Taxation Flashcards
(78 cards)
1
Q
What is the Annual Capital Gains Exemption (“ACGE”)?
A
A Tax Allowance of £3,000 for Individuals.
2
Q
What are Benefits in Kind (“BIKs”)?
A
Non-Cash Employement Benefits that:
- Employers must report to HMRC (Form P11D) and Employees; and that
- Employees must disclose in their Tax Returns, since BIKs are subject to Income Tax but exempt from PAYE.
3
Q
What is Business Asset Disposal Relief (“BADR”)?
A
Definition:
- A Tax Relief for Individuals that reduces the rate of CGT to 10% on the Disposal of QBAs.
- Individuals have a Lifetime Allowance of £1m.
Deadline for Application:
- The First Anniversary of January 31st following the end of the relevant Tax Year.
4
Q
What are Capital Allowances?
A
Annual Deductions of QCEs from TTPs.
5
Q
What are Capital Expenditures?
A
Expenses from one-off transactions.
6
Q
What are Capital Receipts?
A
Proceeds from one-off transactions.
7
Q
What is Capital Gains Tax (“CGT”)?
A
A Tax on:
- Chargeable Disposals;
- Of Chargeable Assets;
- By Chargeable Persons;
- That give rise to a Chargeable Gain;
- Except if it takes place between S/CPs.
Applicable Rates:
-
Basic Rate:
- 10% generally.
-
Higher and Additional Rate:
- 20% generally.
- You determine which Rates apply by adding TI to Chargeable Gains.
8
Q
What is an Allowable Expenditure in relation to Capital Gains Tax?
A
Disposal Expenditure:
- Cost of Disposal.
Initial Expenditure:
- Cost of Acquisition, including incidental costs.
Subsequent Expenditure:
- Cost of enhancing the Asset’s value.
- Cost of establishing, preserving, or defending the Asset’s Title.
9
Q
What is a Chargeable Asset?
A
All Assets, except:
- PPRs.
- Sterling and foreign currency.
- Motor vehicles for private use.
-
Certain investments, including:
- Life assurance policies.
- Government securities.
- National savings certificates.
- Any investment held in an Individual Savings Account.
10
Q
What is a Chargeable Disposal?
A
A Sale or Gift during a Chargeable Person’s lifetime.
11
Q
What is a Chargeable Person?
A
A UK Taxpayer.
12
Q
What are the Formulae for calculating Chargeable Gain?
A
Disposals at Arm’s Length:
- Sale Proceeds − Allowable Expenditures − ACGE.
Disposals as Gifts, at an Undervalue, or between CPs:
- Market Value − Allowable Expenditures − ACGE.
Important Considerations:
- Capital Losses can be offset against Capital Gains in the same Tax Year, and can be carried forward if the are insufficient Gains to offset.
13
Q
What is a Connected Person (“CP”) in relation to Capital Gains Tax?
A
Relatives:
- S/CPs.
- Siblings.
- Lineal Ascendants.
- Lineal Descendants.
- In-Laws, Full-Bloods, and Half-Bloods.
Commercial Connections:
- Business Partners and their Relatives.
- Firms wherein an Individual owns more than 50% of voting rights or Issued Share Capital.
- Trustees of Settlements where the Individual, their S/CP, or children are Beneficiaries.
Related Companies:
- Firms wherein an Individual owns more than 50% of voting rights or Issued Share Capital.
- Firms under the control of the same Individual or CPs.
Broadly, Business Partners are joint owners of commercial venture with the Individual, and are not considered CPs in bona fide commercial acquisitions or disposals of partnership assets.
14
Q
What is Corporation Tax?
A
A Tax on the Taxable Total Profits (“TTPs”) of Corporations.
15
Q
Regarding Corporation Tax, what are the Applicable Rates?
A
Main Rate:
- Rate: 25%.
- Threshold: Over £250,000.
Small Profits Rate:
- Rate: 19%.
