CTA Part 1 key terms

The part of a person's total income for a period that remains after permitted deductions and reliefs have been subtracted, and to which the applicable tax rates are then applied.

A fixed amount of income that an individual may receive free of income tax in a tax year, typically reduced or withdrawn once total income exceeds a set threshold.

A rate structure in which the rate of tax rises as income increases, so that each slice of income is taxed at the rate applying to the band into which it falls.

Earnings and other rewards arising from an office or employment, including salary, wages, bonuses and commissions, together with most benefits provided by the employer.

A non-cash reward given to an employee because of their employment, such as a company car or subsidised loan, which is normally valued and brought into charge.

Tax relief for payments an individual makes into a qualifying retirement scheme, usually delivered by deducting the contribution from income or by adding basic-rate relief into the fund.

The classification of a receipt or payment as capital, relating to the structure or assets of a business, or revenue, relating to day-to-day trading; the label decides how it is taxed.

Tax relief that spreads the cost of qualifying plant, machinery or similar capital assets against business profits over time rather than allowing the whole cost immediately.

Rules allowing a business loss to be set against other profits, such as earlier or later profits of the same trade or other income and gains, subject to conditions and time limits.

A mechanism that lets one company in a qualifying corporate group surrender its current-period losses to another group company, lowering the group's overall taxable profit.

The test deciding which country may tax a company's worldwide profits, commonly based on the place of incorporation or the place where central management and control is exercised.

The classification of an individual as an employee or as self-employed; it determines who withholds tax, which social security rules apply and what expenses may be claimed.

The profit realised when an asset is disposed of, computed as disposal proceeds less allowable costs, which is then subjected to capital gains tax after exemptions and reliefs.

The amount spent to acquire an asset plus related incidental costs of purchase and of improvement, which is deducted from disposal proceeds when computing a gain.

Any sale, gift, exchange or other transfer of ownership of an asset, including certain deemed disposals, that can trigger a capital gain or a capital loss.

A fixed amount of net gains an individual may realise in a tax year before any capital gains tax becomes payable; unused amounts cannot normally be carried forward.

A deferral relief that allows a gain on disposing of a qualifying business asset to be postponed by deducting it from the cost of a replacement asset bought within a set period.

Relief that exempts, or reduces, the capital gain on a dwelling that served as the owner's main home for part or all of the period of ownership.

A loss arising on the disposal of an asset; it may generally be set only against capital gains of the same or later years and not against ordinary income.

The indirect tax a business charges on its taxable supplies of goods and services, which it collects from customers and then accounts for to the tax authority.

Tax a registered business pays on purchases and expenses that it may recover, in whole or in part, from the tax authority, subject to rules on exempt and private use.

A supply charged at a rate of zero per cent; it remains a taxable supply, so the supplier may still recover input tax attributable to making it.

A supply that falls outside the charge to the tax, so no output tax is levied and the supplier generally cannot recover input tax linked to making it.

The rules deciding which country's indirect tax applies to a transaction, based on factors such as where the supplier, the customer or the goods are located.

A mechanism that shifts the duty to account for indirect tax from the supplier to the business customer, commonly used for cross-border services and certain domestic supplies.

A turnover level set by law; once a business's taxable supplies exceed it, the business must register for indirect tax and begin charging it on its supplies.

A tax charged on transactions or instruments transferring land, buildings or shares, usually payable by the buyer and calculated on the consideration paid.

A system in which the taxpayer calculates and reports their own liability on a return, with the revenue authority checking compliance afterwards through risk-based enquiries and audits.

The legal duty to keep supporting documents and accounting records for a set number of years so that figures reported on tax returns can be verified.

The set of charges imposed for late filing, late payment, inaccurate returns and other non-compliance, separate from the tax itself and designed to encourage timely, accurate reporting.

Avoidance is arranging affairs to reduce tax within the letter of the law; evasion is deliberately concealing or misreporting information to pay less tax and is a criminal offence.

The standard expected of a taxpayer preparing a return; taking reasonable care means keeping records and making sensible checks, and it protects against penalties for careless inaccuracies.

The statutory period within which the tax authority may open an enquiry or raise an additional assessment, which is often extended where there is carelessness or deliberate behaviour.

A treaty between two countries that allocates taxing rights and provides relief, by exemption or credit, so that the same income is not taxed twice.

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

Tax deducted at source by the payer from payments such as dividends, interest or royalties, often at a reduced or nil rate under the terms of a treaty.

Rules requiring cross-border transactions between related companies to be priced as they would be between independent parties, so profits are taxed where value is created.

A foreign subsidiary controlled by resident shareholders whose low-taxed profits may be attributed back and taxed in the parent's country under anti-deferral rules.

The person who ultimately owns or receives the income or asset, as distinct from a nominee or agent holding bare legal title; treaty benefits often depend on this status.