ICAB PL Business Planning: Taxation and Compliance cheat sheet
ICAB PL Business Planning: Taxation and Compliance · Keep the key ideas within reach.
Taxation of Individuals
Residence determines worldwide liability; non-residence generally limits charge to source income.
Personal allowance is reduced by £1 for every £2 of adjusted net income above the taper threshold (£100,000), reaching nil at £125,140.
Dividend income is taxed at 8.75% (basic), 33.75% (higher) and 39.35% (additional) after the £500 dividend allowance.
Savings income uses the personal savings allowance (£1,000 basic, £500 higher, nil additional) and starting rate for savings of £5,000.
Order of income taxation: non-savings, then savings, then dividends; the personal allowance is set against income in that same order.
Class 1 primary NICs are payable by employees on earnings above the primary threshold; Class 2/4 NICs apply to the self-employed on profits.
Benefit-in-kind charge = taxable value x marginal income tax rate; employer pays Class 1A NICs at 13.8% on the same value.
Payments on account are due 31 January and 31 July, each 50% of the prior year's net income tax and Class 4 NIC liability.
Taxation of Companies and Corporate Groups
Corporation tax is charged on taxable total profits: trading profits plus property and investment income plus chargeable gains.
Trading losses can be carried back one year, carried forward indefinitely, or group-relieved against current-year group profits.
Group relief permits surrender of current-year trading losses between 75%-common-ownership group members.
A consortium claim requires a 5% or greater holding by each of the consortium members.
Transfer pricing rules apply to transactions between connected parties unless the small/medium enterprise exemption applies.
Capital gains groups defer gains via rollover where assets transfer between 75% group members; degrouping charges may claw back relief.
Quarterly instalment payments apply where taxable profits exceed the £1.5m threshold (divided by group size).
Close company rules attribute loans to participators and tax them at 33.75% unless repaid within nine months of the year end.
Taxation of Partnerships and Unincorporated Businesses
A partnership is tax-transparent: each partner is taxed on their share of the trading profit, not the firm.
Profit allocation follows the partnership agreement; absent agreement, profits are shared equally.
A change in profit-sharing ratio is treated as a cessation and recommencement for the affected partner's share.
Basis period reform aligns the tax year to the actual tax year, with transitional profits spread over five years.
Limited liability partnerships are taxed as partnerships but must meet the salaried-member and mixed-membership conditions.
The cash basis is the default for unincorporated businesses below the turnover threshold; accruals basis is optional.
Class 4 NICs are charged at 6% on profits between the lower and upper profits limits, and 2% above the upper limit.
Loss relief for partners is restricted to the amount of capital contributed to the partnership.
Capital Gains and Capital Allowances
Chargeable gain = disposal proceeds minus allowable cost minus incidental disposal costs, adjusted for indexation where applicable.
Annual exempt amount applies per individual; companies do not receive the annual exempt amount.
Business asset disposal relief taxes qualifying gains at 10% up to the lifetime limit.
Rollover relief defers gains where proceeds are reinvested in qualifying business assets within the replacement period.
Gift relief defers gains on gifts of business assets where a holdover claim is made.
Plant and machinery annual investment allowance is a 100% first-year deduction subject to a monetary cap.
Writing-down allowances apply the reducing-balance rate to the tax written-down value of the pool.
A balancing charge arises when disposal proceeds exceed the pool's tax written-down value.
Indirect Taxes (VAT and Sales Tax)
VAT registration is compulsory when taxable turnover exceeds the rolling 12-month threshold, or immediately on expectation of exceeding it.
Standard rate is 20%; reduced rate 5%; zero rate 0%; exempt supplies give no input tax recovery.
Output tax minus input tax equals the VAT payable or repayable for the period.
Partial exemption restricts input tax recovery on costs used for both taxable and exempt activities.
The cash accounting scheme defers VAT accounting until payment is received from customers.
The flat rate scheme applies a single percentage to gross turnover; limited input tax recovery is permitted on capital assets.
Reverse charge shifts VAT liability to the business customer for cross-border B2B services.
Place of supply rules determine the jurisdiction in which VAT is due for goods and services.
International Taxation and Cross-Border Transactions
Double taxation relief is given by credit or exemption under the relevant double tax treaty.
Permanent establishment arises through a fixed place of business or a dependent agent concluding contracts.
Transfer pricing requires arm's-length pricing for controlled transactions between associated enterprises.
