in the corporation tax computation.

Question 223

How are foreign taxes on companies classified?

Answer 223

WHT (Withholding tax) - direct tax on income, always recoverable on any source of income, tax withheld on remittances of income to UK. UT - overseas tax suffered on profits out of which foreign dividends are paid. (Largely irrelevant as most dividends exempt).

Question 224

Why would you calculate Augmented profits for a company?

Answer 224

(I.e. deducting exempt dividends…) If they are more than £1.5 mill then must pay corp tax by instalments.

Question 225

How is Double Taxation relief calculated for companies?

Answer 225

For each item, lower of UK tax on overseas income (usually gross overseas income x 20% then change with qualifying donations) and overseas tax suffered in respect of each separate source.

Question 226

When working out tax liability for a company when there are non exempt foreign dividends what do you do?

Answer 226

Add back on the tax paid so you can see it gross. Add back on your share of the companies tax (what fraction is your dividend of whole profit? Multiply this by tax paid). This then gives the taxable profits. Then for corporation tax, do lower of UK 20% tax and overseas mark up to get to the current figure.

Question 227

How is a company’s property loss dealt with?

Answer 227

First set off against total profits for the accounting period, then carried forward to next one. Also group relief is available.

Question 228

Can a capital loss made by a trading company be set against income?

Answer 228

No. But it can be set against other gains for the accounting period, remaining loss carried forward to available gain.

Question 229

How is company trading loss relieved?

Answer 229

Set against current profits, then earlier period profits, then carried forward to future periods.

Question 230

How does s.45 relief work for companies?

Answer 230

Trading losses carried forward to first available income. (No claims necessary). (Can only be set against trading income, not property or other chargeable income).

Question 231

How does s.37 relief work for companies with trading losses?

Answer 231

Can be set against total profits (all income and net chargeable gains before qualifying donations) in same accounting period, remaining losses then carried back and set against previous 12 months.

Question 232

If there is more than one account falling in the last 12 months, how is the company trading loss relieved?

Answer 232

LIFO basis. Applied to later periods first.

Question 233

A claim for S.37 and s.459 loss relief must be made…

Answer 233

within 2 years of the end of the accounting period.

Question 234

If there is a company loss in the twelve months before the trade ceases then…

Answer 234

The loss may be carried back against the company’s total profits for the proceeding 36 months.

Question 235

s.459 A company that has a non-trading loan relationship deficit may set off…

Answer 235

…the whole or part of that deficit against any profits of the same accounting period.

Question 236

Within an accounting period for a company, current period losses are set against total profits in the following order…

Answer 236

Deficits in non-trading loan relationships, property business losses, trading losses of the current period.

Question 237

When might there be restrictions in use of loss relief for a company?

Answer 237

When there is change of ownership (more than half of shares acquired by 1 or 2 people at least 5% each) and then nature of company in 3 years either side, or a massive revival of the company.

Question 238

What are the restrictions on company loss relief on change of ownership?

Answer 238

s.45 - pre change losses can’t be used post change. S.37 post change losses can’t be used pre change. Also applying to property business losses. Doesn’t apply to capital losses.

Question 239

What is a group (for tax loss relief)?

Answer 239

A company’s with 75% subsidiary connections. If there is a chain of group “children” - all of 80% for example, then multiply the percentages together to find if connected enough to the parent to be included.

Question 240

Can you surrender losses to a group member that is non-UK resident?

Answer 240

No (not in this exam) - but having them as a link in the group is fine.

Question 241

Group relief can be surrendered for the current year in respect of…

Answer 241

Trading losses, deficit on non-trading loan relationships, excess qualifying charitable donations, excess property business losses. (Brought forward losses and losses carried back - no) (if you can set a charitable donation against chargeable gains then do that).

Question 242

What are a claimants (receiving loss relief from a group surrendered) available profits?

Answer 242

Taxable total profits after deducting trading losses brought forward (s.45), current trading losses, non-trading loan deficit brought forward, non trading loan deficit for current period (claim under s.459) but before deducting trading losses carried back (s.37) and non0trading loan deficits carried back.

Question 243

If the members in a group have different accounting periods, how does loss relief work?

Answer 243

The amount of loss relief available to give, and amount of profit available for it to be set against is worked out by taking the proportional amount of profit/ loss in relation to the amount of overlap period.

Question 244

What is a chargeable gains group?

Answer 244

There is a principal company, and its 75% subsidiaries, and their 75% subsidiaries…each must be an effective 51% subsidiary, through multiplication, of the parent. If this separates a group, a subsidiary cannot be in more than one part.

Question 245

What is a nil gain/loss transfer?

Answer 245

One group company transfers chargeable asset to another, deemed to have taken place at such price that no gain or loss to the transfer company. Deemed proceeds = allowable expenditure (original cost) plus indexation. Chargeable gain arises when asset disposed outside of company (or receiver leaves the group)

Question 246

What is a degrouping charge?

Answer 246

The gain which would have arisen if the assets transferred in the six years prior to disposal of the departing group member had been taxable rather than nil rate. Chargeable if departing group still owns asset or a replacement)

Question 247

How are the degrouping gains/losses charges added?

Answer 247

If a gain, then added to sales proceeds received on disposal of the shares. If a loss, then added to allowable cost on disposal of the shares. If share disposal is exempt then so is degrouping charge.

Question 248

If a trading company disposes of shares in another trading company out of a substantial shareholding…

Answer 248

Capital gain is exempt from corporation tax, capital loss is allowable.

Question 249

If a company transfers assets between chargeable gains group members, and the recipient uses it as trading stock…

Answer 249

The first transfer is at nil gain price (cost including indexation), the receiving realises gain due to current value, and then further gain on sale. If election made then it has neither chargeable gain or allowable loss but realised trading profit of total profit.

Question 250

What are the VAT tax rates?

Answer 250

Zero rated - 0%, Exempt - Nil, Reduced rate - 5%, Standard rated - 20%.

Question 251

Is food zero rated for VAT?

Answer 251

Yes but food in the course of catering isn’t. (If something isn’t in a specific list then it is standard rated).

Question 252

If you make exempt supplies, can you recover input VAT?

Answer 252

No. But if you make zero-rated supplies then you can.

Question 253

Is the temporary use of a business asset for non-business use a supply of services when without consideration? (for VAT purposes).

Answer 253

Yes. Similarly with services that have been supplied to a trader on which input tax has been claimed, but the service is then used for non-business purposes (like a building an office that was then used as a bedroom).

Question 254

For VAT purposes, how do you determine if a supply is single or multiple?

Answer 254

Look at it from receiver’s perspective, shouldn’t be artificially split, shouldn’t be separated if ancillary (helping customer enjoy goods). E.g. issue of BA giving meals and including it in zero-rated supply of a “flight”.

Question 255

Would a company in a net VAT repayment position (like zero rated supply) be included in a group that makes standard rated supplies?

Answer 255

Probably not, better to reclaim cash flow from HMRC than net off repayment with other group liabilities

Question 256

What are the advantages and disadvantages of group registration for VAT?

Answer 256

A: No VAT on intragroup supplies, only one VAT return needed, if a small exempt company is included - may be able to recover input tax under de minimis partial exemption rules. D: All companies in group jointly liable, may be difficult admin, bringing exempt or partially exempt company in may restrict input tax.

Question 257

If a supplies are partly taxable, partly exempt (i.e. “non-attributable), how do you work out what is recoverable?

Answer 257

Use the figures for the value of supplies created to proportion out the input VAT to work out the recoverable amount. (Ratio rounded up to nearest whole percentage)

Question 258

What are the de minimis VAT limits, and what are they for?

Answer 258

£625 per month on average and 50% of all input VAT for the period. If total amount of VAT on exempt supplies for the quarter exceeds neither of the limits then all VAT can be provisionally recovered.

Question 259

What is the simpler de minimis VAT calculation businesses can do?

Answer 259

Test 1: If total input tax less than £625 p/month on average and value of exempt no more than 50% of all supplies, Test 2: Total input tax less input tax directly attributable to taxable supplies less than £625 p/month average and the 50% rule.

Question 260

At the end of each year, an annual calculation is required if VAT de minimis. What happens?

Answer 260

Limits are applied to year as a whole, then annual adjustment may be necessary, if the annual recoverable amount exceeds the quartered amount then difference is recoverable, otherwise payable to HMRC.

Question 261

How does the partial exemption de minimis VAT test work?

Answer 261

If passed the test for its previous partial exemption year, applied test through any given partial exemption year, have grounds for not expecting more than £1 mil input in current partial exemption year then it can do the partial exemption calculations once a year, and provisionally recover input tax during year. If conditions aren’t met then it must do the testing in each VAT period.

Question 262

In general, how is the lease of land taxed in VAT?

Answer 262

As an exempt supply.

Question 263

How are residential buildings taxed for VAT?

