ptx personal taxation
Download
Skip this Video
Download Presentation
PTX Personal Taxation

Loading in 2 Seconds...

play fullscreen
1 / 120

PTX Personal Taxation - PowerPoint PPT Presentation


  • 126 Views
  • Uploaded on

PTX Personal Taxation. Introduction. Tax: 3 Rules of Thumb. If you increase your wealth, expect HMRC to tax it Claim all possible tax deductions Disclose all taxable income (to avoid problems later). Objectives. 3. To be able to identify: When tax years start and finish

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' PTX Personal Taxation' - isla


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
tax 3 rules of thumb
Tax: 3 Rules of Thumb
  • If you increase your wealth, expect HMRC to tax it
  • Claim all possible tax deductions
  • Disclose all taxable income (to avoid problems later)
objectives
Objectives

3

To be able to identify:

When tax years start and finish

The deadline for submitting a tax return

Deadlines for paying tax

What basis should be used to assess different types of income

Income which is exempt from Income Tax

How long records must be retained

Responsibilities of a tax practitioner

tax year for income tax and cgt
Tax Year for Income Tax and CGT
  • Tax year 2012/2013
  • starts on 6th April
  • Governed by Finance Act 2012
tax return and payment
Tax Return and Payment
  • Form SA100
  • Supplementary pages
  • Submit by
    • 31/10/13 (paper)
    • 31/1/14 (on line)
  • Payment on account
    • 31/1/13
    • 31/7/13
  • Final (balancing) payment
    • 31/1/14
tax computation
Tax Computation
  • See tax data and pro-forma
  • Personal Allowance
  • Tax Bands:
    • Non-savings (General)
    • Savings
    • Dividends
exempt income
Exempt Income
  • ISAs
  • NS&I Savings Certificates (not savings accounts)
  • Prizes (eg. Premium Bonds)
  • Damages
record keeping
Record-keeping
  • Keep to:
    • 31/1/15
      • Filing deadline + 1 year
    • 31/1/19if there is trading/property income
      • Filing deadline + 5 years

Sufficient to substantiate the information provided to HMRC

duties and responsibilities of a tax practitioner
Duties and Responsibilities of a Tax Practitioner

Put forward the best position in favour of a client or employer

slide12
Q1

When is a tax practitioner allowed to disclose information about a client without their authority

slide13
Q2

If an accountant suspects money laundering, to whom should he/she report it

slide14
Q3

Describe the types of communication with which an accountant should not be associated

slide16
Q1

If there is legal, regulatory or professional duty

slide17
Q2

Money Laundering Reporting Officer, Serious Organised Crime Agency

slide18
Q3

False, misleading, reckless, omitting/obscuring information

ptx personal taxation1

PTX Personal Taxation

Savings & Investments

(Interest & dividends)

objectives1
Objectives

To be able to:

  • Explain the basis on which investment income is taxed
  • Identify income which is not taxed at source
  • Identify income which is exempt from tax
  • Gross-up income and calculate the tax due
  • Explain record-keeping requirements
taxation of investment income
Taxation of Investment Income
  • Receipts basis (not accrual)
tax at source
Tax at source
  • Most interest has tax deducted at source
  • Basic rate
  • Not
    • NS&I accounts and income bonds
    • Gilts
  • Dividends are “deemed” to have tax deducted at source
    • Not repayable
gross assessable income questions
Gross (assessable) income: Questions
  • Net savings income = £160
  • 20% tax already deducted
  • Gross = ???
  • Net dividend income = £270
  • 10% tax already deducted
  • Gross = ???
tax free income
Tax-free Income
  • These do not need to be reported on tax returns:
    • ISAs (£11,280 per year)
    • National Savings Certificates
    • Premium Bonds
record keeping question
Record-keeping: Question
  • What records might you keep relating to investment income?
gross assessable income answers
Gross (assessable) income: Answers
  • Net savings income = £160
  • 20% tax already deducted
  • Gross = £200
  • Net dividend income = £270
  • 10% tax already deducted
  • Gross = £300
record keeping answer
Record-keeping: Answer
  • What records might you keep relating to investment income?
  • Tax deduction certificates
  • Dividend vouchers
  • Account details
  • Working papers
ptx personal taxation2