Withholding tax applies to cross-border interest, royalties and dividends, often reduced by treaty.
Controlled foreign company rules may attribute low-taxed profits of an overseas subsidiary to the UK parent.
The OECD model treaty allocates taxing rights between residence and source states.
Permanent establishment profit attribution follows the authorised OECD approach.
Foreign branch profits may be exempt from UK tax where an election is made and conditions are met.
Tax Planning, Ethics and Compliance
Tax avoidance is arranging affairs to reduce tax within the letter of the law; evasion is illegal.
The general anti-abuse rule targets arrangements whose main purpose is to obtain a tax advantage.
The disclosure of tax avoidance schemes regime requires promoters to notify HMRC of notifiable arrangements.
Professional ethics require integrity, objectivity, confidentiality, competence and compliance with the law.
Penalties for inaccuracies depend on behaviour: careless, deliberate, or deliberate and concealed.
A reasonable excuse defence may reduce or eliminate penalties for late filing or payment.
The GAAR panel issues opinions that are binding on HMRC in applying the rule.
Tax planning should be commercially driven; artificial steps risk challenge under the Ramsay principle.
Taxation of Individuals
Statutory residence test: automatic UK tests, automatic overseas tests, then sufficient-ties test.
Split-year treatment applies to arrivals and departures meeting the relevant conditions.
The remittance basis is available to non-domiciled individuals, with an annual charge after seven years of residence.
Capital gains tax rates are 18% and 24% for most assets; residential property and carried interest have specific rates.
Entrepreneurs' relief (now business asset disposal relief) applies a 10% rate to qualifying gains.
Inheritance tax is charged at 40% above the nil-rate band, with 36% where 10% or more is left to charity.
The annual exemption for capital gains tax applies per individual per tax year.
Gift aid donations extend the basic rate band and the higher rate threshold.
Taxation of Companies and Corporate Groups
Corporation tax rates apply to taxable total profits; marginal relief applies between the lower and upper limits.
Capital allowances for companies follow the same pool system; the super-deduction and full expensing apply to qualifying expenditure.
Group payment arrangements allow groups to make a single corporation tax payment.
The substantial shareholding exemption exempts gains on disposals of qualifying shareholdings.
Intangible fixed assets regime provides tax relief on amortisation of goodwill and IP.
Research and development tax credits are available under the SME and large-company (RDEC) schemes.
Creative industry reliefs provide enhanced deductions or payable credits for qualifying productions.
Corporate interest restriction limits deductible interest based on a fixed ratio or group ratio.
Taxation of Partnerships and Unincorporated Businesses
Partnership tax returns are filed by the nominated partner, reporting each partner's profit share.
Each partner includes their share in their personal self-assessment return.
A partner's capital allowances are allocated according to their profit-sharing ratio.
The cash basis restricts interest deductions to £500 or the accruals-basis amount, whichever is higher.
Trading allowance provides £1,000 relief for small trading income instead of actual expenses.
Class 2 NICs are payable where profits exceed the small profits threshold, with a de minimis exception.
Loss relief for partners is restricted to the amount of capital contributed to the partnership.
A change in accounting date can trigger a basis period adjustment for the affected partner.
Capital Gains and Capital Allowances
Allowable expenditure includes acquisition cost, incidental costs of acquisition and disposal, and enhancement costs.
Indexation allowance for companies is based on the retail prices index from acquisition to disposal.
The annual exempt amount is deducted from net gains after losses.
Capital losses must be set against gains of the same year before the annual exempt amount.
Business asset disposal relief requires a qualifying business disposal and a minimum holding period.
The structures and buildings allowance provides straight-line relief over 33.33 years.
The annual investment allowance is shared across connected companies and groups.
A disposal of an asset to a connected person is deemed to occur at market value.
Indirect Taxes (VAT and Sales Tax)
VAT returns are typically filed quarterly; the default is online filing with digital record-keeping.
Making tax digital requires digital records and compatible software for VAT-registered businesses.
The option to tax applies to commercial property, making supplies taxable and enabling input tax recovery.
The margin scheme applies to second-hand goods, calculating VAT on the margin rather than the full price.
The tour operators margin scheme applies VAT to the margin on travel packages.
Bad debt relief allows recovery of output tax on unpaid supplies after six months.
The capital goods scheme adjusts input tax recovery on high-value assets over several years.
A VAT group allows members to be treated as a single taxable person.