Answer 263

Construction of new, sale of new, sale of conversion into residential is zero rated. Sale and lease of existing residential is exempt. Work on existing residential is standard rated. Reduced 5% rate for renovation of 2 year empty dwellings, conversion into numerous dwellings.

Question 264

How are commercial buildings taxed for VAT?

Answer 264

Construction and sale of new is standard rated along with work on existing. Sale of old (3 yrs.) and lease is exempt.

Question 265

What are the terms (words) used for purchase of goods in and out of the EU.

Answer 265

Within the EU: Dispatch and Acquisition. From out of the EU: Import, Export.

Question 266

When must an exempt trader register for VAT?

Answer 266

If acquisitions from EU member states exceed £82,000 or will do in next 30 days.

Question 267

A dispatch (sale to EU) is zero rated for VAT if…

Answer 267

Made to registered VAT trader, he quotes his VAT number on invoice, holds evidence the goods were delivered to another member state.

Question 268

If goods have been exported out of the EU, how are they VAT taxed?

Answer 268

zero rated.

Question 269

Where services are received by a UK VAT registered trader from another country for business, how is the supply taxed?

Answer 269

Deemed to be made in the UK. VAT is charged in the UK under the reverse charge system… (seems to be charged as input and output…

Question 270

What is the difference between B2B (business to business services in EU - I think) and B2C - business to customer in terms of VAT taxation?

Answer 270

B2B supplies taxed on location of customer, the receiver must account for VAT on his own return, the UK deliverer will not add it. B2C is based on supplier. So UK VAT charged.

Question 271

What is the rate of stamp duty?

Answer 271

0.5% of the consideration, payable by the person acquiring shares, rounded up to nearest £5. (Not chargeable if consideration is £1,000 or less - then stock transfer form sent straight to registrar, not HMRC.

Question 272

What securities are exempt from stamp duty?

Answer 272

With no consideration - gifts, divorce arrangements, variation of wills.

Question 273

When is intra-group stamp duty relief given?

Answer 273

Effect of instrument is to transfer the beneficial interest in the shares, and once company is parent of other, or they have common parent. (75% of ordinary share capital/ 75% chain and interest in dividends and wound up assets).

Question 274

When must the stock transfer form be presented to HMRC? Late interest?

Answer 274

30 days within execution. Interest from end of 30 days, rounded down to nearest 5, not charged if less than 25.

Question 275

What are the penalties for late presentation for stamp duty?

Answer 275

Late by up to 12 months - 10% of duty cap of £300. Late up to 24 months - 20% stamp duty. More than 24 months - 30% of duty.

Question 276

What is SDRT?

Answer 276

Stamp duty reserve tax. For when there is no paper form. Done on CREST system. Paperless. 0.5% of consideration. No rounding. Payable on 7th day of month following agreement confirmation month. 14 calendar days if CREST.

Question 277

For acquisitions of residential property of more than 500,000 for companies, partnerships with corporate members, collective investment schemes… the stamp duty rate is usually…

Answer 277

15%

Question 278

What is the difference between the band widths used for SDLT on residential and non-residential?

Answer 278

Residential - charge the band widths for the portion that lies in each one. For non-residential, all charged at given rate.

Question 279

What relief is there for SDLT if you buy multiple dwellings via linked transactions?

Answer 279

Take mean consideration, then use rates, minimum of 1%.

Question 280

Is stamp duty land tax payable on leases?

Answer 280

On the premium, yes, within the normal bands. On the Net present value of lease: If over 125,000 for residential and 150,000 for non-residential then 1% (only excess over 1% paid).

Question 281

When might there be exemptions from SDLT?

Answer 281

For gifts, divorce, will variation (no chargeable consideration).

Question 282

When is SDLT form due?

Answer 282

Within 30 days of transfer.

Question 283

What penalties are there for late SDLT?

Answer 283

If form filled up to 3 months late, £100. Over 3 months, £200. Over 1 year, 100% of SDLT.

Question 284

Steps to calculating income tax liability…

Answer 284

Get total income, deduct reliefs (gift assets to charities), deduct personal allowance, calculate tax at rates. Deduct tax reductions like married couples allowance. Add pensions annual allowance charge, child benefit charge.

Question 285

What is the cap for relief in calculating income tax?

Answer 285

Higher of 50,000 and 25%. I.e. you can’t offset your profits by more than this for tax relief as a trader.

Question 286

The effective tax rate on 100,000 to 121,200 is…

Answer 286

60% but then for above 100,000 national insurance is 2% so marginal tax rate 62%

Question 287

Adjusted net income is,.,

Answer 287

Net income after deducting grossed amounts of any gift aid donations and personal pension contributions.

Question 288

In married couples, how much of your personal income allowance can you transfer..?

Answer 288

10% (in special cases)

Question 289

If you have made gift aid donations and are working out adjusted net income…

Answer 289

Remove the gift aid donations.

Question 290

If your income is between 50,000 and 60,000 what is the child benefit tax charge?

Answer 290

1% of the child benefit total for every £100 between 50,000 and 60,000.

Question 291

What’s the deal with gift aid?

Answer 291

Basic and higher band rate extended by gross up donation (100/80)

Question 292

When is interest deductible for total income In tax calculations?

Answer 292

To buy plant or property for partnership or employment purposes (3yrs), buy interest in close company, buy shares in employee controlled company, invest in partnership, buy shares or lend money to co-operative, pay inheritance tax.

Question 293

What is a close company ?

Answer 293

U.K. Resident company, controlled by shareholder directors or by five or fewer shareholders.

Question 294

What is an employee controlled company?

Answer 294

Unquoted trading company, 50% voting shares held by employee.

Question 295

If a house is owned 60:40, then the property income…

Answer 295

Can be taxed in the same ratio

Question 296

When deducting pension contributions to work out adjusted net income you should remember to…

Answer 296

Gross up 100/80

Question 297

Allowable expense son property income include…

Answer 297

Legal, professional, admin, interest on loans or overdraft, landlord tax (council), ancillary services (gardening), insurance for property, furnishings, repairs and maintenance. Include only for period of tenancy if relevant.

Question 298

Is there bad debt relief for tax on property income?

Answer 298

Yes

Question 299

What capital expenditure is allowably deducted on tax on property income?

Answer 299

Only on cost of plant and machinery used for repair and maintenance.

Question 300

What is wear and tear allowance?

Answer 300

10% of rents accrued less amounts paid by landlord which are legally responsibility of tenant.

Question 301

What is rent a room relief?

Answer 301

If your rental income for the furnished room is below this then expenses ignored.

Question 302

If room rental income is more than 4250 per year you can elect to…

Answer 302

Have no relief for expenses but are relieved by the rent a room limit.

Question 303

Amounts paid out of a real estate investment trust are taxable as…

Answer 303

Normal dividends, same method. Gains in disposal of shares are subject to capital gains tax.

Question 304

Property authorised investment funds are taxable…

Answer 304

Like normal dividends if paid out as dividends. Or if property or interest distribution then taxable as property income, paid net of tax rate at 20%

Question 305

Commercial lettings of Holiday Homes can be taxed as trading income if…

Answer 305

Available 210 days in tax year, let for 105 days minimum (on average over multiple properties), individual stays 31 days or less, total of longer term occupation must be less than 155.

Question 306

If there is a short lease and the landlord has a premium from the tenant, some is capital payment, the amount that is taxable property income is…

Answer 306

P multiplied by (50 -Y+1) / 50

Question 307

If you are paid a premium as a landlord, what relief do you get later on for tax?

Answer 307

You can divide the taxable property amount from the premium by the number of years leased and remove it from trading profits.

Question 308

If there is subletting, what can you do on your taxable property income as the middle man?

Answer 308

From your taxable property income, you can deduct the relevant share (for the sublet period) of the taxable property income of the big boss.

Question 309

The maximum amount of contributions (pension scheme) attracting tax relief …

Answer 309

Higher of individuals earnings chargeable to income tax and the basic amount (3,600 in FY16)

Question 310

If someone makes personal pension contributions, what tax relief is there?

Answer 310

Tax relief is given at source. (20% - HMRC contributes this)

Question 311

The pension annual allowance is …

Answer 311

The overriding limit for total pension Input for the tax year (varies per year), unused allowance can be carried forward for 3 years.

Question 312

When are tax bands extended (basic, higher…)

Answer 312

Gift aid or pension contribution.

Question 313

What is the value of a capital asset for tax purposes?

Answer 313

VAT exclusive or inclusive depending on if VAT registered (cars aren’t). Price paid or trade or market value.

Question 314

What is the disposal price of an asset for VAT purposes?

Answer 314

Usually sale proceeds (less than original price), if sold for less than market value then it is at market value. If scrapped then scrap value or compensation received.

Question 315

How are cars written down in capital allowances?

Answer 315

Less than 75g/km is 100% FYA (for non second hand cars only), less than 130g/km is 18% main pool, more than 130 is special rate pool at 8%

Question 316

What happens to WDA if period is not 12 months?

