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AAT Level 4 > Business Tax > Flashcards

Business Tax Flashcards

(64 cards)

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1
Q

Ethical Principles

A

Integrity
Objectivity
Professional Competence & Due Care
Professional Behaviour (Not bringing profession into disrepute)
Confidentiality (only breach if required by law or given permission)

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2
Q

Money Laundering

A

Cleaning dirty money
Obtained by illegal methods

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3
Q

Limited Company

A

Limited liability
Owned by shareholders
Ran by directors
Legally required annual accounts
Pay corporation tax ONLY
Shareholders are paid dividends (share of profit)

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4
Q

Sole Trader

A

Unlimited liability
Owned by one person, not a legally separate entity
Pay income tax, NI, capital gains tax
No requirements for accounts

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5
Q

Tax Traffic Lights

A

GREEN - GO - Tax Planning, Legal & Ethical, using rules to plan lower tax bills
AMBER - LIMBO - Tax Avoidance, Legal & Unethical
RED - STOP - Tax Evasion, Illegal & Unethical

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6
Q

What To Do If There Is An Error In Clients Tax Return

A
  1. Recommend they inform HMRC
  2. If they refuse, cease to act for the client (in connection with this return)
  3. Inform HMRC we no longer act for the client
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7
Q

LTD COMPANY
Accounting Periods

A

Only in blocks of 12
e.g 15 months = 12 + 3

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8
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Pre Trade Expenditure

A

Allowable
Going back 7 years, need to still be present now & were allowable at the time

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9
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Trade Samples

A

Allowable
True samples only, not for resale

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10
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Car Leasing

A

Allowable
15% deduct if over 50g emissions

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11
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Other Legal Fees

A

Allowable
Rent reviews
Debt collection
Employee matters & disputes

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12
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Irrecoverable Non-Trade Debt

A

Disallowable
e.g loan to employee

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13
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Private Mileage

A

Allowable
IGNORE PRIVATE MILEAGE FOR LTD COMPANIES

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14
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Depreciation / Gain or Loss on Disposals

A

Disallowable

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15
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Capital Expenditure

A

Disallowable
Should be on SFP

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16
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Repairs & Renewals

A

Allowable
Revenue

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17
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Improvements & Enhancements

A

Disallowable
Capital - SFP

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18
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Legal Fees Of a Capital Nature

A

Disallowable
Exceptions - Defending an asset, registering a patent

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19
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Fines

A

Breaking the law - Disallowable
Parking fines - Allowable (as long as not director)

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20
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Fraud

A

Allowable (non director only)

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21
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Donations

A

Small local - Allowable
Large national - Disallowable

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22
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Irrecoverable Trade Related Debt

A

Specific - Allowable
Provisions - Disallowable

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23
Q

LTD COMPANY
ALLOWABLE / DISALLOWABLE
Non Trade Interest Paid

A

Disallowable
e.g borrowing money for non trade investments

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24
Q

LTD COMPANY
Capital Allowances - Disposals

A

Full Expense - Full proceeds deducted from allowances
FYA - Proceeds deducted from general pool
Pool - Lower of cost / proceeds deducted from pool

