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PRINCIPLES OF TAX ICAEW QUESTIONS & ANSWERS
What does the property value have to be above where there is additional rent? - Answer - £75, How many years does the property have to be owned by the employer before given to the employee, for it to be valued at Market Value & not the orginal cost? - Answer - MORE THAN 6 years What % does the use of assets have to be used for private use to be deemed as insignificant? - Answer - 40% For Car benefit, what is the maximum contribution the employee can contribute? - Answer - £ Can you deduct the employee contributions to fuel for cars? - Answer - No Is L&H a chargeable benefit or Exempt benefit regarding accommodation expenses? - Answer - Chargeable. RITZ LTD decorated the flat which the employer owns, but is currently being resided by an employee called Bob, does Bob have to pay for this decoration accomodation expense? - Answer - Yes For a VAN is driving from work to home considered private use? - Answer - No How do you calculate Assets for private use? - Answer - 20% the Market Value (If its 41%+ for Private use) Is a pool car a taxable benefit? - Answer - No, it is exempt. When must you pay your PAYE by? - Answer - 2 weeks after the end of the tax month (5th) so the 19TH of each month. How many employee's must you have where you have to submit your PAYE payments electronically? - Answer - If you have 250+ employees Are PAYE payment deadlines extended if you pay electronically? - Answer - Yes, they are extended to the 22nd (By 3 days) When are you able to pay your PAYE quarterly? - Answer - If your NI & PAYE is less than £1500 a month Is it a Criminal offence to not comply with HMRC wanting security where payments are at risk? - Answer - Yes & up to a £5000 fine.
What is Real time information? - Answer - Emloyers are made to provide HMRC with information everytime a payment is made to an employee, this ensures the right amount of tax is being paid over. What is the tax code 'L' & does it come before or after the number? - Answer - Basic Personal allowance, and it goes after. What is the tax code 'N' & does it come before or after the number? - Answer - LESS Marriage allowance £1250 & it goes after What is the tax code 'M' & does it come before or after the number? - Answer - PLUS Marriage Allowance £1250 & is after What cost does in-house benefit use? - Answer - Marginal - the additional cost, NOT the normal fee or average. What is the maximum % a Car benefit can go up to? - Answer - 37% Is employment income on an accruals or receipts basis? - Answer - receipts - when you are paid or entitiled to When is Living accomodation EXEMPT from being a chargeable benefit? - Answer - Job-related - proper/better performance or is provided if there is a security threat Can directors claim the exemptions of Living accomodation? - Answer - Yes - If he is working full time, owns less than 5% shares or works for a non-profit charity. When does the employee have to pay back the benefit by for the benefit to be zero? - Answer - 6th of July, the following Tax year What is the tax code 'M' & does it come before or after the number? - Answer - It is when you have used up all your personal allowance, either by earning £125K or having benefits over £12,500. It goes BEFORE the number. How do you calculate the number to go in the Tax Codes - Answer - (PA + Allowable exp+ overpaid tax) - (Taxable benefits + Underpaid Tax) = Number
- You must remove the last digit of the number
- for the 'K' code ONLY, you muse '-1' from the number. When you +/- the overpaid/underpaid tax when calculating the Tax code numbers, do you use the Tax amount, or the Gross amount? - Answer - You Gross it up depending on the tax band they are in, basic/higher etc. Exempt benefit or chargeable: Contributions by an employer to a registered pension scheme? - Answer - Exempt
Exempt benefit or chargeable: Cleaning for Bobs living accommodation provided by the employer. - Answer - Chargeable. Exempt benefit or chargeable: Free meals in a canteen for directors. - Answer - Chargeable - must be for ALL employees. Exempt benefit or chargeable: Free meals in a canteen for ALL employees. - Answer - Exempt Exempt benefit or chargeable: Social event from the employer £200 per head. - Answer
- Chargeable - must be £150 per head. Exempt benefit or chargeable: Social event from employer £100 per head. - Answer - Exempt - £150 threshold. Exempt benefit or chargeable:Entertainment provided by a 3rd party. - Answer - Exempt Exempt benefit or chargeable:Cash given from a 3rd party for £240. - Answer - Chargeable - must be non-cash. Exempt benefit or chargeable: Non-cash gift from a 3rd party for £200. - Answer - Exempt - £250 threshold. Exempt benefit or chargeable: Work parking space - Answer - Exempt Exempt benefit or chargeable:Award for Tim of £4500 for a Staff suggestion, under the staff suggestion scheme. - Answer - Exempt - Up to £5000 rewards. Exempt benefit or chargeable: £6090 given to Phillip for his good idea under the staff suggestion scheme. - Answer - Chargeable - only up to £5000 are exempt. Exempt benefit or chargeable: Work related training courses. - Answer - Exempt Exempt benefit or chargeable:Sport centre not available to the public. - Answer - Exempt. Exempt benefit or chargeable: Payments of people working from home - Answer - Exempt - up to £4 per week with evdience. How much is exempt from payments of working from home? - Answer - £4 a week with evidence. Exempt benefit or chargeable: Personal incidental expenses - £5 per night UK , £ Abroad. - Answer - Exempt Exempt benefit or chargeable: Bus services (Any) - Answer - Exempt
