Tax Note

Course Content
Section A Section B Section C
15 MCQs 3 OTQs 1 CRQ(10 marks) > MIX TOPIC

2 CRQs(15 each) > INCOME TAX
30 Marks 30 Marks > CORPORATION TAX
40 Marks
VAT
CGT
IHT
Tax
Direct Tax Indirect Tax
Direct Direct Value added tax/ Sale Tax(2 chp)
Revenue Capital > 85000+ GBP
tax tax
Income tax(12-13 chp) Capital gain tax(4 chp)

NICs(1 chp) Inheritence tax(1 chp)
Corporation tax Corporation tax(5 chp)
Income tax(12-13 chp) tax on salary e.t.c 0

Capital gain tax(4 chp) gain on selling an asset
Indiviual
Employed Self employeed
employment income Trading income
Property income Partnership income
Pension income Interest income
Dividend income
NCA sale> Gain Capital gain tax(CGT)
Companies
Income (revenue income)
Asset > Gain
Corporation Tax
> MIX TOPIC
> INCOME TAX
> CORPORATION TAX
e Tax(2 chp)
Puprose of Taxation in a modern economy
Many factor that influence the government's tax policy:
A) Economical Factor
B) Social Factor
C) Environmental factors
A) Economical Factor
Encourage Discourage
Indiviual Saving account / ISA Smoking
Charitable donations Alchol
Entrepreneurs Motoring
Investment in plant and machinery
>Tax also raise money for defence, law and order , overseas aid and government and parlimantery costs
B) Social Factor
TAX SOCIAL EFFECT
Direct taxes tax only those who have these resources
Indirect taxes Discourage spending and encourage saving (0 rate is paid on essential like food)
Progressive taxes target those who can afford to pay
C) Environmental factors
Tax may be lieved for environmental reasons(landfill tax)
Ad valoren priciple
A tax is calculated as a percentage of the value of the item .
For eg : VAT on goods sold in the UK 20%
Progressive tax
Income tax is exmaple of Progrssive tax
1- 37700 20%
37700-150000 40%
150000+ 45%
Regressive tax
As income rises the proportion of tax paid fall
e.g A litre of petrol
Proprtional tax
rate remain same
e.g corporate tax 19% regardless of company level of income and gain
direct tax is tax on income , gain and wealth
Taxes in UK
Tax D or ID cap or rev Suffered by
Income tax Direct Revenue Indiviuals and partners

National insurance Direct Revenue Employee,employees and self employed
Corporation tax Direct Both UK companies
Capital gains tax Direct Capital Indiviuals and partners
Inheritance tax Direct Capital Indiviuals
VAT Indirect Neither End consumer
Structure of the UK tax system

> HM treasury formally imposes and collects tax
> HMRC is part of HM treasury and has responsibilities for the administrative function for the collection of tax
> HMRC staff are reffered in tax legislation as "officers of Revenue and Customers" and responsible for supervising
the self assessment system and raising queries about tax liability
> Crown Prosecutive Service (CSP) provides legal advice and institutes and conduct criminal prosecution
in England and Wales where there has beewn investigation by HMRC
Appeal
> A taxpayer can appeal against a decision of HMRC.
> Appeals relating to direct taxes first be made to HMRC
> Appeals relating to indirect taxes must be made directly to the Tax Tribunal
> Two tiers in tribunal hear
> First tier tribunal : deals with most cases
> Second tier tribunal : deals with complex cases
> Before an appeal is heard by tax tribunal there is an option for taxpayer to request an internal review of decision by HMRC r
> tax payer are encouraged to file their tax return online and by electronic means
> automatic system will automatically calculate the tax return but the paper tax can request officer of revenue and customs ca
Source of reveue law

three sources of revenue law:
1) Primary legislation(Act of parliament ) which set basic principles
2) Secondary legislation (Statutory Instruments) which gives the detail of how the law applies
3) Case law which is interpretation of legislation by the court
Income Tax Tax year

FA22 6th April 2022 to 5th April 2023
Tax avoidance and Tax evasion

> using the legal way to reduce the tax liability (e.g using joint property ownership) is known as Tax avoidance
> misleading HMRC by either supperessing information or providing false information is Tax evasion
Reporting suspicion
> use profressional judgement
> If client evade tax, first make the client change it and disclose the error and omission
> If still he/she doesn’t disclose , then accountant should cease to act for client
> after cessation, inform to HMRC without informing them a reason
> consider making a money laundering report to accountant's firm's money laundering reporting officer or to National Crime A
> accountant who are aware of tax evasion by a client may commit an offence if they do not report their suspecions.
> Accountant must not disclose to client that money laundering report has been made doing this would constitute a criminal o
> report to MLRO

> MLRO will consider whether a transaction should be reported to National Crime Agency
Double taxation agreement

it is an agreement between most countries to ensure that taxpayer are not taxed twice under different system
It also includes rules for the exchange of information between revenue authorities
sential like food)
hm treasury
hmrc csp
> officers of Rev & Cust > legal advice
llection of tax > administrative function > conduct criminal prosecution in Eng&wales
ble for supervising > self assessment
> raising quesries about tax liability
direct taxes> HMRC>tx tribunal tiers

Indirect taxes>tx tribunal first second
> most cases > complex cases
l review of decision by HMRC review officer
cer of revenue and customs can request to do calculation if it is indiviual and submitted at time
Tax avoidance
g officer or to National Crime Agency if accountant is sole practitioner
ort their suspecions.
s would constitute a criminal offence tipping off
fferent system
in Eng&wales
> indiviual are asssesed on their income arising in a tax year.
6th april to 5th april
assessable person:
All indiviual including childrens are chargeable ot income tax
Both spouse within marries couple in civil partnership are treated as separate indiviual for purpose of income tax
Tax residency status?
Step:1 Automatic Non-UK resident

Meet
Yes No
Non UK Resident step:2 Automatic UK resident test

Meet
Yes
UK residnet
Automatic Non-UK/ Overseas resident Test

) Spent <16 Days
) Spent <46 Days, Not resident in previous three years
) Overseas work & <91 Days in UK
Autoamtic UK tests
) Spent 183 days or more
) Only home in UK
) Full time work in UK
Does not meet any test

Ties+ No of day spent
FIVE Ties
) Close family in UK
) Accomodation in UK(at least one night spent )
) Substantive work in UK(at least working 40 days at least 3 hours daily )
) spent more than 90 days in previous 2 tax years
) Spent more time in UK in any other country (relevent if indiviual is resident in UK in the previous 3 years)
Table will be given in exam
> event present at midnight consider as a full night spent

ose of income tax
K resident test
No
Stpe:3 Ties+ Days spent (Table)

Indiviual Tax Computation
Non SavingSaving Dividend Total

Income Income Income
Employment income XX XX
Trading income XX XX
Property income XX XX
Pension income XX XX
partnership income XX XX
Interest income XX XX
Dividend received XX XX
Total Income XX XX XX XX
Loss relief (XX) (XX)
Qualifying interest (XX) (XX)
Net income XX XX XX XX
Personal Allowance (XX) (XX)
Taxable income XX XX XX XX
Tax rate 20% 40% 45%
Income Tax liability XX
total income: is all income subject to income tax . Each amount that make up total income is called a component
Net income: is the income after qualifying interest and trade losses
Taxable income : is the income less tham personal allownace
Saving Income
> Bank interest
> Building society interest
> Interest from company loan stock
> Interest from government stock(gilts)
> Interest from National saving & Investment account
Exempt Income
> Income from National Saving certificate
> Statutory redundancy money
> Winnings(including premium bond prizes)/ betting/lottery
> Scholarship
> Interest on damage for personal injuries
> Local authority grant
> Income from investment made through ISAs(indiviual savongs accounts)
ISA( Investment saving account )

Two types:
1) Cash ISA (only cash component)
2) Stocks and shares (shares and can keep cash also
> annual subsciption limit is GBP 20000

> Exempt from tax
> Taking out and investiong is not count in its limit
> Dividend and interest income from ISA are exempted from income tax
> Upon disposals capital gain is also exempt from tax
Personal allowance
Indiviual entitiled 12570
Tapering the personal allowance
Adjusted Net income (ANI) Net income XX

Gross gift aid donation (XX)
Gross personal pension contribution (XX)
Adjuted Net income XX
ANI exceed > 100000 GBP (PA will reduce)

Contribution Paid HMRC
Net Gross
80% 20% 100%
4000 5000
Entitle 12570
Case 1 Case 2 Case 3
Mr A Mr A Mr A
W-1 net income 105000 105000 105000
gross gift aid donation 0 -1000 -6250
gross personal pension 0 0 0
Adjusted net income 105000 104000 98750
W-2
Total personal allowance 12570 12570 12570
Reduction -2500 -2000
10070 10570
W-3 Net income 105000 105000 98750
Reduction -10070 -10570 -12570
Taxable income 94930 94430 86180
> If incoem exceed 100000GBP then PA is reduced by 1 GBP for every 2 GBP
> Surplus PA is lost
> PA can be transferred to a spouse or civil partner
Tax Rate
Non saving Saving Dividned
1-37700 20% 20% 8.75%
37700-150000 40% 40% 33.75%
150000+ 45% 45% 39.35%
Satrting rate band> Saving income

0-5000 0%
Saving income nil rate band
Basic tax payer 0-1000 0%
Higher tax payer 0-500 0%
Dividend income nil rate band
All 0-2000 0%
Examples
Mr A
Employment income 35000
Saving income 5000
Income tax liability ?
NSI Saving Total

Income
employment income 35000 35000

Interest income 5000 5000
Total income 35000 5000 40000

Relief 0 0 0
Total net income 35000 5000 40000

PA -12570
4486
0
800
5286
Transferable Personal allowance

> An indiviuals can transfer 1260GBP of their PA to their spouse/civil partner if certain ccinditions are met
> Also often known as marriage allowacnce
> It is requirement inorder to transfer a allowance that both partners should be basic tax payer
> Any spouse/civil partner receiving the transfer does not have increased PA
> They are entitled to tax reducer 252 (1260*20%= 252)
> If tax liability is less than 252 then liability will be 0
> In the year of marriage the full alownace is available
> election can be in advance

> by 5th april
> the election remian force unless the election is withdrawn or the conditions are no longer met
> election can be made in arrears

> by 5th april 2027 (within 4 years of the end of tax year)
Gift aid
> In basic rate gift aid donation is treated as though paid net of basic rate tax(20%)
If taxpayer give 800 in donation charity will receive 1000 as charity claims 20% tax relief that taxpayed has paid
> In higher and additional rate additional tax relief for higher rate and additional rate is given in
personal tax computation by increasing the donor's basic rate limit and higher rate by gross amount of
gift . Also known as band extension. Not for basic because irrelevent for basic tax payer.
> Also deducted from net income to arrive at ANI for tapering the PA
Qulifying interest / qualifying loan

Deducted from net income
> Loan to buy plant and machinery for use in a partnership or employment.
> loan to invest in partnership
> Laon ti invest in co-operative
> Loan to buy interest in employee-control company (not listed company)
In exam first deducted from NSI then saving then from dividend
Married couples and couples in civil partnership

Are two separate people
Each intitled to PA depending on income
Where possible make sure that all their main nil band rate, saving income nil band rate and dividend band rate by transferring
Jointly held property is split 50:50 unless couples make a joint declaration to HMRC
Child benefit
A spouse , civil partner or unmarried partner who have ANI exceeding 50000 is tax charged on child benefit
Between 50000 and 60000 (XX-50000)/100
Over 60000 the amount of child benefit
> If both partners have ANI in excess of 50000 the partner with the higher ANI is liable for charge
>>>child benefit is assess by self assessment
Accrued income scheme
This ensures that a taxpayer who sells a gilt is taxed on any interest income included in proceed
and relief for buyer of the gilt for interest included in the price paid
Where an indiviual holds gilt with nominal(face) value greater then 5000 and they sell for price included
interest , the amount of interest which has accrued since last payment up to date of the sale is taxed
as saving income on the seller
ed a component
Case 4 Case 5 Case 6
Mr A Mr A Mr A
150000 150000 125140
0 -62500 0
0 0 0
150000 87500 125140
12570 12570 12570

-25000 -12570
-12430 0
150000 87500 125140
0 -12570 0
150000 74930 125140

> Band extention
payed has paid > 20% contributed by HMRC (800 contributed gross is 10000)
> deducted from NI to arrive at ANI
end band rate by transferring asset , BA, shares e.t.c
> this is what we did in calculating taxable income on disposing gilts