- Threshold: Below £50,000.
Tapered Rate (Marginal Relief):
- Gradually increases tax as TTP increases from £50,001 up to £250,000.
16
Q
What is the Dividend Allowance (“DivA”)?
A
An Allowance of £500 for Income earned from Dividends.
In essence, this is a Nil Rate Band.
17
Q
What is an Eligible Savings Product (“ESP”) for Personal Savings Allowance?
A
- Corporate Bonds.
- Government Bonds.
-
Savings Accounts with:
- Banks.
- Credit Unions.
- Friendly Societies.
- Building Societies.
18
Q
What is Holdover Relief (“HR”)?
A
- A Tax Relief that allows a Donor and Donee to roll over Chargeable Gains from;
- A Gift or Undervalued Disposal of:
- Goodwill;
- Off-Market Shares; or
- Assets used in the course of business;
- Into the Acqusition Cost, thereby reducing it.
- Once the Donee later sells the Asset, they pay tax on the Chargeable Gain.
HR is not automatic. The Donor cannot use the ACGE to reduce it.
19
Q
What are Income Expenditures?
A
Expenses from regular, recurring transactions.
20
Q
What are Income Receipts?
A
Proceeds from regular, recurring transactions.
21
Q
What is Investors’ Relief (“IR”)?
A
- A Tax Relief for Individuals that reduces the rate of CGT to 10% on the Disposal of Qualifying Shares in Unlisted Firms.
- Individuals have a Lifetime Allowance of £10m.
22
Q
What are the Qualifying Conditions for Investors’ Relief?
A
Off-Market at Issuance:
- The Shares must have been Off-Market at Issuance.
Continuity of Shareholding:
- The Shares must have been continuously held for at least 3 Years from 06/04/2016.
Investor’s Status at the Relevant Time:
- The Individual (or any CPs) must not have been Employees at any time from Issuance.
Type of Share:
- The Shares must be Fully Paid-Up Ordinary Shares Issued for cash on or after 03/17/2016.
Continuity of Trading:
- The Firm (or Trading Group HoldCo) must have been a Trading Firm for at least two years before Disposal.
23
Q
What is Income Tax?
A
A Tax on the TI of Individuals.
24
Q
What are the Income Tax Bands (after Personal Allowance)?
A
Basic Rate:
- £0 to £37,700.
Higher Rate:
- £37,701 to £125,140.
Additional Rate:
- Over £125,140.
25
How is Income Tax calculated?
**1 — Calculate Gross Income**.
**2 — Calcualte Net Income**:
* **Deduct QLR** and **Pension Scheme Contributions**.
* This gives you **NI**.
**3 — Calculate Taxable Income**:
* Deduct the **PA** from **NI**.
* This gives you **TI**.
**4 — Calculate the Income Split**:
* **Subtract Savings** Income and **Dividend** Income from **TI**.
* This gives you the **Income Split** of Non-Savings, Savings, and Dividend Income.
**5 — Apply the Appropriate Income Tax Rate**:
* Apply the Tax **Rate** on **Non-Savings Income**:
* Basic Rate: **20%**.
* Higher Rate: **40%**.
* Additional Rate: **45%**.
* Apply the **PSA**, then apply the Tax **Rate** on **Savings Income**:
* Basic Rate: **20%**.
* Higher Rate: **40%**.
* Additional Rate: **45%**.
* Apply the **DivA**, then apply the Tax **Rate** on **Dividend Income**:
* Basic Rate: **8.75%**.
* Higher Rate: **33.75%**.
* Additional Rate: **39.35%**.
* This gives you Total Tax Liability ("**TTL**").
## Footnote
You apply the Tax Rate for each Band to the corresponding portion of Total Income. The SA and DivA consume Bandwidth. Consider the following:
* Jim has a TI of £100,000, split as follows:
* Non-Savings Income — £50,000.
* Savings Income — £25,000.
* Dividend Income — £25,000.