Exempt benefit or chargeable: Travel expenses when public transport is disrupted. - Answer - Exempt Exempt benefit or chargeable: Leah & Simon gets a bicycle out of 50 employees - Answer - Chargeable, Must be available for ALL employees. Exempt benefit or chargeable: Bicycles & Safety equip given to all employees. - Answer - Exempt Exempt benefit or chargeable: Jack gets his removal expenses (Costing £7900) when the office moved to Birmingham. - Answer - Exempt - Limit up to £8000. Exempt benefit or chargeable: Tim moves to australia to go work in the australian office & his removal costs cost £16,000. - Answer - Chargeable, only up to £8000. Exempt benefit or chargeable: Pip gets a long service award, he has worked there for 18 years and gets £900. - Answer - Chargeable - Must be service for at least 20 years. Exempt benefit or chargeable: Mike has been working at Stats PLC for 27 years, he gets a long service aware of £1,350. - Answer - Exempt Exempt benefit or chargeable: Flo has been workingat Stationary LTD for 30 years, and gets a long service award for £5000. - Answer - Chargeable - only allowed £50 per year, 30 x £50 = £1,500, she has recieved way over the maximum. Exempt benefit or chargeable: Eye tests and glasses - Answer - Exempt Exempt benefit or chargeable:Vehicle battery charging - Answer - Exempt Exempt benefit or chargeable: Health Screening assessment and medical check up once a year. - Answer - Exempt - must be only once a year! Exempt benefit or chargeable: Medical treatement to Facilitate return to work after an absence due to an injury- for £1500. - Answer - Chargeable, only up to £ Exempt benefit or chargeable: Medical treatement to Facilitate return to work after an absence due to an injury costing £390. - Answer - Exempt - up to £500. Do you add or subtract disallowable expenditure to net profits per FS? - Answer - Add- ADD BACK Do you add or subtract expenditure not in accounts? - Answer - Subtract Allowable or Disallowable exp: Capital expenses - Answer - Disallowable
Allowable or Disallowable exp: Trade and professional subscriptions - Answer - Allowable Allowable or Disallowable exp: Donations to national charities - Answer - Disallowable Allowable or Disallowable exp: Political donations - Answer - Disallowable Allowable or Disallowable exp: Donations with gift aid. - Answer - Disallowable Allowable or Disallowable exp: Fines & Penalties - Answer - Disallowable Allowable or Disallowable exp: Interest on late paid tax - Answer - Disallowable. Allowable or Disallowable exp: Interest on sums borrowed for the business - Answer - Allowable Allowable or Disallowable exp: Legal & Prof for Capital expenditure - Answer - Disallowable Allowable or Disallowable exp: Legal & Prof renewal of a short lease under 50 years - Answer - Allowable Allowable or Disallowable exp: Cost of registration of copyright & patent - Answer - Allowable Allowable or Disallowable exp: Costs of raising long term finance - Answer - Allowable Allowable or Disallowable exp: Irrecoverable VAT on expenditure which was allowable. - Answer - Allowable Allowable or Disallowable exp: Employment payments (paid within 9 months of the accounting period) - Answer - Allowable Allowable or Disallowable exp: Er's Contributions to a registered pension scheme - Answer - Allowable - if in the accounting period of payment. Allowable or Disallowable exp: Private use of leased items - Answer - Disallowable. Allowable or Disallowable exp: Car Leasing & rental - Answer - 15% Disallowance if emissions are >110g/km after April 2018 What % is disallowed with Car leasing payments & what emissions & what year? - Answer - 15%, Over 110g/Km , April 2018 Allowable or Disallowable: Deduction on Capital expenditure on a cash basis. - Answer
Allowable or Disallowable: Duduct Cars on a cash basis. - Answer - Disallowable, Cars you cannot claim even on a cash basis, all proceeds of the cars are not taxable income. Allowable or Disallowable: Goods at own use on a cash basis being on the profit element. - Answer - Disallowable - on the Cost price for cash basis, accruals basis is profit element. Allowable or Disallowable: Bad debts on a cash basis. - Answer - Disallowable , should be no bad debts on a cash basis. Allowable or disallowable: Lease payments for cash basis. - Answer - Allowable, 15% doesnt apply on a cash basis. What is allowable for a cash basis business regarding assets & stock? - Answer - They are treated as a taxable receipt. Allowable or disallowable: Non business interest for £200 in a cash based business. - Answer - Allowable, ALL interest is allowed in a cash based business up to £ What % must you add on for RDE2 for a benefit? - Answer - 0% - Normal diesal is 4% but RDE2 is 0% When must you pro-rata a car/van BENEFIT for exploment income to? - Answer - 31st March Allowable or Disallowable Trading profits: Parking fine from an employee doing business. - Answer - Allowable Allowable or Disallowable for Trading profits : Legal fees to buy a new lease for 8 years.
