Introduction to Taxation – General Principles Flashcards
What taxes are covered in Business module?
2) Capital Gains Tax
3) Value added Tax
4) Corporation Tax
What is a direct tax?
Reference to taxpayer’s circumstances (e.g. Income Tax, CGT, Corporation Tax)
What is an indirect tax?
Tax imposed based on transactions (e.g. VAT)
What is the distinction between receipt and expense?
Receipt is paid into a business. Expense is what a business pays out.
What is the difference between income and capital?
Income expenditure can only apply to income receipts.
Capital expenditure can only apply to capital receipts.
What are income receipts?
Money received on regular basis, e.g. trading profits, rent receipt by landlord.
What are capital receipts?
One-off transactions, e.g. a gain on the sale of a premises
What is income expenditure?
Money spent as part of day-to-day trading, e.g. marketing, stationery expenses, rent
What is capital expenditure?
One-off transaction, such as acquiring assets as part of business
How are trading profits calculated?
Income receipts LESS income expenditure = Trading Profits
How is chargeable gain / loss calculated?
Chargeable receipts LESS chargeable expenditure
When is tax relief for capital expenditure applied?
Only when asset is sold / disposed of
What is corporation tax payable?
On income profits and chargeable gains
What is the income tax and CGT tax year?
6 April to 5 April
What is the company financial year?
1 April to 31 March
When is tax deducted at source?
PAYE
Who can get annual exemption for CGT?
Individuals only
What is the definition of annual investment allowance?
A special type of capital allowance
What is the definition of Business Asset Disposal Relief? Who is it applicable to?
A tax relief available to individuals to reduce chargeable gains
What is the definition of Capital Allowances?
Tax allowances (deductions) for capital expenditure available to businesses
What is the definition of Capital Gains Tax?
A tax paid by individuals on taxable chargeable gains
What is the definition of Corporation tax?
A tax paid by companies on their taxable total profit
What is the definition of current year basis?
Income tax charged on current year basis, meaning income earned in current year (6 April 2024 to 5 April 2024 is 2024/25 tax year)
What is the definition of deduction of tax at source?
Certain sums obliged to deduct tax when making payment