Answer 316

It is 18% but pro rated accordingly

Question 317

If there is a trading loss in the opening periods what do you do?

Answer 317

Work out the loss for each trading basis, but in the second period remove the loss already used. (Total loss must be the same)

Question 318

What is loss relief? Trading loss carrying forward? S.83

Answer 318

You can carry forward losses to next year to reduce trading income. Sole Trader

Question 319

What are the loss relief rules for s.64?

Answer 319

I think a loss can be set against a traders general income for the same tax year and/or or the previous tax year. Remainder carried forward.

Question 320

Is s.64 relief allowed if the business is not continuing?

Answer 320

No, only s.83

Question 321

How are s.64 and s.83 claims made?

Answer 321

Automatic for s.83, but claim made to carry forward. S.64 claim to be made within 12 months from 31 January following end of tax year of loss. No claim means losses carried forward under s.83. Can’t restrict claim to preserve personal allowance.

Question 322

What is s.72 relief?

Answer 322

For opening four years. Loss can be set off any of previous 3 years under a FIFO basis. Claim made within 12 months from 31st Jan following end of tax year of loss. Claim applied to all 3 years.

Question 323

What is s.89 relief?

Answer 323

Relief can be carried back in the final four tax years. Look at terminal loss of last 12 months, look at each tax year falling in last 12 month period, if the results of either produces a profit, ignore profit in terminal loss calculation. Must be made within four years of last tax year.

Question 324

Relief is given against trading income in the last tax year and the previous three tax years on a (FIFO/LIFO)…

Answer 324

LIFO basis.

Question 325

What do you do to overlap profits in s.89 calculations…

Answer 325

Add them to your total losses to get relief

Question 326

What are some restrictions on s.89 reliefs?

Answer 326

If by an individual, must have spent at least 10 hours per week in business trying to profit., otherwise restricted to 25,000.

Question 327

What are the restrictions on income tax relief against total income?

Answer 327

Higher of 50,000 and 25% of adjusted total income (work pension schemes not included here, but other profits can’t be offset by losses more than this,)

Question 328

What kind of relief is s.64 for?

Answer 328

Trading, no restrictions against income of the same trade.

Question 329

Are partners salaries and interest on capital deductible when computing partnership profits?

Answer 329

No, they are drawings. Capital allowances are deductible.

Question 330

What happens if a partner makes a loss but there was a profit in the partnership?

Answer 330

The profit made by partnership is reshared between those partners who profited. The ratio of resharing is the ratio without the loss maker. (Similar if partnership made a loss but one partner profited, reallocate loss made in new ratio)

Question 331

What happens when capital is disposed in a partnership?

Answer 331

Fractional share on gains in capital profit sharing ratio.

Question 332

What is a limited liability partnership?

Answer 332

Liability limited to capital invested.

Question 333

If a partner is salaried and doesn’t receive profits…

Answer 333

They are treated like an employee for tax purposes.

Question 334

The loss relief a LLP partner can receive can’t exceed…

Answer 334

The capital he contributed. The remaining relief available as future relief.

Question 335

Things exempt from capital gains (persons)…

Answer 335

Registered charities, friendly societies, local authorities, registered pension schemes, investment trusts, approved science research.

Question 336

Exempt capital disposals include:

Answer 336

Gifts to charities, art galleries, museums. Death is not a disposal for capital gains purposes and there is a tax free uplift of value of assets passed on death.

Question 337

Exempt assets from capital gains tax include…

Answer 337

Legal tender ??? Motor cars, medals not acquired for money, wasting chattels less than 50 years, gilt edged securities, qualifying corporate bonds (sterling, non-convertible), national savings certificates, premium bonds, shares and investments held in NISA.

Question 338

Allowable deductible costs in disposal are…

Answer 338

Acquisition costs, legal costs, surveyor fees, stamp duty, stamp duty land tax, enhancement expenditure (extensions, planning permission included in cost of asset)

Question 339

The annual exempt amount for 2016 for capital gains tax for individuals is

Answer 339

11,100. For trustees it is half of what is given to individuals. (Full amount for bare trust or disabled persons trust).

Question 340

If an individual has a total capital gains loss, or below the exempt amount…

Answer 340

It is carried forward and set against future years. But cannot take future gains below exempt amount.

Question 341

An individual can make a claim to set trading loss relief against

Answer 341

General income in the tax year and previous one. Within 12 months of 31 January following end of tax year. Amount of loss is lower of unrelieved trading loss and current year gains less current losses and capital losses brought forward.

Question 342

What is the capital gains tax?

Answer 342

18% if basic rate tax payer, 28% otherwise. Entrepreneurs relief takes it to 10%. Deduct capital losses in the order of most relief to reduce owings.

Question 343

What assets qualify for rollover relief? (Relief given on purchase of replacement assets)

Answer 343

Land and buildings, plant and machinery (fixed), ships, aircraft, hovercraft, satellites, space stations, spacecraft, goodwill (sole traders and partners only).

Question 344

What is the qualifying time period for rollover relief to acquire new asset?

Answer 344

1 year before, 3 years after. Claim to be made within 4 years of end of tax year in which gain is realised or new asset acquired.

Question 345

Using rollover relief, to work out the base cost on the sale of a factory and acquisition of a new one…

Answer 345

Find gain on sale of old factory, and chargeable gain (disposal proceeds less cost of new factory). Then base cost is cost of new factory less (gain sale less chargeable gain)

Question 346

Gain on rollover relief is equal to…

Answer 346

Lower of gain on disposal and the amount not reinvested.

Question 347

In rollover relief, if the replacement is depreciating…

Answer 347

Gain not rolled over to reduce cost of replacement… Deferred until earliest of disposal of replacement or 10 years after acquisition of replacement, or date replacement ceases to be used.

Question 348

An asset is depreciating if…

Answer 348

Within the next 10 years it will become a wasting asset, so 60 years or less.

Question 349

If gain on disposal of asset 1 is deferred against depreciating asset replacement 2…

Answer 349

You can transfer the deferred gain to a non-depreciating asset 3 provided it was bought before defended gain on 2 has crystallised.

Question 350

How does gift relief work?

Answer 350

Within four years after end of the tax year of gift. No gain on disposal (chargeable). Donees cost of acquisition (market value) is reduced by amount of gain which would have been chargeable without gift relief. This causes higher future gain for donee.

Question 351

If the gift is shares that were from personal company in last 12 months, then gift relief…

Answer 351

Is limited by gain times fraction: chargeable business assets of company / chargeable assets of company.

Question 352

What happens with gift relief when the donor sells at less than market value?

Answer 352

Gain calculated using market value of asset, not actual consideration. Excess of actual consideration over base cost is chargeable, remaining gain gets gift relief.

Question 353

Your domicile is usually your …

Answer 353

Domicile of the father. Unless no father at birth then mother. Retained until different domicile of choice. Must be evidence you will live there forever, even buried there.

Question 354

Do NIC apply if uk domicile is working abroad in European Union?

Answer 354

Yes, for the first 12 months at least.

Question 355

If an employee abroad returns home to uk at the expense of the employer, will the costs be taxed benefits?

Answer 355

No. If employer provides lodging, this is also a tax free benefit. For 60 day+ absences travelling expense for spouse and minor children also tax free benefit.

Question 356

Disregarded income is…

Answer 356

For non uk residents living here, tax charge limited to tax at source (Inc. savings, dividends, investment, pension, social security) doesn’t include trading, employment, rental income.

Question 357

When is the remittance basis for non uk domicile residents automatically applied?

Answer 357

Unremitting foreign income and gains of less than £2000, or… One with no uk income apart from taxed uk investment income less than £100, and no foreign gains remitted and has been uk resident for 6 out of last 9 years, or is under 18 for whole year

Question 358

If you have to claim remittance you lose…

Answer 358

Entitlement to uk personal allowances and capital gains exempt amount, may have to pay remittance base charge, claim within 4 years of end of relevant tax year.

Question 359

If you don’t make a remittance claim as a uk resident but not domicile, but you have foreign income…

Answer 359

You will be taxed on it all as it arises.

Question 360

What are class 1 NIC? Who pays them and what for?

Answer 360

Paid by employees and their employers on earnings (mostly cash)

Question 361

What are class 1A NIC? Who pays them and what for?

Answer 361

Paid by employers on most taxable benefits provided to employees

Question 362

What are class 1b NIC? Who pays them and what for?

Answer 362

Paid by employers on the grossed up value of earnings in a PAYE settlement agreement.

Question 363

What are class 2 and 4 NIC? Who pays them and what for?

Answer 363

Paid self employed individuals on their earnings.

