FUNDAMENTALS OF TAXATION - CURRENT TAX LEGISLATION
- Each year the Chancellor introduces his budget (Finance Bill). Once this Bill has
- been passed by Parliament it becomes a Finance Act.
- The budget given in March 2018 became the Finance Act 2018.
- Each Finance Act is normally the current tax legislation for 12 months – the
- financial year for companies and the tax year for individuals.
- The financial year runs from 1 April to 31 March.
- The financial year 2018 (FY 2018 = 1 April 2018 – 31 March 2019)
- The tax year runs from 6 April to the following 5 April.
- The current tax year runs from 6 April 2018 – 5 April 2019 (2018/2019 = 18/19)
- Types of tax
- Income tax -
- National Insurance -
- Capital gains tax -
- Corporation tax -
- VAT -
- Inheritance tax -
METHODS OF COLLECTING TAX - By deduction at source
- Some income is received net of income tax. This tax is deducted at source and
- paid directly to Her Majesty’s Revenue and Customs (HMRC).
- Example include:
- Salary from employment
- By assessment
- Some income is received gross (i.e. no tax is deducted at source). The tax on this
- income is collected by Her Majesty’s Revenue and Customs (HMRC) under the self
- assessment rules.
Adjustment of the Profit per the Statement of Profit or Loss to Give Tax Adjusted Trading Profit (TATP) - Capital allowances are given to the owner of the capital assets and are deducted in
- arriving at the tax adjusted trading profits of the business.
Categories of plant and machinery - A) The Annual investment allowance (AIA)
- B) The Writing down allowance (WDA)
- C) The First year allowance (FYA)
- D) Balancing allowance (BA) and balancing charge (BC)
Trading Profits & the Basis of Assessment - Opening year rules
- Continuing to trade
- Ceasing to trade
Trading Losses - Carry forward losses – S.83 ITA 2007
- Current and carry back (S.64 ITA 2007)
- Current and carry back (S.261 TCGA 1992)
Trading Losses TRADING LOSSES MADE AT THE BEGINNING OF THE TRADING CYCLE - Extended carry back (S.72 ITA 2007)
TRADING LOSSES MADE AT THE END OF THE TRADING CYCLE 5. Terminal - Terminal loss relief (S.89 ITA 2007)
Employment Income - Proforma employment income
- £
- (a) Salary X
- (b) Bonus/Commission X
- (c) Benefits X
- (d) Reimbursed expenses X
- ___
- Gross emoluments X
- Less:
- (e) Allowable expenses
- Donation to charity under a payroll deduction scheme (x)
- Contributions to an occupational pension scheme (x)
- Travel, subsistence and entertaining incurred wholly,
- exclusively and necessarily in the performance
- of the office or employment (x)
- Subscription to a professional body (x)
- Deficit on a mileage allowance (x)
- ___
- Employment income X
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