The Taxation of Small Businesses - Fifth Edition
Spiramus Press, August 2012, Pages: 496
Taxation of Small Businesses is a practical guide to all aspects of direct taxation of a small business in one volume. It is ideal for sole practitioners and small partnerships, but will be a handy reference guide for all tax advisers. The book aims to give a clear explanation of the relevant legislation and practical advice on ways of minimising clients' tax liabilities and warning against common pitfalls.
The fifth edition has been updated to incorporate changes as a result of the Finance Act 2012.
The tax advantages of incorporating a small business need weighing up carefully, and business owners need to decide whether or not the advantages outweigh the additional burden of compliance.
Major topics covered by the book include: taxation of business profits, taxation of employment, Corporation Tax, NIC, Capital Gains Tax, Inheritance Tax, Pensions, and Entrepreneurs' Relief.
Chapter 1. Income Tax Computation
1.1. Aggregation of Taxpayer's Income
1.2. Interest
1.3. Payments to Charities
1.3.1........... Gift Aid Scheme
1.3.2........... Gifts of Land and Buildings or Shares
1.4. Personal Allowances Deducted from Net Income
1.4.1........... Introduction
1.4.2........... Personal Allowance (2012/13 £8,105)
1.4.3........... Age Allowance
1.4.4........... Blind Person's Allowance (2012/13 £2,100)
1.5. Computation of Tax
1.5.1........... Tax Rates
1.5.2........... Extension of Basic Rate Band
1.6. Tax Reducers
1.6.1........... Categories of Tax Reducers
1.6.2........... Married Couple's Age Allowance (MCAA)
1.6.3........... Reduction in MCAA
1.6.4........... Marriage During Tax Year
1.6.5........... Transfer of MCAA
1.6.6........... Maintenance Payments
1.7. Tax Retained on Interest, Royalties and Gift Aid donations
1.8. Comprehensive Example
1.9. Death and Separation
1.9.1........... Death
1.9.2........... Divorce and Separation
1.10. Married Couples – Joint Property
1.11. Minor Children
1.12. High Income Child Benefit Charge
Chapter 2. Taxation of Trading Income
2.1. Introduction
2.2. Statutory Definitions of Trading
2.3. Statutory Trades
2.4. Case Law
2.4.1........... Badges of Trade
2.4.2........... Trading or Investment
2.4.3........... Profit Motive
2.4.4........... Subject Matter
2.4.5........... Frequency of Transactions
2.4.6........... Length of Ownership
2.4.7........... Supplementary Work
2.4.8........... Manner in which Assets are Acquired and Circumstances Surrounding Sale
2.5. Gambling and Speculation
2.6. Illegal Activities
2.7. Individuals Trading in Shares
2.8. Definition of Trading – National Insurance
2.9. Mutual Trading
2.10. Capital and Revenue Receipts
2.10.1.......... General Principles
2.10.2.......... Compensation for Loss or Sterilisation of Profit-making Apparatus
2.10.3.......... Compensation for Loss of Profit
2.10.4.......... Compensation for Loss of or Damage to Fixed Assets
2.10.5.......... Compensation and Liability to Tax
2.10.6.......... Know-how
2.10.7.......... Foreign Currency Transactions
2.10.8.......... Grants
2.11. Receipts not Received in Course of Trade
2.11.1.......... Non-contractual Receipts
2.11.2.......... Unclaimed Money
2.11.3.......... Commission, Discounts and Cashback
2.11.4.......... Sponsorship
2.12. Other Receipts
2.12.1.......... Rebates, Insurance Receipts, Damages, Statutory Payments and Interest
2.12.2.......... Release from Debts
2.12.3.......... Directors' Fees and Professional Appointments
2.12.4.......... Rent Receivable
2.12.5.......... Casual Receipts
2.12.6.......... Receipts in Kind
2.12.7.......... Post-cessation Receipts
2.13. Capital and Revenue Payments
2.14. Expenditure Incurred in the Course of a Trade
2.15. Duality of Purpose
2.15.1.......... General Principles
2.15.2.......... Expenditure on Meals
2.15.3.......... Business Clothing
2.15.4.......... Travel and Motoring Expenses
2.15.5.......... Duality of Purpose – Other Items
2.16. Repairs and Maintenance
2.17. Replacement of Assets
2.18. Depreciation and Amortisation
2.19. Subscriptions and Donations
2.20. Sponsorship
2.21. Bad Debts
2.22. Provisions
2.23. Payments to Employees & Appropriations of Profit
