tax (week 7)

Question 1

what is VAT charged on?

Answer 1

any supply of goods or services made in the UK
where it is a taxable supply
made by a taxable person
in the course of any business carried on by that person

Question 2

what does in the course of business carried on by them mean for VAT purposes?

Answer 2

wide meaning and basically means any economic activity carried on, on a regular basis

Question 3

what is the current registration threshold for VAT?

Answer 3

£90,000

Question 4

When is a person required to register VAT at HMRC?

Answer 4

either within 30 days of the end of that month or if they believe they will go over the threshold then in a period of 30 days

Question 5

what is corporation tax payable on?

Answer 5

all income profits
chargeable gains
a body corporate that arise in its accounting period

Question 6

what is TPP (taxable total profits chargeable to corporate tax) what two things make this up?

Answer 6

company’s income profit and chargeable gains

Question 7

how much corporation tax is payable on companies with a TPP greater than £250,000?

Answer 7

25%

Question 8

how much corporation tax is payable on companies with a TPP of £50,000 or less?

Answer 8

19%

Question 9

how much corporation tax is payable on companies with a TPP is between £50,000 - £250,000?

Answer 9

company may claim marginal relief which has a tapering effect on the tax rate.

Question 10

when do income receipts and expenditure arise?

Answer 10

through every day trading

Question 11

when do capital receipts and expenditure arise?

Answer 11

through one-off transactions

Question 12

is dividend income included in calculating a company’s TPP for tax purposes?

Answer 12

no generally exempt

Question 13

what does it mean ‘tax deductible expenditure’?

Answer 13

expenditure by the company that the company is permitted to deduct from its income receipts, thereby reducing the overall tax bill

Question 14

to be deductible for tax purposes what are the 3 things the expenditure must be?

Answer 14

1. be ‘wholly and exclusively’ incurred by the purposes of the trade
2. not be prohibited by statute
3. be of an income nature

Question 15

what is a corporate interest restriction?

Answer 15

where a company (or group of companies) has more than £2millon of net interest in the UK any year, the amount of interest a company may deduct is restricted to maximum amount equal to 30% of its income receipts

Question 16

what is the reducing balance basis?

Answer 16

the idea that companies can deduct 18% of the value of plant and machinery from their income receipts each year on a ‘reducing balance’ basis.

Question 17

what is annual capital allowance?

Answer 17

enables companies to deduct 100% of expenditure on new, used or refurbished plant and machinery up to £1million.
(anything over this they can then use the reducing balance basis 18%)

Question 18

What is rollover relief for replacement of business assets (rollover relief)?

Answer 18

defer tax from a gain when an asset is disposed of

Question 19

do you need to replace an asset with the same type of asset for rollover relief to apply?

Answer 19

no it doesnt need to be the same type of asset - as long as it is a qualifying asset

Question 20

what is the effect of rollover relief?

Answer 20

tax is postponed until the replacement asset is sold and no new qualifying replacement asset is purchased.

Question 21

what qualifying assets attract rollover relief?

Answer 21

land and buildings
goodwill
fixed plant and machinery
ships and hovercrafts
aircrafts
Lloyd’s syndicate capacity

Question 22

what are the timings for rollover relief? (between replacement asset and new asset)

Answer 22

replacement asset must be purchased within 12 months before or 3 years after the sale of the old asset

Question 23

what is straddling?

Answer 23

when a company’s account year and financial year is different - the TPP of the accounting year must be split between the financial years that it goes over (because different financial years have different tax rates)

Question 24

what is the procedure for companies with TTP of less than £1.5million for paying HMRC?

Answer 24

pays HMRC within 9 months and 1 day of the end of the accounting period
company must electronically tax return within 12months of the end of the accounting period it relates to

Question 25

what is the procedure for companies with TTP of more than £1.5million for paying HMRC?

Answer 25

companies are required to pay their tax bill in 4 instalments over the course of the relevant accounting period and the next one.

Question 26

what is a close company?

Answer 26

under the control of:
- 5 or fewer participants; or
- any number of partipators who are also directors

Question 27

what are the exclusions that apply to when a company is NOT a close company?

Answer 27

if shares are quoted and on the stock exchange market; or
company is owned by a non-close company

Question 28

What are the two things prohibited by statute for expenditure?

Answer 28

entertaining clients and provision for debts that might not be paid