Taxation F6

Question 1

Unless the taxpayer has a reasonable excuse, penalties will automatically apply if ?

Answer 1

-a self-assessment tax return (personal or corporate) is submitted late; or
-records are not kept by the taxpayer for the appropriate time; or
-the taxpayer fails to notify HMRC of a new source of income or profit within the appropriate time interval.

Question 2

What are the Penalties for submission of a corporation tax return after the filing date (generally the anniversary of the end of the accounting period)?

Answer 2

1. Up to three months-£100
2. More than three months but less than six months-£200
3. More than six months but less than 12 months-£200 + 10% of any unpaid tax for the relevant accounting period
4. 12 months or more £200 + 20% of any unpaid tax for the relevant accounting period
   5.The £100 and £200 amounts are raised to respectively £500 and £1,000 if the late filing is the third or subsequent consecutive occasion of late filing

Question 3

How much is the penalty for Failure to retain records supporting tax returns and liabilities for the appropriate period attracts ?

Answer 3

a maximum penalty of £3,000

Question 4

What are the 4 payment of tax due(rule) corporation tax ?

Answer 4

Estimated tax is payable 9 mths and 1 day after the end of each acc. period provisions - quarterly instalment payments for ‘large’ companies. electronic payments.
(b) Interest due on tax paid late starts from the due date to the date of payment at 6.5% p.a
(c) Interest on overpayments of tax start from the later of the due date or the date tax was paid at 3% p.a
(d) Under self assessment interest on tax paid late will be deductible against interest receivable.
Interest received on overpaid corporation tax will be taxable as Interest receivable

Question 5

When must a new company notify HMRC and what is the penalty of not doing this?

Answer 5

1. A company filing Corp. Tax for the 1st time must notify HMRC when the 1st acc. period starts, within 3mths of the start f the acc. period.
2. Failure to notify chargeability to tax within 12 mths of the end of the acc. period will lead
   penalty based on a percentage of the tax unpaid 12 mths after the end of the acc. period.

Question 6

What constitutes a quarterly installments of tax payment ?

Answer 6

Quarterly instalments apply to large companies, in respect of its corporation tax liability if augmented profits exceed a profit threshold of £1,500,000.

Question 7

Quarterly Instalments 6 rules ?

Answer 7

(a) large companies.
(b) If a company in respect of its corporation tax liability if augmented profits exceed a profit threshold of £1,500,000.
(c) From 1 April 2023, the profit threshold is instead divided by the no. of associated
companies as at the end of the immediately preceding acc. period.
(d) The instalments are based on the estimated current year’s liability.
(e) The four quarterly instalments will be made in months 7, 10, 13 and 16 following the start of the
acc. period. The instalments are due on the 14th of the month. (eg: yr ended 31 March 2024 the first quarter payment would be due October 14,2023 followed by further payments due January 14, April 14 and July 14, 2024)
(f) Quarterly payments are not required if:
‣ current profits do not exceed £10 million and
‣ the company was not large in previous AP.

Question 8

what are the 3 Claims rule (Corp. Tax)

Answer 8

(a) Wherever possible claims must be made on a tax return or on an amendment to it and must be
quantified at the time the return is made.
(b) If an error in a return or mistake is made claim may be made
within four years from the end of the accounting period.
(c) Other claims must be made within four years of the end of the acc. period unless a different time limit specified.

Question 9

How long must company keep records?

Answer 9

Companies must keep records until the latest of:
‣ six years from the end of the accounting period
‣ the date any enquiries are completed
‣ the date after which enquiries may not be commenced
(b) All businesses records and accounts including contracts and receipts must be kept
(c) Failure to keep records can lead to a penalty or up to £3,000 for each accounting period
affected

Question 10

How are Compliance Checks done ?

