Tax Law

Question 1

Self-assessment for tax

Answer 1

Paper return on 31 October the following year, electronic return on 31 Jan the following year, must make two payments on account (jan/jul) each 50% of previous year’s liability with balance owed 31 jan following year

Question 2

Exempt from tax

Answer 2

Interest from National Savings Certificates, Individual Savings Accounts, winnings, premium bonds, benefits and credits

Question 3

When do you need to register self-employment?

Answer 3

Within 3 months

Question 4

How to calculate chargeable income?

Answer 4

Start with gross income, deduct revenue expenses (exclusively for business purposes), deduct capital allowances (AIA, writing down allowances for cars 18%, 6% for longline assets)

Question 5

What happens when accounting period doesn’t end in tax year?

Answer 5

overlap profits from first year.

Question 6

Personal allowance?

Answer 6

£12,570, tapered £1 for every £2 income above £100,000

Question 7

Marriage allowance?

Answer 7

£1,260 transferred, receives 20% of that (£252) - must be married/civil partnership, transferring spouses income must be less than personal allowance, recipient must be a basic rate taxpayer.

Question 8

Rate bands?

Answer 8

BRB 37,700 (20%) HRB £150,000 (40%) ARB higher (45%)

Question 9

Personal Savings Allowance

Answer 9

BRB £1000, HRB £500

Question 10

Dividend Income rates and allowance

Answer 10

7.5, 32.5, 38.1, £2000 available to everyone

Question 11

Sole trader/partnership losses

Answer 11

1. cannot be transferred to spouses
2. Set off against total income in current or prior year
3. losses can be carried forward and set off against profits (must for next available trading income)
4. Transfers business and receives shares, against salary or dividend payments
5. If ceases trading, then deduct from current year and carried back three years, taking later years first (LIFO)

Question 12

Exemptions for CGT

Answer 12

1. wasting chattels (life less than 50 years, cars, watches, animals, machinery not used in the business etc.)
2. Disposed of for less than £6000
3. transfers upon death, between spouses, to charities

Question 13

How to calculate Capital Gains

Answer 13

Subtract costs incidental - fees, valuation, advertising, defending title, but NOT cost of replacement

Question 14

Private Residence Relief

Answer 14

100% exempt. Deemed occupation:
1. any reason for three years
2. unlimited if abroad for employment
3. 4 years if absent for work elsewhere
4. last 9 months of ownership

Question 15

Business Asset Disposal Relief

Answer 15

1. business if carried on in business at least two years prior, as well as assets
2. shares if owns at least 5% of ordinary voting shares and was an officer of the company for at least 2 years

Taxed at 10% with lifetime limit of £1,000,000

Question 16

Holdover relief

Answer 16

donor/donee must agree (they pay extra)
1. assets for trade in a company in which at least 5% shares are owned
2. shares in unquoted company
3. shares in personal company
4. assets that qualify for agricultural relief

Question 17

Incorporation relief

Answer 17

1. company is a going concern
2. subtracting the gain from the acquisition cost of the company shares
3. taxed when shares are disposed of.

Question 18

EIS (enterprise investment scheme)

Answer 18

defer CGT by investing in qualified unquoted trading companies - pay tax when you sell the shares

Question 19

Annual exempt amount CGT

Answer 19

£12,300, 10% if does not exceed BRB and 20% after that.

Question 20

VAT rates:
1. standard
2. food, books, newspapers, water, sewerage, residential construction
3. domestic fuel, energy-saving materials, car seats
4. land, insurance, financial services, education, health and postal services

Answer 20

1. 20%
2. 0%
3. 5%
4. exempt

Question 21

When must a company register for VAT?

Answer 21

turnover exceeds £85,000 within rolling 12-month period or if expected in next 30 days (either within 30 days or before 30 day future period ends)

Question 22

When can a company deregister for VAT?

Answer 22

if turnover falls below £83,000 in rolling 12-months and MUST within 30 days if it ceases trading

Question 23

How much VAT payable?

Answer 23

Amount charged (output tax) minus input tax