PTX Personal Taxation

Employment

(Salaries, Bonuses, Pensions)

objectives2
Objectives

To be able to:

  • Decide whether a taxpayer is employed or self-employed
  • Decide when employment income is taxable
  • Assess the taxable amount on a variety of benefits in kind
  • Identify expenses which are allowable in calculating taxable income
  • Explain record-keeping requirements
taxation of employment income
Taxation of Employment Income
  • Receipts basis (not accrual)
indicators of self employment contract for services
Indicators of Self-Employment (Contract for Services)
  • Can employ substitute
  • decide how/when/where to work
  • choose work hours
  • financial risk
  • provide own equipment
  • work for several people/organisations
general rule p11d employees
General Rule (P11D employees)
  • Cash cost to employer
employee contribution
Employee contribution
  • Reduces benefit (except fuel)
list price employee contribution x scale charge employee contribution to running cost
List price – employee contribution x scale charge %- employee contribution to running cost

Company Car Benefit

car fuel benefits are time apportioned if the car is not available for the whole tax year
Car & fuel benefits are time-apportioned if the car is not available for the whole tax year

Timing

pool car
Pool Car
  • Not a benefit if:
  • Private use is incidental
  • Used by several employees
  • Not normally kept at employee’s home
company van
Company Van
  • No benefit if insignificant private use
  • £3,000 for private use
  • £550 for fuel for private use
beneficial loan
Beneficial Loan
  • Loan x (Official interest – Actual interest)
  • No benefit if total loans <£5,000
  • If loan written off:
    • Benefit = Amount of loan
accomodation
Accomodation
  • Annual value (or rent paid by employer if higher)
  • +(Cost - £75,000) x Official interest
  • + Cleaning etc
  • + Assets x 20%
  • Time apportioned
accomodation1
Accomodation
  • Exempt for
    • Representative occupier (Caretaker)
    • Customary (Vicar)
    • Security
  • In these cases:
    • Running expenses limited to 10% of earnings
gift loan of asset
Gift/Loan of Asset
  • Gift
    • Benefit = Market value
  • Loan
    • Benefit = 20% of value when first provided
gift of asset previously loaned
Gift of asset previously loaned
  • Higher of:
    • market value when transferred
    • market value when first provided
  • less benefits already assessed (less employee contribution)
tax free benefits1
Tax-free benefits
  • Money:
    • First £30,000 redundancy (not strictly a benefit)
    • £8,000 relocation
    • £5,000 suggestion scheme, long service award (20yrs, £50/yr)
    • £5 per night incidental expenses (£10 overseas)
    • £2/week for work at home
tax free benefits2
Tax-free benefits
  • employers pension contribution
  • one mobile phone + calls
  • Childcare:
    • workplace creche
    • £55 approved childcare
  • Food:
    • staff canteen
    • 15p/day luncheon vouchers
    • Staff entertainments (£150pa per person, events above this disallowed)
tax free benefits3
Tax-free benefits
  • Transport:
    • use of bicycle
    • company bus
    • workplace parking
  • Other:
    • sports facilities
    • counselling
    • eye checks
    • certain state benefits
allowable deductions
Allowable deductions
  • Professional subscriptions
  • Approved Mileage Allowance Payments
  • Reimbursed subsistence and customer entertaining
  • P60 pay shown after:
    • Pension contributions
    • Payroll giving
dispensation
Dispensation
  • Reimbursed expenses not need to be entered on the tax return
records to keep
Records to keep
  • P60
  • P11D
  • P45
  • Receipts
  • Tax return
ptx personal taxation3

PTX Personal Taxation

Exempt Income

Personal Allowance

Pensions, Gift Aid

Administration

objectives3
Objectives

To be able to:

  • Identify income which is exempt from Income Tax
  • Determine a taxpayer’s personal allowance
  • Compute Income Tax payable, making appropriate adjustments for:
    • Personal Pensions
    • Gift Aid
  • Determine payments on account
  • Determine penalties due for lateness and error
tax free income1
Tax-free Income

