UK Taxation of individuals, companies, partnerships and trustees Flashcards
What are capital gains?
Profits made on a one-off basis, unlikely to recur and not made in the ordinary course of employment or business
What is Capital Gains Tax (CGT)?
It is a tax charged if you sell, give away, exchange or otherwise dispose of an asset and make a profit or ‘gain.’
What is a tax year?
The tax year runs from 6th April to 5th April in the next year for income tax and CGT purposes. The tax rates and allowances for the coming year are decided by the Chancellor of the Exchequer in the Autumn Budget.
What are HMRC responsible for?
Her Majesty’s Revenue and Customs is responsible for the collection of taxes in the UK
What is PAYE?
Pay As You Earn (PAYE) is a tax collection system which spreads an employee’s income tax bill over the tax year rather than paying tax in one lump sum. This is a company’s responsibility to calculate and deduct the correct amount from their employees’ gross pay.
Tax returns are required under what circumstances?
If the individual is either a company director, is self employed, in a partnership, or has received other untaxed income where the tax on it cannot be collected through the PAYE system
What is a benefit in kind?
It is a benefit other than pay provided by an employer for an employee.
What is Single Person’s Allowance?
The amount of income each individual resident in the UK for tax purposes is allowed to receive without liability to tax. The allowance for 2022/23 is £12,570
What is IHT?
Inheritance tax (IHT) is a cumulative tax applying to transfers during life and death. All chargeable transfers are totted up and tax is payable once the threshold of £325,000 is reached. However, once a transfer is more than 7 years old, it drops out of the calculation.
What is corporation tax?
It is a tax on a company’s taxable income and profits, companies are liable to this tax on their trading profits and their capital gains. This tax applies to registered companies, member’s clubs (societies and associations), trade associations, housing associations, and groups of individuals carrying on a business but not as a partnership.
What is the main rate of corporation tax?
19% for 2022/23
What is a partnership?
It is the relationship which subsists between persons carrying on business in common with a view to profit. A partnership is not a distinct legal entity in England or Wales.
What is a chargeable event?
It is when unapproved policies suffered the second death taxation issue which is levied against the policyholder. The Finance Act 2003 resolved this anomaly by setting out criteria for excepted group life policies which are exempt from chargeable events.
What is a discretionary trust?
It is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor.
How does the cost of certain Employee Benefits reduce a company’s corporation tax liability?
When calculating a company’s taxable income or profits, certain expenses of running the company are allowed by HMRC to be offset against income so that taxable income is reduced. The cost of providing certain EBs may be included as a business expense, thus reducing a company’s taxable income.