Answer 10

HMRC may enquire first give written notice.
(b) The notice must be given within a year after the later of:
‣ 12 months following the date the return is actually received by HMRC
‣ If the return is late, 12 months following the 31/1, 30/4, 31/7, 31/10 that next follows the actual date of delivery.
(c) An enquiry may be made due to:
‣ A suspicion income is understated
‣ Deductions being incorrectly claimed
‣ Other information in HMRC’s possession
‣ Being part of a random review process

Question 11

When is a derminations and Discovery assessments issued ?

Answer 11

(a) If a return is not delivered by the filing date, HMRC may issue a determination of the tax payable within 3 years of the filing date.
(b) If HMRC believe that not enough tax has been assessed for an acc. period they can make a discovery assessment to collect the tax.
(c) A discovery assessment can only be made if:
HMRC could not reasonably be expected to have been aware of a loss of tax and are supplied
with information to draw their attention to a contentious matter such as the use of a valuation
or estimate. HMRC can raise an assessment within 4 years from the end of the acc period; this is extended to 6 years if there is a careless error or 20 years if there is a deliberate error or failure to notify a chargeability to tax.

Question 12

When can a company appeal ?

Answer 12

(a) The company can appeal against amendments to the corporation tax return.
(b) The appeal must be normally be made within 30 days of the amendment and must state the
grounds for appeal.
(c) The appeals procedure is as per VAT

Question 13

What are the Corporation tax return rules?

Answer 13

(a) Companies that do not receive a tax return are required to notify HMRC if they have income or
chargeable gains on which tax is due. This must be done within 12 months from the end of the
accounting period in which the liability arises, otherwise the standard penalty for late notification will arise.
(b) The filing date for accounts and computations is 12 months after the end of the financial
accounting period. Returns must now be made online and any corporation tax paid electronically.
(c) If the accounts and computations are filed late there is a fixed penalty of £100. If the return is
filed more than 3 months after the filing date the fixed penalty is increased to £200 (These
penalties become £500 and £1,000 if it is the third consecutive time the return is late).
(d) Returns may be subject to a random or specific enquiry by the HMRC. Written notice of the
HMRC’s intention to make an enquiry is given within 12 months from the date the return is
received by HMRC.
(e) There will be an additional corporation tax related penalty of 10% of the tax unpaid 6 months
after the return is due, if the self-assessment tax return is more than six months late, or 20% of
the tax unpaid 6 months after the return is due, if more than 12 months late.
(f) HMRC may amend a return to correct obvious error within nine months of the day the return is
filed. A company may amend a return within 12 months of the filing date.

Question 14

What are the Penalties for incorrect returns ?

Answer 14

The amount of penalty is based on the amount of tax understated, but the actual penalty payable is
linked to the taxpayer’s behaviour, as follows:
(a) there will be no penalty where a taxpayer simply makes a genuine mistake.
(b) moderate penalty (up to 30% of the understated tax) where a tax payer fails to take reasonable care.
(c) higher penalty (up to 70% of the understated tax) if error is deliberate.
(d) higher penalty (up to 100% of the understated tax) where the error is deliberate and there is also concealment of the error.
A penalty will be substantially reduced where the taxpayer makes disclosure, especially unprompted
disclosure to HMRC.

Question 15

What is direct tax and the types ?

Answer 15

Direct taxes are levied on income, chargeable gains and capital transfers. It includes: income tax, national insurance, capital gains tax, inheritance tax and corporation tax, which HMRC collect directly from the taxpayer.

Question 16

What is indirect tax and the types ?

Answer 16

Indirect taxes are applied to spending on goods and services supplied to individuals and businesses. Indirect taxes include value added tax (VAT) which HMRC collects from the supplier who collected it from the taxpayer.

Question 17

What is Tax evasion?

Answer 17

Tax evasion is the illegal underpayment of tax achieved by negligence or fraud.

Question 18

What is Tax avoidance ?

Answer 18

Tax avoidance (in the form of tax planning) seeks to minimise tax liabilities through the organisation of a taxpayer’s financial affairs within the limits of tax law.