2.24. Entertainment
2.25. Gifts to Customers and Samples
2.26. Gifts to Educational Establishments and Charities
2.27. Cost of Leasing Cars
2.28. Legal and Professional Fees
2.29. Fines and Payments Against the Public Interest
2.30. Interest and Bank Charges
2.31. Pre-trading Expenditure
2.32. Indirect Taxation
2.33. Compensation and Ex gratia Payments to Former Employees
2.34. Redundancy Payments
2.35. Removal Expenses to New Business Premises
2.36. Premiums for Insurance
2.37. Payments to Employees for Restrictive Undertakings
2.38. Staff Training and Development
2.39. Counselling Courses in Connection with Termination of Employment
2.40. Payments to Secure Release from Unprofitable Contracts
2.41. Payments to Political Parties
2.42. Preservation of Goodwill
2.43. Payments on the Cessation of Trade
2.44. Post-cessation Expenditure
2.45. Rent
2.46. Lease Premium
2.47. Patents and Intellectual Property
2.48. Telephone
2.49. Business Rates and Council Tax
2.50. Security Expenditure
2.51. Loan Guarantee Payments
2.52. Use of Home
2.53. Website Expenditure
2.54. Expenses Connected with Foreign Trades
2.55. Valuation of Stock
2.55.1.......... General Principles
2.55.2.......... Appropriations of Stock
2.55.3.......... Long-term Contracts
2.55.4.......... Discontinuation of Trade
2.56. Overseas Aspects of Trading
2.56.1.......... Chargeability of Overseas Trades
2.56.2.......... Computation of Profits of Overseas Trades
2.56.3.......... Traders not Resident in the UK
2.56.4.......... Payments to Entertainers and Sportsmen
Chapter 3. Capital Allowances on Plant and Machinery
3.1. Introduction
3.2. Definition of Plant and Machinery
3.2.1........... Statutory Rules
3.2.2........... Case Law
3.3. Assets Deemed to be Plant and Machinery
3.3.1........... Thermal Insulation of Industrial Buildings
3.3.2........... Fire Safety Expenditure
3.3.3........... Expenditure on Safety at Sports Grounds
3.3.4........... Assets Acquired for Personal Security
3.3.5........... Computer Software
3.4. Definition of Expenditure
3.4.1........... General Principle
3.4.2........... Grants, Subsidies and Contributions
3.4.3........... Loan Interest
3.4.4........... Exchange Rate Fluctuations
3.4.5........... Assets Originally Acquired for Non-qualifying Purposes
3.4.6........... Assets Acquired at Undervalue
3.5. Date of Expenditure
3.6. Disposal of Assets
3.7. Allowances
3.7.1........... Writing Down Allowance (WDA)
3.7.2........... First Year Allowances (FYA)
3.7.3........... Annual Investment Allowance (AIA)
3.7.4........... 100% FYAs
3.7.5........... Energy-saving Plant and Machinery
3.7.6........... Cars with Low CO2 Emissions
3.7.7........... Expenditure on Zero emission Goods Vehicles
3.7.8........... Expenditure on Plant or Machinery for Gas Refuelling Stations
3.7.9........... Expenditure on Environmentally Beneficial Plant and Machinery
3.8. Calculation of Capital Allowances
3.8.1........... Categories of Plant and Machinery
3.8.2........... General Pool Expenditure
3.8.3........... Cars Costing over £12,000
3.8.4........... Special Rate Expenditure
3.8.5........... Assets With Private Use
3.8.6........... Partial Depreciation Subsidies
3.9. Short-life Assets
3.10. Cessations and Successions
3.10.1.......... Cessations
3.10.2.......... Successions
3.11. Hire Purchase and Leasing
3.12. Fixtures
3.12.1.......... Definition
3.12.2.......... Fixture Installed in Building in which Qualifying Activity is Carried On
3.12.3.......... Transfer of Allowances to Lessee
3.12.4.......... Equipment Leases
3.13. Disposal of Fixtures
3.13.1.......... Sale of Qualifying Interest
3.13.2.......... Expiry of Qualifying Interest
3.13.3.......... Discontinuance of Qualifying Activity
3.13.4.......... Use of Fixture for Purpose Other Than Qualifying Activity
3.13.5.......... Transfer of Allowances to Lessee
3.13.6.......... Severance of Fixture
3.13.7.......... Fixture Which is Subject of an Equipment Lease or is Owned By Energy Services Provider
3.13.8.......... Merger of Interest
3.13.9.......... Apportionment of Sale Proceeds
3.13.10........ Allowances Claimed by Subsequent Owner
3.13.11........ Fixtures – Anti-avoidance Provision
3.14. Anti-avoidance