International Taxation and Cross-Border Transactions
The arm's-length principle requires pricing consistent with what independent parties would agree.
The OECD transfer pricing guidelines provide the five comparability factors.
Advance pricing agreements provide certainty on transfer pricing methods.
Withholding tax on dividends is often eliminated by the parent-subsidiary directive or treaty.
The principal purpose test denies treaty benefits where obtaining a benefit was a principal purpose.
Permanent establishment profit attribution follows the authorised OECD approach.
Foreign branch profits may be exempt from UK tax where an election is made and conditions are met.
Country-by-country reporting applies to large multinational groups.
Tax Planning, Ethics and Compliance
The GAAR applies a tax result that is just and reasonable, disregarding the abusive arrangements.
The disclosure of tax avoidance schemes regime requires promoters to notify HMRC of notifiable arrangements.
Professional ethics require integrity, objectivity, confidentiality, competence and compliance with the law.
Penalties for inaccuracies depend on behaviour: careless, deliberate, or deliberate and concealed.
A reasonable excuse defence may reduce or eliminate penalties for late filing or payment.
The GAAR panel issues opinions that are binding on HMRC in applying the rule.
Tax planning should be commercially driven; artificial steps risk challenge under the Ramsay principle.
The anti-money-laundering regime requires customer due diligence and suspicious activity reporting.
Taxation of Individuals
Statutory residence test: automatic UK tests, automatic overseas tests, then sufficient-ties test.
Split-year treatment applies to arrivals and departures meeting the relevant conditions.
The remittance basis is available to non-domiciled individuals, with an annual charge after seven years of residence.
Capital gains tax rates are 18% and 24% for most assets; residential property and carried interest have specific rates.
Entrepreneurs' relief (now business asset disposal relief) applies a 10% rate to qualifying gains.
Inheritance tax is charged at 40% above the nil-rate band, with 36% where 10% or more is left to charity.
The annual exemption for capital gains tax applies per individual per tax year.
Gift aid donations extend the basic rate band and the higher rate threshold.
Taxation of Companies and Corporate Groups
Corporation tax rates apply to taxable total profits; marginal relief applies between the lower and upper limits.
Capital allowances for companies follow the same pool system; the super-deduction and full expensing apply to qualifying expenditure.
Group payment arrangements allow groups to make a single corporation tax payment.
The substantial shareholding exemption exempts gains on disposals of qualifying shareholdings.
Intangible fixed assets regime provides tax relief on amortisation of goodwill and IP.
Research and development tax credits are available under the SME and large-company (RDEC) schemes.
Creative industry reliefs provide enhanced deductions or payable credits for qualifying productions.
Corporate interest restriction limits deductible interest based on a fixed ratio or group ratio.
Taxation of Partnerships and Unincorporated Businesses
Partnership tax returns are filed by the nominated partner, reporting each partner's profit share.
Each partner includes their share in their personal self-assessment return.
A partner's capital allowances are allocated according to their profit-sharing ratio.
The cash basis restricts interest deductions to £500 or the accruals-basis amount, whichever is higher.
Trading allowance provides £1,000 relief for small trading income instead of actual expenses.
Class 2 NICs are payable where profits exceed the small profits threshold, with a de minimis exception.
Loss relief for partners is restricted to the amount of capital contributed to the partnership.
A change in accounting date can trigger a basis period adjustment for the affected partner.
Capital Gains and Capital Allowances
Allowable expenditure includes acquisition cost, incidental costs of acquisition and disposal, and enhancement costs.
Indexation allowance for companies is based on the retail prices index from acquisition to disposal.
The annual exempt amount is deducted from net gains after losses.
Capital losses must be set against gains of the same year before the annual exempt amount.
Business asset disposal relief requires a qualifying business disposal and a minimum holding period.
The structures and buildings allowance provides straight-line relief over 33.33 years.
The annual investment allowance is shared across connected companies and groups.
A disposal of an asset to a connected person is deemed to occur at market value.
Indirect Taxes (VAT and Sales Tax)
VAT returns are typically filed quarterly; the default is online filing with digital record-keeping.
Making tax digital requires digital records and compatible software for VAT-registered businesses.
The option to tax applies to commercial property, making supplies taxable and enabling input tax recovery.
The margin scheme applies to second-hand goods, calculating VAT on the margin rather than the full price.
The tour operators margin scheme applies VAT to the margin on travel packages.