Question 19

What is Non-savings income ?

Answer 19

Non-savings income comprises earned income (employment income, trading income and pension income) and property income.

Question 20

what is the Replacement of domestic items relief?

Answer 20

Replacement of domestic items relief can be claimed as an allowable deduction on the replacement, but not initial purchase, of items such as furniture.

Question 21

What is a Short life asset?

Answer 21

A short life asset is an asset that has an expected life to the business of less than eight years.

Question 22

Until what date can HMRC amend a tax return?

Answer 22

Within 9 months from the date of filing

Question 23

Which taxes does self-assessment for individuals cover?

Answer 23

Income tax
Capital gains tax
Class 4 NIC

Question 24

What are the online and paper filing dates of self assessment?

Answer 24

31/10 for paper filing and 31/01 for online filing

Question 25

If a taxpayer wants to claim overpayment of tax for a particular tax year, within how many years can he make this claim?

Answer 25

4 years from the end of the tax year

Question 26

direct revenue tax include?

Answer 26

Income tax
Corporation tax
National insurance contribution

Question 27

What is case law?

Answer 27

Decisions made previously by the judges in court about taxation matters

Question 28

For large companies that have to pay their corporation tax liability in 4 installments, when are these installments due

Answer 28

Months 7, 10, 13 and 16 following the start of the accounting period.

Question 29

What are the main forms of HMRC guidance, which help to explain and interpret the law?

Answer 29

Statements of Practice
Extra statutory concessions
HMRC website, leaflets
Internal HMRC Manuals
Briefs

Question 30

What is the fomula to calculate A benefit arises if an employee is provided with living accommodation, unless it is job related living accommodation?

Answer 30

The benefit can comprise three elements: £
(1) Annual charge – higher of
(i) Gross rateable value (Note 1)
(ii) Rent paid by employer (Note 2)

(2) Additional charge – where accommodation is owned by the employer and cost exceeds £75,000 (Note 2)
(i) If owned for six years or less before being first made available:
Charge = (cost – £75,000) × official rate of interest at 6 April
(ii) If owned for more than six years before being first made available:
Charge = (Open market value (OMV) when first available – £75,000)× official rate of interest at 6 April.
Note: The cost of improvements made since acquisition but before the start of the current tax year is added to cost or OMV as appropriate. Improvements made after the start of the current tax year are ignored.

(3) Ancillary expenses – (e.g. utility expenses – gas, electricity and water; Council tax; redecoration; wages for domestic help paid by employer).
Charge = cost to employer of providing the benefit Less: Contribution by employee

Notes:

1. Gross rateable value is the annual rental value of property (set by government at old historic rates).
2. Rent paid by employer will only arise when the property is not owned by the employer.

The additional charge only applies to properties owned by the employer because the historic rateable values do not accurately reflect the current market rentals payable on such property. (That is, if the property is rented by the employer the rent paid by the employer will equate to the current rateable value and logically the additional charge is unnecessary.)

3. The official rate of interest is given on the tax rates and allowances provided in the exam.  

Question 31

How do you calculate A taxable benefit arises on the private use of a company car?

Answer 31

A taxable benefit arises on the private use of a company car, although not on a pool car. Private use of a company car includes travel from home to the workplace. The car benefit is based on a percentage of the manufacturer’s list price (“list price”), less any contributions that an employee pays towards the private use of the car:

list price of the car X
less: Capital contribution (X)
mulitiply by: Relevant % Less: Employee contribution towards private use (X)
Taxable benefit X
 

Question 32

(Provision/Use of Other Assets)
Rodney, who has a salary of £40,000 a year, was provided with a new camera by his employer on 6 October 2021, costing £2,000.

Required:

(1) Show the benefit assessable on Rodney if his employer immediately transferred ownership to Rodney on 6 October 2021.

