ICAB PL Business Planning: Taxation and Compliance flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Statutory residence test

A three-part test determining UK tax residence: automatic UK tests, automatic overseas tests, and the sufficient-ties test applied when neither automatic test is met.

Personal savings allowance

A nil-rate band for savings income of £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers, and nil for additional-rate taxpayers.

Dividend allowance

A £500 annual amount of dividend income taxed at 0%, with dividends above it taxed at 8.75%, 33.75% or 39.35% depending on the band.

Payments on account

Advance income tax payments due 31 January and 31 July, each equal to 50% of the prior year's net income tax and Class 4 NIC liability.

Group relief

Surrender of current-year trading losses by one company to another within a 75%-common-ownership group, reducing the claimant's taxable profits.

Consortium relief

Group relief available where a company is owned by a consortium, each member holding at least 5%, allowing claims for a proportionate share of losses.

Loans to participators

A close company making a loan to a participator is charged tax at 33.75% unless the loan is repaid within nine months of the year end.

Quarterly instalments

Corporation tax payment method required where taxable profits exceed £1.5 million, with instalments based on the prior year's liability.

Profit-sharing ratio

The proportion in which partnership profits and losses are allocated to each partner, set by the partnership agreement or equally by default.

Basis period reform

A change aligning the tax year with the actual tax year rather than a prior accounting period, with transitional profits spread over five years.

Salaried member rules

Conditions determining whether an LLP member is taxed as an employee rather than a self-employed partner, based on remuneration and capital contribution.

Nominated partner

The partner responsible for filing the partnership tax return and reporting each partner's share of profits to HMRC.

Annual exempt amount

A per-individual allowance of net capital gains that is exempt from capital gains tax each tax year, deducted after losses.

Business asset disposal relief

A reduced 10% capital gains tax rate on qualifying business disposals, subject to a lifetime limit on the gains eligible for relief.

Rollover relief

Deferral of a capital gain where disposal proceeds are reinvested in qualifying replacement business assets within the permitted time window.

Balancing charge

An addition to taxable profits arising when disposal proceeds for plant and machinery exceed the tax written-down value of the pool.

Compulsory VAT registration

Registration required when taxable turnover exceeds the rolling 12-month threshold, or immediately where there are reasonable grounds to expect it will.

Partial exemption

A method restricting recovery of input tax on costs used to make both taxable and exempt supplies, calculated by a standard or special method.

Reverse charge

A mechanism shifting VAT liability to the business customer for specified cross-border services, so the customer accounts for output and input tax.

Option to tax

An election making supplies of commercial property taxable, enabling the business to recover input tax on related costs.

Permanent establishment

A fixed place of business or dependent agent through which a business carries on activity in another state, giving that state taxing rights.

Double taxation relief

A credit or exemption under a double tax treaty that prevents the same income or gains being taxed twice in two jurisdictions.

Controlled foreign company rules

Rules attributing low-taxed profits of an overseas subsidiary to the UK parent where control and low-tax conditions are met.

Withholding tax

Tax deducted at source on cross-border payments such as interest, royalties and dividends, often reduced by an applicable double tax treaty.

General anti-abuse rule

A rule allowing HMRC to counteract tax arrangements whose main purpose is to obtain a tax advantage, producing a just and reasonable result.

DOTAS

The disclosure of tax avoidance schemes regime requiring promoters to notify HMRC of notifiable arrangements and clients to be informed.

Ramsay principle

A judicial approach construing tax statutes purposively, disregarding artificial steps in a scheme and taxing the real substance of the transaction.

Reasonable excuse

A defence available against certain penalties for late filing or payment where the failure arose from circumstances outside the taxpayer's control.

Remittance basis

A basis taxing only foreign income and gains remitted to the UK, available to non-domiciled individuals subject to an annual charge after seven years.

Transfer pricing

The requirement that transactions between connected parties be priced on an arm's-length basis, with adjustments where they are not.

Capital goods scheme

A mechanism adjusting input tax recovery on high-value capital assets over several years to reflect their actual taxable and exempt use.

Advance pricing agreement

An arrangement with a tax authority confirming a transfer pricing method for future transactions, providing certainty for the taxpayer.