Question 364

The secondary class 1 contributions are reduced for each employer by

Answer 364

2000

Question 365

Employers are liable to pay class 1A / 1Bcontributions on taxable benefits provided at the rate of…

Answer 365

13.8%

Question 366

Class 1 And 2 maximum contributions. If an individual has two employments, and the earnings from one exceed the upper earnings limit (42,385)…

Answer 366

HMRC may agree to defer payment of NICs on the other employment, these contributions will only be payable at 2%.

Question 367

Main dispositions outside of scope of inheritance tax are…

Answer 367

Dispositions without gratuitous intent (eg commercial transactions with loss), dispositions made for maintenance of transferors family, gratuitous dispositions which are allowable expenditure for income tax and corporation tax (e.g. Employer pension contributions)

Question 368

Name some exempt IHT transfers of value…

Answer 368

To spouse, to an interest in possession trust for spouse (if before March 2006 or. Qualifying trust), death transfer to interest in possession to spouse, to charity if the charity uses it, to qualifying political party.

Question 369

What is a qualifying political party for IHT exempt transfer?

Answer 369

Two members of parliament, or one elected and at least 150,000 votes to candidates who were members of that party.

Question 370

What is the annual exemption amount for IHT?

Answer 370

3000 pa, used in chronological order of items, excess can be carried forward one year.

Question 371

If the transferor dies within 7 years, how does the inheritance get taxed?

Answer 371

On the nil rate band on the year of death (not year of transfer) Then the upper limit is 40% taxed! (Additional tax, if death tax is equal to or less than lifetime tax then no tax due)

Question 372

If after transferral, the survivor lives for less than 7 but more than 3 years, what is the tax rate?

Answer 372

3-4 = 80%, 4-5 = 60%, 5-6 = 40%, 6-7 = 20% (not inclusive of the upper bounds)

Question 373

When might the transfer be a PET? (Potentially exempt transfer)

Answer 373

Individual other than spouse, trust where individual has interest before 22 March 06, trust after this date but is qualifying (rare), bare trust, Accumulation and Maintenance trust before 22 March 06.

Question 374

Is there a lifetime charge on a PET?

Answer 374

No, but remember the annual exemption and marriage exemption are deducted from gift to find the amounts of PET which may become chargeable in the future.

Question 375

What debts and expenses can be deducted from free estate in computation of death estate?

Answer 375

Debts incurred for full consideration, eg credit card bills for goods bought prior to death, rent accrued to death. (Not gaming debts as not for consideration?), taxes imposed by law, funeral expenses, tombstone, unpaid commercial debts.

Question 376

Is a debt deductible on death estate for a loan for a property outside of uk and the individual is domiciled out of uk?

Answer 376

No, this is excluded property.

Question 377

What is quick succession relief?

Answer 377

If property acquired in five years before death (even if also disposed - if two IHT charges within 5 years). Tax paid on first transfer X (net transfer/gross transfer) X relevant %.

Question 378

What is net transfer and gross transfer?

Answer 378

Amount received by transferee (so deduct the IHT from the chargeable amount) vs. Gross transfer amount chargeable to IHT.

Question 379

What is the relevant percentage used on the quick succession relief?

Answer 379

Relates to period of time between first transfer and date of death.

Question 380

If the question doesn’t say the amount of tax paid in relation to the specific legacy, what happens to the QSR?

Answer 380

Formula is now (tax paid on first estate) / (gross value of estate) X net transfer X relevant %

Question 381

How does transferring to a spouse of your lifetime limit work?

Answer 381

Take the proportion you haven’t used, they can then have that proportion extra of their nil rate. P.s. Work out remaining portion by deducting transfers and value of chargeable death estate.

Question 382

If trustees pay inheritance tax but because of a spouse transfer, it wasn’t due, do they get it back?

Answer 382

No - it get’s rolled over to the next year.

Question 383

Can multiple spouses transfer their nil rate band to you?

Answer 383

Yes but your limit is on having 100% extra.

Question 384

Claims for nil rate spouse band transfers must be made by …

Answer 384

Later of 2 years from end of death month and 3 months from date the personal representatives first act for the survivor.

Question 385

What advantages are there if an individual leaves at least 10% of net chargeable estate to charity?

Answer 385

36% (rather than 40%) inheritance tax.

Question 386

What is the net chargeable estate on death?

Answer 386

Estate after deducting all reliefs, exemptions, remaining. niIl rate band, but not the charity legacy.

Question 387

If the individuals free estate includes jointly owned property or settled property, what happens to the 10% charity advantage?

Answer 387

10% test for reduced IHT tested on each individual component.

Question 388

What is the transfer of value? (I.e. Of shares)

Answer 388

Value you have before - value you have after. (Different to value of shares transferred). This only applies for inheritance tax diminution of value. For capital gains use the value of amount transferred.

Question 389

How might shares be valued?

Answer 389

If you have a large percentage, then valued on assets of company. If you have a small percentage them valued on income expected to receive. (Because of level of control)

Question 390

Shares listed on stock exchange in inheritance tax calculations are valued at lower of…

Answer 390

Quarter up rule (lower quoted price + 1/4 step to higher price), and average of highest and lowest marked bargains on day of transfer.

Question 391

How are units in an authorised trust valued for inheritance tax purposes?

Answer 391

Bid price (amount units will be bought for by trust manager), (not offer price, amount sold for)

Question 392

If an individual dies owning a life assurance policy, how is it valued in his estate for IHT?

Answer 392

If it is his own, valued by proceeds. (In this case, usually held on terms of trust for beneficiaries, not on own estate, so no IHT paid on proceeds. If it is someone else’s, valued by market value.

Question 393

What is related property?

Answer 393

Property related to property in the transferors estate which is in the estate of spouse, or has been held in previous 5 years by charity or political party, as the result of transfer made by transferor or spouse (to do with avoiding IHT by splitting property).

Question 394

Related property is valued at higher of…

Answer 394

Value of transferors interest as if there were no related property, and proportion held by transferor of the value of the whole of the transferors interest plus related property.

Question 395

If Trevor and Mary have 40% (15,000) and 60% (42,000) ownership of land (together 80,000) how is Trevor’s share valued when he transfers to son at death?

Answer 395

Interest of olive taken into account as together they own the whole land. Do: (15,000/(15,000+42,000)) X 80,000. Trevor’s unrelated proportion of the full value. (For shares, calculated with number of shares, not value of holding - this is for the first fraction, then multiply by full value)

Question 396

To qualify for business property relief consider…

Answer 396

ROSE, Relevant property transferred, Ownership period of transferor, Sale contract in place already would deny relief, Excepted assets reduce amount of relief.

Question 397

For what relevant business property transfers do you get 100% relief?

Answer 397

Unincorporated business, furnished holiday incorporation, shares in unquoted company, securities in unquoted (AIM is ok) company that gave transferor control.

Question 398

For what relevant business property transfers do you get 50% relief?

Answer 398

Share’s transferred from a controlling holding company, PPE owned by transferor and used in partnership if he was a partner or in a company if he had control.

Question 399

What are some exceptions to the “had it for 2 year rule” needed to qualify for business property relief?

Answer 399

If it replaced another business asset which together were owned for 2 years in last 5 years (inc shares). On death, ownership by spouse seen as ownership by dead spouse. If successive transfers of same property, one on death, and first transfer qualified for relief, 2 year rule deemed to have worked.

Question 400

What are exceptions to the disallowal of business property relief when there are already sale contracts?

Answer 400

Sale of an unincorporated business to a company mainly in consideration for shares/ securities in the company. Sale is of shares/ securities for the purpose of reconstruction or amalgamation. (If in partnership agreement interest said to sell to other partners on death, no BPR).

Question 401

What is an excepted asset?

Answer 401

Not used mainly for business in the prior two years, not required at time of transfer for future use by the business. (E.g. Large cash, land or shares held as investments.

Question 402

In business property relief calculations, if you are transferring shares, and the net assets of business include excepted assets, what do you do?

Answer 402

Times the business relief given by the proportional fraction to use the proportion that doesn’t relate to excepted assets.

Question 403

What are the rates for agricultural transfer relief?

Answer 403

Vacant possession or right to obtain vacancy in 12 months - 100%. Property letted out after Sep 1995 - 100%. Let out before Sep 1995 with more than 12 months left - 50%

Question 404

What are usual conditions to apply for agricultural transfer relief?

Answer 404

Occupied by transferor in 2 years prior to transfer or owned by him through the 7 years prior for agriculture.

Question 405

What are the required time conditions for agricultural relief (in terms of replacement assets)?

Answer 405

Where property transferred replaced another property which together were owned for at least 2 out of last 5 years if its the 2 year rule. 7 years out of past 10 if it’s the 7 year rule. Ownership by spouse is counted as ownership to self.

Question 406

APR isn’t available when there is a…

Answer 406

Contract in place already where the sale is in consideration for shares/securities that would give control.

Question 407

Give a condition for APR and BPR related to attributable liabilities.