* The Basic Rate will be applied to the first £37,700 of his Non-Savings Income, and the Higher Rate will be applied to the rest thereof, his Savings Income, and his Dividend Income.
26
What is Net Income ("**NI**")?
An Individual's **Gross Income after Reliefs**.
27
What is Non-Savings Income ("**NSI**")?
**Income not sourced** from **Savings** or **Dividends**.
28
What is the Personal Allowance ("**PA**")?
* **£12,570**, **reduced** by **£1** for **every £2** of Income **above £100,000**.
* At **£125,140** or above, it **disapplies**.
29
What is the Personal Savings Allowance ("**PSA**")?
* An Allowance for **Interest** earned from Eligible Savings Products ("**ESPs**").
* The **Allowance varies** based on your **Bracket**:
* Basic Rate: **£1,000**.
* Higher Rate: **£500**.
* Additional Rate: **£0**.
| In essence, this is a **Nil Rate Band**.
30
What is a Principal Private Residence ("**PPR**")?
* A Property **occupied** by an Individual as their **Main Residence** for the **entire period of Ownership**.
* This includes a **Grace Period** of **9 Months of vacant possession prior** to **Disposal**.
* **S/CPs** can **only designate one** Residence between them, **unless** they are **separated** (formally or informally) **and living apart**.
31
What is a Qualifying Business Asset ("**QBA**")?
**Trading Partnerships and Sole Traders:**
* The Partnership or Sole Tradership must have been owned for at least 2 Years before Disposal.
**Assets in a Business that Used to Trade:**
* The Firm must have been owned for at least 2 Years before cessation of trading.
* The Assets must have been used in the course of business while the Firm traded.
* The Assets must be Disposed of within 3 Years of cessation of trading.
**Shares in a Trading Firm:**
* The Firm (or HoldCo of a Trading Group) must have been a Trading Firm for at least 2 Years before Disposal.
* The Shares must have been held for at least 2 Years before Disposal.
* The Applicant must have been an Employee or Officer during the 2-Year period.
* The Applicant must:
* Hold at least 5% of the Ordinary Voting Shares; and
* Be entitled to at least 5% of Distributable Profits and Assets on Winding Up.
**Shares in a Firm that Used to Trade:**
* The Shares must have been held for at least 2 Years before cessation of trading.
* The Applicant must have been an Employee during the 2-Year period.
* The Applicant must:
* Hold at least 5% of the Ordinary Voting Shares; and
* Be entitled to at least 5% of Distributable Profits and Assets on Winding Up.
* The Shares must be Disposed of within 3 Years of cessation of trading.
32
What is a Qualifying Capital Expenditure ("**QCE**")?
* **Enduring Benefit:** Asset provides value for at least 1 Year.
* **Business Use:** Asset is used within the business, not held as an investment.
* **Business Purpose:** Asset is used solely for business income, not personal use.
* **Qualifying Types:** Asset must be of a Qualifying Type, e.g. Plant, Machinery, R&D, etc.
* **Capital Nature:** Expenditure must be used to acquire or enhance long-term Assets, not maintenance.
33
What is Qualifying Loan Relief ("**QLR**")?
Relief on the **Interest paid** under **Qualifying Loans**, which include Loans to:
* **Buy** an **interest** in a **Partnership**.
* **Buy Shares** in or **lend to** a **Close Company**.
* **Contribute capital** or **lend** to a **Partnership**.
* **Buy Shares** in an **Employee-Controlled Firm** or **invest** in a **Co-Operative**.
34
What is Rollover Relief ("**RR**")?
* A Tax Relief that allows Entities to **roll over Chargeable Gains** on the **Disposal** of:
* **Land**.
* **Aircrafts**.
* **Goodwill**.
* **Buildings**.
* **Ships** and **Hovercraft**.
* **Fixed Plant** and **Machinery**.
* **Lloyd's Syndicate Capacity**.