Bad debt relief allows recovery of output tax on unpaid supplies after six months.
The capital goods scheme adjusts input tax recovery on high-value assets over several years.
A VAT group allows members to be treated as a single taxable person.
International Taxation and Cross-Border Transactions
The arm's-length principle requires pricing consistent with what independent parties would agree.
The OECD transfer pricing guidelines provide the five comparability factors.
Advance pricing agreements provide certainty on transfer pricing methods.
Withholding tax on dividends is often eliminated by the parent-subsidiary directive or treaty.
The principal purpose test denies treaty benefits where obtaining a benefit was a principal purpose.
Permanent establishment profit attribution follows the authorised OECD approach.
Foreign branch profits may be exempt from UK tax where an election is made and conditions are met.
Country-by-country reporting applies to large multinational groups.
Tax Planning, Ethics and Compliance
The GAAR applies a tax result that is just and reasonable, disregarding the abusive arrangements.
The disclosure of tax avoidance schemes regime requires promoters to notify HMRC of notifiable arrangements.
Professional ethics require integrity, objectivity, confidentiality, competence and compliance with the law.
Penalties for inaccuracies depend on behaviour: careless, deliberate, or deliberate and concealed.
A reasonable excuse defence may reduce or eliminate penalties for late filing or payment.
The GAAR panel issues opinions that are binding on HMRC in applying the rule.
Tax planning should be commercially driven; artificial steps risk challenge under the Ramsay principle.
The anti-money-laundering regime requires customer due diligence and suspicious activity reporting.
Taxation of Individuals
Statutory residence test: automatic UK tests, automatic overseas tests, then sufficient-ties test.
Split-year treatment applies to arrivals and departures meeting the relevant conditions.
The remittance basis is available to non-domiciled individuals, with an annual charge after seven years of residence.
Capital gains tax rates are 18% and 24% for most assets; residential property and carried interest have specific rates.
Entrepreneurs' relief (now business asset disposal relief) applies a 10% rate to qualifying gains.
Inheritance tax is charged at 40% above the nil-rate band, with 36% where 10% or more is left to charity.
The annual exemption for capital gains tax applies per individual per tax year.
Gift aid donations extend the basic rate band and the higher rate threshold.
Taxation of Companies and Corporate Groups
Corporation tax rates apply to taxable total profits; marginal relief applies between the lower and upper limits.
Capital allowances for companies follow the same pool system; the super-deduction and full expensing apply to qualifying expenditure.
Group payment arrangements allow groups to make a single corporation tax payment.
The substantial shareholding exemption exempts gains on disposals of qualifying shareholdings.
Intangible fixed assets regime provides tax relief on amortisation of goodwill and IP.
Research and development tax credits are available under the SME and large-company (RDEC) schemes.
Creative industry reliefs provide enhanced deductions or payable credits for qualifying productions.
Corporate interest restriction limits deductible interest based on a fixed ratio or group ratio.
Taxation of Partnerships and Unincorporated Businesses
Partnership tax returns are filed by the nominated partner, reporting each partner's profit share.
Each partner includes their share in their personal self-assessment return.
A partner's capital allowances are allocated according to their profit-sharing ratio.
The cash basis restricts interest deductions to £500 or the accruals-basis amount, whichever is higher.
Trading allowance provides £1,000 relief for small trading income instead of actual expenses.
Class 2 NICs are payable where profits exceed the small profits threshold, with a de minimis exception.
Loss relief for partners is restricted to the amount of capital contributed to the partnership.
A change in accounting date can trigger a basis period adjustment for the affected partner.
Capital Gains and Capital Allowances
Allowable expenditure includes acquisition cost, incidental costs of acquisition and disposal, and enhancement costs.
Indexation allowance for companies is based on the retail prices index from acquisition to disposal.
The annual exempt amount is deducted from net gains after losses.
Capital losses must be set against gains of the same year before the annual exempt amount.
Business asset disposal relief requires a qualifying business disposal and a minimum holding period.
The structures and buildings allowance provides straight-line relief over 33.33 years.
The annual investment allowance is shared across connected companies and groups.
A disposal of an asset to a connected person is deemed to occur at market value.
Indirect Taxes (VAT and Sales Tax)
VAT returns are typically filed quarterly; the default is online filing with digital record-keeping.
Making tax digital requires digital records and compatible software for VAT-registered businesses.