- Answer - Disallowable - Only allowable with a RENEWAL not an acquisition. Allowable or Disallowable Trading profits: Legal fees to collect debt. - Answer - Allowable - Legal fee's regarding CAPITAL acquisition are disallowable. If you have irrecoverable VAT and loss the VAT invoice do you still add back? - Answer
- No, do not add back - lost receipt doesnt matter. Do you add back Class 2 NIC? - Answer - YES Trading income , is bank overdraft allowable? - Answer - YES Do you round up or down for 102g/km for calculating the 1% per 5g/km - Answer - Round down
If a house has a MV of £200,000 but the company rent it, do you use the £75k rule? - Answer - NO, as they have rented it. The company must OWN it to use the £75k rule. Are meal vouchers a benefit? - Answer - Yes they are chargeable. If vouchers are worth £6000 but the employer paid £5500 what is the benefit? - Answer
- What the employer paid - £5500 ( Cost to employer) IF you have a rental benefit where the company pays £10,000 but the annual value is £11500, which one do you choose to be the benefit? - Answer - £11,500 - You choosw the HIGHER of the two. When working out the benfit of a car % do you include the cost with the additional accessories? - Answer - YES IF with trading profits a person takes out £600 worth of stock but could have sold it for £800, which amount would you add back? - Answer - £800 - the amount you would have sold it for. Is the £3000 ers allowance okay for single directors? - Answer - No it doesn't apply to companies with just one director Who pays for class 2 & 4 - Answer - Self employed Does apprentices and age affect class 1 primary NI? - Answer - No, only class 1 Secondary Does someone whose 67 have to pay class 1 primary? - Answer - No as they are retirement age, BUT companies still have to pay class 1 secondary When answering NI calculation questions, what two things must you bare in mind? - Answer --their age
- apprentice
- is there the £3000 allowance
- is it asking in annual, months or week, whatever one it tells you in you use that threshold What is the exemption for capital gains tax? - Answer - £12,000 which cannot be carried forward and not for companies Can companies use the £12000 exemption from chargeable gains? - Answer - No- only individuals can and that for capital gains Is goodwill and share capital a chattel? - Answer - No
What is a chattel? - Answer - Disposable asset that has increased in value since it was acquired such as land or shares What doesn't count as a disposal? - Answer - Gift to charity/museums Death Does loss/destruction could as a disposal? - Answer - Yes If a asset has been gifted for CGT, what amount do I use? - Answer - Market value For commercial transaction for CGT what value do I use? - Answer - GROSS sale proceeds Is a legal tender an exempt asset from CGT? - Answer - Yes Do you have to pay CGT on a classic car? - Answer - No- all cars are exempt! Are chattels sold & bought under £6000 exempt? - Answer - Yes Is Gilt - edged securities - treasury stock exempt from CGT? - Answer - Yes What % is the basic band for CTG? - Answer - 10% What is the higher rate band % for CGT? - Answer - 20% What is the additional rate band % for CGT? - Answer - 20% Is a wasting chattel exempt? - Answer - Yes What is a wasting chattel? - Answer - Asset with a life not longer than 50 years. When is a wasting chattel not exempt? - Answer - Solely business and owner has claimed capital allowances on it If I had a vase that I bought for £4000 but sold for £8000 how would I calculate the CGT? - Answer - Whichever is the LOWEST out of the two Sale - costs or Sale- £6000 = y. (Y/3) x 5 How would I calculate capital gains tax if I bought some art for £10,000 and it sold for £4000 - Answer - £6000 - costs = CGT What if I bought a vase for £7500 and sold it for £9000? - Answer - Normal CGT with % What is in the allowable costs for CGT? - Answer - Stamp duty Cost of asset