Chapter 4. Other Allowances
4.1. Business Premises Renovation Allowance
4.1.1........... Qualifying Expenditure
4.1.2........... Qualifying Building
4.1.3........... Relevant Interest
4.1.4........... Initial Allowance
4.1.5........... Writing Down Allowance
4.1.6........... Grants and Payments Towards Expenditure
4.1.7........... Balancing Adjustments
4.1.8........... Termination of Lease
4.2. Flat Conversion Allowances
4.2.1........... Introduction
4.2.2........... Qualifying Expenditure
4.2.3........... Qualifying Building
4.2.4........... Qualifying Flat
4.2.5........... Relevant Interest
4.2.6........... Allowances
4.2.7........... Balancing Adjustments
4.2.8........... Termination of Lease
4.3. Patents
4.4. Know-how
Chapter 5. Basis Periods
5.1. Current Year Basis (CYB)
5.2. Opening Year Rules
5.3. Closing Year Rules
5.4. Tax Planning on Commencement
5.5. Tax Planning on Cessation
5.6. Change of Accounting Date
5.7. Period Less than 12 Months
5.8. Period More Than 12 Months
5.9. Two Accounting Dates in Tax Year
5.10. No Accounting Date in Tax Year
5.11. Transitional Overlap Relief
5.12. Changes in Size and Nature of Operations
5.13. Death of Trader
5.14. Mergers and Demergers
5.15. Date of Commencement and Cessation
5.16. Successions
5.17. Trader Becoming, or Ceasing to be, UK Resident
Chapter 6. Trading Losses
6.1. Introduction
6.2. Offset Against Future Trading Income
6.3. Transfer of Business to a Company
6.4. Offset Against Total Income and Carry-back
6.5. Offset Against Capital Gains
6.6. Losses in the Early Years of Trading
6.7. Terminal Loss Relief
6.8. Tax Planning and Loss Relief
6.9. Restriction of Loss Relief
6.10. Late Claims
Chapter 7. Property Income
7.1. Introduction
7.2. Basis of Assessment
7.3. Dilapidations
7.4. Lease Premiums
7.4.1........... Premium Taxable as Property Income
7.4.2........... Duration of Lease
7.4.3........... Amount of Premium
7.4.4........... Premiums on Grant of Sub-lease
7.4.5........... Reverse Premiums
7.4.6........... Assignment of Leases Granted at Undervalue
7.5. Sale with Right of Conveyance
7.6. Expenditure Deductible
7.7. Sea Walls
7.8. Mutual Business
7.9. Relief for Capital Expenditure
7.10. Losses
7.11. Furnished Holiday Lettings
7.12. Rent a Room Scheme
Chapter 8. Employment and Self-employment
8.1. Introduction
8.2. Benefits of Self-employment
8.3. Definition of Employment and Self-employment
8.4. Tests for Employment
8.4.1........... General Principles
8.4.2........... Mutuality of Obligations
8.4.3........... Control
8.4.4........... Right to Use a Substitute or Obtain Assistance
8.4.5........... Provision of Equipment
8.4.6........... Financial Risk
8.4.7........... Part and Parcel of Organisation
8.4.8........... Employee Benefits and Right of Dismissal
8.4.9........... Method of Payment
8.4.10.......... Intention of the Parties
8.5. Workers Supplied by Agencies
8.6. Non-executive Directors
8.7. Self-employment or a Number of Separate Employments
8.8. Provision of Services Through an Intermediary – Income Tax
8.8.1........... Legislative Framework
8.8.2........... Calculation of Deemed Payment
8.8.3........... Deemed Payment – Treatment by Intermediary
8.8.4........... Provision of Services through an Intermediary – National Insurance
8.8.5........... Payment of Tax on Deemed Payment
8.8.6........... Multiple Intermediaries
8.9. Managed Service Companies
8.10. National Insurance – Deemed Employment
8.11. National Insurance – Deemed Self-employment
8.12. National Insurance – Persons Deemed not to be Employed
Chapter 9. Employment Income
9.1. Income Tax – Introduction, Charging Legislation and General Definitions
9.2. National Insurance Contributions – Charging Legislation and General Definitions
9.3. Income Tax and National Insurance – a Comparison
9.3.1........... General
9.3.2........... Cash Payments
9.3.3........... Expenses
9.3.4........... Capital Allowances, Pension Contributions and Other Deductions
9.3.5........... Benefits in Kind
9.4. Time of Receipt
9.5. Cash Payments to Employees
9.6. Payments Arising by Reason of Employment
9.6.1........... Inducements (‘Golden Hellos')
9.6.2........... Employment Income Provided Through Third Parties
