Workshop 6 - Taxation of Individuals: IT, CGT and IHT
1. What are direct taxes <Answer> Imposed by reference to a taxpayer's
circumstances
2. What are indirect taxes <Answer> Imposed by reference to transactions.
3. What is income/receipt <Answer> A receipt is money (of whatever nature) that
is paid TO the business and is often referred to as income.
Contrast that to an expense which is money the business pays OUT.
4. In what circumstances can expenditure be deducted from receipts
<Answer> Income expenditure can only be deducted from income receipts and
capital expenditure can only be deducted from capital receipts to reduce the
overall tax bill.
5. What is an income receipt <Answer> Money received on a regular basis will be
classified as an income receipt.
6. What is a capital receipt <Answer> If a receipt is from a transaction that is
not a part of such regular activity this is likely to be classified as a capital receipt.
Think of capital transactions as 'one-off' transactions.
7. What is income expenditure <Answer> Money spent as part of day-to-da
trading.
- E.g. bills, rent, general repairs, interest payable on loans.
8. What is capital expenditure <Answer> If money is expended to purchase a
capital asset as part of the infrastructure of the business or as an enduring benefit
for the business.
Capital expenditure can be seen as a 'one-off' transaction, e.g. large items of
equipment or property.
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, Expenditure on enhancing a capital asset (other than routine maintenance) will be
capital expenditure.
9. How are trading profits calculated <Answer> Income receipts - income
expenditure = trading profits
10. Capital allowances: Tax relief for capital expenditure is usually only given at the
time when the capital asset is sold or otherwise disposed of (e.g. by way of gift).
11. When is the tax year for individuals <Answer> From 6 April in one calendar
year to 5 April in the next.
12. When is financial year for companies <Answer> From 1 April in one
calendar year to 31 March in the next.
13. How does the PAYE system work <Answer> Tax is deducted at source by the
payer and the employee receives the salary net of income tax.
14. What is business asset disposal relief <Answer> A tax relief available to
individuals in certain circumstances to reduce their chargeable gains.
15. What are capital allowances <Answer> Tax allowances for capital expenditure
available to businesses.
16. What is capital gains tax (CGT) <Answer> A tax paid by individuals on
their taxable chargeable gains.
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1. What are direct taxes <Answer> Imposed by reference to a taxpayer's
circumstances
2. What are indirect taxes <Answer> Imposed by reference to transactions.
3. What is income/receipt <Answer> A receipt is money (of whatever nature) that
is paid TO the business and is often referred to as income.
Contrast that to an expense which is money the business pays OUT.
4. In what circumstances can expenditure be deducted from receipts
<Answer> Income expenditure can only be deducted from income receipts and
capital expenditure can only be deducted from capital receipts to reduce the
overall tax bill.
5. What is an income receipt <Answer> Money received on a regular basis will be
classified as an income receipt.
6. What is a capital receipt <Answer> If a receipt is from a transaction that is
not a part of such regular activity this is likely to be classified as a capital receipt.
Think of capital transactions as 'one-off' transactions.
7. What is income expenditure <Answer> Money spent as part of day-to-da
trading.
- E.g. bills, rent, general repairs, interest payable on loans.
8. What is capital expenditure <Answer> If money is expended to purchase a
capital asset as part of the infrastructure of the business or as an enduring benefit
for the business.
Capital expenditure can be seen as a 'one-off' transaction, e.g. large items of
equipment or property.
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, Expenditure on enhancing a capital asset (other than routine maintenance) will be
capital expenditure.
9. How are trading profits calculated <Answer> Income receipts - income
expenditure = trading profits
10. Capital allowances: Tax relief for capital expenditure is usually only given at the
time when the capital asset is sold or otherwise disposed of (e.g. by way of gift).
11. When is the tax year for individuals <Answer> From 6 April in one calendar
year to 5 April in the next.
12. When is financial year for companies <Answer> From 1 April in one
calendar year to 31 March in the next.
13. How does the PAYE system work <Answer> Tax is deducted at source by the
payer and the employee receives the salary net of income tax.
14. What is business asset disposal relief <Answer> A tax relief available to
individuals in certain circumstances to reduce their chargeable gains.
15. What are capital allowances <Answer> Tax allowances for capital expenditure
available to businesses.
16. What is capital gains tax (CGT) <Answer> A tax paid by individuals on
their taxable chargeable gains.
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