(2) Show the benefits arising on Rodney if he had used the camera until 5 January 2024 when ownership was transferred to him for a payment of £100, when the market value of the camera was £500.

Answer 32

Benefit
(1) Transfer when new
2021-22
Cost to employer £2,000
 
(2) Use of asset and subsequent transfer
£
2021-22 £2,000 × 20% × 6⁄12 200
2022-23 £2,000 × 20% 400
2023-24 £2,000 × 20% × 9⁄12 300
Total 900
2023-24 Transfer benefit (W) 1,100
Less: Contribution by employee (100) 1,000
Taxable benefit for 2023-24 (£300 + £1,000) 1,300
 
Working
Benefit on transfer of used asset – greater of
£
(a) Market value at date of transfer 500
(b) Original market value 2,000
Less: Annual use benefits assessed to date (£200 + £400 + £300) (900) = 1,100
 

Question 33

PAYE Penalties: What is the Penalties can be charged if the FPS is submitted late?

Answer 33

Penalties can be charged if the FPS is submitted late. No charge arises for the first late submission in the tax year, but any further default can be charged a penalty based on the number of employees as follows:

Number of employees Monthly penalty
£
1 – 9 100
10 – 49 200
50 – 249 300
250 or more 400
Also, if the submission is more than three months late, an additional tax-based penalty may be charged at 5% of the tax and NIC being reported.

Question 34

What is the First Year Allowance (FYA) ?

Answer 34

First Year Allowance (FYA)
FYA is a 100% deduction which applies only to new and unused (not second-hand) cars with zero CO2 emissions. The FYA is given in the chargeable period of purchase.

Question 34

What are the percentage for WDA ?

Answer 34

WDA is an annual allowance calculated on a reducing balance basis at 18% (generally) and 6% (for special rate assets and cars with CO2 emissions over 50 grams per kilometre) by reference to the written-down value (WDV) of assets held at the end of the chargeable period.

Question 35

what are Badges of trade tests ?

Answer 35

Badges of trade tests are tests which HMRC applies to determine whether a profit should be assessed as trading income or as a capital g

Question 36

What is the Allowances For Cars ?capital allowance

Answer 36

Allowances For Cars
Cars have special rules for capital allowances purposes, with the rate of allowance dependent on the level of CO2 emissions. Cars fall into one of three categories as follows:

100% FYA - Electric cars with zero CO2 emissions
18% WDA - Low CO2 emissions of 50 grams/km or less
6% WDA - CO2 emissions over 50 grams/km

Question 37

What items are in the main pool Main Pool (18% WDA) ? capital allowance

Answer 37

Main Pool (18% WDA)
This pool (also sometimes known as the general pool) includes expenditures on all qualifying plant and machinery (including low CO2 emission cars).

Certain assets cannot be included in the main pool:

cars with CO2 emissions over 50 grams/km;
assets with private use by the owner of these business
short life assets (where an election to de-pool has been made or
assets that form part of the special rate pool (see s2.5).
New cars with zero CO2 emissions can be included in the main pool if the FYA is not claimed. Second hand cars with zero CO2 emissions can also be included in the main pool.

Question 38

What items are in the Special Rate Pool (6% WDA)? capital allowance

Answer 38

Special Rate Pool (6% WDA)
This pool only includes expenditures on:

long life assets;
thermal insulation of buildings;
integral features of buildings; and
cars with CO2 emissions over 50 grams/km.

Long life assets are items of plant and machinery, with certain exclusions, which, when new, have an expected life to the business of at least 25 years, provided the expenditure is more than £100,000 for the 12-month period.
The £100,000 limit is pro-rated for a long or short period of account, and if expenditure is less than this limit, it will be added to the main pool, or the special rate pool, depending on the type of expenditure. The following are excluded from ever being long life assets:

cars;
plant and machinery in dwelling houses, retail shops, showrooms, hotels or offices.
Thermal insulation expenditure is appropriate expenditure on all commercial buildings, except those let for residential purposes by a property letting business.