> interest for months kept
Example 1
NSI
Trading profit 184000

Total income 184000
Relief 0
Net incoem 184000
PA 0
Taxable income 184000
7540
44920
15300
67760
Example 2
NSI
W1- Adjusted net income W2- personal allowance
Trading income 159000
Total net income 159000 Allowed 12570
Total income 159000 Gross personal pensio -40000 Deduction -3500
Relief 0 Gross gift aid donatio -12000
Net income 159000 9070
Personal allowance -9070 107000

W3- Band
17940 1 - 89700
24092 89700-202000
42032
Example 10
NSI
W1- Adjusted net income
Employment incoem 125000 net income 125000
Total ioncome 125000 Gross gift -16000
Relief 0 109000
Net income 125000
PA -8070 W2- PA
PA 12570
Taxable income 116930 Deduction -4500
8070
Example 11
NSI

Total income 24165
Relief 0
Net income 24165
PA -12570
2319
Example 12 NSI

Total income 50765
Relief 0
Net income 50765
Personal allownace -12570
7540 38195
198
7738
Example 13
NSI

Total income 168680
Relief 0
Net income 168680
PA 0
7540
44920
8406
60866
Example 25
NSI Saving Dividend Total

Trading income 11615 11615
Employment income 13500 13500
Dividend income 2000 2000
Total income 25115 3500 2000 30615

Qualifying interest pa -1000 -1000
Net income 24115 3500 2000 29615

personal allowance -12570 -1000
Taxable income 11545 3500 2000 28615
2309
0
500
0
2809
Tax liabilit 2809

PAYE -330
Tax payabl 2479
Example : 24
A)

Total income 15500 375 1500 17375

Relief 0
Net income 15500 375 1500 17375

PA -12570
Taxable income 2930 375 1500 4805
586
B)

Total income 51595 375 1500 53470

Relief 0
Net income 51595 375 1500 53470

PA -12570
Taxable income 39025 375 1500 40900
7540
530
8070
C)

Total income 149875 375 1500 151750

Relief 0
Net income 149875 375 1500 151750

PA 0
Taxable income 149875 375 1500 151750
7540
44870
50
112.5
52572.5
Example 23
NSI Dividend Total

Dividned income 4500 4500
Total income 14850 4500 19350

Relief 0
Net income 14850 4500 19350

Personal allowance -12570
Taxable liability
456
0
218.75
674.75
-600
74.75
Example 22
NSI Saving Total

Interest receive 7500 7500
Total income 13085 7500 20585

Qualifying interest -100 -100
Net income 12985 7500 20485

PA -12570
Taxable liability
83
0 2915
0 1915
383
-47
419
Example 21
NSI Saving Total

Total income 11000 3000 14000

Relief 0 0
Net income 11000 3000 14000
PA -11000 -1570 -12570
taxable income 0 1430 1430
taxable liability
0
0
B)
NSI Saving Total

Total income 15200 3000 18200

Relief 0 0
Net income 15200 3000 18200

PA -12570 -12570
Tax liability
526
0 2370
0 630
526
C)
NSI Saving Total

Total income 29000 3000 32000

Relief 0 0
Net income 29000 3000 32000

PA -12570 -12570
Tax liability
3286
0
400
3686
Example 9

Toatl income 46700 2000 48700
Qualifying interest -300 -300
Net income 46400 2000 48400

PA -12570 -12570
taxable income 33830 2000 6000 41830
Tax liability
6766
0
300
1350
8416
-6826
1590
Example 8
NSI Dividend Total

Total income 44000 8500 52500

Relief 0 0
Net income 44000 8500 52500

PA -12570 -12570

6270
tax liability
6286
373.625
752.625
7412.25
Example 7
NSI Dividend Total

Total income 62500 3800 66300

Relief 0 0
Net income 62500 3800 66300

PA -12570 -12570
tax liability
7540
4892
607.5
13039.5
Example 5
NSI Saving Total
Pension income 14200 14200

Total income 14200 6000 20200

Relief 0 0
Net income 14200 6000 20200

PA -12570 -12570
326
0 3370 2630
0 1630
326
652
Example 4
NSI Saving Total

Total income 46500 10000 56500
Relief 0 0
Net income 46500 10000 56500

PA -12570 -12570

7770
6786
1454
892
9132
Example 3
NSI Saving Total

Total income 52500 1800 54300

Relief 0 0
Net income 52500 1800 54300

PA -12570 -12570
7540
892
520
8952
onal allowance
PROPERTY INCOME
income(tax)
Furinished Unfurinshed
commercial residencial
From 6th april 2022 to 5th april XX

Income (XX)
allowable expenses
XX
Net income(subject to tax)
Cash basis Accrual basis

> income/expense accounted > income/expense accounted
when paid when receivable/payable
> default basis for calculating property > Msut be used if cash basis receipt exceed 150000GBP
income for indiviuals and partnership
Cash basis
GBP
Rental income received XX
Relaeted expenses paid (XX)
XX
> to period which they relate is irrelevant
Allowable expenses
> those of revenue nature incurred by landlord wholly and exclusively in relation to letting of the property
before, during or between lease period
> Insurance
> Management (accountancy and legal cost)
> Council tax (residential property only ) and business rate (commercial property)
> Water chareges
> Rent payable
> Repairs (but not if purchase price was discount to allow for repair or property could not let without repair)
> Loan interest (subject to restriction)
> Motor expenses relating to property business such as property visits
Finance cost restriction

> For residential letting (apart from FHL) an indiviual's finance cost is disallowed expense
> 100% of finance cost is blocked to restrict landlords from tax relief
> but they are given a tax reducer (20%) of blocked finanace cost setoff against income tax payable on the rental in
> doesnot effect basic rate taxpayer
> Restriction apply to any loan taken to acuire property or repair or fee or commision in obatining loan
> Restriction doesn’t apply to Commercial properties or FHL

> any interest related to these are is fully deductible from rental income
> given tax relief but only at basic rate
> Taxable income can be increased by the disallownace

> a higher tax band rate applying
> a loss of personal allwance / personal sasving allowance
> application of high income child benefit charge
> in order to reduce tax cost

> letting the property as FHL
> changing the portfolio from residential to commercial letting
> incorporating the property business
Capital Expenditure - Cash basis
General rule
there Is no difference between capital & revenue cost for tax treatment
There is certain exceptions regarding capital expenditiure

> cost incurred on Land & Building is disallowed
Improvement is Disallowed
Repair is allowed
> if improvement is accidental then it is allowed
> if improvement is intentional then it is disallowed
> proper suitable for letting is treated is capital expenditur not allowed
> cost incurred on plant & machinery is allowable

Exception
Traetment of cars & replacement of domestic items
Car
Capital cost is eligible for capital allowance
Car running cost

Actual Cost HMRC approved mileage allowance
rate deduction cliam
10000 miles 45P

10000+ miles 25P
> higher will be deducted as will reduce taxable income
Replacement of Domestic items

> can be claimed as an allowable deduction on the replacemnt but not initial purchase of item e.g furniture
> relief allowable for both cash and accrual basis
> include
. Moveable furniture
. Furnishing such as carpet
. Household appliances eg fridge
. Kichenware such as dinnerware
>Solely for use by the tenant
> procedd from old asset is deducted from available relief

> Deduction is restricted to cost of purchasing equivalent item of original item
> any upgarding sofa to sofabed would limited to replacement cost of euivalent sofa
> although later sofabed is replaced now full cost of replacement is deductible
Accrual basis
> can be elected if user wish BUT must be used if income receipt exceed 150000 GBP
> Rental income should be accrued for the tax year . For e.g march rent is paid in june but should record in march
> Expenditures should also be accrued or prepaid like insurance example in eg2
> if tenant want to leave without paying any debt as accrued previously therefore taxable income but bad debt can be cliamed
> Under accrual basis the traetment pf Plant and machoinery is different from treatment under cash basis
> Capital expenditures on P&M such as cleaning euipment is not allowable deduction however capital allowance may be avail
> treatment of replacement of domestic items , motor expenses and finance cost apply in same way in accrual basis as in cash
Lease Premium
Short lease < 50 years
Lump sum(include advance rent portion)

Revenue Receipt (INCOME TAX) Capital receipt (CAPITAL GAIN TAX)
Rent income XX
Income element of a short lease premium XX
Allowable expenses (XX)
Assessable property income XX
Gross premium XX
Capital element (XX)
Income elemnet XX
Capital element capital element * 2% * (N-1)

> If lease of 51 or more than 100% capital sum and none is income
Rent a room
Relief
Lower off
Rent received XX Rent received XX
Allowable exp (XX) Relief (7500)
XX XX
> If allowable expenses exceed 7500 then case A will be selected

> if allowable expenses below 7500 then case B will be selected
If gross income is less than < 7500 If gross income is > 7500
Income is Exempt (0) Lower off

Rent received XX Rent received XX
Rent receive 6000 6000 Allowable exp (XX) Relief (7500)
Expenses -2000 -7500
XX XX
4000 0
Rent receive 6000 6000

Expenses -8000 -7500
-2000 0
> if tax relief then not better to take relif of 7500
> If spouse/cicil partner divide income them relief will be divided (3750 each) / 7500 for one room
> may elect to elect the exemption may not is loss for next year tax relief
> The rent a room election must be made within the 2 years of end of tax year
22/23
31-Jan-25
> if want to reomove then inform HMRC within 2 years
Furnished Holiday letting (FHL)

FHA (FH accomaodation) is a property located in UK that is let on commercial basis ans satisfy all:
> the property is let furnished
> The property is let on a commercial basis
> It is available to let out for at least 210 days a year
> It is actually let for at least 105 days
> The total of longer term letting donot exceed 155 days a year
A longer term letting is a single letting to same person of more than 31 consecutive days.
Each FHL is assessed indiviually
Tax conseunces
> separate from other property letting profit/loss
> Plant and machinery , fixture and euipment
cash basis- deduction is available for all cost including first replacement
accrual basis - capital allowance
> FHL whole finanance cost is deducted no tax reducer as it is commercial
Losses and loss relief

> loss occur when expense exceed income
> all losses / profit are aggregate from all property and loss occur then it is carried dorward and unrelieved in future
loss of FHL will be offset against FHL
loss of other properties will be offset against other properties
not let without repair)
me tax payable on the rental income

in obatining loan
se of item e.g furniture

d record in march
e but bad debt can be cliamed
apital allowance may be available
way in accrual basis as in cash basis
PITAL GAIN TAX)

(7500)
unrelieved in future
Example 1
6-Jun-22
let 6-Oct-22
annual ren 12000
rent 6000
Legal fee -500
other expe -1800
3700
Example 2
rental income 20000

finance cost 12000
allowable expenses 4000
trading income 40000
rental income 20000

allowable expenses -4000
Property income 16000

trading income 40000
Total income 56000

PA -12570
43430
7540
2292
9832
-2400
7432
Example 4
20 YEARS
10000
-3800
6200
Example 5
9360 9360
-8100 -7500
1260 1860
should withdrw the HMRC relief of rent a room
Example 5
rent 3500
income port 4100
7600
council tax -600
utility bills -270
carpet rep -700
insurance 400
6430
National Insurance Contribution
Self employed
Employees Earning Trading income
> with employees > with out employees
Class 1 secondary (employer) Class 2

Class 1A (Taxable benefits) Class 4
Employee
Class 1 Primary (employee)
class of contribution Basis of assessment

Class 1 Employee Employee earning excess of 12570 for tax year
Class 1 Employer Employee earning excess of 9100 for tax year
Class 1A Taxable employment benefits provided to employees
Class 2 A flat rate weekly contribution (3.15 GBP)
Class 4 Tax adjusted trading profit in excess of 12570 lower limit
Class 1 employee and employer NIC

Both NIC paid by employee and employer is based on percntage on Gross earning
Employee= 12570+
Employer= 9100+
Gross earning
Consist of:
>any remuneration derived from the employment
>paid in cash or assets which are readily convertible into cash
> earning with no allowable deduction
Examples:
> Wages , salary , bonuses and commisios
> Sick pay including statutory sick pay
> tips paid or allocate by the employer(not indiviuals)
> reimbursement of the cost of travel beween home and work
> Vouchers (exchange for cash or non cash)
Exclude :
> Exempt employment benefits
> Non-cash benefits except non cash vouchers)
> tips directly from customers
> Milage allownace received from HMRC . The allowance doesn’t decrease to 25P after 10000 miles
All miles are applied to 45P and excess is added intop NIC
> Travel cost for business purpose
Milage example
Company paid 60P each mile (12000 miles)
received 7200
HMRC -5400
Add to NCI 1800
> it is employer duty to calculate class 1 employee NIC and deduct from employee's wage
> Class 1 employee
> are not allowable deduction
> does not represent a cost to business as paid by the employee
Class 1 employer's NIC