What do you 'x' the indexation allowance against? - Answer - ONLY THE PURCHASE & ADDTIONS , not incurring legal fees etc How long must corp tax be? - Answer - Only be 12 months, can't be any longer For Vat purposes when can you write off irrecoverable debt? - Answer - 6 months since the DUE DATE Written off in the accounts Supply of invoice Claim within 4 years How long do you have to claim bad debt for vat? - Answer - 4 years Can you claim vat from client entertainment? - Answer - No Pre-registration how long do you have to claim Vat on some building work? - Answer - 6 months as it's a service Pre-registration of vat, how long do you have to claim stock? - Answer - 4 years as it's stock Can people who make just zero rated supplies ask for a Vat exemption? - Answer - Yes Are gifts of service vatable? - Answer - NO Are goods of gifts vatable? - Answer - Yes if they are over £ When is the tax point for goods on sale or return? - Answer - Adoption date If I'm bill and sold an item forgetting to tax it for £79 is that vat exclusive of inclusive? - Answer - Vat inclusive Gift for vat cost or what you could sell it for? - Answer - Cost When are you charged vat registration immediately? - Answer - When you expect it in the future and isn't cumulative When is vat deregistration compulsory? - Answer - Ceases to make taxable supplies and has no intention to When is vat de-registration voluntary? - Answer - Below threshold If I deregister do I have to pay output vat on supplies worth £900? - Answer - No, anything less than £1000 you don't have to bother
Does the £85,000 include capital assets? - Answer - No, capital assets are not part of taxable turnover Vat collection is it cost to business or what it could have been purchased for? - Answer
- Purchased for What is the threshold of payments on account for vat? - Answer - 2.3 million LIABILITY Over the 2.3mil liability threshold, when do you have to pay? - Answer - 1/24 of the previous years liability paid the end of the 2 & 3 months of each quarter, then the remaining balance on THIS YEARS LIABILITY. O/s balance is end of the following month Annual vat returns balance payment due? - Answer - Within 2 months of year end - make sure balance is current year For annual vat returns what is the threshold? - Answer - £1,350, Annual vat returns what payments do you make? - Answer - 9 monthly payments of 1/10 of previous year liability Or 3 quarterly payments of 25% The first payment is due end of the 4th month When can you not join the cash accounting vat scheme? - Answer - If you have any late submissions or payments within the prev 12 months Is flat rate £150k threshold excluding vat or including vat? - Answer - Excluding When calculate flat rate do you do net amount of gross? - Answer - Gross amount What happens to the % of flat rate vat in the first year of vat registration - Answer - You decrease it by 1% For normal vat returns, when is submitting and payment? - Answer - BOTH 1 month and 7 days Do flat rate scheme apply their % to exempt supplies? - Answer - Yes Failure to send a vat return- what % of potential Loss revenue? - Answer - 30% How many days must a penalty be paid? - Answer - 30 Does private usage matter for a company? - Answer - No
If a tax return isn't automatically issues when do you have to notify of changeability? - Answer - 5th of October after the end of the tax year When is the balancing payment for self assessment? - Answer - January the FOLLOWING YEAR , happens in 3 installments, half of the previous years in jan, July then the remaining balance the following jan. Can you get penalties on payments on account? - Answer - No but you can get interest. How do you calculate payment on account for self assessment? - Answer - Half the income tax & class 4 nic of the previous year If there is an underpayment on tax in the self assessment for an employee , what is the threshold when you are able to tax it automatically the following year in your PAYE code ? - Answer - £ When are payments on account not required? - Answer - Tax paid is under £ Or is 20% of the total liability in the previous year - income tax AND class 4!!! Can you get a penalty arising from amendments of self assessment? - Answer - Yes Is repayment interest exempt? - Answer - Yes When does overpaid tax apply? - Answer - From the Due date to the day before they pay you back. For Vat what is the penalty for late return? - Answer - You get a 12 month penalty period first then if you default within the penalty period again, it extends further 12 months & is a £400 fine minimum What form is used for large and deliberate vat errors? - Answer - VAT 652 When can you correct your error on the next vat return? - Answer - Under £10k 1% of turnover (max £50k) If you want to Amend your tax return how long do you Have to do it? - Answer - 12 months from the submission DUE date If hmrc want to amend your tax return how long do they have to do it? - Answer - 9 months from when it was ACTUALLY FILED, not the due date. Can you appeal an inspection notice form hmrc? - Answer - No What do you need to do to appeal to hmrc? - Answer - In writing within 30 days of the event and specific the grounds of appeal.
