Taxation

Question 1

Taxation of sole traders

Answer 1

First year: commencement to 5th April
Second year: first full accounting period ending in that tax year (will be some overlap)
Third and subsequent years: account period ending in that tax year
Final year: end of last accounting period to cessation (deduct overlap unless already recovered)

Question 2

Tax year

Answer 2

6-5 April

Question 3

When you start a business how soon must you register with HMRC

Answer 3

Within 3 months

Question 4

Taxation of partners and LLP

Answer 4

Same as sole traders for income and outgoing

Apportion between Ps

Question 5

Is employment income still taxable if received from a third party not employer

Answer 5

Yes

Question 6

What is employment income

Answer 6

All benefit derived from their office or employment as a reward for their service including non cash benefit

Not personal gift because not a reward for service

Question 7

How to do calculate the value of a non cash benefit for employment income

Answer 7

The value of the benefit is the cost to the employer in providing it

Question 8

Non cash benefits that are not taxable as employment income

Answer 8

Accommodation is necessary for job or customary for job
Special rate loans not exceeding £10k at any time in tax year
Employers pension contributions into HMRC approved scheme
Gifts of shares, sale at favourable price or option to pro base share in future
Expenses wholly incurred exclusively and necessary for performance of duty if not reimbursed by employer

Question 9

Do lenders pay tax on interest received from loan

Answer 9

Yes income tax or corporation tax

Question 10

When do S pay income tax

Answer 10

Dividends
When a loan from a close company is written off
When the company buys back S shares

Question 11

2 income tax reliefs for S

Answer 11

1. When an individual borrows money to purchase ordinary shares in a close company that carries on a trade or to lend money to a close company that carries on a trade
2. Enterprise investment scheme. Sum equal to 30% of shares of unquoted company deducted from IT liability.
   Cannot be connected to company 2 years before or 3 years after share purchase
   Combined shares of them and their associates cannot exceed 30%

Question 12

If income is liable for income tax how soon must you notify HMRC

Answer 12

Within 6 months of end of tax year or get a fine and interest on unpaid tax

Question 13

How does HMRC know if you lied on your tax return

Answer 13

Can carry out audits

Question 14

Can you appeal against an HMRC assessment

Answer 14

Yes to first tier tribunal

Question 15

If you file a tax return how is your tax paid

Answer 15

2 payments on account, each aprox half of liability based on last years liability then one balancing payment

Can request reduction if you think it should be less than last year

Question 16

What is tax avoidance

Answer 16

Lawful but not in spirit of law

Question 17

Was is tax evasion

Answer 17

Illegal methods to reduce tax payment

Question 18

What is the general anti avoidance rule

Answer 18

HMRC can adjust liability to compensate for abusive arrangements
Abusive - an unreasonable course of action. Not illegal but not reasonable

Question 19

How do you appeal against HMRC corrective action for abusive arrangement

Answer 19

Request GAAR advisory panel to consider case

Question 20

Liability for person who in the course of their business enables an abusive tax arrangement

Answer 20

Pay penalty equal to benefit they gained from facilitation

Not individual employees