> paid by employer in respect of employee also known as secondary contribution
> paid until age is 16 or + and until the enployee cease employment
> The employer is liable for class 1 even if employee's age exceed state pension age
> are expense for business so are deductible expenses when calcualating employer trading profit
> 15.05% on all gross earnign above 9100
> no upper age limit
For employee NIC Primary contribution

1-12570 0%
12571-50270 13.25%
50271+ 3.25%
NIC employment allowance

Employer also can claim upto 5000GBP relief from classs 1 employer NIC
> cannot be used against any other classes of NICs
> claimed through RTI (reael time information) PAYE system
> NOT AVAILABLE if the director is sole employed paid over the earning limit of 9100+
> ONLY AVAILABLE to employers with total class 1 employer's contribution <100000 in previous tax year
Class 1A NICs
> on taxable benefits provided to employees
> NOT included:
> exempt benefits
> benefits already traeted as earning and subject to class 1 NIC such as remuneration
> 15.05% on taxable benefits

> Additonal cost to employer so deductible expenses
Class 2
payable when
> age is 16 or over
> until attaining state pension age
> If the adjusted trading income excedd 12570 GBP
payable
Flat rate payment of GBP 3.15 per week
> maximum can be 164 (52*3.15)
> are collected by HMRC through self-assessment system (tax return)
Class 4
payable when
> age is 16 or over
> until attaining state pension age
> If the adjusted trading income excedd 12570 GBP
Profit
Tax adjusted profit of the indiviual that are subject to income tax after deducting trading losses if any
> 10.25% 12570-50270

> 3.25% 50270+
RATES
Class 1 employee / primary contribution Class 2
1-12570 0% 3.15 GBP per week
12571-50270 13.25%
50271+ 3.25%
Class 1 employer / secondary contribution Class 4

1--9100 0% 1-12570
9100+ 15.05% 12571-50270
50271+
Class 1A taxable benefits
Any 15.05%
> occupationla pension scheme not inlcuded

> HMRC excess milage is added to income to caculate benefit on defined percentage
> bonuses are added
> exempt benefits are not added
> contribuion are also exempt from class 1A
> for car first calculate car benefit according to Co2 emisison % then apply 15.05%
> Class 2 and 4 is paid on trading profit mean non saving income so saving items such as interest in not included as trading is N
> whether class 2 and 4 is apply for sole trader compare tax adjsuted profit with 12570 not trading profits
> If person exceed pension age then he/she is not applicable for class 2 NIC
> if period is less than 12 months then basis of assessment is starting date till 12 months
t employees
Perosn liable
Employee
Employer
Employer
Self-employed
Self-employed
25P after 10000 miles
y contribution Age 16+ until employment cease

paid even if pension age exceed
tate pension age
deducible expense
lating employer trading profit 15.05%
5000 GBP allowance for employer class 1

cant be used in other classes
NA If sole director
only available if employer contrinution <100000 in pre
ning limit of 9100+

ribution <100000 in previous tax year
15.05%
lass 1 NIC such as remuneration by employer
additional cost > exempt
age is 16+
until pesion age
12570+
3.15 per week
age 16+
until pension age
12570+
fter deducting trading losses if any
0%
10.25%
3.25%
nterest in not included as trading is NSI
ot trading profits
for employer class 1
loyer contrinution <100000 in previous tax year

Diane
Class 2 and 4
Class 2 Class 4
163.8 3864.25
72.475
3936.725
Class 1 Employer Class 1 Employee

4394.6 3409.225
-4394.6
0
8038.005
Class 1A
50
10
26
3510
528.255 6578
989.989
1518.244
Employment income
Employe vs self employed Employment income

Total earning
Employeed Self Employed Allowable expenses
Employment income Trading income employemnt income
Protect unfiar dismissal
PAYE self assessment
> A contract of service is indication of employment

> A contract for service is indication of self-emplpoyment
> Difficulty arise when sub-contract to provide service (teacher , actor , freelancer)
Why HMRC prefer Employee status

> it generates more NIC as employer pay class 1 employer and Class 1A and employee pay class 1 employee
while self employee pay only class 2 and 4 only
> it reduce the risk of tax evasion by applying deduction at source as self-employee assess himself
> It make more difficult to claim allowabble expenses for self employeed
> It make tax collection cheaper
Proof of Employee Status

> HMRC may treat an indiviual as employee without employmet letter
. Can you send in a subsitute?
. Does the person for whom you are working has control over your work ?
. Does you work a set working plan?
. Are you paid a fixe salary?
. Do you receive bonuses/overtime?
. Do you bear a financial risk for unsatisficatory work?
. Does you provide P&E to do job?
. Do you work for number of different customer?
Type of Income
> employment income consist of remuneration less any allowable expenses
> Remuneration may be paid in monetry form or non monetry(non cash)
> Earning also include benefits along with salry bonus e.t.c
Pro-forma Computation
Salary XX
Bonus XX
Commission XX
Expense allownances (reimbursed expense) XX
Less allowable deduction
Employee contribution into occupational pension sch (XX)
Subsription paid to profressional body (XX)
payroll gift to charity (XX)
Employment Income XX
Basis of assessment
> Earning are actual receipt basis
Actual receipt basis
Earlier of
Payment is made When taxpayer become entitle to the amount
Directors
>Dirctor can made manipulation as it is easy for them to transfer tax to next year so different rule for them
Earlier of
Received Amount determined
Before company After company

AP AP
End of Company AP Determined date
Expense allowance and reimburesed Expense

> Genarally , if expenses are wholly and exclusively necessary in the performance of duties of employmnet
Allowbale expenses
> Occupational pension scheme
> payroll gift to charity
> Subscriptions to professional bodies
> entertaining cost are tretaed as disallowed expense in hand of employer
> qualifying travel cost
> use of own car for business purpose
> Working from home
> other exoenses wholly and exclusively for performance of duties of employtment
Use of own car

> milage allownace ccording to HMRC is deducted from actual cash received and remaing is taxable
e.g
ABC recived 1 for every mile and total miles are 12000
HMRC 5000 Cash received 12000 0
HMRC allowed -5000 -5000
Taxable 7000 -5000
Trave cost
travel expenses incurred by employee are tax deductib le provided that they are :
> necessarily for the performance of duties of employment
> incurred enable employee to travel from home to temporary workplace
> incurred to travel between two or more temporary places
> from normal place to temporary place and viceversa it is allowable
> A place of temporary work is one in which an employee is expected to work for contoinous period of 24 months or less
Working from Home

> Employee working from home can cliam following amount as an allowable
> cost of telephone call (but not rental charges ) from a provate telephone
> other household cost upto 6 GBP (without evidence) and larger amount (with evidence)
>. These tax relief can be claimed whether employee has reimbursed or not
Charitable donation under payroll system

> Employee can deduct on saying of employee earning .
> These are allowable deduction
> given at source as the employer must deduct from gross before calulating PAYE
Benefits
General> marginal cost to employer of providing benefit
Special rules> Vouchers, living accomodation , cars , fuel e.t.c
Accomodation benefits
Basic charge
Property owned by employer Property not owned by employer
Annual value Higher off

Annual value Rent paid by the
employer
> if employee contribute per month then deducted
12000
per month 200 -2400
9600
Expensive Accomodaation benefit

> only in property owned by employee
> If property is higher 75000 GBP
Original cost / market value XX
Capital improvement before start of curent tax year XX
Cost of providing accomodation XX XX-75000*2%
> when employer acuired accomodation more then six year then market value is use
> when employer acuired accomodation less then six year then original cost is use
> 2% official rate of interest
> not allowbalre if rented
> if used foor business then it is out of scope of this benefit
>> If use of furniture or other take 20% of value and apportion it
Job related accomodation

> no benefit arise if property is JRA
JRA property is provided:
> where necessary for proper performace
> better perofrmance
> special threat to employee's security
taxable benefit is 0
Accomodation
JRA Others
Taxable benefit = cost to employer Taxable benefit = cost to employer
> BUT cannot exceed 10% of employee's net earning
Use of Asset
> benefit is 20%
> asset of employer given to employe is taxable (20%)
Asset
owned Rent
20% Higher off
20% Rent paid by employer
> apportion if available part of year

> Contribution by employee is deducted
Gift of asset
> All assets except vehicle and compter equipment
Higher off
MV of asset when XX MV at the date of gift
first provided
Benefit assessed (XX)
XX
> If vehicle and compuet equipment

MV current XX
benefit assessed (XX)
XX
> 1 MOBILE PHONE is exempt per emplpoyee are exempted , but the running cost is taxed(20%)
> BICYCLE provided for private use is exempt
Company cars , vans and fuel

> Employes are taxed on company cars provided for private use not pool car (cars kept at emplloyer's pernises , for common u
Car benefit
Electric car Hybrid Electric car
0% CO2 ommision CO2 Emmission between 1-50g/km
List price* 2% 1-54 g/km

15%
> car list price include VAT

> VAT is not recoverable in UK on cars
> accessories is added in car if amount is above 100 GBP
> benefits need to be pro-rata
> any contribution is deducted from lsit price
CAPITAL CONTRIBUTION
> can deduct 5000 from list price if capital contribution
> after deduction % is calculated
> if car unavailable for more than 30 continious day then no tax
PETROL
> Fixed amount , taxable percentage on 25300 GBP (25300*CO2 ommission)
> fuel contribution is not allowed unless not full amount is paid back
COMPANY VAN
> Van CO2 ommission is 0 then 0% benefit
> above 0 then benefit is of 3600 GBP
> additional fuel provided is additional charge is 688 GBP
> no fuel for 0% ommission
CHEAP/INTEREST - FREE LOAN
> Loan related to employee and their relative give rise to a benefit eual to :
> any amount written off
> interest save
> Loan benefit will be used if loan will be greater than 10000
Methods
Average method Strict method
(o/p+c/d) *2% Loan taken on 6-Apr

2 100000
Repaid 31-Dec
Loan taken on 6-Apr 20000
100000
Repaid 31-Dec april to dec
20000 100000*2%/12*9
1500
o/p 100000 dec to april
c/d 98000 98000*2%/12*3
198000 *2%
2
99000 *2%
1980
> default is Average method

> we will move with low value method so that benefit will be less and hence tax will be less
Exempt Benefit
Include :
> Job related accomodation
> Subsidised canteen available to staff
> expense of 8000 GBP paid by emlployer when employee job is relocated
> expense paid by employer while employee is required to stay away overnight , upto 5 GBP per night in UK and 10
> trival benefits, provide for non work reason and doesn’t exceed 50 GBP per employee , not in cash and cash form
> car parking spaces at or near place of work
> Use of pool car
> use of van unless private use is significant
> workplace nursery provision / childcare on non-domestic permises
> contributin by employers into pension scheme
> sports and recreational facilities not available to public
> outplacement counselling services to employee after being redundant
> employee liability and indemnity insurance
> staff party , not exceed 150 per year in a year
> small loan less under 10000
> one mobile phone for exclusively used by employee
> provision of work buses , bicycles
> non cash long service awar in respect of last 20 years services and doesn’t in exces 50 per year 1000 (50*20)
> hospitslity non cash reward by third party not exceeding 250GBP in tax year
> travel expenses incurred when public transport is disrubted , late night journey and employee cmpensation is exe
> entertainment provided for employee by third parties
> award under suggestion scheme available to all employee and upto 25 GBP
> upto 5000 GBP for suggestion that will save te business money
> the cost of work related training
> provision of staff uniform and protective clothing for work purpose
> routine heath check and screening
> Voucher for eye tests and spectles
> Medical expenses of upto 500 GBP to help an employee back to work after at least 28 days of illness
Tax system
> tax is deducted from PAYE at source automatic calculation and deducted by employer
P11D
> employer complete this form P11D for each director and employee with taxable benefits notalready reported under RTI
> it shows
> general expense allowance
> travel and entertainment alownace
> benefits
> due date of competion of form is 6 july following a end of tax year mean 6july 2023 for tax year 22/23
P60
> on or before , the employee should make submission FPS to HMRC
> After tax year annual total gross pay , NIC , tax deducted for each employee is given to them to help them computing heir an
> should also show the employee's final tax code
Payrolling benefit
> employee have option of payrolling most benefits , reporting values include taxable pay and liability is colleted under PAYE
> employee who wish should register HMRC before start of tax year
> if employee benefits are all payrolled then no need for a form P11D
Employment income Earning
Total earning XX Monetry Non monetry
>salary > car
employemnt income XX > bonuses >accomodation
> Tips > use of assets
1 employee
riod of 24 months or less
by employer
Rent paid by the

employer
oyer's pernises , for common use)
Petrol car Diesel Car
CO2 ommission RDE 2 met RDE 2 doesn’t met
55 g/km above 55 g /km Same as petrol Additional 4% wil add