9.6.3........... Tips and Gratuities
9.6.4........... Payments to Sales Representatives
9.6.5........... Other Payments Arising by Reason of Employment
9.7. Payments on Termination of Employment or Variation of Employment Terms
9.7.1........... Payments in Lieu of Notice (PILONs) and ‘Gardening Leave'
9.7.2........... Payments on Death or Disability
9.7.3........... Compensation for Loss of Office or Variation of Terms of Employment
9.7.4........... Calculation of Termination Payment
9.7.5........... Legal Costs Associated with Termination of Employment
9.8. Damages and Compensation Paid to Employee
9.9. Sick Pay and Sickness and Other Benefits
9.10. Commission, Cashbacks and Discounts
9.11. Tax-free Lump Sum Payments
9.12. Payment of Expenses to Third Parties on Behalf of Employee
9.13. Payments for Clothing
9.14. Directorships Held by Partners
9.15. Payment of Employee's Tax by Employer
9.16. Income Tax – Deduction of Expenses
9.17. Reimbursement of Expenses
9.17.1.......... Income Tax
9.17.2.......... Expenses – Class 1 NIC
9.18. Qualifying Travel Expenses
9.18.1.......... Case Law
9.18.2.......... Statutory Relief for Travel to Temporary Place of Employment
9.18.3.......... Travel Expenses – Agency Workers
9.18.4.......... Other Deductible Travel Expenses
9.18.5.......... Overnight Allowances – Lorry Drivers
9.19. Entertainment
9.20. Expenses Incurred by Homeworkers
9.21. Other Deductible Expenses
9.22. Payments and Benefits Exempt from Income Tax and Class 1 National Insurance Contributions
9.22.1.......... Job-related Accommodation
9.22.2.......... Loans to Employees
9.22.3.......... Suggestion Schemes
9.22.4.......... Long Service Awards
9.22.5.......... Gifts to Employees and Payments made to Employees in a Personal Capacity
9.22.6.......... Entertainment
9.22.7.......... Small Gifts from Third Parties
9.22.8.......... Staff Entertainment
9.22.9.......... Crèche and Childcare Facilities
9.22.10........ Sports and Recreational Facilities
9.22.11........ Free or Subsidised Meals
9.22.12........ Removal Costs
9.22.13........ Fixed Profit Car Scheme (FPCS)
9.22.14........ Passenger Payments
9.22.15........ Bicycles and Motorcycles
9.22.16........ Car Parking Facilities
9.22.17........ Works Bus Services
9.22.18........ Subsidies Provided to Public Bus Services
9.22.19........ Transport and Accommodation Provided due to Industrial Action
9.22.20........ Taxis Provided for Employees Required to Work Late
9.22.21........ Breakdown of Car Sharing Arrangements
9.22.22........ Transport – Disabled Employees
9.22.23........ Scholarships and Apprenticeships
9.22.24........ Work-Related Training
9.22.25........ Contributions to Individual Learning Account (ILA) Training
9.22.26........ Retraining Courses
9.22.27........ Air Miles and Car Fuel Coupons
9.22.28........ Payment of Expenses for Employees Temporarily Absent from Normal Place of Employment
9.22.29........ Expenses Incurred Whilst Employed Abroad
9.22.30........ Travel and Other Costs of Non-domiciled Individuals Working in the UK
9.22.31........ Mobile Telephones
9.22.32........ Workplace Counselling
9.22.33........ Medical Check-ups and Payment of Medical Expenses
9.22.34........ Eye Tests and Special Corrective Appliances
9.22.35........ Health and Employment Insurance Payments
9.22.36........ Security Assets
9.22.37........ Accommodation, Supplies or Services Used in the Performance of Duties
9.22.38........ Employee Liabilities and Indemnity Relief
9.22.39........ Contributions to Retirement Benefit Schemes
Chapter 10. Benefits in Kind
10.1. Valuation of Benefits in Kind
10.2. Benefits – Definition of Cost
10.3. Lower-paid Employment
10.4. Benefits in Kind and National Insurance Contributions
10.5. Payment of Expenses by Employer
10.6. Gift of Assets to Employees
10.6.1.......... General Rule
10.6.2.......... Readily Convertible Assets
10.6.3.......... Beneficial Interest in Assets Listed in Social Security (Contributions) Regulations 2001 Sch. 3 Pt. IV
10.6.4.......... Gift to Employees of Computers and Bicycles
10.7. Cash Vouchers, Non-cash Vouchers and Credit Tokens
10.7.1.......... General Principles
10.7.2.......... Vouchers and Credit Tokens Exempt from Income Tax Class 1 NIC