Answer 407

If transfer takes place after 16 July 2013, asset qualifies, and transferor has liability taken after 5 April 2013… BPR and APR only applies to net value of asset, deduct attributable liability. (Or relevant part)

Question 408

When is a company resident in UK?

Answer 408

Incorporated or has central control and management in UK. So must pay corporation tax.

Question 409

A company accounting period starts…

Answer 409

When it commences trade or receives chargeable income. Or the previous accounting period ends.

Question 410

A company accounting period ends…

Answer 410

Earlier of 12 months after start, or date company begins/ ceases trade, or date ceases to be uk resident, or date period of account ends.

Question 411

When is the filing date for corporation tax return?

Answer 411

Latest of: 12 months after period of account (if not a longer than 18 month period), if longer then 30 months from start of period, 3 months from notice requiring return to be made is issued.

Question 412

How do you work out the chargeable gain on disposal for a company?

Answer 412

Disposal consideration - allowable costs - indexation allowance

Question 413

How does indexation allowance work?

Answer 413

(RD - RI) / RI where RD is the disposal indexation, RI is the acquiring. If negative result then it is nil. Rounded to 3dp and multiplied by cost.

Question 414

Can a capital loss incurred by a company be set against income?

Answer 414

No but it can be set against other gains for the accounting period, remaining loss carried forward to first gains.

Question 415

In what order are disposed shares in a company matched against acquired ones in the same class?

Answer 415

Shares bought on the same day, in previous 9 days (on FIFO basis), shares in s.104 pool (after 1 April 1982), shares bought before 31 March 1982.

Question 416

What is special about using the indexation factor when acquiring and disposing of shares?

Answer 416

Indexation factor that is assigned on each purchase and disposal is not rounded to 3dp. Work out the increase in indexed cost and add it each time there is addition or disposal. Use this when working out chargeable gain. Work out the normal gain, then deduct indexation (indexed value of disposed share less original cost of shares).

Question 417

If you have shares, and there is a bonus issue, do you include indexation increase when calculating profits on disposal?

Answer 417

Don’t include indexation at the bonus issue, this increase the number of your shares but not the total value. Use indexation on the sale to work out increase.

Question 418

If you have shares, and there is a rights issue, do you include indexation increase when calculating profits on disposal?

Answer 418

Yes, do a indexation revaluation at, each rights issue as the value of what you have changes. Deduct the indexed gain to get chargeable gain in your calculation (increased cost with indexation).

Question 419

What is a substantial shareholding?

Answer 419

One where the investing company owns at least 10% of the ordinary share capital and is entitled to at least 10% of the distributable profits and assets on winding up.

Question 420

If a trading company disposes of shares out of a substantial shareholding, what tax is charged?

Answer 420

Capital gains are exempt from corporation tax and capital loss is not allowable. (Investing company must have been trading from start of latest period where it had substantial holding until the disposal).

Question 421

If you have a balancing allowance and there is part private use… what do you do in the TWDV calculation?

Answer 421

Use the full balancing amount, but in the allowances column only take the business use part.

Question 422

What is a non qualifying IIP?

Answer 422

Interest in possession trust, created after 22 March 2006 then it is a CLT.

Question 423

What is a PET (with examples)

Answer 423

Potentially exempt transfers, gifts made in non CLT gifts made in lifetime, transfers to non spouse, transfers to IIP before March 2006 or to qualifying IIP after 22 March. IHT chargeable on PETs made 7 years prior to death.

Question 424

On inheritance tax, what are the rates for transferor and transferee?

Answer 424

20% for trustees paying, or 25% if transferor pays (assume this)

Question 425

What are the 3 stages to remember in calculating inheritance tax?

Answer 425

1) deduct exemptions (marriage, cy, py), 2) deduct nil rate band and do 20%, 25% tax, 3) calculate any death tax.

Question 426

What is the gross chargeable transfer value?

Answer 426

If trust pays tax, it is number at end of stage 1. If donor pays tax, number at end of stage 1 plus lifetime tax.

Question 427

How are shares valued (inheritance purposes?)

Answer 427

Lower of: Quarter up rule (quarter of way up between low and high price) and average of highest and lowest marked bargains on day. For CGT valued at half up (average).

Question 428

For inheritance tax and valuations, and related transfers… When is someone related?

Answer 428

The same for when there would be an inheritance tax charge. E.g. Spouse related, son isn’t

Question 429

What debts can’t you deduct when calculating inheritance tax?

Answer 429

Casino winnings, dodgy things. Outstanding IT and CGT fine.

Question 430

When is inheritance tax charged at 36% rather than 40%?

Answer 430

When more than 10% of your net chargeable estate is left to charity. (Charity amount/(taxable estate + charity))

Question 431

When might transfers to a spouse not be exempt from IHT?

Answer 431

When you are uk domiciled and your spouse isn’t. Up to 325,000 (lifetime limit) exempt.

Question 432

How do you work out the net cost of a gift aid gift to a tax payer?

Answer 432

Work out how much tax he saved in increasing his bands by the gross amount, now deduct this from his paid amount.

Question 433

Julius owns 55,000 units in a Trust. At the time of his death they are quoted at 125p-133p. What is the value of the units for IHT purposes? (How would you work it out).

Answer 433

55,000 x £1.25 = £60,750

Question 434

If in your business you make lease payments on a car, when would the cost be fully allowable in adjusted trading profits?

Answer 434

If it is less than or equal to 130g/km

Question 435

On gifting shares, how do you calculate the transfer of value for IHT purposes?

Answer 435

Lower of Quarter up method and average of highest and lowest marked bargains.

Question 436

Can a third party (not necessarily employer) make contributions to your pension scheme?

Answer 436

Yes

Question 437

What is the most you can contribute to your pension in a year?

Answer 437

Gross it is higher of 3600 (for 2015/16) and the individuals relevant earnings (not including investment income - just employment income).

Question 438

This is part of the chattel rules: If an asset is bought for under 6000 and sold for over 6000 (like a diamond), how do you work out the chargeable gain?

Answer 438

Consideration, less fees, less cost. This gives the gain but it cannot exceed 5/3 of difference from 6000.

Question 439

How are benefits taxed in NICs?

Answer 439

Benefits given to employees are taxed on Class 1A contributions.

Question 440

How do you work out an individuals CGT liability?

Answer 440

Remember to expand band widths if necessary after gift aid donations, Tag the CG on after the taxable income. The remaining amount in the Basic band is charged at 18%, rest is at 28%.

Question 441

Would an employee pay NIC on his benefits?

Answer 441

Only pay NIC on cash convertible earnings, the employer pays NIC on employee benefits.

Question 442

Is your grandmother’s spouse connected to you for Chargeable gains purposes?

Answer 442

Yes

Question 443

Who pays Class 4 NIC?

Answer 443

Self employed

Question 444

Who pays class 2 NIC?

Answer 444

Self employed

Question 445

Who pays Class 1B NIC?

Answer 445

Paid by employers on grossed up value of earnings in a PAYE settlement agreement.

Question 446

Who pays Class 1A NIC?

Answer 446

Payed by employers on most taxable benefits provided to employees.

Question 447

Who pays Class 1 NIC?

Answer 447

Paid by employers and their employees on earnings (monthly cash earnings).

Question 448

Is there a restriction on the amount of loss in a partnership a partner can set off against income not related to the partnership with s.64 and s.72?

Answer 448

Yes, the loss is restricted to the amount of capital they contributed.

Question 449

If you sell a car for less than the TWDV what happens in terms of allowances?

Answer 449

B/F the TWDV. Then deduct the price sold at. The remaining amount is the balancing adjustment (an allowance for the year). Remember to pro rate if there is private use.

Question 450

How is the grant of a short sub-lease from a short lease treated?

Answer 450

As a disposal of a wasting asset (less than 50 years).

Question 451

How do you work out the amount assessable to income tax on the grant of a short sub-lease from a short lease?

Answer 451

Income element of sublease premium: (51-sublease length/50. Then deduct the allowance from premium paid on main lease: (main premium x (51 - main lease length)/50) but this should be proportioned to the length of sub lease.

Question 452

How do you work out the capital gains on sale of a short sublease on a short lease?

Answer 452

Premium received less income taxable amount (from prior slide) less allowable expenditure (like depreciation). (for this use pg.103 tables. (%of remaining main lease days on granting sublease, - % of remaining days on expiration)/%full amount of days of main lease - multiply this by main lease amount.

Question 453

When a short lease is granted on a short lease (wasting asset) how is excluded expenditure calculated?

Answer 453

Use p3. 103 tables (Change in % amount remaining in main lease at start and end of short one) / % amount for full longer one. Multiply this by full lease premium.

Question 454

If paying corporation tax by instalments, when are they due?

Answer 454

First on on 14th day of 7th month following start of accounting period, then at 3 month intervals. Last one on 14th day of 4th month following end of accounting period.

