Taxation For Individuals

Question 1

What’s the inheritance advantage of making lifetime gifts to individuals

Answer 1

• PET = IHT exempt if d’er survives more than 7 years
• values used time of the gift rather than at death = increases ignored
• fall in value following the gift = relief available
• AE £3k
• taper relief

Question 2

Advantages of voluntary registration of VAT

Answer 2

• reclaim input tax
• recover pre registration input tax - if still owns - purchased item 4 years before registration or services 6 months prior to registration
• make the business seem bigger
• VAT registered suppliers - can reclaim input VAT
• VAT registered customers - they can reclaim the VAT

Question 3

What’s the availability of a remittance basis if:
- individual is UK r but non- UK dom
- unmerited income and gains less that £2,000

Answer 3

• The remittance basis is available where the individual is UK resident but not UK domicile
• only available is unremitted overseas income and gains are less than £2,000
• so no remittance basis charge
• because the individual will qualify for the remittance basis automatically

Question 4

Advantages of adopting an earlier accounting date rather than a later accounting date

Answer 4

• Greater time period on earning the profit and paying the tax due
• Greater time period between knowing the amount of taxable profits and the end of the tax year = better planning in regards to e.g pensions
• helps with cash flow in the earlier years = if businesses expect to increase profits , tax is paid on earlier lower profits

Question 5

Information required to advise on voluntary VAT registration

Answer 5

1. nature of business goods & service
   - can’t register if only making exempt supply = must be making some taxable supplies
2. If customers registered for VAT
   - customers whos not registered = unable to recover VAT = price increase for them

Question 6

PSC - deemed employment income for a small client

Answer 6

Invoice amount
Less
( statutory 5% deduction )
( salary paid by PSC )
( E’er Nics on salary )
( pension contn paid by PSC )
( expenses deductible )

Less:
( Employers NIC 15.05/115.05 )

Question 7

What is the availability if BADR

Answer 7

1. Business owned for atleast 2 years before it’s it’s sold
2. Ceases to be carried on and it’s assets are sold within 3 years of cessation