CTA Part 2 key terms

The amount of income an individual can receive in a tax year before income tax becomes payable, reduced where income exceeds £100,000 and restricted for certain non-residents and other special cases.

The slice of taxable income charged at the basic rate of income tax, sitting above the personal allowance and below the higher rate threshold; it can be widened by Gift Aid donations and personal pension contributions.

A non-cash reward provided by an employer to an employee, such as a company car, medical insurance or cheap loan, generally taxed on the employee and reported to HMRC by the employer.

Employer-only National Insurance contributions charged on most taxable benefits in kind, calculated at the employer's secondary Class 1 rate and reported annually rather than through the monthly payroll.

An arrangement where an employee gives up part of their gross pay in return for a non-cash benefit, reducing taxable earnings and NICs if the sacrifice is effective and the benefit is not one of the restricted types.

A 100% first-year capital allowance for qualifying plant and machinery, available to businesses irrespective of size up to a set annual limit, with apportionment where an accounting period straddles a change in that limit.

The mechanism allowing companies in a 75% common ownership group, or consortium companies, to surrender trading losses and certain other amounts to another member, offsetting them against that company's profits for the same accounting period.

A UK-resident company controlled by five or fewer participators, or by any number of participators who are also directors, which triggers special rules on loans to participators, distributions and certain expenses.

Advance corporation tax payments required from larger companies, made in four instalments during the accounting period based on estimated current-year liability, with any balance settled after the period end.

The requirement that transactions between connected parties be priced as they would be between independent parties, with a compensating adjustment made for tax purposes where the arm's length principle is not satisfied.

A taxable above-the-line credit for qualifying research and development spending by larger companies and certain small companies, claimed through the corporation tax return and often paid in cash where a loss arises.

The system under which a company calculates and reports its own corporation tax liability, filing a return normally within twelve months of the period end and paying tax about nine months and one day after it.

The allowance of chargeable gains an individual or trust may realise in a tax year free of capital gains tax; unused amounts generally cannot be carried forward.

A capital gains tax relief applying a reduced rate to gains on disposing of a business, or shares in a personal trading company, where qualifying conditions and a lifetime limit are met.

Relief from capital gains tax on gains arising from disposing of an individual's only or main residence, calculated by reference to periods of ownership, occupation and permitted absences.

A claim that defers capital gains tax when assets are gifted or sold at an undervalue, so the gain is held over and taxed when the recipient later disposes of the asset.

The rules deciding which shares have been sold when part of a holding is disposed of, applying same-day acquisitions first, then purchases in the following thirty days, then the pooled holding.

The threshold of chargeable transfers an individual may make free of inheritance tax, applying to lifetime transfers in any seven-year period and to the estate on death.

An additional inheritance tax threshold available where a main residence is left to direct descendants, tapered away for larger estates and dependent on a valid claim by the personal representatives.

A lifetime gift to an individual or to certain trusts that becomes fully exempt from inheritance tax if the donor survives seven years, but is otherwise brought into charge when the donor dies.

A lifetime transfer into a discretionary trust or to another non-exempt recipient, chargeable immediately at lifetime rates to the extent it exceeds the available nil rate band.

A reduction in the inheritance tax payable on lifetime transfers made more than three years before death, scaling the tax down in steps as the gap between transfer and death lengthens.

An inheritance tax relief that reduces the value of qualifying business property, such as unquoted trading company shares or an interest in a trading business, by 100% or 50% depending on the asset, subject to ownership conditions.

A trust in which trustees decide how income and capital are shared among a class of beneficiaries; it is treated as relevant property and bears entry, ten-year anniversary and exit charges.

A trust in which a named beneficiary is entitled to the income as it arises, so the trust fund is generally treated as part of that beneficiary's estate for inheritance tax purposes.

The level of taxable turnover above which a business must register for VAT, tested on a rolling twelve-month basis for past turnover and on a forward-looking basis for expected future turnover.

A supply that is taxable but charged at 0% VAT, so the supplier charges the customer nothing while still being able to recover input tax on related costs.

A supply that falls outside the charge to VAT, such as many financial, education and healthcare services, on which no VAT is charged and for which related input tax is normally not recoverable.

The set of rules for businesses making both taxable and exempt supplies, restricting recovery of input tax linked to exempt activity and requiring an annual calculation and adjustment.

An election to charge VAT on supplies of land or buildings that would otherwise be exempt, enabling the supplier to recover input tax on associated costs but usually making the property VATable for future supplies.

A mechanism under which the customer rather than the supplier accounts for VAT on a supply, used for certain services bought from overseas businesses and for specified domestic supplies such as construction services.

The date by which a tax return must be submitted, generally 31 January following the end of the tax year for online returns, with fixed and tax-geared penalties for late filing.

Advance payments towards the following year's income tax and Class 4 National Insurance, normally two instalments based on the previous year's liability, with a balancing payment due on 31 January.

An assessment HMRC may raise outside the normal enquiry window to recover tax where income or gains were insufficiently disclosed, or where an officer could not reasonably have been expected to know of them.

A defence available against many tax penalties where a failure arose from circumstances beyond the taxpayer's control, judged in the light of that person's knowledge, experience and abilities.

The regime requiring promoters, and in some cases users, to notify HMRC of specified avoidance arrangements, giving HMRC a scheme reference number and exposing participants to penalties for non-compliance.

A report a regulated tax adviser must submit to the National Crime Agency where they know or suspect money laundering or terrorist financing, with consent generally needed before continuing the work.

The joint professional bodies' code of standards for tax advisers, covering integrity, competence, client confidentiality, dealing with errors and the adviser's wider responsibilities to the tax system.