Question 455

If you bought a lease for £10,000 with 15 years left to run and sold it when there was 10 years left, how do you work out the cost (value) of the lease on sale?

Answer 455

Look up the percentage value on purchase and sale. Do the relevant proportion of purchase price: %at sale/% at purchase x purchase price.

Question 456

What are the key things to remember about remittance basis claims for CGT vs. non remittance?

Answer 456

In remittance basis: No CGT allowance, No personal allowance when working out remaining band widths.

Question 457

When doing the DTR, what do you do again?

Answer 457

Remove the lower of the foreign tax suffered and the UK tax (take at highest band width) on foreign gains.

Question 458

When using occupational pension schemes, do you get tax relief?

Answer 458

Yes, employer deducts gross pension contributions from income before operating PAYE.

Question 459

What is a money purchase scheme? (Pensions)

Answer 459

Where the value of pension benefits depend on the value of investments in the pension scheme at the date that you set aside (vest) funds to produce those benefits.

Question 460

What is a defined benefits scheme? (Pensions)

Answer 460

Benefits are defined from the outset. Private schemes are likely to be money purchase.

Question 461

Why might it be advantageous to pay into a pension scheme over the tax relief limits?

Answer 461

There is no income tax nor capital gains tax payable by a pension scheme.

Question 462

If you (or employer) pays into your pension scheme an amount less than your income but more than annual allowance (40,000 for 15/16) what happens?

Answer 462

The relief is clawed back. Annual allowance charge payable by you. (Remember annual allowance b/f) 45%, 40% or 20% depending on taxable income of individual. Treat excess pension amount as taxpayer’s top slice of income.

Question 463

If your pension contains more than the lifetime allowance what happens?

Answer 463

Tested when you vest benefits. 55% charged on excess to provide a lump sum, 25% on excess to provide pension income.

Question 464

At what amount does the Personal Age Allowance start getting reduced to the normal amount on 2015/16?

Answer 464

27,700

Question 465

What is the penalty on late stock transfer form if up to 12 months late for stamp duty?

Answer 465

Lower of £300 and 10% of stamp duty owed.

Question 466

When organising your basis periods, do you proportion out your capital gains?

Answer 466

No, leave that in the period it comes from.

Question 467

Do you exclude supplies of capital goods when calculating partial VAT exemptions?

Answer 467

Yes

Question 468

How is the partial exemption ratio calculated for VAT products?

Answer 468

Computed as a percentage and then rounded up to the next whole number.

Question 469

What is s.72 loss relief?

Answer 469

Losses in the first 4 years can be carried back and set against the general income in the 3 tax years before the loss on a FIFO basis.

Question 470

What profit can you set losses against in s.83?

Answer 470

Losses can only be set against profits of the same trade.

Question 471

What is an important mistake to remember not to repeat when calculating loss relief in opening years??

Answer 471

You may have to work out the tax basis periods.

Question 472

How do you work out the RPI index allowance?

Answer 472

(new index - old)/old then multiply this by old cost. (deduct this) (It’s like deducting the natural percentage increase).

Question 473

How do you work out the rollover relief?

Answer 473

Well do all your calculations, then work out what has not been reinvested, this is your chargeable gain, the rollover relief is the balancing payment.

Question 474

How do you work out gift relief when there are shares as consideration and business (and non-business) assets?

Answer 474

Find the gain (MV compared to cost), amount of gain eligible for relief is proportion of shares relating to chargeable business assets, the chargeable gain is the amount left over.

Question 475

What is the base cost after gift relief?

Answer 475

Take the MC and reduce it by the amount that was eligible for gift relief. (The amount of original MV to cost gain that related to chargeable business assets).

Question 476

How do you know If you need an annual adjustment when looking at de minimis limits?

Answer 476

If exempt supplies tax amount per month is less than £625 and full value of exempt supplies is under 50% of full value of all supplied items then test is passed on input tax for the quarter is recoverable, adjustment made,

Question 477

If you have two employments, one of them has earnings over the UEL for NIC, what happens to the NIC of the other?

Answer 477

Taxed at the UEL (2%).

Question 478

Can a company be in two chargeable gains groups?

Answer 478

No. So if it is already in one from the main parent then it can’t be another.

Question 479

If a married couple own a house in different proportions which they rent out, how will it be taxed?

Answer 479

It will be usually taxed equally, but it can be decided to be taxed in accordance with their proportional ownership.

Question 480

Which one of the following is not a deemed supply for VAT purposes: Sale of goods on hire purposes, Gifts of business assets worth £100 each to a customer, Gifts of services worth £100 to each customer, Drawings of by the proprietor of a business?

Answer 480

Gifts of services worth £100 to each customer

Question 481

What is covered by the capital goods scheme?

Answer 481

Purchases of land and buildings costing at least £250k or ships, aircraft and computing systems costing at least £50k.

Question 482

If sometimes there are related companies and sometimes no longer, how do you know how much to divide the small/large profit limits by?

Answer 482

Use the number of companies at the end of the accounting period. Also remember to adjust for timings.

Question 483

What is the thing you have to remember about usable loss with s.89 in the last 12 months.

Answer 483

Look at the last 12 months of trade, splitting up by tax year around the Aprils. Ignore any split period that is profit in total.

Question 484

What is wear and tear allowance?

Answer 484

If you have property income, you can deduct it when calculating taxable income. It is 10% of rent income less anything the tenant should pay for (like water rates).

Question 485

In calculating income tax, what must you do after working out the tax liability?

Answer 485

Deduct the tax deducted at source. Like the notional dividend and savings taxed.

Question 486

Do rental properties and net current assets qualify for entrepreneurs relief on sale?

Answer 486

No as it is not a “relevant business asset” for the rental property. The net current assets are not chargeable assets.

Question 487

At what income does the age-increased personal allowance begin getting decreased?

Answer 487

Income (less charity donations) over 27.700. Deduct half of the excess.

Question 488

Who gets the marriage allowance?

Answer 488

The married man if one of them is eligible and they were married before April 05.

Question 489

How do you calculate the married couples allowance?

Answer 489

Find it in the tables. Reduce it by the “remainder of the excess” you got when reducing your extra aged persons allowance because it was over 27,700. Then take 10%.

Question 490

What happens in your income tax computation if you gave quoted shares to charity?

Answer 490

Deduct it from your non-savings income column.

Question 491

When working out capital allowances and taxable trading income for a sole trader, what order should you do it in?

Answer 491

Deduct the capital allowances from each accounting period from the taxable trading income, then pro rate the answers into the basis periods.

Question 492

If you are part exchanging an old car for a new one, what do you do in the Capital allowances table?

Answer 492

Make an addition of the (part exchange allowance plus cash paid) then make a deduction of the part exchange allowance.

Question 493

If you have trading income over 100,000, would pension contributions affect the reduction in personal allowance?

Answer 493

If employer contributions then no. If personal contributions then yes. Reductions start when adjusted net income (total income less gross gift aid less gross personal contributions (100/80)) exceed £121,200.

Question 494

How do you calculate the annual allowance charge on excess pension contributions?

Answer 494

Work out how much extra was vested (by subtracting, 40,000). Increase your band rates by gross pension payment. Excess is charged at 20%, 40%, 45% depending on which bands it lies in. (As if continuing on from income tax, and using leftover grossed bands). Remember to carry forward allowance by 3 years.

Question 495

Are personal pension contributions deductible in working out class 4 NICs?

Answer 495

No

Question 496

Complete the sentence: For corporation tax, where the period of account is more than 12 months long but doesn’t exceed 18 months, the returns for both accounting periods in the period of account are due…

Answer 496

12 months after the end of the period of account.

Question 497

If you are a sole trader, and you have deducted private phone and car expenses in calculating trading income, what should you do?

Answer 497

Add back the private part. It doesn’t relate to business, should be taxed.

Question 498

If you have deducted a written off loan to a customer to get sole trader trading income, what should you do?

Answer 498

Add it back. Disallowable.

Question 499

Which of these count as “non-trading income” for a sole trader and should be deducted if they are included in trading income? Sales, Bank interest receivable, Rents receivable, Profit on sale of fixed assets.

Answer 499

All of them apart from sales.

Question 500

If you are a sole trader making a longer period of account in the middle, how do you deal with that in terms of tax trading basis periods?

Answer 500

Don’t do much, just deduct the relevant proportion of overlap profits you have for the extra months you are including.

Question 501

If you finish with a short accounting period that is only a little bit longer, not going past April, what should you do in the trading basis (sole trader)?

Answer 501

Add the two periods together and deduct overlap relief.

Question 502

If you make a longer period of account as a sole trader, and no accounting period ends in a tax year…

Answer 502

You create a notional one ending 12 months before new accounting date. Overlap profits may be created.

Question 503

If a wife disposes of a painting her husband gave her, what is the cost when you are working out gains?

Answer 503

NOT market value at time of transfer, it is original cost. NGNL transfer.