* Into the **Acquisition Costs** of **new QBAs**, thereby **reducing them**;
* But only if the **Purchase** is made **within One year before** or **three years after** the **Disposal**; and
* The **proceeds of Disposal** are used as **funding**.
* **Rollover** is **reduced** by **£1** for **every £1 not reinvested**.
## Footnote
RR is **not automatic**. **ACGE cannot be used** to reduce the **Chargeable Gain rolled over**.
35
What is Taxable Income ("**TI**")?
An Individual's **Gross Income after Reliefs** and **Allowances**.
36
What is Taxation at the Source?
**Deduction** of Tax from the transaction **before** the **Payee receives funds**.
## Footnote
The **converse** is **Taxation** by **Self-Assessment**.
Pay As You Earn ("**PAYE**"), where Employers pay Employees' Income Tax and National Insurance Contributions to HMRC from their wages, is one such example.
37
What is Gross Income ("**GI**")
The **sum** of an Individual's **Income before Reliefs**, **Allowances**, **Deductions**, or **Exemptions**.
38
What are Total Taxable Profits ("**TTPs**")?
The sum of a Firm's **Income Profits** and **Chargeable Gains**.
39
How is Corporation Tax calculated?
* Calculate **TTPs**.
* Apply the **appropriate Rate**.
40
Regarding TTPs, how are Chargeable Gains calculated?
* Calculate the **Sale Proceeds**.
* Deduct **Allowable Expenditures**.
* Apply **Substantial Shareholding Exemption**.
* Deduct **Indexation Allowance**.
* Deduct **Capital Losses**.
* Deduct **Trading Losses**.
* Apply **Rollover Relief**.
41
Regarding TTPs and Chargeable Gains, what is the Substantial Shareholding Exemption?
An **Exemption** for **Gains** made on the **Disposal** of **Shares** in a **Trading Firm** or the **HoldCo** of a **Trading Group**.
## Footnote
This **only applies** to **Firms**, not Individuals.
42
Regarding TTPs and Chargeable Gains, what are the Conditions of the Substantial Shareholding Exemption?
The **Disposer** must have:
* **Owned** at least **10%** of the **Firm's Ordindary Shares**; and
* **Held** them for at least **12 consecutive months** in the **last six years** before Disposal.
Firms **cannot claim BADR or IR** on the **same Gain**.
43
Regarding TTPs and Chargeable Gains, what is the Indexation Allowance?
* A **Tax Relief** that allows Firms to **inflation-adjust Initial and Subsequent Allowable Expenditures** using an Indexation Factor.
* It **does not apply past 31/12/2017**.
44
Regarding TTPs and Chargeable Gains, how are Capital Losses Deducted?
**From Current-Year Gains:**
* Deduct from Chargeable Gains within the same Tax Year.
**Carried Forward Four Years:**
* If Losses cannot be fully deducted against Current-Year Gains or Prior-Year Gains, they are carried over automatically.
* Up to £5m in each subsequent Tax Year may be deducted (the "**Deduction Allowance**" or "**DedA**").
* This Allowance is shared with Trading Losses.
* If Gains exceed the DedA, Capital Losses may be deducted from 50% of the excess.
* Claims must be submitted within four years of the end of Losses' Tax Year.
**Carried Forward Indefinitely:**
* Such Losses can only be used by the Firm that initially incurred them.
* Claims must be submitted within four years of the end of Losses' Tax Year.
45
Regarding TTPs, how are Income Profits calculated?
* Calculate **Income Reciepts**.
* Deduct **Expenditures**.
* Deduct **Capital Allowances**.
* Deduct **Trading Losses**.
46
Regarding TTPs and Income Profits, how is Dividend Income treated?
* **Dividend Income** is **generally exempt** from Corporation Tax.
* **Dividends** are a **Non-Deductible Expenditure**, as they are paid from Post-Tax Profits.
47
Regarding TTPs and Income Profits, when is an Expenditure Tax-Deductible?