Integral features are specific plant and machinery expenditures incurred when constructing or altering all non-residential commercial buildings. The list includes:

electrical (including lighting) systems;
cold water systems;
space or water heating systems;
powered systems of ventilation, air cooling or air purification, and any floor or ceiling comprised in such systems;
lifts, escalators and moving walkways;
external solar shading.

Question 39

What is a short life asst/

Answer 39

A short life asset is an asset that has an expected life to the business of less than eight ye

Question 40

What is a balancing charge and a balancing allowance ?

Answer 40

balancing charge arises when disposal proceeds exceed the tax written down value.
A balancing allowance arises when the tax written down value exceeds disposal proceeds.

Question 41

Information

Answer 41

An election can be made to treat an item of plant and machinery which would normally be included in the main pool as a short life asset, provided the asset is not a car and is not an asset subject to private use by the proprietor.

The election should be made where the taxpayer expects to sell the asset for less than its WDV – hence accelerating allowances via a balancing allowance. However, it should not be made if a balancing charge is anticipated on disposal

Question 42

information

Answer 42

Since capital allowances are a trading expense (and balancing charges are a trading receipt) they automatically form part of a loss. Capital allowances can increase the size of a trading loss or turn a tax adjusted trading profit into a trading loss.

Question 43

What are the three options for Loss Relief?

Answer 43

Three reliefs are available to relieve a trading loss of an established business. These are:

Set off against total income (of the same tax year and/or the previous tax year);
Carry forward against future profits from the same business;
Set off against chargeable gains.

Question 44

A trader is entitled to relieve the loss in any order they wish. what is the maximum amount or rule?

Answer 44

The maximum amount of loss relief in the tax year of the loss cannot exceed the higher of:

£50,000; and
25% of total income (after pension contributions but before charitable donations).
In the tax year preceding that of the trading loss, no restriction applies to the set off against profit of the same trade; however, the 25% and £50,000 caps still apply in setting off losses against other income

Question 45

Explain the NIC classes

Answer 45

Class 1:
Employee’s Class 1 – paid by employees;
Employer’s Class 1 – paid by employers;
Class 1A - paid by employers on taxable benefits;
Class 2 - paid by the self-employed; and
Class 4 - paid by the self-employed.

Question 46

Employee Payment of Class 1 NIC explain

Answer 46

Employees pay primary contributions on their earnings above the lower earnings limit of £12,570 for the tax year 2023-24, initially at a main rate (12%) and then at a lower rate (2%) on earnings in excess of the upper earnings limit of £50,270.

eg: annual salary of £60,000
£(50,270 − 12,570) × 12 = 4,524
£(60,000 − 50,270) × 2% = 195
Total 4,719

annual salary 24000
(24,000 – 12,570) × 12% =1,372

Question 47

What is the Employer Class 1 NIC contribution Explain

Answer 47

One contribution rate (13.8%) applies to all earnings above a lower earnings limit of £9,100. There is no upper earnings limit.

eg: annual salary of £70,000
(70,000 − 9,100) × 13.8% = 8,404

Question 48

Explain Annual employment allowance

Answer 48

Each employer is entitled to claim an annual employment allowance to reduce the amount of employer’s Class 1 NIC payable to HM Revenue & Customs (HMRC) by up to £5,000 for the tax year.eg: contributions for tax was £8,500, deduction of the allowance would result in a liability of only £3,500. If the total is £5,000 or less, then no payment need be made.

The employment allowance is not available if a director is the only employee with earnings subject to Class 1 NI (i.e. above £9,100 per annum). It is also not available to a business whose total employer NIC liability in the previous tax year was over £100,000.

Answer 49

Class 1A contributions are payable by the employer only and are based on the value of taxable benefits of employment unless they are readily convertible into cash .using the employer’s secondary Class 1 rate (13.8%).