Question 504

If you have made a personal pension contribution, do you gross up the pension value when increasing your taxable band limits?

Answer 504

Yes

Question 505

If you have a change in taxable usage in the capital goods scheme, how do you calculate additional input tax to reclaim?

Answer 505

(Full input tax/ intervals) x (taxable % now - taxable % on first purchase)

Question 506

What are the intervals used when making adjustments in reclaimable amount of input tax in the capital goods scheme?

Answer 506

10 for buildings and 5 for aircraft, ships and computers.

Question 507

What is the difference between opting to tax and not opting to tax in the capital goods scheme?

Answer 507

I think, at the end, the VAT recoverable is {(original VAT charged/interval) x (100% - original use %)} for opt to tax and 0% instead of the 100% for not opting to tax.

Question 508

What are the consequences of “Opting to tax”?

Answer 508

Charge and recover VAT: Standard VAT charged on sale or lease of property - (may be a problem if purchaser makes some exempt supplies as his recovery options are limited). And, any input relating to the supply may be recovered (e.g. cleaning, heating, repairs etc.)

Question 509

If you sell a patent in a company, is the gain included in adjusted trading income?

Answer 509

Yes

Question 510

How long can you carry losses back for with s.37?

Answer 510

12 months, but when it is a terminal loss then 36 months.

Question 511

When setting off losses in s,37 relief. Would you include charitable donations, interest receivable and UK dividends received in your Total profits?

Answer 511

No, Just the interest (NTLR) received out of these would get included with Trading income.

Question 512

If you got 20,000 from a premium for a 10 year property this year. How much of it is income this year?

Answer 512

(51-10)/50 and then multiply this all by 20,000.

Question 513

When do you apply the married couples allowance?

Answer 513

You deduct it from the tax liability.

Question 514

How would a gift aid donation affect the married couples allowance?

Answer 514

For the purposes of calculating the personal age and married couples allowance, net income reduced by the gross Gift Aid payment.

Question 515

Using the average method, how do you work out the taxable loan benefit?

Answer 515

Use average balance outstanding at start and end of year. Multiply this by the official interest rate (or official amount less company amount (pg. 59 TCQB). If it is made/repaid in year only months of outstanding loan used.

Question 516

What is the strict method for working out the taxable loan benefit?

Answer 516

Official rate in force on outstanding balance, done per month.

Question 517

How would you calculate the benefit of a photocopier that has been installed in your home by work, used by you, and then given to you after you made a contribution?

Answer 517

Benefit is 20% of full amount of photocopier (this is the benefit of usage for the year). When sold, benefit Is full price of photocopier less benefited amounts taxed so far less contribution made.

Question 518

How do you work out the deductible expenses relating to car mileage when working out taxable income for an individual?

Answer 518

Take the income received (i.e. 35p per mile received from company for driving) then deduct the allowable expense (45p for first 10,000 miles, then 25p etc).

Question 519

If you get a pension contribution from a company you used to work for, does this fall into your taxable income?

Answer 519

Yep, Once you’ve done your benefits and deductible expenses to get general earnings, put it in the next line before net income.

Question 520

If you pay 275,000 into your pension fund, how much pension tax relief will you be entitled to if your salary is 350,000. Also, what is the actual amount paid into the pension?

Answer 520

You will get full relief as it’s below your salary. Amount paid in will be 20% less (tax).

Question 521

What are the limits for not paying tax charges into pension schemes?

Answer 521

40,000 from 2014/2015 and 50,000 before (basically).

Question 522

If you pay more than 40,000 into your pension scheme, what are the charges?

Answer 522

40% for the remaining amount in the basic band and 45% for the amount in the higher band. (As if it is income, continuing on from taxable income in the recalculated bands).

Question 523

What happens to unused yearly pension allowances?

Answer 523

Can be carried forward 3 tax years.

Question 524

If you pay money into your personal pension contributions, what do you do to your band widths (talk about grossing).

Answer 524

Gross up the contribution 100/80 and increase bandwidth unless it says it was paid in gross.

Question 525

What do you have to do before you use s.37(b) carry back loss relief?

Answer 525

Set it against current year gains first. (a). Claim must be made for whole loss.

Question 526

If there is opportunity to use s.37 and s.46, what would be the steps in employing them?

Answer 526

Cancel any current losses with s.37(a) - ignore dividends (exempt) and qualifying charitable donations (put them in a row at bottom “unrelieved QCD”). Then cancel any prior year losses. Then remainder cancels next year losses but only trading income.

Question 527

When deciding if a company should pay tax in instalments, and looking at the augmented profits figure, what figure would you use to make augmented profits?

Answer 527

Well in Qu 56 QB they used current year profits (inc. loss reliefs made) and then added grossed up exempt dividends.

Question 528

In basis periods for sole traders, if you open with a loss, what happens?

Answer 528

First period: Take proportion of loss till April. For next period take relevant proportion of loss but deduct loss already considered.

Question 529

What are the types of loss relief (for companies and sole traders - how do they pair up in terms of similarity?)

Answer 529

s.37 (comp) is like s.64 for sole traders. s.45 (comp) is like s.83 for s.t. Then also s.72 for opening four years of trading and s.89 for closing 4 years against trading income (for both).

Question 530

Can you relieve a trading loss (from commencement in trading this year) against net income in prior years not related to that trading?

Answer 530

Yes. Under s.64. Doesn’t have to be same trade.

Question 531

If you start trading, and you make a loss, under s.72 you can set losses in the first 4 years against previous 3 tax years, does this include tax years prior to trading?

Answer 531

Yes. Loss in first year of trading can be set against non trading income prior to that.

Question 532

How do you calculate the c/f of a discretionary trust tax pool?

Answer 532

Take the b/f add 20% tax paid in year, add 45% tax paid in year, add 37.5% dividend tax paid (less the 10% credit), Then deduct the 45/55 of payment to beneficiary (to cover tax payment).

Question 533

What happens if the c/f on a tax pool to discretionary trust is positive or negative?

Answer 533

If positive then that’s fine, sufficient tax credit to cover payment to beneficiary. If negative then include “additional tax payable to HMRC”. And c/f will be NIL.

Question 534

What would be in an R185 form given to a beneficiary of a discretionary trust?

Answer 534

Net amount of non-savings income and tax credit.

Question 535

Does the indexation allowance apply to sole traders?

Answer 535

No, only companies.

Question 536

In working out adjusted trading profits, and there is a bit about stock at cost value and market value, what should it be valued at?

Answer 536

Lower of the two. So if it isn’t deduct the amount to get down to this value (deducting as you are losing out).

Question 537

What is the income amount and capital amount of a short lease premium?

Answer 537

Income amount is total x (51 - number of years)/50… This is then divided over the number of years. Capital is rest.

Question 538

What can s.83 losses be set off against?

Answer 538

Profits of the same trade.

Question 539

What can s.89 and s.72 losses be set off against?

Answer 539

Only trading income.

Question 540

What profits can s.64 losses be set off against?

Answer 540

General income of this year and then preceding year.

Question 541

Hello Maria

Answer 541

I love you.

Question 542

If you sell treasury stock, how will it be dealt with in CGT?

Answer 542

It is exempt.

Question 543

What would be your capital losses c/f?

Answer 543

Any capital losses b/f plus extra less amount used.

Question 544

How are capital losses used? Set off in full? How must they be used?

Answer 544

Must be set off in current year gains to bring utilised gains down to annual exempt amount.

Question 545

If you get a loss in disposal of shares to your brother (i.e. valued at M.V.) what restrictions are on the loss as relief?

Answer 545

As it is from a connected person, not available until another disposal made to brother.

Question 546

What is the differences in groups for loss relief and gains group:

Answer 546

Gains groups have 75% direct and 51% effective interests. Groups for loss relief have 75% effective interest. (Sharing losses more common).

Question 547

If you have your house for 10 years and are travelling for 4 years, how many years of PPR relief do you get?

Answer 547

9. Because you are allowed 3 years of travelling for no reason.

Question 548

If you are working out your PPR relief… but actually on the sale of your house you make a loss, what are you going to do with your PPR calculation?

Answer 548

Find the proportion that relates to not being lived in. This is an allowable loss that can be set against future capital gains.

Question 549

If legal services were used before registering for VAT, can the VAT be recovered?

Answer 549

Service VAT only recoverable if less than 6 months prior to registration.

Question 550

Can VAT be reclaimed on goods purchased prior to registration for VAT?

Answer 550

Only on those bought within 4 years before registration and goods are still on hand.

Question 551

Can input VAT on entertaining suppliers prior to registration for VAT be recovered?

Answer 551

No.

Question 552

If you sell boat cruises that come with a Buffet, what are the two ways they could be taxed? (Cruises is 0 rated and buffet is standard rated).

Answer 552

HMRC could either tax it all at main supply rate (so 0% in this case). Or it could treat it as a multiple supply by splitting elements in a reasonable manner.