The Expenditure is:
* **Not prohibited** by **Statute**;
* **Wholly and exclusively** for **business purposes**; and
* Of a **revenue**, not capital, **nature**.
* This **includes Interest** on **Business Debt**.
* If Interest **exceeds £2m p/a**, deductions are **capped at 30%** of **Income Receipts**.
48
Regarding TTPs and Income Profits, what are the applicable Capital Allowances?
* **Main-Rate Capital Allowance**.
* **Annual Investment Allowance**.
* **Full-Expense Capital Allowance**.
* **Super-Deduction Capital Allowance**.
## Footnote
These are the equivalent of Depreciation.
49
Regarding TTPs and Income Profits, what is the Main-Rate Capital Allowance?
An **18% p/a**, **reduced-balance-basis Deduction** of the **value** of **P&M**.
## Footnote
When a Firm claims this Deduction, the asset's Tax Written Down Value ("**TWDV**") is reduced by 18%, and in the subsequent year, the 18% will be deducted from TWDV as it then stands.
50
Regarding TTPs and Income Profits, what is the Annual Investment Allowance?
An Allowance of **£1m** for **Expenditures** on **new**, **used**, or **refurbished P&M**.
51
Regarding TTPs and Income Profits, what is the Full-Expense Capital Allowance?
* A **complete Deduction** of the value of **new and unused P&M**.
* The Firm **must claim** within the **same Tax Year** as the **purchase**.
## Footnote
**Active** from **01/04/2023** until **31/03/2026**.
52
Regarding TTPs and Income Profits, what is the Super-Deduction Capital Allowance?
* A **130% Deduction** of the value of **new and unused P&M**.
* The Firm **must have claimed** within the **same Tax Year** as the **purchase**.
## Footnote
**Currently Inactive**. **Was Active** from **01/04/2021** until **31/03/2023**.
53
Regarding TTPs, what are Trading Losses?
Losses incurred due **Trading Expenses exceeding Trading Income**.
54
Regarding TTPs, how are Trading Losses Deducted?
**From Current-Year Profits:**
* Deduct from TTPs within the same Tax Year.
* Claims must be submitted within two years of the end of Losses' Tax Year.
**Carried Back to Prior-Year Profits:**
* If Losses cannot be fully deducted against Current-Year Profits, deduct them from TTPs within the last Tax Year.
* The Firm's course of business giving rise to the Losses between the two years must have been identical.
* Claims must be submitted within two years of the end of Losses' Tax Year.
**Carried Forward:**
* If Losses cannot be fully deducted against Current-Year Profits or Prior-Year Profits, they are carried over automatically.
* Up to £5m in each subsequent Tax Year as per the Deducation Allowance.
* If TTPs exceed the DedA, Trading Losses may be deducted from 50% of the excess.
* The Firm's course of business must remain identical in subsequent years.
**Group Relief:**
* Transfer Losses between other Firms in the Group.
## Footnote
Trading Losses incurred between 01/04/2020 and 31/03/2022 ("**Pandemic Trading Losses**") may be Carried Back as follows:
* As per usual; and
* Up to two more years, with the most recent year first subject to a £2m cap on Losses for each Pandemic Year.
55
Regarding Corporation Tax, what is the Payment Procedure?
**TTP Below £1,500,001:**
* Pay within **9 months and one day** of the **Tax Year's end**.
* File a **Tax Return** within **12 months** of the **Tax Year's end**.
* **Interest accrues** on **overpayments** and **underpayments**.
**TTP Over £1,500,000:**
* Pay in **four installments** over the **current and subsequent Tax Year**.
56
What is a Trading Firm?
A Firm that **generates revenue** by **providing goods and services**, as opposed to merely holding investments.
57
What is Value Added Tax ("**VAT**")?
A **Consumption Tax** charged on the **value** of certain **transactions**.
58
What are Conditions for VAT?