16% 1% will be added for
complete 5 g/km
maximum is 37% for both
List price XX
Capital contribution(max 5000) (XX)
revised XX
CO2 emision %
Benfits XX * %
Contribution (XX)
XX
o 5 GBP per night in UK and 10GBP per night abroad
ee , not in cash and cash form
50 per year 1000 (50*20)

employee cmpensation is exempt
t 28 days of illness
ready reported under RTI
o help them computing heir annual tax return
ability is colleted under PAYE

l 4% wil add
Example 1
Salary 39000
Bonus 6000
45000
Example 2
year end 31-Dec
salary 72000
director fe 20000
bonus 100000
Total 192000
Example 3
HMRC 5000
A B C
Recived 6000 3600 0
HMRC -5000 -5000 -5000
Taxable ex 1000 -1400 -5000
Example 3
Alex
original cos 190000
Improveme 13000
203000
9100
Expensive Basic
Bess
Use of furn 810
Basic 6750
running 1900
8650
Example 5
A) JRA B)
salary 7000
Basic 5333.333
Expensive 40000
Expense 1800 700
Other bene 0
-900
53233.33
Example 6
A) 80
b) 50 400
-80
320
-30
290
A) 4400 3860 4400

-660 -660
3740 3740
Example 8
Florida 5800
Jasper petrol
15000
2250
-500
1750
Nigel 60
12
32
5280
Robyn 6
3960
Vicky 25000 1850

-5000 -300
20000 1550
20000
Example 9
Amanda 1610
betty 24
3936
Diana 84600
84600
31302 40
1800
33102
-1200
31902
Example 10
kim
4000
Ming
1266.667 600
583.3333
1183.333
Newt
1100
-425
675
PENSION
> to cover their needs when indiviual reach a certain age
> consist of state pension arrangement and own pension provision
> under automatic enrolement, employer autimatically enroll most emplyees into workplace pension scheme , they may opt o
> minimum contribution is 8% of empployee earning for employee and 3% for employer
> indiviuals (employee, self employed or not working) may make their own pension scheme
> relief is available to both scheme
> relief consist on the contribution paid into scheme during working life and exempltion from tax on income and gain from pen
> relief :
> indiviual obtain relief on contribution
> employer also get relief and without any tax
> PS grow slowly so income and capital tax is also exempt
> When taking out pension a lump sum amount is tax free
Types
> occupational pension scheme
> personal pension scheme
> occupational pension scheme

> employer set out an occupational pension scheme . The employer may use the service of an insurance company or may set u
Types of occupational pension scheme

Defined benefits scheme Money purchase scheme
> earning related > invetsment related

> pension is based on employees earning > also known as defined contribution sc
> at retirement or throughout their employent > doesn’t provide any guarantee of leve
> linked to number of years they work for employer > the amount by indiviuals is invested to
> depends upon performance of investm
> personal pension scheme
> personal pension are money purchase (defined contribution) scheme which are provided by baks, insurance company and o
> can be paid by indiviuals and any third party on behalf of indiviulas for eg parents
Tax relief
> tax relief is same for both types of scheme
> the method is different of obtaining relief
> all pension scheme are governed by same rules
Tax relief on contribution made by indiviuals

> pension scheme is registerd scheme
> indiviual is reident of UK and aged under 75
> regardless of level of earning indiviuals can invest in either pension scheme or number of diffreent PS
>> Tax relief is available for upto a maximum annual amount each tax year
Maximum annual amount
Lower off
Gross pension contribution Higher off

3600 Relevent earning
Relevent Earning
> taxable trading profits
> employment income
> profits from FHL
> not investment income
> applied whether invested in both PPS or OPS or in only PPS
> indiviual with no relevent earning can still obtain tax relief on gross contribution of upto 3600 per annum
Contribution to a personal pension allowance

> indiviual under age of 75 can make relievable pension contrbution
> payments are made on net of basic rate 20% for eg indiviual need to pay 800 for 1000 contribution
> basic relief is given at source
> band extention on gross contribution
Contribution to an occupational pension scheme

> employee cut pension before appling PAYE
> tax given at source
Contribution by an employer into pension scheme

> tax deductible in calculating trading profit
> exempt employment benefit
> deductible is only paid amount so add back any charge in SOPL and deduct any cash paid
Annual allowance
> annual allowance restrict the amount of tax relievable contribution that can be paid each year
> the annual allowance is 40000GBP
> apply to all scheme
> if not fully used in any tax year , unused allowance can be carried for upto 3 years
> if indiviual is member then can be carried forward
> if not a member then annual allowance is wasted
> current year is used first and then earliest of year is brought forward
> if all contribution exceed AA then tax is charged on excess
> tax is charged as top slice mean after all tax ha charge , NSI rate is used
Tapering the annual allowance

> if adjusted income exceed 240000 , annual allowance is reduced
> for every excess 2 GBP 1 GBP is reduced
> if adjusted income exceed 312000 , annual allowance is minimum 4000 GBP
(XXX-240000)/2
Adjuted income
net income XX
Indiviual employee occupational PC XX
Employers contribution to any scheme for that indiviuXX
Adjusted income XX
Other concepts
> minimum pension age is 55
> 25% of pension fund canbe withdraw as tax free lump sum
> balance can be reinvested to provide furthur benefits
> A lifetiem allowance is 1073100 GBP .

> if excedd the lifetime allowance then excess value is charged as tax
> when indiviual recive pension benefits and if in excess rate is 55% on value taken as lump sum and 25% if funds are used to p
> annual allowance charge is excess taxable income on gross contribution

nsion scheme , they may opt out of the scheme
x on income and gain from pension
surance company or may set up a totally self administrative pension fund
urchase scheme
ent related
own as defined contribution scheme
provide any guarantee of level of pension received
ount by indiviuals is invested to buid up a pension
s upon performance of investment
aks, insurance company and other financial institution

and 25% if funds are used to provide pension income
Trading income
Accounting profit
Accounting standard/ IFRS
Sales XX Profi before tax (net profit) XX

COS (XX) Expenses
Allowed 0
Gross Profit XX Disallowed XX
Operating expenses (XX) Income
Investment income XX Disallowed (XX)
PBIT XX Income (owner drawing) XX
Finance cost (XX) Capital allowance (XX)
PBT XX
Tax adjusted trading profit XX
The badges of trade

> determine wether it is trading business
apply badges of trade if deem to be trading profit don’t apply badges if non trading capital gain
e.g Income tax and NIC e.g CGT( usually preferale)
Badges of trade
> subject matter
> frequency of transaction
> Lenghth of ownership
> Profit motive
> Supplementary work and marketing
> Manner in which asset is acquired
Trading income
> profit of unincorporated e.g self-emploed and partnership
Expenses
Disallowed
Accounting treatment Accounting treatment
SOPL charge No charge in SOPL
Adjustment Adjustment
Add back No adjustment
Expenses
Allowed
SOPL charge No charge in SOPL
No adjustment Deduct it
Income
Allowed
SOPL credit No charge in SOPL
No adjustment Add
Income
Disallowed
SOPL credit No charge in SOPL
Deduct No adjustment
Disallowed expenditure
> expenditure is an allowable deduction from trading profits if incurred wholly and exclusively for the purpose of the trade
Disallowed if :
> too remote from the purpose of trade
e.g normal tax fee is allowable but cost of personal tax advice is not
> has more than one purpose of the trade - the duality principle
e.g car for business use as well as for private use
deduction can be claim for business purpose
Rules
Disallowed Allowed
> private expense by owner > Borrowing cost for trade purpose
> Drawing (salary of tax) > Rental and lease car when CO2 ommision < 50g/km
> excessive salary to family member > Subscription for trade
> Late payment interest to HMRC > Trade donation
> repayment interest by HMRC > trade purpose
> Qualifying interest (to avoid double relief) > local & reasonable
> rental and lease car CO2 > 50 g/km , 15% disallowed > Registered charity
> subscription and donation to political parties > Gift of business sample to public
> non charitable gifts are not allowed > Employee parking fine & penality
exception > The written off a trade debt
> Employee entertainment allowable > Irrecoveribility / imapairment
> Gifts to employee > Legal and professional charges are allowable , reason for b
> Gifts to customer allowable (if criteria not mention assume DA) > Long-term debt finance
exception > the cost of registering patents is allowable
> less than 50 gbp per tax year > the expense of renewing a short lease
> food, drink , tobacco vouchr
> gift adcertisment carry
> Employer's parking fine & penality
> not deductile if making to constitute offence by the payer
> written off of an non-trade debt (e.g loan to a customer or a former employee)
> legal and professional for acquiring new non-current aset
> initial granting
Capital expenditure
> expenses on capital expendiure is not an alloawable expenses
> any expenses in the form depreciation, loss on sale of non-current asset or amortisation of a leasr is also disallowed
> Revenue expenditure (allowable ) and capital expenditure (disallowed)
> the cost of initial repair in order to make asset is disallowed

> If asset can be put into place for use then it is allowable
> replacing part of an asset rather than replacing a whole asset is allowable
Drawing
> trader remove goods for his own use
> for goods not service
> Owner drawing as salary is disallowed
> if trader has done drawing entry then add profit part
> if trader hasn’t done drawing then add selling price
Accounting profits not taxable as a trading income

> Capital receipt
> Income taxed in other ways e.g bank interest ,taxable as saving income
> income specifically exempt from tax
Deductible expenditure not charged in the statement of profit or loss

> capital allowances
> allowing trading element of lease preium paid on short lease
> when a business owner use his private residence for business purpose , the business portion of running expenses
> business calls from private telephone
> expenses that are wholly and exclusively for the trade met by owner funds
Short term lease premium

Lnadlord Tenant
20 years
LP= 50000
Premium 50000
Capital -19000
allowed expense
Assessable premium 31000 1550
Pre-trading expenditure
Pre trading expenditure is treated as trading expense incurres on the frt day of trading providing:
> expense was incurres in the seven years prior to the commencement of trading
> it would have been a deductible expense had the trade already started
Cash basis option for small business

> small unincorporated business/ optional
Cash recived XX
Expense paid (XX)
Profit XX
> provided they have annual cash receipt of not more than 150000 gbp
> not available to:

> Companies
> Limited liability partnership(LLP)
> unincorporated business can use the cash basis until its cash receipt exced 300000 gbp
> default category is accrual basis and use accrual if examiner is silent about basis used
> no distinction between capital and revenue expenditure in respect of Plant, machinery and equipment therefore:
> purchase are allowable deduction when paid for
> proceeds are treated as a taxable cash receipt when asset is sold
> capital allowances remain available for expenditure on cars only , capital cost of a car is not an allowable
deduction when paid
> the falt rate expense deduction for car expene is claimed instead of capital allownace on car , car fuel and other e
> expenditure on buildings can not be deducted when paid , structure building allowance can be claimed
inrespect of qualifying expenditures
advantages of cash bais

> simpler accounting treatment as there is no need to account for receivable, payable and inventory
> profit is not accounted for and is taxed until realised therefore cash is available to pay liabilities
disadvantage of cash basis
> losse can be carried forward in next year only , whereas in accrual basis many more loss relief are available
> in accrual basis plant , equipment , car and building is capital cost and disallowed and capital allowance is avialble in future
> in cash basis no caital allownace , on plant and machinery deduct at that time when paid but for car flat rate is available
and for buiding SBA (structure building allowance) is available
> deduct business rate while using cash basis

ng capital gain
or the purpose of the trade
2 ommision < 50g/km

s are allowable , reason for business is allowable
s is allowable
asr is also disallowed
running expenses
ipment therefore:
r is not an allowable
e on car , car fuel and other expenses
nce can be claimed
and inventory
oss relief are available

owance is avialble in future
r car flat rate is available
Example 5
Utilities 220
Telivision repairs 0 generic expenses
Groceries 0 generic expenses
Mortage interest 180
400
Example 6
Adjusted taxable trade profit of Yan for the year ended 5th April 2023
Net profit 17710

Bank interest receive -860
Wages and salaries 0
Rent and rates 0
Depreciation 1500
Impairment loss 0
Entertainment expene 750
Patent royalities paid 0
Legal expenses on acq 250
Bank interet paid 0
Adjsuted taxable trad 19350
Example 7
John's adjsuted trading income
Net profit 7900

