Unit 1 topic 3 - Taxation Flashcards
What is the main statute relating to taxation
Income and Corporation Taxes Act 1988
What are the 2 other sources of tax law (besides Income and Corporation Taxes Act 1988)?
StatutesCase Law
In the UK, what dates do a tax year run from and to?
Runs from 6 April in one calendar year to 5 April in the next.
‘Residence’ mainly affects which 2 types of tax?
Income tax Capital gains tax.
Any person who is present in the UK for at least ____(?) days in a given tax year is regarded as automatically UK resident for tax purposes
183
Where someone is not resident for at least 183 days in a tax year, what is applied?
statutory residence test is applied (unless they are regarded as automatically not UK resident).
True or false: A person who is resident and domiciled in the UK will be subject to UK income tax on their worldwide earned and unearned income, whether or not such income is brought into the UK.
True(Similarly, capital gains tax is charged on the realisation of gains anywhere in the world)
What is CAPITAL GAINS TAX?
Tax payable on the gain made when certain assets (eg personal property above a specific value, or business assets) are disposed of, usually by selling them.
What is EARNED INCOME?
Income from employment or self‐employment (profits, salary, tips, commission, bonuses and pension benefits).
What is UNEARNED INCOME?
Income that is not derived from employment or self‐employment (interest/dividends from investments, rental income, trust income, etc).
Explain Domicile
Domicile is best described as the country that an individual treats as their home, even if they were to live for a time in another country. This is the domicile of their father on the date of their birth (or the domicile of the mother if the parents are not married).
Which tax is mainly affected by domicile?
Inheritance tax (IHT).(If a person is domiciled in the UK, inheritance tax is chargeable on assets anywhere in the world, whereas for persons not domiciled in the UK, tax is due only on assets in the UK.)
True or false:People who are not UK‐domiciled but have been resident in the UK for tax purposes in at least 15 of the previous 20 tax years are deemed to be UK‐domiciled for inheritance tax purposes.
True
What qualifies you to be a UK resident for tax purposes?
Any person who is present in the UK for at least 183 days in a given tax year is regarded as automatically UK resident for tax purposes.
Which of the following people would be most likely to be a ‘UK resident’?a) Susan, who normally lives in Spain but spends three months a year working for the family business in England.b) Antoine, a French surveyor, whose eight‐month contract in Devon with a construction company started in May.c) Max, who moved to London from Cologne on 6 January for a seven‐month teaching contract.d) Brenda, who spends 180 days a year in the UK and the remainder in the USA.
b) Antoine, a French surveyor, whose eight‐month contract in Devon with a construction company started in May.c) is not correct because three months of Max’s contract are in one tax year and the rest in the following year. He will not spend 183 days in either tax year in the UK.
Which of the following will not be subject to UK inheritance tax upon death?a) UK property owned by Paolo, who has lived in the UK for three years but is not UK domiciled.b) Overseas property owned by Kavita, who was born in the US (to American parents) but has lived in the UK for the past 18 years.c) Overseas property owned by Helena, who is UK resident but not UK domiciled nor deemed domiciled.d) Overseas property owned by David, who is UK domiciled but resident in France.
As Helena is not UK domiciled she will not pay IHT on overseas assets.
On which of the following would a child be subject to income tax?a) All earned income.b) An educational grant.c) Any earned income that exceeds their personal allowance.d) A settlement from their parents.
c) Any earned income that exceeds their personal allowance. The settlement from their parents (answer d) will be taxed as the parents’ income, the educational grant (answer b) is tax‐free, and they would not pay tax on all of their earned income (answer a), only that which exceeds their personal allowance.
What is your Personal tax allowance?
£12,570
People whose annual income exceeds £100,000 have a restricted personal allowance, what is it?
The allowance is reduced by £1 for every £2 they earn above the £100,000 limit