Income Tax
Exempt income:
a) Certain state benefits
b) Interest on savings certificates
c) Scholarships
d) Interest on damages for personal injuries or death
e) Income from interests on savings account- ISA
f) Gross income up to £7,500 a year from letting a furnished room in the taxpayer’s home;
g) Annual payments under certain insurance policies, example- where insurance benefits are
provided in times of sickness
h) Premium bonds winnings.
Calculating trading income:
1. Chargeable receipts
(sales)
Derive from trade and must be income in nature not capital
LESS
Any deductible expenditure
I W E P T- Income in nature, wholly and exclusively for the purpose of trade
ITTOIA 2005 s.34
Salaries
Rent on premises
Utility charges
Stock
Stationary
Business rates
LESS
Any capital allowances CAA 2001 ss 52-59 (plant and machinery and AIA)
Plant and machinery @18% of value
Annual investment allowance- of £1million totally deducted from the income
= trading profit or loss
, Relief for trading loss- page 382 onwards
Section of ITA 2007 When will the loss Against what will the Which periods are
have occurred? loss be set? relevant?
s.72 start-up loss relief First four tax years of Total income- subject The three years
trading to cap of 50k or 25% preceding the tax year
of income of the loss
Must be set against
earlier years first
s.64 Any accounting year of Total income- subject The tax year in which
(carry-across/carry trading to cap and thereafter, the accounting year of
back one year relief) chargeable gains the loss ends and/ or
the preceding tax year
s.83 (carry forward Any accounting year of Subsequent profits of Any subsequent tax
relief) page 384 trading the same trade year until the loss is
absorbed
s.89 (terminal relief by The final 12 months of Previous profits of the The final tax year and
carry back) trading same trade then the three tax
years preceding the
final tax year
s.86 (carry forward Up to incorporation Subsequent income Any subsequent tax
relief on incorporation) received from the year until the loss has
company been absorbed
Exempt income:
a) Certain state benefits
b) Interest on savings certificates
c) Scholarships
d) Interest on damages for personal injuries or death
e) Income from interests on savings account- ISA
f) Gross income up to £7,500 a year from letting a furnished room in the taxpayer’s home;
g) Annual payments under certain insurance policies, example- where insurance benefits are
provided in times of sickness
h) Premium bonds winnings.
Calculating trading income:
1. Chargeable receipts
(sales)
Derive from trade and must be income in nature not capital
LESS
Any deductible expenditure
I W E P T- Income in nature, wholly and exclusively for the purpose of trade
ITTOIA 2005 s.34
Salaries
Rent on premises
Utility charges
Stock
Stationary
Business rates
LESS
Any capital allowances CAA 2001 ss 52-59 (plant and machinery and AIA)
Plant and machinery @18% of value
Annual investment allowance- of £1million totally deducted from the income
= trading profit or loss
, Relief for trading loss- page 382 onwards
Section of ITA 2007 When will the loss Against what will the Which periods are
have occurred? loss be set? relevant?
s.72 start-up loss relief First four tax years of Total income- subject The three years
trading to cap of 50k or 25% preceding the tax year
of income of the loss
Must be set against
earlier years first
s.64 Any accounting year of Total income- subject The tax year in which
(carry-across/carry trading to cap and thereafter, the accounting year of
back one year relief) chargeable gains the loss ends and/ or
the preceding tax year
s.83 (carry forward Any accounting year of Subsequent profits of Any subsequent tax
relief) page 384 trading the same trade year until the loss is
absorbed
s.89 (terminal relief by The final 12 months of Previous profits of the The final tax year and
carry back) trading same trade then the three tax
years preceding the
final tax year
s.86 (carry forward Up to incorporation Subsequent income Any subsequent tax
relief on incorporation) received from the year until the loss has
company been absorbed