Depreciation 2000
Entertaining 2500
Car expenses 300
Rent and rates 0
Bank interest paid 0
Bank interest receive -500
Profit on sale of asset -700
Adjusted taxable inc 21500
Example 8
Williams tax adjusted profits for the year ended 31 May 2023
Net income 30200
Depreciation 4760
Light and heat 610
car expenses 3540
Repair and renewal
Decorating the shop 0
Decorating the private 1050
Rent and rates 1560
Professional fees
Accountancy 250
Debt collection 0
Legal fee in connecti 1200
Other operating expenses
Giftes to customer 640
Pen carrying avertise 0
Donation to national 100
Donation to local char 0
Drawing 650
Capital allowances -13060
Adjusted trading profi 36000
Kapan kit 110 IDRIS trader

Accrual basis
Net profit 20175

Personal use 4500
Depreciation 1250
Car expenses 3269
Other expenses 0
Capital allownaces(gi -4553
Tax adjusted trading 24641
Cash basis
Revenue 49910
Receivable -10275
Food and utilities an -16777
22858
Depreciation 0
Car expenses
Flat rate expene 4200
Furniture -3500
Approved Mileage all -5250
Other expenses -1085
17223
Second
Accral basis
Net profit 20175

Utilities and food 4500
Depreciation 1250
Car expense 3269
Other expense 0
Capital allowance -4553
24641
Cash basis
Revenue 49910
Receivable -10275
Deprciation 0 working top to down so depreciation is excluded
Purchase -16777
Flat rate 4200
HMRC approved milag -5250
Furniture -3500
Other expenses -1085 cash recived Flat rate
HMRC allowance HMRC allowance
17223
4200
-5250
-1050
Capital allownace
> Capital allowances are available to person who buy qualifying assets i.e plant & machinery for use in trade
> Not available to unincorporated business that use cash basis
> Are available to both sole trader and companies
Qualifying Expenditure
> Capital allowances are given on the original cost of capital asset
> Any capital(improvement ) nature expenses is added
> Deduct from tax adjusted profit (calculated in tradig profit)
> calculated for trader's period of account
Plant and machnery allowances

> Include all addition and disposal occuring in the relevant period of account
> It doesn’t matter when it is bought
> Allowances are available for expenditure on plant and machinery which perform a function in trade rather then setting withi
> Car , office machinery availavle allowances category
> Not availale on building or structure (doors, floors, windows, bridges, waste disposal , drainage system)
Proforma
Description AIA/FYA Main pool Special Short life Private Allowances
pool asset use asset
TWDV b/f X X X
Addition qualifying X X
FYA
Addition qualifying X X
AIA
Additon not qualifying X X X
AIA/FYA
Disposal (X) (X)
Total X X X X
WDA 18%/6% (X) (X) (X) (X)
TWDV c/d X X X X
Allowances X
Meaning of plant & machinery

> icludes all machine, computers, office equipment e.t.c
> key principle
Does the asset peform Plant and machinery ?
An active function Yes
A passive function No
Assets deemed (assume) to be plant

> installation of plant (alteration)
> expenditure on acquiring computer software
Assets deemed not to be plant

> Land > Building > Structure
Most examples of plant and machinery

> Computer and software
> machinery
> Cars and lorries
> Office furnture
> Movable partitions
> Air conditions
> Alteration to building to install P&M
Building cannot be plant

> parts that are not part of building
> Walls > Floors > Ceiling > Doors > Windows> Stairs > System of water, electricity, gas
> parts that fall within definition of a building

> electricity, cold or gas system provided for requirement of trade or for machine used in trade
> Space or water heating system , ventilation and air cooling or ceiling in such system
> manufacturing and processing equipment
> Sanitary items
> Furniture and furnishing
> lifts, escavelator or moving walkways
> fire alarm system
> decoration for enjoyment of public
> advertising sign and similar displays
calculating an allownaces
The main pool(general pool)
> most item if plant and machinery purcahsed are included in the main pool
> Cars are also included in main pool category provided that:
> All cars with CO2 emission between 1 g/km and 50 g/km
> Second hand car with zero CO2 emission
> When asset acquire ain pool value increase
> When asset is disposed of pool value decline
not included
> new zero CO2 emission car
> New second hand car with Co2 emission exceeding 50 g/km
> Asset that are used for private purpose
> Expenditure incurred on short life asset
> Expenditure on item that form part of specila rate pool
The annual investment allowance

> The AIA is 100% allowance for first 1000000 Gbp of expenditure by business in a 12 months perod of p& m
> available to all business

> available on acquisition of P & M in the main pool and acquisition of special rate pool
> not available on cars
> max 1000000 gbp in 12 months
> increaed / decrease in increase / decrease in length of period
> not available in period of trade ceasation
> expenditure exceeding 1000000 qualify for WDA allowance
> taxpayer do not have to claim full allownace if they donot want
> AIA unused cannotbe carried forward in next year
The First Year Allowance (FYA) - new zero emission cars

> AIA is not available on cars , however 100% FYA is available on purchase of zero emission cars
> not WDA in the period of acquisition
> FYA is never time apportioned
> if FYA is not utilised then WDA is avaiable
> if partially used the balance goes into main pool and is not entitled to allownce
Writing down allowances (WDA)

> 18% in main pool
> on any addition on which FYA/AIA is not available
> after taking account of disosal
TWDA c/d is o/p including exinditure in main pool less any allowance
Shorter or longer period of account

> Apportioned with increae / decrese in time
> if 18 month period CA computation , 12 months and 6 months period
> FYAs are never adjusted to reflect the period of account
Length of ownership in the period of account

> WDA applied according to length of period of account
> WDA is never restricted to length of ownership of assets
> WDA is available provided that asset was owned at the year end
> length of ownership is irrelevant
Sale of plant and machinery

> The disposal value (lower of original cost and sale proceeds) is deducted from the total of :
> TWDV o/p on the pool
> Addition to the pool not qualifying for either AIA/FYA and
> Addition to the pool but not covered by the AIA
Deduct
Lower off
Original cost Disposal proceeds
Balancing Charge
Cessation of trade
> when business is permanently discontinued , the AIA , FYA , WDA are not available in final period of account
> Add any addition and subtract any disposal
> Then calculate Balancing Charge (BC) or Balancing allowance (BA)
> There should not be any carried forward at the end of trade
Balancing allowance
> If total exceed disposal then balacing allowance is given as a capital allowance
Asset with private use by the owner of the business

> only the business portion of available capital allowances is available as a tax deduction
> The AIA , FYA and WDA of asset is based on its full cost
> but only the business portion of any allowance is deductible in computing the taxable trading profit
> only the business portion of any AIA allocated can be actually be claimed
> asset most commonly used for private business arent eligible for AIA
> Cars with private use are always treated separately
> On disposal of private use asset , a balancing adjustemnt is computed by comparing the sale proceeds with the original cost
> Note that this private use include of owner not employees
Special rate pool

> Special pool is a pool of qualifying expenditure
> WDA is 6% for 12 mpnths
Qualifying expenditure:
> Long life asset
> Integral feature of a building or structure
> Thermal insulation of a building
> High emission car with Co2 emission > 50g/km
Long life asset

plant and machinery with :
> a total cost exceeding 100000 Gbp for 12 months
> 25 years or more working life
If less than 10000 Gbp classified as normal and go to main pool

Doesn’t inlcude
> Cars
> Plant and machinery situated in a building that is used as retail shop , showroom , hotel or office
Integral feature of a building or structure

> expenditure incurred on
> electrical system > Cold water system > Space or water heating system
> external solar system > Ventilation / air cooling > lift, escalator , moving walkways
> all include in special pool
AIA special rate pool

Most benefical to use aia in this order:
> Special rate pool
> the main pool
> short life asset
> private use asset
The small pool WDA

> when the balance is in main / special pool
> Is less than 1000Gbp
> optional
Qualifying expenditure
> all plant and machinery (with exception of car) which would normally go in main pool
> where it is the intention to sell or scrap the item within eight years of the end of chargeable period of acquisition
Points note from kit practice

If any assset was purchsed and at the time of ceasation it was retaine so deduct the marke value to show as disposal
to calculate the balancing allowance / charge
SBA is 3%
SBA can be claimed on qualifying asset which include cost of building, structure as well as renovation but not the
cost of land
SBA need to be time apportioned
Expenditure on building qualify for 3% SBA from the date it is bought into use
Samll pool WDA of 1000 gbp is time apportioned if not 12 months
No balancing adjustment on disposal of a building on which SBA have claimed instead buyer takes over the remaining
SBA based on the original cost of building
On disposal of building that qualify for SBA seller increase the price by SBA claimed
use in trade
trade rather then setting within trade

lectricity, gas
erod of p& m
od of account
roceeds with the original cost

ating system
ing walkways
eriod of acquisition
e to show as disposal
ation but not the
es over the remaining

Basis of assessment
New business
Opening year rule
First Basis of assessment = Starting date ------> following 5th april
Second basis of assessment = Is POA ends within 2nd tax year or not
Yes
POA= 12 months POA> 12 months POA< 12 months
2nd BOA= POA 2nd BOA= Last 12 months of POA 2nd BOA= Starting date--> 12 months
3rd BOA= Ongoing Basis
> BOA rules apply regardless of whether the business uses the accrual basis or the cash basis for tax purpose
> Profits that are assessed in motr than one tax year are known as overlap profits
> The overlap from commencement are deducted from the assessment for the final tax year
> If the final year is second year the basis period runs from 6april to the date of cessation
> If a trade starts and cease in the same tax year, the basis period is the whole lifespan of the trade
No
2nd BOA= Tax year
3rd BOA=
POA= 12 months POA> 12 months POA< 12 months
2nd BOA= POA 2nd BOA= Last 12 months of POA 2nd BOA= Starting date--> 12 months
or tax purpose
ate--> 12 months
Example 1
21/22 20000
22/23 20000
Example 2
stated trading = 1-Jan-22
1 BOA 1 january 2022 to 5 april 2022 3000

2 BOA 1 january 2022 to 31 december 2022 12000
15000
Example 3
Started trading = 1-Sep-21
1 BOA 1 sept 2021 to 5 april 2022 21/22 10500

2 BOA 1 sept 2021 to 31 augest 2022 22/23 18000
28500
Example 4
started trading = 1-May-20 period = 14 months
1 BOA 1 may 2020 to 5 april 2021 20/21 22000

2 BOA 1 july 2020 to 30 june 2021 21/22 24000
1 july 2021 to 30 june 2022 22/23 30000
76000
Example 5
started trading = 1-Sep-20
1 sept 2020 to 5 april 2021 20/21 21000

1 sept 2020 to 31 aug 2021 21/22 38000
1 july 2021 to 30 june 2022 22/23 48000
Example 6
started trading = 1-Jul-20 period = 22 months
1 july 2020 to 5 april 2021 20/21 22500

6 april 2021 to 5 april 2022 21/22 30000
1 may 2021 to 30 april 2022 22/23 30000
1 may 2022 to 30 april 2023 23/24 32000
114500
Example 7
53000
Example 8
10500
Example 9
1 july 2017 to 5 april 2018 6750

1 sept 2017 to 31 augest 2018 9000
15750
5250
Tax adjusted loss
tax adjusted trading profit /loss before capital allowances XX (XX)

Capital allowances (XX) (XX)
(XX) (XX)
Capital allowances are taken into account in calculating amount of trading loss avialable for relief
> CA can increase tax adjusted trading loss
> CA can turn adjusted trading profit into losses
when trading loss occur , the indiviual's taxabale trading income is 0 GBP
a number of options are available for obtaining a relief
Loss relief options:

> Carry forward against future trading profit
> Relief against total income
> Opening year loss relief against total income
> Trminal losses against previous trading profits
In format trading losses are NIL

Never put negative assessment
. Relief loss are availale on total Income , chargeable gain , future trading income
Loss relief against total income:-
> optional
> relieve on trading losses against thr total income of:
> tax year of the loss
> previous tax year (carry back)
> If claims against both current and prior year income are made, taxpayer can specify in which order the loss is used
> offset against non saving , then saving and then dividend
> If claim is made, use maximum possible offset
> A claim for a loss must be made by 31 january which is 22 months aftre the end tax year (31 jan 2025 for tax year 22/23)
> If taxpayer has loss for two period , they should give priorty for two loss period
maximum deduction from total income

HIGHER OFF
50000 GBP 25% of adjusted total income
Adjusted total income

Total income XX
Gross Personal pension contri ut(XX)
XX
> APPLY TO :-
:- apply to current year total income
:- the prior year if set against income other than profts of same trade
> any loss that cannot be set agaist total income can be carried forward against future profits
Carry forward loss relief

> if not opt against trading income or some of the loss is left
> Automatic if no claim made
> A claim must be made to establish the amount of loss caried forward with in four years of the end of tax year (5april 2027
Advantages
Useful as taxpayer gets the potential of an unrestricted period over which to utilise the available loss
Providing that tax payer tarde continues and taxpayer makes subsequent future profits for same trade
Disadvantages
> in prolonged difficult trading period for a business , relief may take long time to materialise
> less advantageous for cashflow and time value of money prospective
> no certainity about the level of future trading profit
Relief of trading losses against chargeable gains

