CTA IND 11-20

Question 1

Property income is calculated using the cash basis where gross property income does not exceed …. in the tax year?

Answer 1

£150,000

Question 2

Examples of allowable expenses for letting business are:

Answer 2

• Repairs
  -Insurance
  -Council tax

Landlord can choose either to claim relief for actual expenditure re vehicles or claim flat rate expense on business miles

Question 3

How to claim in respect of capital expenditure under :

1. accruals basis
2. cash basis

Answer 3

1. claim capital allowances
2. deduct cost of asset when acquired

Question 4

Interest paid on a loan to purchase commercial property or FHL is ?

Answer 4

Deductible in full from PROPERTY INCOME

Question 5

Loan interest in respect of residential property (not FHL) is eligible for :

Basic rate tax relief (given as reduction in tax liability) .

In a tax year relief at BR is available on the lowest of?

Answer 5

1. Interest eligible for relief
2. Property income for year less losses b/f
3. adjusted total income (net income - savings and dividend - PA)

Question 6

What are the key elements of rent-a-room

Answer 6

If gross rents are UNDER £7,500 (per house)

Rental income not taxable, no relief for expenses.

*can elect for this not to apply

Question 7

If gross rent is OVER £7,500….

Answer 7

Taxed under normal basis ie Income - allowable expenses

*can elect for rent a room and get no relief for actual expenses but deduct the 7.5k to find property income

Question 8

What is the property allowance?

Answer 8

£1,000 per person (e.g rent driveway or garden).

Same rules as rent a room re electing for or against it

Question 9

Can you mix overseas property losses with UK property losses?

Answer 9

NO

*an overseas property business is also separate when considering cash or accruals basis

Question 10

FHL’s must satisfy what conditions?

Answer 10

1. Furnished
2. EEA or UK
3. Available for let for at least 210 days
4. Actually let for 105 days
5. Long term occupation not more than 155 days (longer term is continuous period over 31 days)

Question 11

FHL advantages are:

Answer 11

1. Interest on loan to purchase can be deducted in full from rental income
2. Income from FHL qualifies as earnings for pension
3. Relief for capital expenditure (furniture, fixtures and equipment)
4. CGT reliefs on disposal:
   - rollover
   -gift
   - BADR

Question 12

Premium on long lease = no income tax implications.

Short lease, part of the premium is taxed as property income. Formula is…

Answer 12

Px [(50-Y)/50]

P= premium
Y= length of lease minus 1 year

Question 13

The taxable amount of a benefit on the employee is?

Answer 13

The ‘cash equivalent’ which is usually the cost to the employer of providing the benefit

Question 14

How do you calculate the fuel taxable benefit?

Answer 14

£27,800 x %(based on CO2 emissions)

Question 15

Job-related accommodation is a …

Answer 15

Tax free benefit

Question 16

The benefit for rented accommodation is the higher of?

Answer 16

1. Rents paid by employer
2. Annual value

*where lease premium paid for lease of 10 year or less, amount of premium is treated as rent paid by employer.

Annual rent paid by employer calculated as :

Lease premium / length of lease + actual rent paid

Question 17

Where employer owns the property for living accommodation, the benefit is the annual value.

Additional yearly rent if property cost more than £75,000 calculated as:

Answer 17

(Cost - 75,000) x ORI at start of year

*cost = original cost plus improvements carried out before beginning of tax year

**if bought more than 6 years before employee moving in, MV at date moved in is substituted for cost in the above

Question 18

Loan to employee is taxable benefit throughout year is more than?

Answer 18

£10,000

Question 19

The average method to calculate loan benefit is?

Answer 19

(Loan at 6 April + Loan at 5 April) / 2 x ORI for year

Question 20

The strict method to calculate loan benefit is?

Answer 20

Done on monthly basis i.e. :

100,000 x 8/12 x 2.25% AND

80,000 x 4/12 x 2.25%

Add them up

Question 21

The benefit for an employee of the use of an asset owned by the employer is:

Answer 21

20% x MV when first provided to employee

Question 22

Where employer allows employee to keep an asset, the benefit is higher of:

Answer 22

1. MV when given
2. MV when originally provided less amounts charged for use of asset

*not applicable to cars/houses

Question 23

VANS:

1. Zero emission
2. emissions and unrestricted private use
3. free or subsidised fuel for private use

Answer 23

1. no taxable benefit
2. £3,960 / year
3. £757

Question 24

Where a benefit is provided under an ‘optional renumeration arrangement’, the actual amount taxed is the ….

Answer 24

HIGHER OF:

1. Cash amount that would have been received
2. Taxable benefit amount determined under benefit rules (before taking account of employee contributions)

Question 25

To find the tax payable by employer on a PAYE settlement agreement, we must

Answer 25

Gross up the benefit to find the tax payable: BR = benefit x 20/80 HR = benefit x 40/60 AR = benefit x 45/55

Question 26

When is PAYE due: 1. electronic 2. paper

Answer 26

1. 22nd of the calendar month 2. 19th of the calendar month *can be paid quarterly if total tax and NICs due is less than £1,500 per month on average

Question 27

What does PAYE employment income consist of?

Answer 27

Taxable earnings and other taxable income from an employment in the year: -Readily convertible assets - bonuses -termination payments

Question 28

What is an example of a cash payment made by an employer to an employee that will not be subject to PAYE?

Answer 28

Payment or reimbursement of genuine business expenses

Question 29

When must we report the cash equivalent of a benefit under PAYE?

Answer 29

When the benefit has NOT been payrolled

Question 30

What is the purpose of a tax code?

Answer 30

To tell the employer how many allowances or reliefs the employee is entitled to

Question 31

How do we calculate the tax code?

Answer 31

Employee allowances for year (deduct benefits for year) = Net allowances due

Question 32

The tax code can also be used to collect tax in respect of income which is not taxed at source. What do we need to take into account?

Answer 32

Savings allowance Dividend allowance

Question 33

What does the letter L represent on a tax code?

Answer 33

Personal allowance amount

Question 34

What is a K code for PAYE?

Answer 34

A negative code - ie where benefits not included in the payroll exceed allowances for the year 12,570 (12,885) (2,315) K230

Question 35

Under PAYE, the maximum amount of tax that can be deducted from any payment cannot exceed?

Answer 35

50% of the payment