* There is an **exchange** of **Goods or Services** for **Consideration** in the **UK**.
* The **Goods or Services** constitute a **Taxable Supply**.
* The **Transaction** involves a **Taxable Person**.
* The **Transaction** is executed in the **ordinary course of business**.
59
Regarding VAT, what is a Taxable Supply?
* **Any Good or Service** that is **not explicitly exempt** from VAT.
* This is **inclusive** of a **Firm's entire scope** of business **activities**.
## Footnote
This **excludes employment services**.
60
Regarding VAT, what is a Taxable Person?
**Any Person registered**, or that **must** be **registered**, for **VAT**.
61
Regarding VAT, when is Registration necessary?
**Compulsory Registration — Historic Test:**
* If **Taxable Supply exceeds £90,000 p/a** in Month 1;
* The Firm must **register** within **30 days** of **Month 1's end**; whereafter
* **Registration takes effect** from the **start** of **Month 2**.
**Compulsory Registration — Future Test:**
* If **Taxable Supply** is **projected** to **exceed ££90,000 p/a** within a **30-day period**;
* The Firm must **register** within **30 days** of the **Awareness Date**; whereafter
* **Registration** will be **backdated** to the **Awareness Date**.
**Voluntary Registration:**
* **Any Firm** may choose to **volunatrily register** for VAT.
**Deregistration:**
* The Firm may **Deregister** if its **Taxable Supply falls** to **£88,000 p/a**, or is **expected** to.
* Supporting evidence must be submitteed.
62
Regarding VAT, what are the Two Types of VAT?
**Output Tax:**
* **Tax charged** by the Firm on the **sale** of its **Taxable Supply**.
* Applies based on the **Transaction Value** and **given Rate**.
**Input Tax:**
* **Tax paid** by the Firm on the **purchase** of **Taxable Supply** for **business purposes** .
* **Offset against Output** Tax to determine Net VAT Liability.
**Net VAT Liability:**
* If **Output Tax exceeds Input Tax**, the **Firm pays HMRC** the difference.
* If **Input Tax exceeds Output Tax**, **HMRC pays** the **Firm** the difference.
63
Regarding VAT, what are the Applicable Rates?
**Exempt Supplies:**
* **Output VAT cannot** be **charged**, but **Input VAT cannot** be **reclaimed**. Accordingly, **Netting** is **not possible**.
* Applies to the Health, Insurance, Education, and Financial Services Sectors, among others.
**Zero-Rated Supplies:**
* **Output VAT** is **charged** at **0%**, and **Input VAT** is **payable**. Accordingly, **Netting** is **possible**.
* Applies to essential Goods and Servies, like Public Transport.
**Reduced Rate Supplies:**
* **Output VAT** is **charged** at **5%**, and **Input VAT** is **payable**.
* Applies to limited Goods and Servies, like fuel and power.
**Standard Rate Supplies:**
* **Output VAT** is **charged** at **20%**, and **Input VAT** is **payable**.
* This is the **default rate**.
64
Regarding VAT, when must Invoices and Returns be Filed?
**Invoices:**
* Within **30 days** of the **Transaction**, **specifying** that **VAT** is **charged**.
**Returns and Payment:**
* Within **one month and seven days** of **Quarter's end**.
* Returns must detail the **Net VAT Liability**.
65
Regarding VAT, what are the available Accounting Schemes?
**Retail Scheme:**
* Allows Retailers to **estimate VAT Payable** based on **total daily sales**.
**Cash Accounting Scheme:**
* Firms with **Turnover below £1.35m** can **account** for VAT on **cash received and paid**.
**Annual Accounting Scheme:**
* Firms with **Turnover below £1.35m** can **submit** an **Annual VAT Return** and **pay** instalments **quartery**.
**Flat Rate Scheme:**
* Firms with **Annual Taxable Turnover below £150K** have **VAT charged** as a **fixed percentage** of **Turnover**, with rates varying by Industry.