The option to tax applies to commercial property, making supplies taxable and enabling input tax recovery.
The margin scheme applies to second-hand goods, calculating VAT on the margin rather than the full price.
The tour operators margin scheme applies VAT to the margin on travel packages.
Bad debt relief allows recovery of output tax on unpaid supplies after six months.
The capital goods scheme adjusts input tax recovery on high-value assets over several years.
A VAT group allows members to be treated as a single taxable person.
International Taxation and Cross-Border Transactions
The arm's-length principle requires pricing consistent with what independent parties would agree.
The OECD transfer pricing guidelines provide the five comparability factors.
Advance pricing agreements provide certainty on transfer pricing methods.
Withholding tax on dividends is often eliminated by the parent-subsidiary directive or treaty.
The principal purpose test denies treaty benefits where obtaining a benefit was a principal purpose.
Permanent establishment profit attribution follows the authorised OECD approach.
Foreign branch profits may be exempt from UK tax where an election is made and conditions are met.
Country-by-country reporting applies to large multinational groups.
Tax Planning, Ethics and Compliance
The GAAR applies a tax result that is just and reasonable, disregarding the abusive arrangements.
The disclosure of tax avoidance schemes regime requires promoters to notify HMRC of notifiable arrangements.
Professional ethics require integrity, objectivity, confidentiality, competence and compliance with the law.
Penalties for inaccuracies depend on behaviour: careless, deliberate, or deliberate and concealed.
A reasonable excuse defence may reduce or eliminate penalties for late filing or payment.
The GAAR panel issues opinions that are binding on HMRC in applying the rule.
Tax planning should be commercially driven; artificial steps risk challenge under the Ramsay principle.
The anti-money-laundering regime requires customer due diligence and suspicious activity reporting.
Taxation of Individuals
Statutory residence test: automatic UK tests, automatic overseas tests, then sufficient-ties test.
Split-year treatment applies to arrivals and departures meeting the relevant conditions.
The remittance basis is available to non-domiciled individuals, with an annual charge after seven years of residence.
Capital gains tax rates are 18% and 24% for most assets; residential property and carried interest have specific rates.
Entrepreneurs' relief (now business asset disposal relief) applies a 10% rate to qualifying gains.
Inheritance tax is charged at 40% above the nil-rate band, with 36% where 10% or more is left to charity.
The annual exemption for capital gains tax applies per individual per tax year.
Gift aid donations extend the basic rate band and the higher rate threshold.
Taxation of Companies and Corporate Groups
Corporation tax rates apply to taxable total profits; marginal relief applies between the lower and upper limits.
Capital allowances for companies follow the same pool system; the super-deduction and full expensing apply to qualifying expenditure.
Group payment arrangements allow groups to make a single corporation tax payment.
The substantial shareholding exemption exempts gains on disposals of qualifying shareholdings.
Intangible fixed assets regime provides tax relief on amortisation of goodwill and IP.
Research and development tax credits are available under the SME and large-company (RDEC) schemes.
Creative industry reliefs provide enhanced deductions or payable credits for qualifying productions.
Corporate interest restriction limits deductible interest based on a fixed ratio or group ratio.
Taxation of Partnerships and Unincorporated Businesses
Partnership tax returns are filed by the nominated partner, reporting each partner's profit share.
Each partner includes their share in their personal self-assessment return.
A partner's capital allowances are allocated according to their profit-sharing ratio.
The cash basis restricts interest deductions to £500 or the accruals-basis amount, whichever is higher.
Trading allowance provides £1,000 relief for small trading income instead of actual expenses.
Class 2 NICs are payable where profits exceed the small profits threshold, with a de minimis exception.
Loss relief for partners is restricted to the amount of capital contributed to the partnership.
A change in accounting date can trigger a basis period adjustment for the affected partner.
Capital Gains and Capital Allowances
Allowable expenditure includes acquisition cost, incidental costs of acquisition and disposal, and enhancement costs.
Indexation allowance for companies is based on the retail prices index from acquisition to disposal.
The annual exempt amount is deducted from net gains after losses.
Capital losses must be set against gains of the same year before the annual exempt amount.
Business asset disposal relief requires a qualifying business disposal and a minimum holding period.
The structures and buildings allowance provides straight-line relief over 33.33 years.
The annual investment allowance is shared across connected companies and groups.
A disposal of an asset to a connected person is deemed to occur at market value.