These do not need to be reported on tax returns:

ISAs (£11,280 per year)

National Savings Certificates

Premium Bonds

tax free benefits4
Tax-free benefits

59

  • Money:
    • First £30,000 redundancy (not strictly a benefit)
    • £8,000 relocation
    • £5,000 suggestion scheme, long service award (20yrs, £50/yr)
    • £5 per night incidental expenses (£10 overseas)
    • £2/week for work at home
tax free benefits5
Tax-free benefits

60

  • employers pension contribution
  • one mobile phone + calls
  • Childcare:
    • workplace creche
    • £55 approved childcare
  • Food and entertainment:
    • staff canteen
    • 15p/day luncheon vouchers
    • Staff entertainments (£150pa per person, events above this disallowed)
tax free benefits6
Tax-free benefits

61

  • Transport:
    • use of bicycle
    • company bus
    • workplace parking
  • Other:
    • sports facilities
    • counselling
    • eye checks
    • certain state benefits
other exempt income
Other Exempt Income
  • Income from scholarships
  • Disability pensions
  • Some social security benefits (eg. housing benefit)
  • Most commissions, discounts, cashbacks received by retail customers
  • Damages or compensation
  • Home-generated electricity
personal allowance high income
Personal Allowance (High Income)
  • If adjusted net income is above £100,000
  • Reduce personal allowance by
  • 50% of the difference
  • until the allowance = £0
adjusted net income
Adjusted net income
  • Income less:
  • Gross gift aid and personal pension contributions
personal allowance age related
Personal Allowance (Age-related)
  • Allowance:
    • £10,500 65-74
    • £10,660 75+
  • If adjusted net income is above: £25,400
  • Reduce personal allowance by
  • 50% of the difference
  • until the allowance = Basic Allowance
basic rate taxpayer no action
Basic rate taxpayer: No Action

Gift Aid & Pension Contributions

higher rate taxpayer increase basic rate band by gross amount
Higher rate taxpayer:Increase basic rate band by gross amount

Gift Aid & Pension Contributions

late return
Late Return

Penalties:

  • £100 after 31/Jan
  • £10/day after 3 months (max £900)
  • +5% (min £300) after 6 months
  • and again after 6 months
late payment
Late Payment
  • Interest

From due date to day before payment

  • Penalties:

5% of tax if >30 days

+ 5% on 31/July

+ 5% if 12 months late

Balancing payment only

incorrect returns
Incorrect Returns

71

  • Tax due multiplied by:
    • 0-30% Lack of reasonable care
    • 20-70% Deliberate
    • 30-100% Deliberate and concealed
  • Limited to half of maximum if unprompted
ptx personal taxation4

PTX Personal Taxation

Income From Property

(Rental Income)

Tax Returns

objectives4
Objectives

To be able to:

  • Identify allowable expenses
  • Calculate taxable property income
  • Treat property losses correctly
  • Make suitable elections for Rent-a-Room relief
  • Calculate taxable income from furnished holiday lets
  • Prepare tax return supplements for
    • Employment Income
    • Property Income
expenses
Expenses

The general rules for expenditure to be allowable:

Revenue, not capital.

ie. Not improvements (central heating)

Wholly and exclusively for purpose of lettings

allowable expenses
Allowable Expenses

Irrecoverable rent (NOT deducted from income)

Expenditure before a property is rented out

But not renovation

Expenditure in void periods

wear tear allowance
Wear & Tear Allowance

Furnished lettings

10% (rent received - rates - council tax)

Or Renewals Basis

property loss
Property loss

Offset against:

Other properties in the same tax year

Future property income

Of same type

rent a room relief
Rent a Room Relief

£4,250 /year

Example

If you rent out part of your own home for £5,000 a year, taxable income is:

£5,000 less expenses

OR

£5,000 less £4,250 Rent a Room Relief

See p2.9

rent a room relief question
Rent a Room Relief: Question

If you rent out part of your own home for £6,000 a year, incurring expenses of £3,200, what is your taxable income?

holiday lets
Holiday Lets

Different rules:

Capital allowances (furniture, equipment)

Pensionable

holiday lets1
Holiday Lets

View to making a profit

Max 31 continuous days per tenant

Actually let for 105 days

Available for twice this (210 days)

question
Question

What records might you keep relating to property income?

income tax returns
Income Tax Returns

Employment

Property

rent a room relief answer
Rent a Room Relief: Answer

If you rent out part of your own home for £6,000 a year, incurring expenses of £3,200, what is your taxable income?