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25
LTD COMPANY Negative Pool Balance
POOL CANNOT HAVE A NEGATIVE BALANCE Create 'Balancing Charge' Add to main pool to balance to 0, deduct from total allowances
26
LTD COMPANY Small Pool WDA
If pool is £1,000 (12 months time apportioned), can write it off as small pool WDA Deduct from pool to balance to 0, add to total allowances
27
LTD COMPANY Business Ceases To Trade - Capital Allowances
No allowances in the last calculation All pools cleared to 0 with balancing charge / balancing allowance
28
LTD COMPANY Chargeable Gains Layout
Gross Sale Proceeds (Selling Costs) =Net Selling Price (Allowable Costs) =Unindexed Gain (Indexation) =Indexed / Chargeable Gain
29
LTD COMPANY Indexation
COST X INDEX FACTOR Stopped December 2017 Cannot create a loss Cannot increase a loss
30
LTD COMPANY Disposal of Share Match Rules
1. Bought on same day 2. Bought in previous 9 days 3. In the share pool (all shares after 10 days of purchase) No indexation allowance is given for 1 & 2 Place every transaction in the pool ✔ where money changes hands Do indexation ✔ to ✔ (keep subtotalling)
31
LTD COMPANY Bonus Issue
Free Shares ✘ in pool
32
LTD COMPANY Rights Issue
Cheap Shares ✔ in pool
33
LTD COMPANY Summary of Gains & Losses
Calc chargeable gain for every transaction Add all together in a list Less: capital losses b/f from previous years = Net Chargeable Gains You pay corporation tax on this figure
34
LTD COMPANY Rollover Relief
Full Gain (Amount not reinvested) - TAXED NOW ON THIS = Amount of rollover relief NEW ASSET COST = Cost - Rollover relief
35
LTD COMPANY Taxable Total Profit Layout
Trading Profits (Adjusted trading profit - capital allowances) Non-Trade Interest Property Income Net Chargeable Gains = Total Profits (Qualifying Charitable Donations) = Taxable Total Profits (TTP)
36
LTD COMPANY Paying Corp Tax - Upper / Lower Limits & Associates
Limits are time apportioned Also apported if there are associate companies
37
LTD COMPANY Marginal Relief
1. Calculate corp tax at the main rate (25%) 2. Calculate marginal relief using formula 3. Deduct 2 from 1 = Tax To Pay
38
SOLE TRADER Badges Of Trade
Subject Matter Ownership Frequency of Transactions Improvements Reason For Sale Motive For Sale
39
SOLE TRADER Badges Of Trade - Subject Matter
What is the item / service in question? is it inventory or for personal use? Investment shares do not indicate trade
40
SOLE TRADER Badges Of Trade - Ownership
Length of ownership Short ownership indicates trading
41
SOLE TRADER Badges Of Trade - Frequency of Transactions
High frequency indicates trading
42
SOLE TRADER Badges Of Trade - Improvements
Enhancing to improve - increases value - indicates trading
43
SOLE TRADER Badges Of Trade - Reason For Sale
No longer needed, need cash, inheritance - do not indicate trading
44
SOLE TRADER Badges Of Trade - Motive For Sale
Motive to make profit - indicates trading
45
SOLE TRADER ALLOWABLE / DISALLOWABLE Excessive Family Salaries
Disallow the 'excess amount'
46
SOLE TRADER ALLOWABLE / DISALLOWABLE Goods For Own Use
Disallow: Original cost Profit that would have been made on the goods
47
SOLE TRADER ALLOWABLE / DISALLOWABLE Private Usage By OWNER
Disallow
48
SOLE TRADER ALLOWABLE / DISALLOWABLE Bills For OWNER
Disallow
49
SOLE TRADER Capital Allowances - Private Usage
Deduct WDA from 'specific column' Add % used by company into allowances column
50
Tax Year
6th April - 5th April
51
Allocation of Partnership Profits
Adjust profit for salaries, interest, etc Split profit last IF THERE IS A CHANGE: Do different calculations for before & after the change
52
Structures & Building Allowance
For commercial structures & buildings Must be newly constructed or renovated from October 18 Does not include land, planning permission & stamp duty Can only be claimed from the date the asset is used BASED ON COST Must time apportion Disposal proceeds = Actual proceeds + SBA Claimed
53
SOLE TRADER When To Pay HMRC - Class 2 NI
31st Jan following end of tax year
54
SOLE TRADER When To Pay HMRC - Capital Gains Tax
31st Jan following end of tax year
55
SOLE TRADER When To Pay HMRC - Income Tax & Class 4 NI
31st Jan Follwing Tax Year End Reference Material
56
SOLE TRADER Class 2 NI
Payable between 16 - state pension age Only paid once even if own more than one business £3.45 per week (52 weeks)
57
SOLE TRADER Class 4 NI
No liability if under 16 or over state pension age AT THE BEGINNING OF TAX YEAR Paid with income tax
58
LTD COMPANY Losses
Carry forward - Can choose amount and when to do it Current year / Carry back - must do current year first, QCD's could be wasted
59
Losses - Short Periods
Carry back can be done for 12 months If period is less than 12 months, can be carried back for the remainder months time apportioned
60
SOLE TRADER Losses
Carry forward - automatically happens after other claims are made Current / carry back - can do in any order, cannot preserve personal allowance
61
SOLE TRADER Calculating Capital Gains Tax
1. Calculate chargeable gain 2. Deduct annual exempt amount (£6,000) if available 3. Calculate tax Basic rate £1 - £37,700 High rate £37,700 + UNLESS ELIGIBLE FOR BADR X 10%
62
SOLE TRADER Gift Relief
Both parties have to agree! 1. Do a pretend sale to work out gain 2. Deduct the gain from the cost of asset to create new base cost Once asset is sold they will be taxed on it
63
After Tax Proceeds
What is left in the bank after tax has been paid
64
Dividend Allowance
£1,000

AAT Level 4 (7 decks)

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