* Limited-cost Traders must account at 16.5%.
* **Input VAT** generally **cannot** be **reclaimed**, **except** on **specific purchases**.
66
What is the Difference between Direct and Indirect Taxes?
**Direct Taxes:**
* Levied on **persons** based on their **finances**.
**Indirect Taxes:**
* Levied on **transactions**.
67
What are the Boundaries of the Tax Year?
**Individuals:**
* **April 6th** through to **April 5th**.
**Companies:**
* **April 1st** through to **March 31st**.
## Footnote
This is what the term Current Year Basis ("**CYB**") refers to.
68
What happens if a Firm's Accounting Periods do not perfectly overlap with the Financial Year?
**TTP** is **apportioned** according to the **periods within each Financial Year**, with the **respective rates payable**.
69
What is a Close Company?
A Firm that is **controlled** by:
* **Five or fewer Participators**; or
* **Any number** of **Participators** if they are **all Directors**.
This is unless:
* It is **Public**; or
* It is **controlled** by a **Non-Close Company**.
70
Regarding Close Companies, what is a Participator?
Someone with a **share** or **interest** in the **Firm's capital** or **income**.
## Footnote
This includes Shareholders and Creditors with appropriate Security.
71
Regarding Close Companies, what constitutes Control?
The ability to **exercise control** over the **Firm's affairs**. **Established if** the **Person** or an **Associate** or **Nominee**:
* Holds **more than 50%** of **votes**.
* Is **entitled** to **more than 50%** of **Distributions**.
* Is **entitled** to **more than 50%** of **Capital** on **Liquidiation**.
72
Regarding Close Companies, what constitutes an Associate or Nominee?
**Associate:**
* S/CPs.
* Issues.
* Siblings.
* Forebears.
**Nominee:**
* Someone that holds Rights or Property on another's behalf, to whom they are attributed.
73
Regarding Close Companies, what are the Tax Implications of a Loan to a Participator?
**For the Firm:**
* It **must pay Corporation Tax** on the Loan at the Higher Rate Band for Dividends (**33.75%**).
* It must pay within **9 months and one day** of the **Tax Year's end**.
* If the Loan is **repaid**, **written off**, or **waived**, the Firm can **reclaim** the **Tax**.
**For the Participator:**
* It **must pay Income Tax** on the Loan as a **Distribution**.
74
Regarding Close Companies, when will a Loan to a Participator not trigger Tax?
**Trade Credit:**
* Credit given for Goods or Services supplied in the ordinary course of business.
* The Duration must be per the Firm's normal terms, elsewise no more than six months.
**Money-Lending Businesses:**
* Loans made in the ordinary course of a money-lending business.
**Small Loans to Employees:**
* Loans not exceeding £15,000 to a Borrower; that
* Works full-time at the Firm; and that
* Lacks a material interest in the Firm, meaning:
* Direct or Indirect control of over 5% of Ordinary Shares.
* Entitlement to over 5% of Assets on Liquidation.
75
Regarding Close Companies, what is a Distribution?
**Benefits** provided to **Participators** **other** than by **reason of employment**.
76
Regarding Close Companies, what are the Tax Implications of a Distribution to a Participator?
**For the Firm:**
* The Distribution is **not Tax-Deductible**.
**For the Participator:**
* It **must pay Income Tax** on the **value** of the **Distribution**.
77
Regarding Close Companies, what is a Transfer of Value?
A **Transaction** that:
* **Reduces** the **Firm's value**; and
* **Increases** a **Shareholder's Estate**.
Accordingly, it **may be subject** to **Inheritence Tax**.
78
Regarding Close Companies, what are the Transactions in Securities Rules?
* Rules governing **Tax advantages gained** by **reclassifying Income Receipts** as **Capital Receipts**.
* If they **bite**, they **nullify** the **reclassification**.
* Where this is **ambiguity**, Firms should **request advance clearance** from HMRC.