Question 50

Explain Class 2 Contributions

Answer 50

lass 2 contributions are payable by self-employed person the liability is based on a flat weekly rate, which for the tax year 2023-24 is £3.45 (given on the tax rates and allowances provided in the exam).self-assessment system and is due in a single instalment by 31 January following the year of assessment

Question 51

Explain Class 4Contributions

Answer 51

The liability is calculated on an annual basis by reference to the amount of tax-adjusted trading profits assessable for the relevant tax year. A main rate (9%) applies for profits between the lower (£12,570) and upper earnings limits (£50,270), with a reduced rate (2%) applying thereafter.

Question 52

Information

Answer 52

Under self-assessment an individual taxpayer is required in respect of each tax year to:
complete an annual tax return by 31 October following the end of the tax year if submitting a paper tax return or 31 January following the end of the tax year (“the filing date”) if submitting an electronic (online) tax return; calculate their own tax liability;settle tax by the due date(s
A taxpayer can correct or repair (i.e. amend) their return at any time within the 12 months following the prescribed filing date (i.e. on or before 31 January 2026 for the 2023-24 return).

Question 53

What are the dates in which Make payments on account of 2023-24 income tax/Class 4 NIC?

Answer 53

Date Event
31 January 2024–Make first payment on account of 2023-24 income tax/Class 4 NIC

31 July 2024 –Make second payment on account of 2023-24 income tax/Class 4 NIC

31 October 2024 –Submit 2023-24 tax return if filing paper return

31 January 2025 –Submit 2023-24 tax return if filing electronic return
–Make final balancing payment of 2023-24 income tax/Class 4 NIC
–Make only payment of 2023-24 CGT/Class 2 NIC (and balancing payment of CGT if residential property disposal)
–Make first payment on account of 2024-25 income tax/Class 4 NIC

Question 54

Information

Answer 54

Unless a specified alternative time limit applies, all claims must be submitted within four years of the end of the relevant tax year for income tax and CGT.

Question 55

What is the penalty when a paper or online return has not been submitted by the filing date for online returns (e.g. 31 January 2025 for a 2023-24 return)?

Answer 55

, a penalty of £100 is imposed.

Question 56

What are the penalties of late filing for the periods:
at least 3 mths, least 6 mths and 12 mths or more ?

Answer 56

At least three months (i.e. after 30 April 2025 for a 2023-24 return) but not more than six months - In addition to initial £100 penalty, £10 per day (from 1 May 2025 for a 2023-24 return) for up to 90 days.

At least six months (i.e. after 31 July 2025 for a 2023-24 return) but not more than 12 months - In addition to initial penalty £100 and the £10 daily penalty, the higher of:£300; and5% of the tax due for the relevant tax year.

12 months or more (i.e. after 31 January 2026 for a 2023-24 return) - In addition to the initial penalty £100, the daily charge £10 per day and the 5% penalty, a further penalty equal to the higher of:· £300; and 5% of the tax due for the relevant tax year. Significantly higher percentages than 5% can be applied (under the “penalties for incorrect returns” regime) if HMRC concludes that the delay is deliberate to avoid paying tax.

Question 57

For balancing payments of income tax, NIC and CGT that remain unpaid 30 days after the filing date for the tax return What late payment penalties apply?

Answer 57

5% of the tax unpaid 30 days after the due date;
A further 5% of the tax unpaid more than six months after the due date;
A further 5% of the tax unpaid more than 12 months after the due date.

Question 58

Information

Answer 58

A discovery assessment is an additional assessment raised by HMRC within four years of the end of the tax year (or accounting period for companies). The time limit is extended in the case of careless behaviour by the taxpayer, or deliberate understatement or concealment.

Question 59

How do you calculate penalties for Incorrect Returns?

Answer 59

Penalty (= % × tax lost)

Question 59

If full disclosure of the taxpayer’s affairs has not been made, HMRC may make a discovery assessment. What are the time limits?