> if any loss remain after a claim against total income a taxpayer claim against chargable gain
> optional
> same year against total income
> tax year of loss
> previous tax year
> can claim in:
> either year in isolation
> both years in any order
chargeable gains in year XX

capiatl losses in year (XX)
XX
Trading loss relief (XX)
AEA(annual exempt amount) -12300
Net cahrgeable gain before b/f l XX
tax loss relief

LOWER OFF
reamining loss charegable gain less current year capital losses
relief for trading losses in the opening years

> options are exactly same as ongoing business with one extra option to carry back losses three yeas against total inocme
> optional
> taxpayer has to make a choice
> However a loss relief can be claimed it is necassry to determine the loss arising each tax year
> normal BOA (basis of assessment) apply regardless making profit or loss
> loss is relieved once / loss is not over lapped
> first 4 tax year

> total income
> in 3 tax year before loss yaer
> FIFO bais
> must set off maximum amount possible

> no restriction for PA
> loss cliam must be made by 31January 2025 (22 months)
Terminal loss releif

> option availale in closing year
> same as ongoing bases except
> no option of carried forward losses as no furthur profits
> an extra option for terminal loss relief is available
> optional
> terminal loss is against trading profit
> of last 3 tax year
> carry back 3 yaer
> on LIFO basis
> loss is loss of the last 12 months
> relief must be made by 5 april 2027( within 4 yaers of the end tax year )
> aganst total income
> loss of last 12 months are calculated as follow:-

6 April 20XX to ceasation date
Actual trading loses X
X
12 months before cessation to 5 april 20XX
Actual trading loses X
terminal loss X
> ignore profits
> Against trading proit

rder the loss is used
jan 2025 for tax year 22/23)

e end of tax year (5april 2027 for 22/23
same trade
yeas against total inocme
Example no 1
21/22 22/23 23/24
Trading profit 34000 0 6800

-6800
0
Other income 5000 6000 13000
Total income 39000 6000 13000

Loss relief -39000 0
Net income 0 6000 13000

PA 0 -6000 -12570
W1- Loss memorendum W-2 maximum allowable expense for back year
Higher off
Loss for the year 22/23 -48000 1250 50000
Relief for the yaer 21/22 39000
Relief for the yaer 23/24 6800
Loss c/d -2200
Example no 2
21/22 22/23
Trading profit 64000 0

-64000
0
Saving income 63000 63000
Total income 63000 63000
Loss relief -13800 -50000

PA -12570 -12570
Taxable income 36630 430
W-1 Loss memorendum W-2 allowable relief for year 22/23

Higher off
Trading loss for year 2022/23 -127800 50000 14318.75
Loss relief for year 2022/23 50000
-77800 W-3 allowable relief for year 21/22
Loss relief for trading for year 2 64000 Higher off
-13800 50000 14318.75
Loss relief for other income for 13800
0
Example no 3
20/21 21/22 22/23
Total income 0 6000 19000

Loss relief 0 -6000 -3000
Net income 0 0 16000

PA 0 0 -12570

W-1 loss memorendum
Trading loss for the year 20/21 -9000

Relief in the year 21/22 6000
Relief in the year 22/23 3000
0
Example no 4
22/23 23/24
chargeable gain
Other income 4500 Chargable gain for the year 26000
capital loses -5000
Total income 7500 0 Net chargeable gain 21000
Loss relief -7500 Relief -6500
14500
Net income 0 AEA -12300
chargebale gain c/d 2200
W-1 loss memorendum W-2 relief for chareabe income

Lower off
Trading loss for the year 23/24 -14000 6500 21000
Relief on Trading profit for year 3000
Other income relief for the year 4500
relief c/d -6500
Relief for chargeable gain 6500
0
Example no 1
21/22 22/23 23/24

-6800
0
Other income 5000 6000 13000
Total income 39000 6000 13000

Loss relief -39000 0
Net income 0 6000 13000

PA 0 -6000 -12570
W-1 loss memorendum
Loss for the year 22/23 -48000

Offset against trading profit of 34000
Offste against other income of t 5000
Offste against the trading profit 6800
Unrelieved -2200
Exmaple no 2
21/22 22/23
Saving income 63000 63000

Loss relief -77800 -50000

PA -12570 -12570
Taxable income 36630 430
W-1 loss memorendum W-2 maximum relief available for year 21/22 and 22/23
Ajusted total income
Loss for tax year 22/23 -127800 Total income 63000
Offset agianst saving income for 50000 Gross personal pensio -5725
offset aginst the trading profit o 64000
offset against the saving income 13800 57275
0
Higher off
14318.75 50000
Example no 3
20/21 21/22 22/23
Trading income 0 6000 19000

-6000 -3000
0
Total income 0 0 16000
Loss relief 0 0 0
Net income 0 0 16000

PA 0 0 -12570
W-1 loss memorendum
Loss for the yaer 20/21 -9000

offset against the year 21/22 6000
offset agints the year 22/23 3000
Unrelieved 0
Example no 4
22/23 23/24

-3000
0
Other income 4500 0
Total income 4500 0
Loss relief -4500
Net income 0 0
PA 0 0
Taxable income 0 0
Chargeable gains
Realised chargeale gain 26000

Capital losses -5000
capital loss b/f 0
21000
Relief for cahrgeable gain -6500
14500
AEA -12300
2200
W1- loss memorendum W-2 relief avalable for chargeable gains
Loss for the year 23/24 -14000 Lower off

offset against trading profit of y 3000 6500 21000
Other income 4500
Unrelieved -6500
Example 5
1 June 2021 - 5 april 2022 21/22 -16000
1 June 2021 - 31 May 2022 22/23 -3200
1 June 2022 - 31 May 2023 23/24 48000
Exampe 6
18/19 19/20 20/21 21/22 22/23
Trading profit 16200 13490 7300 0 5465

Other income 4850 4850 4850 4850 4850
Total income 21050 18340 12150 4850 10315

Loss relief -9000 -3000 0 0 0
Net income 12050 15340 12150 4850 10315

PA -12050 -12570 -12150 -4850 -10315
Taxable income 0 2770 0 0 0
W-2 Loss memorendum for the year 21/22 W-1 basis of assessmet
1 july 2021 to 5 april 2022
Loss for the year 21/22 -9000 1 july 2021 to 30 June 2022
off set against other income of 9000 1 july 2022 to 30 June 2023
offset against 18/19
0
W-3 loss memorendum for the year 22/23
Loss for the year 22/23 -3000

off set against 19/20 3000
Example no 7
6 April 2021 to 30 june 202 22/23 -2400
1 jul 2021 to 5 april 2022 21/22 -4775
Overlap profit -1800
Terminal loss -8975
19/20 20/21 21/22 22/23

Trading profit 7500 7300 100 0
-1575 -7300 -100
Revised trading profit 5925 0 0 0
nse for back year
/22 and 22/23
21/22 -9000
22/23 -3000
23/24 5465
49 A
21/22 22/23

employment income 92000 0

Loss relief -74000
Net income 42000 0
W-1 loss memorendum
Trading loss for thr year 22/23 -110000

relief on trading profit year 21/22 24000
-86000
Other income relief for year 21/2 50000
-36000
50 13000
21/22 22/23

-12000
0
NSI income 0
Dividend income 9000

Net income 13000
W-1 loss memorendum
Trading loss for the year 21/22 -65000

Relief for next year 22/23 12000
-53000
51 D
21/22 22/23

Bank interest 14000 14000
W-1 loss memorendum

Loss for the year -90000
Trading profit relief 55000
-35000
14000
-21000
14000
-7000
53 D
22/23
49
21/22 22/23

Employment invome 92000 0
Total icome 116000

Loss relief 74000
23000
50000
50
21/22 22/23

Dividnend income 9000
NSI income 0
0 25000
Loss relief -12000
Net income 13000

51
21/22 22/23

Interest 14000 14000

Loss relief -14000
52
17/18 18/19 19/20 20/21 21/22 22/23
Trading profit -10416.67 -14583.33 5000

Employment income 45000 45000 45000
Total income
1 nov 2020 - 5 april 2021 -10416.67 20/21

1 nov 2020 - 31 oct 2021 -14583.33 21/22
53
22/23
0 37000 10000
8000
54
6 april 2022 to 30 september 2022 -18000
1 oct 2021 to 5 april 2022 0
-12000
-30000
13000
-5333.333
7666.667
25
salary 55000 Cash received 6235
surplus HMR 610 HMRC approved miala -5625
55610 610
26
0
650
0
650
27 0
2600
-3000
-400
28
36
10080
9240
29 B
1600 1000 600
733.33333 333.3333 400
866.66667 733.3333
30
MV @ 6 april 2021 2000 1400
Assessable beneit -400
1600
33
450
150
600
34
248600
35
25000
-9500
15500
775
36 6200
1600
-9800
-2000
37
6000
3600
38
2160 12
14420
40
TWDV o/p 15000
Laptop 4500
-4150
-14550
800
41
580000
7250
43
1 augest 22 to 5 april 23 22/23 16500
1 jan 23 to 31 Dec 23 23/24 24000
44
21/22
22/23 10000
22/23 14000
overlap -3000
21000
45 25000 62700 110000

-5000 12540
20000
46
62500 120000
3600 120000
71
40000 100000 100000
15000 -25000 -20000
25000 75000 80000
50000
5000
145000
20000 -29000
165000 145000
-2900 -2900
142100
100000 110000
17540 -12570
4920 97430
22460 19486 110000 110000
7540 10000
27892 -12570
35432 107430
100000
-12570
87430
17486 87700
54 270
3892 9730
21432 97430
45
e h
1 jan - 31 jul 7
E H Total
salary 0 0 0
profit 49000 21000 70000
sybtotal 49000 21000 70000
1 aug - 31 dec
E H Total
salary 0 10000 10000
profit 32000 8000 40000
sybtotal 32000 18000 50000
Total 81000 39000 120000
46
A J Total
salary 25000 0 25000
IOC 2000 1600 3600
RP 12850 38550 51400
Total 39850 40150 80000
47
1 jan to 31 may
T A An Total
salry 6250 6250
RP 23958.33 143750
Total 30208.33 150000
48
1 june to 31 oct
N L F Total
Profit 40000 40000 20000 100000
60000 300000 75000
1 june to 5 april 2023 45000

1 june to 30 may 2024 55000
100000
125000 60000
140
338500
-150000
188500 96000 49336
-12300 80200
176200
141
165300
-115000
50300
-12300
-4300
33700
9436
144
4000 7200
-1000 -1000
0
6200 2000
145
5700
-22800
-17100
146
Chargeale gain 23700
capital losses -10100
Net chargeable gian 13600

AEA -12300
1300
-1300
0
4000
147
disposal 28800 21 years life
-12600 15 unused
16200
148
disposal 150000 425600

-112500 -187500
37500 238100
149
Disposal 27900
cost -14616
13284
150
142000 230000
70000 -152000
-60000 78000
152000
151
73000
41700
-37200
77500
152
12800
-2666.6667 256
10133.333 128
153
1 2
8000 12300
-2500 -8000
0 4300
4300
155
45300
-12300
33000
3300
156
26-Apr-11 pur 40000 260000 300000
19-May-14 right issue 10000 40000 50000
30-May-18 bonus 10000 0 6
25-Mar-23 sold 12500 62500
175000
-62500
112500
157
50000
90000
150000 50000 100000

120000 40000 120000 40000 72000 48000
-72000
105 48000
3251200
-12300
3238900
323890 3770
640240
644010
PARTNERSHIP
> each partner is taxed indiviually despite a single trading entity
> each partner is taxed based on their allocated share of partnership profit
> To determine patner's taxable profit :
> the trading profit per partnership account are adjusted for tax puprose
> the tax adjusted profits of partnership is allocated to the indiviuals
> the BOA are applied to determine the partner's taxable profit in a tax year
Computation of partnership profit and losses

> the principle of computation of adjusted trading profit are same as those for sole trader
> partner salary and IOC are not deductible expenses in adjusted profit computation
The allocation of the profit or loss

> Partner are entitled to salary and IOC
> after allocating salaried and IOC the residual profit is allocated to partners according to partner's sharing ratio
Partnership capital allownaces

> capital allowances are deductes as an expense in same way as sole trader deucted to arrive at tax adjusted profits
> indivuals cannot cliam capital allowances on their behalf
> If asset is owned privately then total cost of asset is included in partnership capital allowance and maximum capital
allowance is caluclated in normal way and amount claimed for business portion of used asset and these capital allowanecs
are deducted as an expense prior to alloacting the profit to each partner
Change in the profit sharing ratio