10.8. Payment Made to a Registered Pensions Scheme for the Benefit of Two or More People
10.9. Waiver of Loan
10.10. Job-related Accommodation
10.10.1........ Scope of Benefit Charge
10.10.2........ Calculation of Benefit
10.10.3........ Additional Accommodation Benefit
10.10.4........ Properties Acquired More than Six Years before First Occupied by Current Occupant
10.10.5........ Salary Sacrifice Option
10.10.6........ Living Accommodation Provided to More than One Employee in Same Period
10.10.7........ Accommodation Used Partly For Business Purposes
10.11. Assets Available for Private Use
10.12. Expenses Connected with Living Accommodation
10.13. Cars
10.13.1........ Scope of Benefit
10.13.2........ Cost of Car
10.13.3........ Cost of Classic Cars
10.13.4........ Calculation of Benefit
10.13.5........ Reduction in Percentage for Cars Using Alternative Fuels
10.13.6........ More than One Car Made Available
10.13.7........ Car Unavailable for Part of Year
10.13.8........ Use of Car by Family Members and Shared Use
10.14. Fuel for Private Use
10.15. Pool Cars and Vans
10.16. Vans and Heavier Commercial Vehicles
10.16.1........ Scope of Benefit
10.16.2........ Vans and Heavier Commercial Vehicles – Calculation of Benefit
10.17. Emergency Vehicles
10.18. Beneficial Loans
10.18.1........ Calculation of Benefit
10.18.2........ Rate of Interest – Foreign Currency Loans
10.18.3........ Replacement Loans
10.18.4........ Exempt Loans
10.18.5........ De Minimis Exemption
10.19. Scholarships
10.20. Relocation Packages and Guaranteed Selling Price Schemes
10.21. Medical Treatment and Medical Insurance
Chapter 11. National Insurance Contributions
National Insurance Contributions and Employees
11.1. Earnings Period
11.1.1.......... General Rules
11.1.2.......... Earnings Period in Unusual Circumstances
11.1.3.......... Payment Not Made on Usual Day
11.1.4.......... Payment of Earnings of More than One Period Made in Same Earnings Period
11.1.5.......... Change in Length of Earnings Period
11.1.6.......... Joiners and Leavers
11.2. Aggregation of Earnings
11.2.1.......... General Principles
11.2.2.......... Exceptions to Requirement to Aggregate Earnings
11.2.3.......... Aggregation Where Employee is Not Contracted Out in all Jobs
11.2.4.......... Aggregation Where all Jobs Contracted Out
11.2.5.......... Aggregations Where Employments are Mixed
11.3. Rate of Class 1 National Insurance Contributions
11.4. Class 1A Contributions
11.5. Calculation of Contributions
11.6. Class 1A Charge Where Benefits Provided by Third Parties
11.7. Earners over Pensionable Age
11.8. Notional Payments of Class 1 Contributions
11.9. Annual Maximum Contributions
National Insurance Contributions and the Self-Employed
11.10. Class 2 Contributions
11.10.1........ Liability to Pay Contributions
11.10.2........ Low Earnings Exemption
11.11. Class 4 Contributions
11.11.1........ Liability to Pay Contributions
11.11.2........ Special Class 4 Contributions
11.11.3........ Exception from Class 4 Contributions
Chapter 12. Pensions
12.1. Introduction
12.2. Scope of Regime
12.3. Registration of Pension Schemes
12.4. Payments by Registered Pension Schemes
12.5. Pension Payments
12.6. Contributions
12.6.1.......... Member Contributions
12.6.2.......... Employers' Contributions
12.6.3.......... HM Revenue & Customs Contributions
12.7. Purchase of Shares in Sponsoring Employer
12.8. Loans to Employers
12.9. Unauthorised Payments Charge
Chapter 13. Capital Gains Tax
13.1. Scope of Capital Gains Tax (CGT)
13.2. Exemptions
13.3. Residence
13.4. Annual Exemption and Losses
13.5. Offset of Losses against Capital Gains
13.5.1.......... Trading Losses
13.5.2.......... Post-cessation Trading and Post-employment Expenses
13.6. Capital Gains Tax Rate
13.7. Disposal Consideration
13.8. Date of Disposal
13.9. Allowable Costs
13.10. Indexation Allowance
13.11. Taper Relief
13.12. Assets Owned at 31 March 1982
13.13. Married Couples and Civil Partners
13.13.1........ General Principles
13.14. Disposal to Connected Parties
13.15. Valuation of Assets
13.16. Negligible Value Claim
13.17. Value Shifting
13.18. Disposal by Way of Security
13.19. Hire Purchase Transactions