Answer 59

four years – if tax lost is not due to the careless or deliberate behaviour of the taxpayer;

six years – if tax lost is due to the careless behaviour of the taxpayer;

20 years – if tax lost is due to deliberate understatement or concealment (i.e. fraud) by the taxpayer.

The time limits run from the end of the accounting period (for corporation tax purposes), tax year (for income tax and CGT purposes) or VAT accounting period (for VAT purposes).

Question 60

When can a taxpayer appeal against assessment?

Answer 60

1. an amendment to a self-assessment arising from an HMRC compliance check;
2. HMRC’s right to raise a discovery assessment;
3. a discovery assessment.

Question 61

Within how many days must a taxpayer response from receipt of the statutory review offer ?

Answer 61

The taxpayer may, within 30 days from receipt of the statutory review offer, either:

accept the offer of a statutory review; or
appeal directly to an appeal tribunal (normally the First-Tier Tribunal).
If HMRC does not receive a response to the offer within the time limit, the appeal is treated as settled by agreement. It is only possible to re-open the appeal with the permission of the First-Tier Tribunal.

Question 62

What are the installment dates for Income Tax and Class 4 NIC ?

Answer 62

payments are due on :
*1st payment: 31 January in year of assessment
*2nd payment: 31 July following end of year assessment
*Balancing payment: 31 January following end of year of assessment

Question 63

What are the installment dates for CGT and Class 2 NIC ?

Answer 63

Due on 31 January following end of year of assessment.

Question 64

What is a chattel ?

Answer 64

Chattels (tangible movable property): assets such as furniture, works of art, vehicles, jewellery and animals. They are distinguished from land and buildings because they are movable, and from securities because they are tangible assets.

Question 65

What are the two tribunal types and what are the appeal tracks?

Answer 65

Two types of tribunals exist:

First-tier Tribunal; and
Upper Tribunal.
Appeals to tribunals are split into four categories:

Paper Track – simple cases (e.g. an appeal against a fixed penalty) are settled by exchange of documents without any formal hearing.
Basic Track – case resolved by exchange of documents followed by a formal hearing.
Standard Track – case resolved as for Basic Track, but procedure is more detailed and formal.
Complex Track – resolved as for Basic Track, but cases typically involve complex technical/legal principles or large sums of money.

Question 66

what is a wasted assets/chattel

Answer 66

Wasting assets: assets with a predictable useful life of 50 years or less.
Non- wasting chattel is one with an estimated remining life of more than 50 years.

Question 67

What is the formula to calculate part disposals? (capital Gains tax)

Answer 67

(A/A+B)*COST
a= Gross proceeds of the part disposal
b= Market value of the remainder of the asset at the time of disposal

Question 68

How do you calculate the gain or loss on a non-exempt chattel?

Answer 68

cost proceeds details
1.<= 6000 <= 6000 EXEMPT
2.<= 6000 >= 6000 Proceeds - Cost =CGT but gains restricted to 5/3*(gross proceeds-6000)
3. > 6000 < 6000 Gross proceed =6000
4. > 6000 > 6000 Proceeds - Cost =CGT

Question 69

how do you calculate Chargeable Disposal of a Wasting Asset?

Answer 69

P/L*(C-S)
P=period of ownership of seller
L=Predictable life of assets on acquisition
C=Cost of asset
S= Scrap /residual values at end of asset life

Question 70

How are shares disposed of ? (CGT)

Answer 70

A disposal of shares of the same class in the same quoted company is matched with acquisitions in the following order:
(1) all shares acquired on the same day treated as a single transaction;
(2) shares acquired in the next(within) 30 days on a FIFO basis;
(3) shares held in the pool.