> for number of reasons
> The way of allocating profit amy change due to change in duties, seniority or by agreement
> membership of partner may change due to admission , death or retitrement of partner
> if one partner is common to business the partnership will automatically continue for tax purpose
Commencement and cessation

Change in memebership
> normal o/p and c/d year basis of assessment apply upon commencement and cessation of a partnership
> this will effect only partner joining and leaving . The remaining continuing partner are assessed on CYB basis
Commencement of new partner

> identify the start of the new partner
> allocate the profit between new and old partner
> if partner join during the period of account then allocation is split into two period
> if partner join at the start of period , the profits are allocated through out using PSR
> BOA
> for existing partner CYB basis are used for BOA
> for new partner new year/opening year BOA is used
> each partner has own overlap profits available for releif
Cesation / partner leaving

> identify the partner ceasing member
> if partner cease part way through the period caluclation is split in two partners
> for continuing partner CYB BOA are used for tax
> for partner ceasing use the closing year rule and deduct any overlap profit that partner has availble
in a tax year
r's sharing ratio
tax adjusted profits
and maximum capital

d these capital allowanecs
r tax purpose
d on CYB basis
Example no 1
Phil Dan Toal
Salary 25000 25000 50000

IOC 3750 3000 6750
Residual Pr 10350 6900 17250
Total profit 39100 34900 74000
Phil Dan
Basis of assessment for yaer 22/23
1 oct 2021 to 30 septemebr 202 39100 34900
Example no 2
For the year 30 september 2022
From 1 october 2021 to 30 june 2022 9 months
Rosaline Logan Total

Salary 2250 1500 3750
IOC 0 0 0
residual pro 5175 3450 8625
Subtotal 7425 4950 12375
From 30 june 2022 to 30 septemebr 2022
Rosaline Logan Total

Salary 1500 1000 2500
IOC 0 0 0
residual pro1083.333 541.6667 1625
Subtotal 2583.333 1541.667 4125
total 10008.33 6491.667 16500
Rosaline Logan
Basis of assessment for year 2022/23
I oct 2021 to 30 septeber 2022 10008 6492
Example no 3
Year ended 30 september 2021

Alex Aresna Jose Total
Salary 15000 12000 10000 37000

IOC 5000 4000 2000 11000
Residual pr 18500 18500 18500 55500
Total 38500 34500 30500 103500
Alex Aresna Jose

Basis of assessment for the yaer 21/22
1 oct 2020 to 30 sep 2021 38500 34500 30500
Year ended 30 septemebr 2022

From 1 october 2021 to 31 december 2021
Alex Aresna Jose Total
Salary 3750 3000 2500 9250

IOC 1250 1000 500 2750
Residual pr 6666.667 6666.667 6666.667 20000
Subtotal 11666.67 10666.67 9666.667 32000
From 1 jan 2022 to 30 septemebr 2022
Alex Aresna Jose Rafa Total
Salary 15000 13500 11250 7500 47250

IOC 3750 3000 1500 0 8250
Residual pr 14175 12150 10125 4050 40500
Subtotal 32925 28650 22875 11550 96000
Toatl 44591.67 39316.67 32541.67 11550 128000
Alex Aresna Jose

1 oct 2021 to 30 september 2022 44591.67 39316.67 32541.67
Rafa basis of assessment

1 january 2022 to 5 april 2022 21/22 3850
1 january 2022 to 31 december 22/23 15700
Projected for the year 30 september 2023
Alex Aresna Jose Rafa Total
Salary 20000 18000 15000 10000 63000

IOC 5000 4000 2000 0 11000
Residual pr 23100 19800 16500 6600 66000
Total 48100 41800 33500 16600 140000
Alex Aresna Jose Rafa

1 oct 2022 to 30 septemebr 2023 48100 41800 33500 16600
Example no 4
Year ended 30 septemebr 2022
Ball Sphere Globe Bauble Total
Salary 20000 18000 15000 10000 63000

IOC 5000 4000 2000 0 11000
Residual pr 37100 31800 26500 10600 106000
Total 62100 53800 43500 20600 180000
Ball Sphere Globe Bauble

Basis of assessmnt for 22/23
1 oct 21 to 30 sept 22 62100 53800 43500 20600
Year ended 30 september 2023

from 1 oct 2022 to 31 march 2023
Salary 10000 9000 7500 5000 31500

IOC 2500 2000 1000 0 5500
Residual pr 23800 20400 17000 6800 68000
Subtotal 36300 31400 25500 11800 105000
From 31 march 2023 to 30 september 2023
Sphere Globe Bauble Total
Salary 10000 9000 7500 26500

IOC 2500 2000 1000 5500
Residual pr 24333.33 24333.33 24333.33 73000
Subtotal 36833.33 35333.33 32833.33 105000

Total 36300 68233.33 60833.33 44633.33 210000
Sphere Globe Bauble

Basis of assessment 23/24
1 oct 2022 to 30 september 2023 68233.33 60833.33 44633.33
Ball basis of assessment

year 2022/23 98400
overlap profit -15000
83400
Capital gain tax
> capital gain tax is where there is a chargeable disposal of chargeable asset by a chargeable person
Chargeable person
> incude indiviulas and companies
> indiviuals who are UK resident in the tax yaer
> apply on all UK CGT on disposal of all assets
> Non UK resident has only UK CGT on disposal of land in UK
Chargeable disposal
Chargeable disposal Exempt diposal
sale or gift of whole or part of asset disposal as a result of death of indiviuals
exchange of an asset gift to charity
loss or distruction of an asset
receipt of capital sum derived from asset
> compensation of damaged asset
> for surrender of right to an asset
Charegable asset
Cahregable assets Exempt assets
all form of capital assets wherever
situated are charegable asset > motor vehicles (including vintage car)
> Main residence
> Freehold land and buildings > Cash
> Goodwill > Certain type of chatels
> Unquoted shares > Investment held in ISA
> Quoted shares > Qualifying corporate bonds(QCBs)
> Certain type of chattels debt security exempt for CGT
> Gilt adge securities
Chattels are tangible movable asset > NS&I certificate
(e.f furniure and plant) > Foreign currency for private use
> Receivable
> Trade inventory
> Prizes and betting winning
Calculation of Gain/loss on indiviual disposal
Disposal proceed XX
Selling cost (XX)
Net disposal proceeds XX

Cost
Purchase cost XX
Acquisition cost XX
Capital cost XX
XX (XX)
Chargeable gain/allowable loss XX/(XX)

Current year capital losses (XX)
Net chargeable gain XX

AEA -12300
Capital losses B/F (XX)
Taxable gain XX
Tax % XX * X%
CGT payale XX
> while calcuclating net disposal poceed if disposal is not made at arm length (eg gift) and transfer between connected parties
> connected parties include parents, siblings, child)
When indiviual acquire asset

the cost of acquisition= market value of the asset at the date of gift
Where an indiviual inherent an asset on death
the cost of acquisition= market value of the asset at the date of death (probate value )
Annual exempt allowance (AEA)

Annual exempt allowance (AEA) is 12300 gbp for a tax year
is deducted from net chargeable gain mean after deducting current yaer capital loss and before deducting capital loss b/f
only use till 0 taxable gain
excess of 12300 is liable for chargeable tax
is wasted if not utilised mean it can not be carried forward
current year loss is offset maximum this year and remaining is carried froward
b/f capital losses are offset aginst after deducting AEA and remianing is C/F again
CGT is payable on taxable gain

> CGT rate for tax is dependent upon the amount of atxpayer total taxable income
taxable gain (CGT) is taxed after after taxable incoe ( as top slice)
donnot combine income and gain in one computation
Taxale agin for basis rate band is 10%

for higher and additional is 20%
This apply to commercial property
> band extention due to GGAD and GPPC the extended band is used to eatablish the rate of CGT
Offset AEA and capital allowances

Taxpayer can offset the AEA and capital allowances against whichever thay want
In order to maximise the relief they should offset the AEA against residential prpoerty gains 10% for both (10and 20)(18 and
UK residential property disposals

Disposal of UK rsidential property must be reported HMRC within 60 days of competion along with payment on account of rel
the rate of CGT is determined how much basic rate will be remaining
There Is no need to submit a return if there is no CGT due
All disposal made during a tax year are included in a final tax year
Any payment on account made is deducted from the CGT liability to reach the final amount of CGT payable
If repayment is due it will bw claimed on the CGT return
Payment of CGT
On 31 January following the tax year (31 january 2024 for 2022/23)
Payment on account for UK residential property are deducted from the final liability
CGT planning opportunities

Delaying disposal until following tax year
Tax saving
> if AEA is utilised in this tax year and in following year AEA will offset the disposal
> If taxable income is lower in a subsequent tax year then bsaic band will be avalable
this mean will be taxed on 10% rather than 18%
Cash flew advantage
> if disposal include in year ending 5 April 2023 then taxable in tax year 2022/23, payable by 31January 2024
> If disposal include in year ending 5 April 2024 then taxable in tax year 2023/24, payable by 31January 2025
Transfer between spouses and civil partners

where an asset is transferred between spouse and civil partners
> no gain or loss arise on the trasnfer
> any actual proceed are ignored
> the transfer is deemed to be dispose at its acqisition cost
> the deemed proceeds of the tranferor are treated as the deemed acquisition cost of transferee
> This rules only apply whilst the spouse or civil partners are living together (not separated)
Subsequent dispsoal by transferee

> the deemed acquisition cost is the original acquisition cost to the first spodue
Planning opportunity
Married couples can transfer asets between them at no tax costs
This provide opportunities to minimise their total CGT liability
They can transfer asset between them to maximise the use of :

> each indiviual AEA
> each indiviual basic rate band
> capital losses
Part disposal
Disposal proceed XX cost= original cost * (A/(A+B))
Cost (XX)
A= disposal proceed
Gain XX B= market value of the remainder at the time of the part diposal
> If some incidental cost of acquisition or enhancement is incurred:-

> if related to the whole asse= added in the original cost and apportioned
> if realted to the part of asset being diposed of = deduct in full in the cahrgeable gain calculation
The cost of remaining disposal is the original cost less cost of 1st disposal
Chattels
> Tangible movable asset
Wasting chattels Non-wasting chattels

Greyhound Antiques
Boat Paintings
Plant and machinery Jewellery
Racehorse
Wasting Non-wasting
Chattels Chattels
Life < 50 years Life> 50 years
Not eligible eligible for

for capital allowances capital allowances
Exempt Not exempt like plant and machinery

Same rule of non wasting chattel
Non wasting cahttels

Life > 50 years
Painting
Antique
Jewellery
Disposal Rule
Case 1 Case 2 Case 3 Case 4
Disposal proceed <6000 >6000 >6000 <6000

Cost <6000 >6000 <6000 >6000
Exempt Normal Lower off Deem disposal

Gain 6000
Lower off
Normal 5/3 *(GP-6000)
gain
Sale (wasting- plant and machinery)

Sold at loss
Capital loss is restricted as relief for the loss has already been give through capital allowances system
Balancing allowance/ Balancing charge
> Plant and machinery which is eligible for capital allowances and sold at a loss , result in no gain/loss for CGT purpose
Sold at gain
normal 6000 rule
Other wasting assets

They are not tangible and not movable
e.g copyright
allowable cost= cost* Remaining life of disposal

Estimated useful life
in short, this is CV
Asset loss or Destroyed
Insurance receive
No Yes
Normla CGT computatin
Loss Not reinvested Reinvested within partial
12 months reinvestment
Normal Elect of no Amount not reinvested will

gain or loss gain or loss immediately chargeable
Asset Damage
Insurance proceed
NO YES
NO disposal Not used in Used in

restoration restoration
Norml part Part disposal

disposal CGT unless roll-over
computation election to deduct
proceed from cost of asset
Government securities and qualifying corporate bonds

All shares and securities disposed by an indiviual are subject to CGT except:
> listed government securities (gvt gilts)
> qualifying corportae bond(loan notes)
> shares held in ISA
Valuation of quoted shares

Unconnected party> Actual disposal proceed
Connected party or gift of shares > market value (midprice/average)
market value= o/p+c/d

