ICAB PL Business Planning: Taxation and Compliance key terms

The final amount of income left after allowable deductions and reliefs have been subtracted from total income, on which an individual's income tax is then calculated at the applicable rates.

A fixed amount of income that an individual may receive free of income tax each year, usually reduced or withdrawn once income exceeds a set threshold.

The rate of tax applied to the next unit of income or gain, showing how much of an additional amount is taken in tax rather than the average burden across all income.

Total tax payable expressed as a percentage of total income or profit, giving an overall picture of burden rather than the rate on the last slice of income.

A system in which an employer or payer deducts income tax from wages or other payments at source and remits it to the tax authority on the recipient's behalf.

An amount subtracted directly from the tax liability itself, rather than from taxable income, so each unit of credit reduces tax owed by the same unit.

A deduction or exemption that reduces taxable income or tax payable, often granted to encourage specific behaviour such as saving, pension contributions, or charitable giving.

The profit of a business adjusted from accounting profit to the tax rules, adding back disallowable expenses and deducting permitted allowances and reliefs.

Tax relief spread over time for the cost of qualifying capital assets used in a business, replacing accounting depreciation with statutorily permitted deductions.

An amount added back to taxable profit when an asset is sold or disposed of for more than its remaining tax value, reversing earlier allowances that proved excessive.

An additional deduction claimed when an asset is disposed of for less than its remaining tax value, reflecting the unrecovered cost of the asset.

A mechanism allowing losses or surplus expenses of one company in a qualifying group to be surrendered to another group company, reducing the group's overall tax burden.

A form of loss sharing available where a company is owned by a consortium of several companies, permitting losses to be surrendered among qualifying members.

The right to apply a trading loss against profits of later accounting periods, subject to rules that may restrict the amount or the type of profit it can offset.

A special relief permitting losses incurred in the final period of a trade to be carried back against profits of earlier periods, giving priority over other loss claims.

The rules requiring transactions between connected or related parties to be priced as they would be between independent parties, preventing profit shifting across borders or entities.

A fixed place of business or dependent agent in a country through which an enterprise carries on business, giving that country the right to tax the resulting profits.

A credit or exemption that prevents the same income or gain from being taxed twice, typically by allowing tax paid abroad to reduce the domestic tax due.

A bilateral agreement between two countries allocating taxing rights, defining residence and source rules, and providing mechanisms to relieve double taxation.

Rules that limit the tax deduction for interest on debt owed to related parties where the company's debt-to-equity ratio exceeds a permitted level, treating excess as equity.

The legal connection between a person or company and a country that generally triggers tax on worldwide income, determined by tests such as domicile, days present, or place of management.

The country or place from which income is derived, which typically gives that jurisdiction the primary right to tax the income even where the recipient is not resident there.

Tax deducted at source by the payer on certain payments such as dividends, interest, royalties, or fees, and remitted to the tax authority on behalf of the recipient.

A consumption tax charged on the value added at each stage of supply, collected by businesses from customers and remitted to the authority net of tax paid on purchases.

Tax charged on purchases and expenses incurred by a registered business, which may generally be recovered as a credit against the tax charged on its own sales.

Tax charged by a registered business on its own taxable supplies, which it must account for and pay to the tax authority after deducting recoverable input tax.

The rule determining which country's indirect tax applies to a transaction, based on factors such as where goods are located or where the customer belongs for services.

A mechanism shifting the obligation to account for tax from the supplier to the business customer, commonly used for cross-border services and certain domestic supplies.

The level of turnover above which a business must register for indirect tax, with voluntary registration sometimes available below it to recover input tax.

The profit realised when a capital asset is disposed of for more than its allowable acquisition and improvement cost, taxed separately from trading income.

The taxable portion of a capital gain after deducting allowable costs, reliefs, and the annual exemption, on which capital gains tax is calculated.

The original acquisition cost of an asset plus incidental purchase costs and qualifying improvements, used to measure the gain on eventual disposal.

The portion of partnership taxable profit allocated to each partner under the profit-sharing agreement, on which that partner is personally taxed.

A partner's share of partnership income calculated for tax purposes even where no cash was actually drawn, reflecting entitlement rather than amounts received.

A rule making each partner liable for the whole of a partnership's tax debt, while the partnership retains a right to recover contributions from the other partners.

Arranging affairs within the letter of the law to reduce tax in a way the legislature did not intend, often challenged under anti-avoidance rules or general anti-abuse provisions.

The illegal reduction of tax by concealment, misrepresentation, or deliberate failure to disclose, exposing the taxpayer to criminal penalties as well as financial sanctions.

A principle allowing tax authorities or courts to look at the economic reality of a transaction rather than merely its legal label when determining the tax outcome.

The set of statutory sanctions for non-compliance, such as late filing, late payment, or inaccuracy, usually scaled to the behaviour and the amount of tax at stake.

A binding statement from the tax authority on how it will treat a proposed transaction, giving certainty to the taxpayer before the arrangement is implemented.