Question 71

Write the proforma for disposal of share

Answer 71

Shares Cost Gain/loss
(1) Same day matching
Proceeds x
Cost (x)
Gain/loss x x
Unmatched shares x
(2) Shares acquired in next 30 days
Proceeds x
Cost (x)
Gain/loss x x
Unmatched shares x
(3) Shares held in pool
Proceeds x
Cost (x)
Gain/loss x x
Unmatched shares x
Total XXXX

Question 72

What is rollover relief, gift holdover relief and business asset disposal relief?(cgt)

Answer 72

Rollover relief – where the assessment of a gain on the sale of a qualifying business asset is deferred because the sale proceeds are suitably reinvested. if the whole of the proceeds of sale of the old asset are reinvested into the new asset, no tax is assessed on the old asset and the gain is rolled over by either:

deducting it from the cost of the new asset; or
if the new asset is a depreciating asset (see s.2.6) by delaying the assessment of the rolled over gain for a limited period.

Gift holdover relief (or sales at undervalue) of qualifying assets – where the assessment of the transferor’s gain on the gift or sale at undervalue of a qualifying asset is deferred until the same asset is sold for full consideration by the transferee.

Business asset disposal relief – where up to £1 million of gains arising on a qualifying disposal of all or part of an unincorporated business or qualifying shares are taxed at a special rate of 10% instead of the normal rates of 10% or 20% (18% or 28% for residential property).

Question 73

what are the VAT points ?

Answer 73

The VAT rules that determine the tax point in respect of a supply of goods are as follows:
‣ The basic tax point is the date goods are made available to the customer or service
completed.
‣ If an invoice is issued or payment received before the basic tax point, then this becomes
the actual tax point.
‣ If an invoice is issued within 14 days of the basic tax point, the invoice date will usually
become the actual tax point.

Question 74

INFORMATION
Exemptions Applying to Lifetime Transfers and Death Estate - Spouse Exemption

Answer 74

the first spouse to die can leave the whole of their estate to the surviving spouse free of IHT; and
one spouse can transfer property in their lifetime to the other spouse without the process incurring an IHT (or CGT) liability

Question 75

WHAT ARE THE RUES FOR GIFTS OUT OF INCOME IHT?

Answer 75

A gift of cash of any value will be exempt from IHT if it can be shown that the gift was made out of current income as opposed to capital.

The following conditions must be satisfied :

The gift is part of a pattern of regular giving (e.g. every birthday or Christmas); and
The transferor’s after-tax standard of living is not reduced by the gift (i.e. the loss of income does not have an adverse financial impact on the transferor’s life style).
In practice, this exemption will most likely apply only where the transferor has a very large regular income and their remaining income is sufficient to maintain their standard of living

Question 76

Small Gifts Exemption EPLAIN

Answer 76

A small gift is a lifetime transfer to an individual of no more than £250.

Question 77

information VAT

Answer 77

Disallowed input VAT on revenue expenditure ranks as a deductible expense for income tax and corporation tax provided the related cost is a tax deductible trading expense (i.e. wholly and exclusively incurred, etc)

Disallowed input VAT on capital items qualifying for capital allowances will rank as part of cost for capital allowance purposes, for example, on a car with some private use, capital allowances will be available on the full VAT inclusive amount.

Question 78

What is Irrecoverable Input VAT?

Answer 78

Input VAT on certain expenditure made by a registered taxable trader can never be reclaimed. This is referred to as blocked, or irrecoverable, input VAT.

Question 79

What are the irrecoverable Input VAT ?

Answer 79

-The value of goods or services withdrawn from the business for non-business purposes unless output VAT is accounted for on the private use (see s.5.4 and s.5.5).
-New cars (and extra equipment purchased with the car) unless the cars are either used for a car-based business (e.g. driving schools, car hire) or otherwise used wholly for business purposes (e.g. a pool car used by various employees for business only).
-Where a new car is leased and also used partly for private purposes, 50% of the input VAT on the lease charge is irrecoverable.
-Entertaining, except of staff and overseas customers.