2
Identifiaction rule for disposal by indiviuals

When shares are disposed they are matched against share acquired in following order:
> on the same day
> within following 30 days
> from the share pool
Bonus issue
1-Jan pur 3500 7350 1-Jan pur 3500 7350
1-May-17 pur 500 1750 1-May-17 pur 500 1750
1-Jun-18 bonus issue 800 0 4000 9100
1-Sep-22 sold 2600 10400 2.275
Share issue
Jan-16 pur 2700 5400
May-17 pur 600 1500
Jun-18 right issue 0 0
3300 6900 2.090909
Aug-22 sold -4000 -8363.636
disposal 14000
cost -8363.636
5636.364
Reorganisation
Usama SBM prefrence shares
cost cost
1000 shares 2000 5000 odinary shares 2000
ols cost of shares will become the cost of new shares
1000 shares 1000 ordinary shares

shares cost MV
Class 1 prefrence shares 1000 1200 3000
Class 2 ordinary shares 1000 800 2000
2000 2000
> reorganisation involves the exchnage of existing shares in a company for other shares of another class in same company
> A takeover occurs when one company require the shares in another company either in exchange for shaers itself, cash, mixt
Takeover : consideration in cash and shares

Cash proceeds- part disposal computation
original shares * cash received

cash received + MV of remaining
Private residence relief (PRR)

> apply when an indiviual dispose of:
> a dewelling house (include normally up to half a hectare of adjoining land
> which has some time during their ownership been their only or main private residence
residence occupied
Throughout period For part of period of
of ownership ownership
> Gain is exempt > Calculate gain

> PRR reduce the gain
Step 1> calculate gain on disposal

Step 2> Total ownership period Gain 200000
Step 3> Period of occupation PRR -76923.08 156 months
Chargeable 123076.9
Occupational period
Actual occupation Deemed occupation

at home assume to be at home by law
> last 9 months of ownership
> Up to three years absence for any years
only meet when a person > any period spent living overseas due to employment
come back after the period > up to fours years (working elsewhere in UK)
> If there is ownership of more than one residence the indiviual has to nominate the main residence by
notifying HMRC in writing
> The election must be made within two years of acquiring an additional reidence otherwise HMRC can openly
assume any residence as main residance
> Gain after PRR is taxable on 18% and 28%
Business use
If property is use for business too , relief is available on private residence
Letting relief
If the owner is lodger then relief is PRR
> If fully let out (portion)
Lower off
40000 Relief of PRR Part of gain attributable to
lettling period
er between connected parties ) then use market value as subsitute
deducting capital loss b/f

% for both (10and 20)(18 and 28)
ith payment on account of relevant CGT liability
GT payable
able by 31January 2024

able by 31January 2025
part diposal
n calculation
Kit point note

In case 4 if cost incurred to sell is 300 then deem disposal
is 6000 but suntract 300 from 6000
Deem disposal
and add any purchase acquisition cost to cost
5/3 *(GP-6000)
n/loss for CGT purpose
Machine
cost 10000
Loss/destroy
ot reinvested will
ely chargeable Insurance proceed
No Yes
Not reinvested
DP 0 Disposal proceed 12000
Cost -10000 cost -10000
Capital los -10000 Allowable gain 2000
Disposal proceed 8000

csot -10000
Allowable loss -2000

her class in same company
ge for shaers itself, cash, mixture
156 months 60 occupational

employment
main residence by
herwise HMRC can openly

dispose 20000 new asswet purchase
New asset purchase 15000 base cost -13000
Roll over /deffered -2000
base cost 13000 7000
Fully reinvest within 12 months Partially reinvest
Disposal proceed 12000 Disposal proceed 12000
Csot -10000 Csot -10000
Gain 2000 Gain 2000

Rollover -2000 Rollover -1000
NO gain/loss 0 Chargeable gain 1000

11000
Example no 2
Vase Painting
Disposa proceed 12000 20000

Selling cost -120 -200
Net chargeable disposal 11880 19800

Cost
Purcahe cost -13000 -7000
Chargeable gain / allow -1120 12800
Net chargeable gain 11680
Example no 3

Cost
Purchae cost 20000
Legal fee 500
Conservatory 10000
30500 -30500
Chargeable gain 69500
Example 4
Disposal proceed 75000 12000

Selling cost -5400 0
Net disposal proceed 69600 12000

cost
purchase cos 53500 probate -9000
extention 16000
legal fee 2300
71800 -71800
Chargeable gain -2200 3000
Net chargeable gain 800
Example no 5
Tom Jerry
chageable gain 12000 14900 4000 14300
Allowale losses -8000 -8000 -4000 -1000
Net charegbale gain 4000 6900 0 13300

AEA -4000 -6900 0 -12300
-1000
taxable income 0 0 0 0
loss carried forward
Example no 6
unused basic band 9000 Antiue tale resdential property

Net charge 20000 40600
AEA -12300
20000 28300
900
2200
7924
11024
-7860
3164
PRACTICE 2
Example no 1
50000
Example no 2
Deemed diposal proced 29175 Disposal proceed

cost -29175 cost of acquisition
No gain/loss 0 Cahrgeable gain
Exampel no 3
original cost 6000

land 20 hectares
8 hactares disposal 12 hectares disposal

disposal proceed 8000 18000
Cost -2086.95652 -5913.0435
chargevale gain 5913.04348 12086.9565

18000
Example no 4
10 hectares 8000
3 hectares 7 hectares
disposal procees 20000 disposal procees 75600
cost -2000 cost -6000
Levelling expense -3000 AEA -12300
Chargeable gain 15000 Chargeable gain 57300
72300
unused band 19560
Capital gain tax liability

1956
10548
12504
Example no 5
1 chattel NW No CGT
2 Not cahttel CGT=3000
3 Exempt from CGT
4 chattel W CGT
5 chattel NW CGT
6 chattel W Exempt
Example no 6
disposal 6600
cost -3200
3400
Lower off
3400 1000
Example no 7
5600 5750
-6500 6500
-750
Example no 8
Case 1 1666.667 5000 1666.667

Case 2 -2000
Case 3 0
Case 4 2500
Example no 9
5000
Example no 10
dp 26500
cost -35000
-8500
Balancing al 8500
No gain/loss 0
Example no 11
cost 24000
30 years life
sold 38000
disposal 38000
cost -16000
22000
Example no 12
Disposal proceed 0
cost -15000
Example no 13
cost -35000
Chargeble gain 15000
Example no 14
cost -57000
Example no 15
Disposal proceed 35000 New asset 40000
cost -25000 Rollover/de -10000
10000 30000
Rollover -10000
NO gain/loss 0
Example no 16
Insurance receied 45000 New asset 50000 sold
cost -21140 rollover/de -23860 cost
26140
23860
Rollover/deffer -23860
NO gain/loss 0
Example no 17
Insurance receied 113000 9560 New asset 103440
cost -83040 rolove -20400
83040
29960
Cahrgeable 9560
Deffer/rollover 20400
Example no 18
Dispoal proceed 30000
cost -5454.545
24545.45
Example no 19
cost 10000
restore 8000
insurance -8000
10000
Example no 20
200000
110000
-100000
210000
Practice 3
Example no 1
500
250
Example no 2
1000
500
Example no 3
date des no of sharecost W1- main pool

1-Jun-04 purchase 4000 8000 date des no of share
30-Jul-08 purchase 1800 9750 1-Jun-04 purchase 4000
30-Apr-13 purchase 500 4000 30-Jul-08 purchase 1800
20-May-18 purchase 1000 8500 30-Apr-13 purchase 500
15-Mar-23 sold 3500 36000 20-May-18 purchase 1000
28-Mar-23 Bought 800 6400
7300
price/shar
Disposal 36000
following 30 -6400
main pool -11188.36 2700
18411.64
Example no 4
11000
18-Dec-22
$50,000
6-Apr-06 pur 8000 7450

12-Dec-14 pur 4000 5500
18-Dec-22 sold 11000 11000 W-1 main pool
10-Jan-23 pur 2000 6000 6-Apr-06 pur 8000
12-Dec-14 pur 4000
12000
Disposal $50,000
cost -15712.5 9000
$34,288 9712.5
Example no 5
16-Apr-03 pur 2000 10000 16-Apr-03 pur 2000

30-Apr-17 pur 1500 18000 30-Apr-17 pur 1500
31-May-17 pur 500 7000 31-May-17 pur 500
31-Jan-23 sold 3500 70000 4000
10-Feb-23 pur 200 3600
28875
dispsoal 70000
cost -32475
37525
Example no 6
1-Jan pur 3500 7350 1-Jan pur 3500

1-May-17 pur 500 1750 1-May-17 pur 500
1-Jun-18 bonus issue 800 0 4000
1-Sep-22 sold 2600 10400
Example no 7
Jan-16 pur 2700 5400 Jan-16 pur 2700
May-17 pur 600 1500 May-17 pur 600
Jun-18 right issue 1100 2530 3300
4400 9430 2.143182
Aug-22 sold -4000 -8572.72727
disposal 14000
cost -8572.727
5427.273
Example no 8
Emina Purchase Blue plc
No of shares 2000
cost 5000
after reorganisation 4000

cost 5000
Disposal proces 8000

cost -13846.15
3000
Example no 9
craig purchase Corus Co

no of shares 20000
cost 20000
ordinary 20000 cost 13846.15

MV 36000
preference 20000 cost 6153.846

MV 16000
disposal 75000
cost -72000
3000
Example 10
Patrick puchase target
no of shares 10000
cost 20000
Bidder plc
no of shareMV cost
shares 20000 25000 16666.6667
cash 10000 5000 3333.33333
disposla 20000
cost -8333.333
11666.67
Practice 4
Example no 1
months as occuapional 14 333

27 Date Des Exempt Chargeable
12
161 Acual 14
4 Deemed 27
9 Deemed 12
227 Deemed 4
Acual 161
Dipsoal 95000 Deemed 9 106
cost -25000
70000 227 106
Total ownership 333

Occupational 227
Gain 70000
PRR -47717.7177
22282.2823
Example no 2
Des Exempt ChargeableTotal
Actual 24 24
Deemed 78 78
Travelled th 36 30 66
Actual+Dee 93 93
231 30 261
Gain 189000
PRR -167276
Taxable gai 21724.14
AEA -12300
9424.138
Basic unused 7000
Tax liability
1260
678.7586
1938.759
Example no 3
gain 70000
-56000
14000
Example no 4
Letting relief
Total gain 209730 Lower off
PRR -142724
67006.39 40000 142723.6
Letting relief-34843.32
32163.07
Des Exempt ChargeableTotal
Atual 12 12
Deemed 36 48 84
Actual 9 9
Reamaining 156 52 208
213 100 313
Example no 5
gain 50600
PRR -50600
0
2000
42000
-29175
12825
65000
-26140
38860
cost
8000
9750
4000
8500
30250
4.143836
7450
5500
12950
1.079167
10000
18000
7000
35000
8.75
7350
1750
9100
2.275
5400
1500
6900
2.090909
Total
14
27
12
4
161
115
333
34843.32

Tax Note

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Section A Section B Section C

15 MCQs 3 OTQs 1 CRQ(10 marks) > MIX TOPIC

Income tax(12-13 chp) Capital gain tax(4 chp)

Income tax(12-13 chp) tax on salary e.t.c 0

employment income Trading income

Property income Partnership income

Pension income Interest income

NCA sale> Gain Capital gain tax(CGT)

direct tax is tax on income , gain and wealth

Income tax Direct Revenue Indiviuals and partners

Structure of the UK tax system

Source of reveue law

Income Tax Tax year

Tax avoidance and Tax evasion

> report to MLRO

Double taxation agreement

direct taxes> HMRC>tx tribunal tiers

l review of decision by HMRC review officer

Tax residency status?

Step:1 Automatic Non-UK resident

Non UK Resident step:2 Automatic UK resident test

Automatic Non-UK/ Overseas resident Test

Does not meet any test

> event present at midnight consider as a full night spent

Stpe:3 Ties+ Days spent (Table)

Non SavingSaving Dividend Total

Tax rate 20% 40% 45%

Income Tax liability XX

ISA( Investment saving account )

> annual subsciption limit is GBP 20000

Tapering the personal allowance

Adjusted Net income (ANI) Net income XX

Adjuted Net income XX

ANI exceed > 100000 GBP (PA will reduce)

Adjusted net income 105000 104000 98750

Taxable income 94930 94430 86180

Satrting rate band> Saving income

Income tax liability ?

NSI Saving Total

employment income 35000 35000

Total income 35000 5000 40000

Total net income 35000 5000 40000

Taxable income 22430 5000 27430

Transferable Personal allowance

> election can be in advance

> election can be made in arrears

Qulifying interest / qualifying loan

Married couples and couples in civil partnership

150000 87500 125140

12570 12570 12570

150000 74930 125140

> this is what we did in calculating taxable income on disposing gilts

Trading profit 184000

Taxable income 184000

Taxable income 149930

Trading income 21165

Employment income 7000

Trading income 135000

NSI Saving Dividend Total

Total income 25115 3500 2000 30615

Net income 24115 3500 2000 29615

Taxable income 11545 3500 2000 28615