When must hmrc give notice to compliance checks? - Answer --First anniversary of the actual submission date
- if it is filed after it's due submission date the quarter day following the first anniversary. Are from the 31st jan, 30 april, 31 July , 31st Oct. What happens to determinations of a return not submitted? - Answer - Hmrc make a determination of the tax due within 3 years of the statutory filing date. What are the years for discovery assessments (discovered that a full disclosure was not made)? - Answer - Not deliberate or careless - 4yrs Careless - 6 years Deliberate- 20 years When must a claim for overpayment relief be done by? - Answer - 4 years Can you have payments on account for capital gains tax? - Answer - No. Only income tax + class 4 When choosing the exempt amount for childcare vouchers , is it the salary they have to decide the band or the whole amount? - Answer - You JUST base it off of the salary element, not the return as a whole. Is treasury stock chargeable? - Answer - Yes For an income tax assessment , for the sole trader to take stock for themselves do you tax the cost to the business or what it could have sold for? - Answer - What it could have sold for. Do you have to issue a VAT invoice to non-taxable customers? - Answer - no What is the basic tax point? - Answer - When goods are made available to the customer Can the actual tax point payment of an item override the 14 day rule? - Answer - Yes if payment comes first When does the 14 day rule apply? - Answer - If goods are SUPPLIED & an invoice is within 14 days What can override the basic tax point? - Answer - The first of payment issued invoice or 14 day rule. What is relevent for individuals, capital gains or chargeable gains? - Answer - Both, but business's do not have capital gains.
When doing a self assessment and the owner takes goods, do you tax the cost or the potential seeing price? - Answer - Selling price Is interest on a loan to extend the office allowable? - Answer - Yes When calculating childcare vouchers do you base the bands off of the salary or the whole taxable profits? - Answer - Just the salary. When working out corp tax liability do you include exempt dividends? - Answer - No just the taxable total profits. What do you need to remember about indexation allowance? - Answer - Can't make it go past ). So if youve got an allowance of £600k, but the gain is only £500k, then the allowance is only £500k as it only gets you to 0. What do you have to remember when doing profit split for partnership? - Answer - Only goes up to 5th of April - sometimes they trick you to the year-end which is for ACCOUNTS purposes, not for tax purposes. Can you get interest penalty on payments on account? - Answer - Yes interest you can. What is GAAR? - Answer - Challenge abusive tax AVOIDANCE arrangements. Trading or Non-trading: Bank overdraft. - Answer - Trading - allowable Trading or non-trading: Interest on loans to buy P+M? - Answer - Trading - allowable Trading or non-trading: Interest on loans to buy a new factory. - Answer - Trading - to buy premesis for use of trade Trade or non-trade: Interest on a loan to buy a let property? - Answer - Non-trade Trade or non-trade: Interest on a loan to acquire shares in another company. - Answer
- Non-trade Trade or non-trade: Interest on overdue corp tax - Answer - Non-trade Trade or non-trade: Interest to write off a non-trading loan such as a loan to an employee. - Answer - Non-trade Trade or non-trade: Interest rec'd on bank and building society accounts. - Answer - Non-trade True or false - for this topic, all interest rec'd as long as its not related to trade, is non- trade. - Answer - True
Trade or non-trade: Gilt-edged securities. - Answer - Non-trade Trade or non-trade: Debentures or loan stock interest rec'd - Answer - Non-trade Trade or non-trade: Interest payable to debentures for a loan to buy machinery. - Answer - Trade Trade or non-trade: repayments of overpaid tax. - Answer - Non-trade for chargeable gains tax at 10% & 20% can it be for companies? - Answer - NO - just individuals interest from gilts & securities exempt income? - Answer - no it is chargeable 'profit seeking motive badge of trade mens? - Answer - you bought the item to make a profit on it For balancing charge do you minus or plus from the capital allowances? - Answer - MINUS Taxing profits LESS thn 12 months? - Answer - 12 months from COMMENCEMENT OF TRADING Taxing profits MORE THAN 12 Months - Answer - 12 months FROM the accounting period!!! is Exchequer stock exempt from CGT? - Answer - YES!!! When do you consider the £12000 CGT exemption? - Answer - When it states 'LIABILITY' not when it asks for the chargeable gain! True or False: Goodwill for a company (but not an individual) is an exempt asset if created after 1 April 2002. - Answer - True Is a gift of a sample a vatable supply even if it is over £50? - Answer - no 14 day rule applies to adoption date - Answer - FLAT RATE ONLY TIMES THE INCOME TAX - Answer - how many years can you claim overpayment relief? - Answer - 4 years.
