Tax Revision Flashcards
What is the threshold salary at which an employer must deduct and submit to HMRC employee income tax?
£184
In the first year of trade, no payments are required
Payments on account are always calculated using 50% of the prior year’s income tax payable figure
Additional rate taxpayers are not entitled to any personals savings allowance
One-off capital expenses are not deductible as revenue expenses
Capital losses can be carried forward indefinitely to offset against future gains
All UK taxpayers can use the full capital gains annual exemption – even taxpayers in the higher rate band.
An individual does not qualify for the absence due to working elsewhere counting as occupation for up to four years nor for the absence for any reason counting for up to three years, as she did not reoccupy the home when they return
People who trade as sole traders, partners, company directors, and people with interest or dividend income higher than the tax-free thresholds are required to register for self-assessment.
Everybody is allowed to receive £2,000 of dividends tax free
Income derived from an ISA or prizes from Premium Bonds are exempt from tax.
The marriage exemption is £1,000 for anyone other than a parent, grandparent, or the other party to the marriage.
For leases stamp duty land tax will be calculated based only on both the premium paid and the present value of the lease payments
In cases where the payment is made and the invoice is issued before the good or service is supplied, the tax point is the earlier of the payment or invoice date
Businesses with turnover above £85,000 must register for VAT. Two tests are used to determine whether a firm must register for VAT: the historic test and the future test. Under the historic test, a firm must register if its turnover over the past 12 months exceeds £85,000. The future test looks to whether the month’s turnover will exceed £85,000.
Companies which are not large (generally, companies with profits of less than £1.5 million) must pay their corporation tax 9 months and 1 day from the end of the accounting period
Residential properties are exempt from VAT
When determining the amount of a chargeable lifetime transfer (such as gifts to most trusts) that is chargeable to tax, we need to take into account other CLTs made by the donor in the previous seven years, because IHT is a cumulative tax.
How to calculate the SDLT on the grant of a lease?
SDLT is due on both the premium and the present value of the lease, although these are calculated separately and not as a lump sum. We use the net present value of the lease payments to calculate tax on them (rather than the total actual lease payments).
The maximum penalty HMRC could impose for a careless error on a self-assessment tax return is 30% of the lost tax revenue. If the taxpayer is a basic rate taxpayer, the lost tax revenue is 20% of the outstanding tax owed. HMRC would use their discretion and in some instances where it is a genuine mistake this could be lessened to 15% or even 0%. If it is deliberate the penalty could potentially be as much as 100% of the lost tax revenue.
A basic rate taxpayer can make use of 10% of their spouse’s personal allowance (£1,250), which would save £250 in taxes
The residents nil rate band is applicable only if the recipient of the estate is closely related to the decedent, such as a lineal descendant
The basic tax point is the time the goods are made available (that is, the despatch/delivery date). However, if the goods are paid for before that date, the payment date will be used. And if a VAT invoice is issued within 14 days after the basic tax point, that date will be used.
Commercial buildings that are less than three years old are a standard-rated supply and therefore VAT of 20% will be suffered on the purchase of these. Commercial buildings that are more than three years old (with no option to tax) and residential properties are exempt supplies and therefore no VAT will be suffered.