13.20. Appropriations to and from Trading Stock
13.21. Series of Transactions
13.22. Options
13.23. Debts
13.24. Compensation
13.25. Asset Derived from another Asset
13.26. Location of Assets
13.27. Chattels and Wasting Assets
13.27.1........ Definitions
13.27.2........ Capital Allowances are not Available
13.27.3........ Capital Allowances are Available
13.28. Part Disposals
13.28.1........ General Part Disposal Rule
13.28.2........ Small Part Disposals of Land
13.29. Leases
13.29.1........ Assignment of Lease
13.29.2........ Grant of Lease
13.29.3........ Sub-lease Granted Out of Short Lease
13.29.4........ Duration of Lease
13.29.5........ Leases of Property other than Land
13.29.6........ Leases not Treated as Wasting Assets
13.29.7........ Extension of Leases
13.30. Loss or Destruction of Asset
13.31. Restoration of Assets
13.32. Replacement of Business Assets
13.32.1........ Introduction
13.32.2........ Categories of Assets Qualifying for Relief
13.32.3........ Use of Assets in Trade
13.32.4........ Time Limits
13.32.5........ Provisional Claim
13.32.6........ Partial Re-investment of Proceeds
13.32.7........ Other Points
13.32.8........ Held-over Gains
13.32.9........ Compulsory Purchase
13.32.10. Exchange of Joint Interest in Land
13.33. Gift Relief
13.33.1........ Operation of Relief
13.33.2........ Crystallisation of Gain
13.34. Transfer of Assets to a Limited Company
13.34.1........ Operation of Relief
13.34.2........ Transfer of Goodwill
13.35. Entrepreneurs' Relief
13.35.1........ Lifetime limit
13.36. Losses on Loans to Traders
13.37. Loan Guarantees
Chapter 14. Corporation Tax
14.1. Scope of Corporation Tax
14.1.1.......... Non-resident Companies
14.2. Trading income
14.2.1.......... General
14.2.2.......... Annual Investment Allowance – Restrictions Applying to Companies
14.2.3.......... First-year Tax Credits
14.2.4.......... Expenditure on Plant and Machinery in Designated Assisted Areas
14.3. Loan relationships
14.3.1.......... Definition of Loan Relationship
14.3.2.......... Scope of Loan Relationship Rules
14.3.3.......... Accounting for Loan Relationships
14.3.4.......... Basis of Taxation
14.3.5.......... Loan Relationships between Connected Parties
14.4. Intangible Fixed Assets
14.4.1.......... Scope of Provisions
14.4.2.......... Treatment of Gains and Losses
14.4.3.......... Deductible Expenditure
14.4.4.......... Bad Debts
14.4.5.......... Realisation of Intangible Fixed Assets
14.4.6.......... Change of Accounting Basis
14.4.7.......... Rollover Relief
14.4.8.......... Groups
14.4.9.......... Computer software
14.4.10........ Transactions with Related Parties
14.4.11........ Anti-avoidance
14.5. Derivative Contracts
14.5.1.......... General
14.5.2.......... Taxation of Profits and Losses
14.5.3.......... Related Transactions
14.5.4.......... Derivatives for Unallowable Purposes
14.5.5.......... Capitalised Expenditure
14.5.6.......... Transactions with Related Parties
14.6. Property income
14.7. Chargeable gains
14.8. Indexation Allowance
14.9. Indexation and Losses
14.10. Assets Owned at 31 March 1982
14.10.1........ Computation of Gains and Losses
14.10.2........ March 1982 Value Election
14.10.3........ Assets Held at 31 March 1982 – Roll-over Relief
14.11. Assets Owned at 6 April 1965
14.11.1........ General Rule
14.11.2........ Land with Development Value
14.12. Dividends Received
14.13. Payments to Charities
14.14. Distributions
14.14.1........ General
14.14.2........ Stock Dividends
14.15. Chargeable Accounting Periods
14.16. Computation of Tax Liability
14.16.1........ Taxation by Reference to Financial Years
14.16.2........ Rates of Corporation Tax
14.16.3........ Marginal Relief
14.16.4........ Reduction of Augmented Profits' Limits
14.17. Corporation Tax – Interaction with Income Tax
14.17.1........ Introduction
14.17.2........ Accounting for Income Tax
14.18. Losses and Corporation Tax
14.18.1........ Introduction
14.18.2........ Offset Against Future Trading Profits
14.18.3........ Offset Against Total Profits of the Period
14.18.4........ Offset Against Total Profits of Earlier Periods
14.18.5........ Terminal Loss