£6,000-£3,200 = £2,800

Or elect for rent a room relief

£6,000-£4,250=£1,750

answer
Answer

What records might you keep relating to property income?

Accounting records

cash books

bank statements

rental agreements

invoices for expenses

working papers

copies of tax returns

ptx personal taxation5

PTX Personal Taxation

Capital Gains Tax

objectives5
Objectives

To be able to:

  • Identify chargeable persons, assets, disposals
  • Calculate gain on disposal
  • Calculate CGT liability
  • Calculate gains on
    • Part-disposals
    • Chattels
    • Shares
objectives6
Objectives

To be able to:

  • Identify exempt assets
  • Calculate PPR relief
  • Complete CGT pages of Tax Return
  • Explain record-keeping requirements
chargeable disposals of assets
Chargeable Disposals of Assets
  • Sell
  • Give away
  • Lose
  • Destroy

93

exempt gains
Exempt Gains
  • Death
  • Spouse/civil partner

Transfer at original cost

connected person
Connected person

Transfer at no less than market value

connected person1
Connected person
  • Ancestors
  • Siblings
  • lineal descendants

(self and spouse)

calculate gain
Calculate Gain

Proceeds

- Costs of disposal

=Net proceeds

- Original cost (+ incidental costs)

- Improvements

= Gain

calculate cgt
Calculate CGT

Total gains for year

- Annual exemption

= Gains subject to CGT

Gains @ 18%

+ Gains @ 28%

= CGT

calculate cgt with losses
Calculate CGT with losses

Total gains for year

- Losses for year

- Annual exemption

- Losses b/f

= Gains subject to CGT

Gains @ 18%

+ Gains @ 28%

= CGT

slide102
CGT
  • Above income in the tax bands
  • Payable 31 January
capital losses
Capital losses
  • Set against gains for year
    • May lose exempt amount
  • Then carry forward against future gains
part disposal
Part-disposal

Cost =

Whole cost x Proceeds

Proceeds + value of remainder

105

chattels
Chattels
  • Bought & sold for <£6,000
    • Exempt
  • Bought for >£6,000 sold for <£6,000
    • Proceeds assumed to be £6,000
  • Otherwise
    • Gain limited to

5/3(Proceeds - £6,000)

wasting chattel
Wasting Chattel
  • Exempt
  • Expected life less than 50 years
shares match sale to purchase
Shares: match sale to purchase
  • Same day
  • Next 30 days
  • 1985 pool
shares question
Shares: question

Against which acquisitions will each disposal be matched?

Date Number of shares

5 June 2010 acquisition 1,000

17 May 2011acquisition 500

17 May 2011 disposal 800

9 June 2011 acquisition 200

13 March 2013 disposal 2,000

28 March 2013 acquisition 1,750

shares1
Shares
  • Bonus
  • Rights issue
exempt assets
Exempt assets
  • Cars
  • Gilts
  • PPR
  • Wasting chattels
  • Chattels bought and sold for £6,000 max
ppr exempt periods
PPR Exempt Periods
  • Last 3 years
  • PLUS (if PPR before and after):
    • Any time employed abroad
    • 4 years due to UK employment
    • 3 years for any other reason
letting relief
Letting relief
  • Owner’s residence, let in part or for part of the time
  • Lower of
    • Gain related to let % (after allowing for deemed occupation)
    • PPR exemption
    • £40,000
records
Records
  • Keep 1 year after online filing deadline
records question
Records: Question
  • What records should you keep for capital gains
records answer
Records: Answer
  • purchase and sale documents
  • Valuations
  • schedules of purchase and disposal
ad