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PTX Personal Taxation

PTX Personal Taxation. Introduction. Tax: 3 Rules of Thumb. If you increase your wealth, expect HMRC to tax it Claim all possible tax deductions Disclose all taxable income (to avoid problems later). Objectives. 3. To be able to identify: When tax years start and finish

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PTX Personal Taxation

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  1. PTX Personal Taxation Introduction

  2. Tax: 3 Rules of Thumb • If you increase your wealth, expect HMRC to tax it • Claim all possible tax deductions • Disclose all taxable income (to avoid problems later)

  3. Objectives 3 To be able to identify: When tax years start and finish The deadline for submitting a tax return Deadlines for paying tax What basis should be used to assess different types of income Income which is exempt from Income Tax How long records must be retained Responsibilities of a tax practitioner

  4. Tax Year for Income Tax and CGT • Tax year 2012/2013 • starts on 6th April • Governed by Finance Act 2012

  5. Tax Return and Payment • Form SA100 • Supplementary pages • Submit by • 31/10/13 (paper) • 31/1/14 (on line) • Payment on account • 31/1/13 • 31/7/13 • Final (balancing) payment • 31/1/14

  6. Types of Income

  7. Tax Computation • See tax data and pro-forma • Personal Allowance • Tax Bands: • Non-savings (General) • Savings • Dividends

  8. Exempt Income • ISAs • NS&I Savings Certificates (not savings accounts) • Prizes (eg. Premium Bonds) • Damages

  9. Record-keeping • Keep to: • 31/1/15 • Filing deadline + 1 year • 31/1/19if there is trading/property income • Filing deadline + 5 years Sufficient to substantiate the information provided to HMRC

  10. Duties and Responsibilities of a Tax Practitioner Put forward the best position in favour of a client or employer

  11. ETHICS QUIZ

  12. Q1 When is a tax practitioner allowed to disclose information about a client without their authority

  13. Q2 If an accountant suspects money laundering, to whom should he/she report it

  14. Q3 Describe the types of communication with which an accountant should not be associated

  15. ANSWERS

  16. Q1 If there is legal, regulatory or professional duty

  17. Q2 Money Laundering Reporting Officer, Serious Organised Crime Agency

  18. Q3 False, misleading, reckless, omitting/obscuring information

  19. PTX Personal Taxation Savings & Investments (Interest & dividends)

  20. Objectives To be able to: • Explain the basis on which investment income is taxed • Identify income which is not taxed at source • Identify income which is exempt from tax • Gross-up income and calculate the tax due • Explain record-keeping requirements

  21. Taxation of Investment Income • Receipts basis (not accrual)

  22. Tax at source • Most interest has tax deducted at source • Basic rate • Not • NS&I accounts and income bonds • Gilts • Dividends are “deemed” to have tax deducted at source • Not repayable

  23. Gross (assessable) income: Questions • Net savings income = £160 • 20% tax already deducted • Gross = ??? • Net dividend income = £270 • 10% tax already deducted • Gross = ???

  24. Tax-free Income • These do not need to be reported on tax returns: • ISAs (£11,280 per year) • National Savings Certificates • Premium Bonds

  25. Record-keeping: Question • What records might you keep relating to investment income?

  26. Gross (assessable) income: Answers • Net savings income = £160 • 20% tax already deducted • Gross = £200 • Net dividend income = £270 • 10% tax already deducted • Gross = £300

  27. Record-keeping: Answer • What records might you keep relating to investment income? • Tax deduction certificates • Dividend vouchers • Account details • Working papers

  28. PTX Personal Taxation Employment (Salaries, Bonuses, Pensions)

  29. Objectives To be able to: • Decide whether a taxpayer is employed or self-employed • Decide when employment income is taxable • Assess the taxable amount on a variety of benefits in kind • Identify expenses which are allowable in calculating taxable income • Explain record-keeping requirements

  30. Income received + benefits in kind - allowable deductions Employment Income

  31. Taxation of Employment Income • Receipts basis (not accrual)

  32. Indicators of Self-Employment (Contract for Services) • Can employ substitute • decide how/when/where to work • choose work hours • financial risk • provide own equipment • work for several people/organisations

  33. Taxable Benefits

  34. General Rule (P11D employees) • Cash cost to employer

  35. Employee contribution • Reduces benefit (except fuel)

  36. List price – employee contribution x scale charge %- employee contribution to running cost Company Car Benefit

  37. Below 100g/km: see data sheet100g/km: 11%+1% per 5g/kmMax 35%Diesel: +3% Scale Charge %

  38. £20,200 x scale charge %Ignore part contribution Fuel Benefit

  39. Car & fuel benefits are time-apportioned if the car is not available for the whole tax year Timing

  40. Pool Car • Not a benefit if: • Private use is incidental • Used by several employees • Not normally kept at employee’s home

  41. Company Van • No benefit if insignificant private use • £3,000 for private use • £550 for fuel for private use

  42. Beneficial Loan • Loan x (Official interest – Actual interest) • No benefit if total loans <£5,000 • If loan written off: • Benefit = Amount of loan

  43. Accomodation • Annual value (or rent paid by employer if higher) • +(Cost - £75,000) x Official interest • + Cleaning etc • + Assets x 20% • Time apportioned

  44. Accomodation • Exempt for • Representative occupier (Caretaker) • Customary (Vicar) • Security • In these cases: • Running expenses limited to 10% of earnings

  45. Gift/Loan of Asset • Gift • Benefit = Market value • Loan • Benefit = 20% of value when first provided

  46. Gift of asset previously loaned • Higher of: • market value when transferred • market value when first provided • less benefits already assessed (less employee contribution)

  47. Tax-free benefits

  48. Tax-free benefits • Money: • First £30,000 redundancy (not strictly a benefit) • £8,000 relocation • £5,000 suggestion scheme, long service award (20yrs, £50/yr) • £5 per night incidental expenses (£10 overseas) • £2/week for work at home

  49. Tax-free benefits • employers pension contribution • one mobile phone + calls • Childcare: • workplace creche • £55 approved childcare • Food: • staff canteen • 15p/day luncheon vouchers • Staff entertainments (£150pa per person, events above this disallowed)

  50. Tax-free benefits • Transport: • use of bicycle • company bus • workplace parking • Other: • sports facilities • counselling • eye checks • certain state benefits

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