14.18.6........ Losses on-trading loan relationships, foreign exchange and financial instruments
14.18.7........ Losses on Miscellaneous Transactions
14.18.8........ Property Losses
14.18.9........ Capital Losses
14.18.10. Excess Management Charges
14.18.11. Anti-avoidance: trades carried on on an uncommercial basis
14.18.12. Anti-avoidance: change in ownership
14.18.13. Transfer of Losses on Transfer of Trade
14.18.14. Choice of Loss Reliefs
14.19. Groups and Consortia
14.19.1........ Introduction
14.19.2........ Group Relief – Definition of Group
14.19.3........ Group Relief – Losses Available for Group Relief
14.19.4........ Group Relief – Surrender of Losses
14.19.5........ Group Relief – Non Co-Terminous Accounting Periods
14.19.6........ Group Relief – Arrangements Exist for Company to Leave Group
14.19.7........ Group Relief – Payment for Losses Surrendered
14.19.8........ Group Relief – Time Limit for Claim
14.19.9........ Capital Gains Groups — Definition of Group
14.19.10. Capital Gains Groups — Transfer of Assets
14.19.11. Capital Gains Groups — Company Leaving Group
14.19.12. Capital Gains Groups — Roll-Over Relief - Groups
14.19.13. Capital Gains Groups — Appropriation of Capital Asset as Trading Stock
14.19.14. Capital Gains Groups — Transfer Out Of Stock for Use as Capital Asset
14.19.15. Capital Gains Groups — Pre-Entry Losses
14.19.16. Capital Gains Groups — Pre-Entry Gains
14.19.17. Capital Gains Groups — Depreciatory Transactions
14.19.18. Consortia
14.20. Close Companies
14.20.1........ General
14.20.2........ Control
14.20.3........ Director
14.20.4........ Participator
14.20.5........ Associates
14.20.6........ Exemptions from Close Company Status
14.20.7........ Consequences of Being a Close Company — Loans to Participators
14.20.8........ Consequences of Being a Close Company — Benefits in Kind Provided to Participators
14.21. Companies with Investment Business
14.22. Close Investment-holding Companies
14.23. Demergers
14.23.1........ General
14.23.2........ Approval
14.24. Purchase of own Shares
14.24.1........ General
14.24.2........ Repurchase for Benefit of Trade
14.24.3........ Payment of Inheritance Tax Liability
Chapter 15. Incorporation, Disincorporation and Choice of Business Medium
15.1. Introduction
15.2. Incorporation
15.2.1.......... Cessation
15.2.2.......... Transfer of Assets
15.2.3.......... Transfer of Trading Stock
15.2.4.......... Losses
15.2.5.......... Transfer of Chargeable Assets
15.2.6.......... Transfer of Goodwill
15.2.7.......... Stamp Duty Land Tax
15.2.8.......... Inheritance Tax
15.2.9.......... Value Added Tax
15.2.10........ Notification of Incorporation
15.3. Disincorporation
15.3.1.......... Methods of Disincorporation
15.3.2.......... Chargeable Accounting Periods and Payment of Tax
15.3.3.......... Capital Allowances
15.3.4.......... Transfer of Trading Stock
15.3.5.......... Losses
15.3.6.......... Chargeable Gains
15.3.7.......... Goodwill
15.3.8.......... Loans to Participators
15.3.9.......... Value Added Tax
15.3.10........ Pre-Sale Dividends and Capital Distributions
15.4. Choice of Business Medium
15.4.1.......... Advantages of Company
15.4.2.......... Disadvantages of Company
15.5. Comparison of Tax Treatment of Companies and Sole Traders
15.5.1.......... Overall Tax Burden
15.5.2.......... Remuneration
15.5.3.......... Computation of Profits
15.5.4.......... Private Use of Assets
15.5.5.......... Loss Relief
15.5.6.......... Tax Rates
15.5.7.......... National Insurance
15.5.8.......... Payment of Expenses
15.5.9.......... Cash Flow
15.5.10........ Other Points
15.6. Salary vs Dividends
Chapter 16. Special Classes of Taxpayers
16.1. Construction Industry Scheme
16.1.1.......... Introduction
16.1.2.......... Registration for Gross Payment
16.2. Farmers and Market Gardeners
16.2.1.......... Introduction
16.2.2.......... Fluctuating Profits
16.2.3.......... Grants, Subsidies and Compensation
16.2.4.......... Levies
16.2.5.......... Cultivations, Unexhausted Manures and Growing Crops
16.2.6.......... Deadstock
16.2.7.......... Livestock
16.2.8.......... Herd Basis
16.2.9.......... Compensation for Compulsory Slaughter of Non-Production Herd Animals
16.2.10........ Grant of Grazing Rights etc.