Question 553

If looking up SDLT and it falls in the 0% band for non-residential… when might it still get more than 0%?

Answer 553

If the rent is more than £1000. Then the zero-rate band isn’t available. In this case I think take 1% of the lease premium and 1% of the total rent payable less 150,000 threshold. (1% of amount it exceeds threshold).

Question 554

In cash basis, would legal fees be an allowable expense?

Answer 554

If they relate to capital items that aren’t plant and machinery then No. (I.e. to acquire another property).

Question 555

When can a cash basis trader not use a fixed rate mileage system?

Answer 555

If capital allowances (like AIA) were used against it. In which case you can only claim the business related expenses.

Question 556

What happens if you want to use the fixed rate mileage system as a cash basis trader?

Answer 556

Remove any other motor expenses and just add the £3,150.

Question 557

When is an adjustment expense deductible relating to the cash basis?

Answer 557

Only in the first year of cash basis, you can deduct it if it is related.

Question 558

In company loan relationship, do you gross up the interest received?

Answer 558

No, it’s received gross.

Question 559

Is interest on loans to buy other companies or investments trading expenditure for companies?

Answer 559

No, only daily operations stuff is trading.

Question 560

When do you not round to 3dp in your indexation factors?

Answer 560

Things in the s104 share pool.

Question 561

Are repairs an allowable deduction in company tax?

Answer 561

Yes

Question 562

What should you think about if you make a PSA? PAYE settlement agreement?

Answer 562

Think about income tax and NICs

Question 563

Do you put things into capital allowances VAT exclusive or inclusive?

Answer 563

Exclusive, unless it is a car, then inclusive because you can’t recover the VAT.

Question 564

What treatment do RnD capital expenditures get in terms of capital allowances?

Answer 564

FYA

Question 565

Where do you put capital allowances in your tax calculations?

Answer 565

Deduct it from trading income.

Question 566

For companies, is interest received an paid net or gross?

Answer 566

Gross

Question 567

How long must you have shares for the Substantial Shareholding Exemption to apply?

Answer 567

10% holding required for 12 months of the 24 months prior to sale.

Question 568

How is private use treated in capital allowances if you are a company or sole trader?

Answer 568

In a company there is no private use calculation, everyone is an employee. If sole trader, only get business use proportion.

Question 569

What are the remittance basis charges?

Answer 569

£30k p/a if UK resident for 7 out of past 9 years, £60k if Uk resident for 12 of past 14. £90k if 17 out of past 20.

Question 570

When do you deduct the QSR?

Answer 570

It is a tax reducer, deduct it right right right at the end. After doing your percentages.

Question 571

What is the maximum contribution an individual can make to an employer given benefit that will be recognised in NIC calculations? (E.g. car)

Answer 571

5000

Question 572

What are the car emission tax rate things?

Answer 572

From 0-50 (5%). From 51-75 (9%). From 76-94 (13%). For 95 (14%). And then 1% for every 5 over (rounded down) up to 37%.

Question 573

How do you charge NIC for a staff party on an additional rate tax payer? (Employer NIC)

Answer 573

Party cost plus gross up by adding 45% (add 45/55). Then charge at 13.8%.

Question 574

General earnings (including bonuses) are taxable when?

Answer 574

On earliest of when payment is received and when entitled to payment.

Question 575

What can you deduct from total income to get net income in the income tax calculation?

Answer 575

Gifts to charity and qualifying loan interest and then personal allowance.

Question 576

Rent and premium on a short lease, the SDLT is payable on…

Answer 576

The full value of all rents and premium to be received.

Question 577

If you have overseas income that has withholding tax and available losses to use what can you do?

Answer 577

Make a claim to expense the overseas tax lost so losses only used on net amount of overseas income.

Question 578

What happens if something gets full FYA and is later sold?

Answer 578

You deduct it from the main pool still (so less main pool to get FYA on).

Question 579

How is REIT income treated in the income tax calculation?

Answer 579

Grossed up by 100/80 and put in the NSI column.

Question 580

Loan benefit in employment income is valued at?

Answer 580

The benefit of the reduced interest rate.

Question 581

Gift of a previously borrowed tv has an employment benefit of…

Answer 581

Higher of MV when gifted and MV when first provided less benefits to date.

Question 582

Do you gross up band rates by the occupational or personal pension scheme contribution?

Answer 582

Personal pensions scheme contribution. Occupational contribution doesn’t increase band rates.

Question 583

What is the additional charge on living accommodation?

Answer 583

(Value of house when purchased less 75,000) x 3% x time apportion. (3% is the ROI thing).

Question 584

In income tax calculation, what is the difference in treatment with occupational pension donation and personal pension donations?

Answer 584

Occupational pensions are deducted straight from salary before tax. Personal contributions used to expand bands.

Question 585

If you are a non UK resident, are you charged on UK CGT?

Answer 585

Only on residential property.

Question 586

A business can only recover VAT on a purchased car if…

Answer 586

It is 100% for business use.

Question 587

VAT can only be reclaimed on bad debt if…

Answer 587

VAT paid over on supply, debt written off, debt at least 6 months overdue.

Question 588

When does a trader need to register for VAT? And what will be payable?

Answer 588

When the taxable supplies reach 82,000. Need to notify HMRC by end of next month. VAT due after this month. If unprompted disclosure perhaps no fine.

Question 589

In what order of pools would you assign the AIA in capital allowances?

Answer 589

8% pool first as least allowance. Then 18%. Then special rate as this ends with a balancing allowance.

Question 590

Can s.37 loss relief be carried back by a period (perhaps less than 12 months) or by 12 months regardless of how many periods?

Answer 590

Can be used for this year and 12 months prior.

Question 591

If you are in the childcare voucher scheme prior to 6 April 2011, what happens to the allowable benefit?

Answer 591

Capped at £55 per week.

Question 592

If you get BPR do you also get 3000 annual exemption?

Answer 592

No need

Question 593

Do you get annual 3000 exemption on death estate?

Answer 593

No, only for lifetime transfers.

Question 594

At what rate is commercial property rental?

Answer 594

It is an exempt supply - unless opted to tax.

Question 595

In life you make a house transfer, at death it fell in value… What is the death tax due (explain calculation).

Answer 595

In life, deduct the 3,000 allowances. And the year Nil rate band. Charge IHT on this. Gross chargeable transfer then the amount less annual allowances plus the charged amount (if you paid, not if trustee paid). On death, take gross chargeable amount, reduce by the fall in value figure and death year NRB, then death tax on this.

Question 596

So what do you do if the de minimus tests were not met but all exempt VAT was recovered?

Answer 596

Do a table of supplies with columns “taxable” and “exempt”. Input the stuff you know. Then use this again to work out the exempt and taxable amount. Do the tests again, is 1/12th of yearly exempt less than £625? And VAT proportion on exempt less than 50%? If not then repay the exempt VAT recovered.

Question 597

How do you deal with non-attributable input tax when working out the taxable and exempt input VAT?

Answer 597

Divide it into the proportions of taxable and exempt supplies made by the business and put it in the taxable and exempt columns of your working?

Question 598

If a car, purchased for an employee has some private use can you recover the VAT?

Answer 598

No

Question 599

How long must the company have the shares for, for the SSE to apply?

Answer 599

12 out of the last 24 months at least.

Question 600

Is income from national savings and investments direct saver accounts taxed or exempt?

Answer 600

It is taxed but remember it is received gross.

Question 601

If your company gives you a holiday voucher, in your income tax calculation is it valued at the market value or cost to employer?

Answer 601

Cost to employer.

Question 602

If an employer contributes to your occupational pension scheme would you include the contribution in your income tax calculations?

Answer 602

No

Question 603

What is the petrol benefit?

Answer 603

22,100 x the CO2 rate.

Question 604

If in your trade you got VAT advice, is this allowable expenditure?

Answer 604

Yes, deduct it but remember to gross up by 120/100

Question 605

You get a car for 13,500 in your personal trading business. Emissions of 73g/km. You use it 60% for business use. What capital allowances do you get.

Answer 605

Gross it up by 120/100 and then get 100% FYA, but then you only get the 60% of this as allowance.

Question 606

Can you get capital allowances on paintings?

Answer 606

Nope, it’s not related to the trade.

Question 607

If an EU customer receives your goods, how are they VATed?

Answer 607

Zero-rated if he is registered. Rated normally for goods if not registered.

Question 608

What is the destination system in VAT?

Answer 608

Goods coming in from Vat registered company taxed at normal rate so no different from other UK goods.

Question 609

If goods are exported out of the EU, how are they VATed?

Answer 609

Zero rated.

Question 610

If goods are imported out of the EU, how are they VATed?

Answer 610

Chargeable if they would have been chargeable when coming from an EU person.

Question 611

Who gets the marriage allowance?

Answer 611

Before Dec 5th 2005 then the man, after then the highest earner.