16.2.11........ Orchards
16.2.12........ Farmhouse Rent and Farm Cottages
16.2.13........ Quotas
16.2.14........ Stud Farms
16.2.15........ Loss Relief
16.3. Authors, Artists and Composers
16.3.1.......... Relief for Fluctuating Profits
16.3.2.......... Awards and Bursaries
16.3.3.......... Royalties to Person other than Author
16.4. Actors, Musicians and Entertainers
16.4.1.......... Employed or Self-employed
16.4.2.......... Expenses
16.4.3.......... Clothing
16.4.4.......... Medical Expenses
16.5. Entertainers – Other Workers
16.6. Builders
16.6.1.......... Mortgage
16.6.2.......... Retentions
16.6.3.......... Premiums
16.6.4.......... Ground Rents
16.6.5.......... Rent
16.6.6.......... Property not Acquired as Trading Stock
16.6.7.......... Compensation under Town and Country Planning Acts
16.6.8.......... Private Street Works
16.6.9.......... Own Occupation
16.7. Care Providers
16.7.1.......... Childminders
16.7.2.......... Foster Carers
16.7.3.......... Adult Carers and Adult Placement Schemes
16.7.4.......... Respite Carers
16.7.5.......... Capital Gains – Principal Private Residence Relief
16.8. Barristers
16.9. Bookmakers
16.10. Breweries and Licensed Premises
16.10.1........ Types of Houses
16.10.2........ Allowable Expenditure
16.10.3........ Disallowable Expenditure
16.10.4........ Tied houses – Rent
16.10.5........ Tied Houses – Allowable Deductions
16.10.6........ Tied Houses – Disallowable Deductions
16.10.7........ Licensed Premises – Legal Expenses
16.10.8........ Licensed Premises – Rent Payable
16.10.9........ Public House Tenants – Compensation Received
16.11. Doctors and Dentists
16.11.1........ Fees Received by Hospital Staff
16.11.2........ Allowances Received
16.11.3........ Reimbursement of Rent
16.11.4........ Cremation Fees Donated to Charity
16.11.5........ Remuneration Withheld for Breach of Terms
16.11.6........ Part-time Hospital Doctors
16.11.7........ Expenses
16.11.8........ Dentists – Successions
16.12. Motor Dealers – Valuation of Used Vehicle Stocks
16.13. Fishermen
16.13.1........ Grants
16.13.2........ Decommissioning Grant
16.13.3........ Laying-up Grant
16.13.4........ Exploratory Voyage Grant
16.13.5........ Joint Venture Grant
16.14. Franchising
16.14.1........ Franchiser
16.14.2........ Franchisee
16.15. Solicitors
16.15.1........ Part-time Offices
16.15.2........ Interest
16.15.3........ Temporary Loans and Guarantees
16.16. Sub-postmasters
16.17. Video and DVD Traders
16.17.1........ Allowances on Tapes and DVDs
16.18. Clubs, Societies and other Mutual Organisations
16.18.1........ Profits from Mutual Trading
16.18.2........ Profits from Dealing with Non-members
16.18.3........ Clubs Incorporated as Limited Company or Industrial or Provident Society
16.18.4........ Interest Paid or Received
16.18.5........ Commission Income
16.18.6........ Distributions
16.19. Charities
16.19.1........ Trading Income
16.19.2........ Gifts
16.19.3........ Investment Income
16.19.4........ Payments from Other Charities
16.19.5........ Fund-raising Events and Lotteries
16.19.6........ Exemption for Transactions in Deposits
16.19.7........ Restriction on Exemptions
16.19.8........ Transactions with Substantial Donors
16.19.9........ Profit-shedding Through Gift Aid
16.20. Credit Unions
16.21. Friendly Societies
16.22. Housing Associations
16.23. Self-build Societies
Chapter 17. Partnerships
17.1. Definitions
17.2. Limited Partnerships
17.3. Limited Liability Partnerships
17.4. Allocation of Profits
17.5. Assessment of Partnerships
17.6. Other Income of Partnership
17.7. Non-trading Partnerships
17.8. Post-cessation Receipts
17.9. Losses
17.10. Notional Losses
17.11. Mergers and Amalgamations
17.12. Restriction on Loss Relief for Limited and Non-Active Partners
17.13. Partnership Property Income
17.14. Corporate Partners
17.15. Partnerships and Capital Gains Tax
17.15.1........ General Principles
17.15.2........ Distribution of Assets in Kind Amongst Partners
17.15.3........ Change in Partnership Profit Sharing Ratios
17.15.4........ Adjustment through the Accounts
17.15.5........ Payments outside the Accounts
17.15.6........ Transfer Between Persons not at Arm's Length
17.15.7........ Disposals – Annuity Payments
17.15.8........ Shares Acquired in Stages
17.15.9........ Roll-over Relief
17.16. Roll-over and Gift Relief - LLPs
Index
Malcolm James is a Senior Lecturer in Accounting and Taxation at the University of Wales Institute, Cardiff and has lectured widely on the subject of taxation on both professional and undergraduate courses. Before becoming a lecturer he worked for several large firms of accountants and also in industry.
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