BTAX Business Taxation Session 1: Introduction & tax-adjusted trading profit

Learning about Tax It is not intellectually challenging There are rules to learn Some calculations must be presented in a certain way

Standard approach In class: Materials on www.meadowgatetraining.co.uk Deal with queries Present key points Demonstrate examples Practice questions Tests Work in pairs and groups Materials on www.meadowgatetraining.co.uk

Standard approach: Homework Make notes from chapter(s) End of chapter questions Problems? Make a note to ask next lesson or E-mail p.r.comber@sussex.ac.uk

Standard approach This approach enables almost all students to pass first time Please let me know if it does not suit you Support: modify approach, specific problems with topics

Absent from class Read chapter Do questions at the end of the chapter

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)

The Tax System HMRC was formed in 2005 Introduction

The laws governing Tax Statute Law Finance Act 2016 relates to financial year 2016 and tax year 2016/2017 Case Law Introduction

Interpretations & Explanations Extra Statutory Concessions HMRC Statements of Practice Guides and Help Sheets www.hmrc.gov.uk Introduction

What is Business Tax? Corporation Tax for Ltd companies & plc’s Income Tax for Sole Traders & Partnerships Introduction

Corporation Tax Financial Year: 1 April to 31 March FY16 Chargeable Accounting Period (CAP) Introduction

Corporation Tax Rates 16/17 See tax data Introduction

Income Tax Fiscal Year: 6 April to 5 April 16/17 tax year Introduction

Income Tax Rates and Bands Provided in the exam: Basic/higher rate (for CGT) Introduction

Capital Gains Tax Rates Provided in the exam: Annual exempt amount Introduction

Tax Returns Companies Corporation Tax CT 600 (short return) Due within 12 months of end of Period of Account Will be asked to complete in exam so we will practice Introduction

Tax Returns Individuals & Partners Income Tax & Capital Gains Tax SA100 (Tax return) Self Assessment & supplementary pages SA800 (Partnership Tax Return) Due by 31st October (paper) or 31st January following Tax year Will be asked to complete in exam so we will practice Introduction

Retention of Tax Records Companies 6 years after end of CAP Individuals 5 years after filing deadline Emphasise importance of memorising these dates as will be asked in the exam Introduction

Payment Corporation Tax 9 months plus 1 day Quarterly for large companies Income Tax by 31st January following Tax year Payments on account: 31st January, 31st July, 31st January “Simple assessment” by HMRC Will be asked these dates in the exam. Introduction

Classes of NIC Class 1 Class 2 Class 3 Class 4 paid by self employed Secondary – 1 & 1A Introduction

NIC and self employed See tax data Question 1.1 Probably be asked to calculate in exam Demonstrate examples from Text Introduction

Duties of Tax practitioner A member providing professional tax services has a duty to put forward the best position of a client. However the service must be carried out with professional competence, must not in any way impair integrity or objectivity, and must be consistent with the law Other issues: Confidentiality Money Laundering Confidentiality is often examined: simple sentence answer required. With growing importance of ethical standards, possible that more might be examined Introduction

Property Income (Rent) Trading Income Employment/pension Income Type of Income Property Income (Rent) Trading Income Employment/pension Income Savings and Investment Income 24 24

Net profit per accounts X Add Expenditure not allowable for tax X Trading income not included in net profit X Less Allowable expenditure not included in net profit calculation (X) Income not taxable as trading profit (X) Capital allowances (X) Tax-adjusted trading profit X 25

Must be wholly & exclusively for the purposes of trade Must be revenue expenditure 26

Expenses not allowable Capital Expenditure Depreciation Disposal of fixed assets Appropriations and dividends Entertaining customers and suppliers Fines for law breaking Donations to political parties General bad debt provision Trading profits

Expenses not allowable Lease rentals on high emission cars Exceed 130 g/km More than 45 days 15% of lease rental disallowed Trading profits

Take care with…. Gifts to customers : if less than £50 each and conspicuous advert it is allowed but not food, drink, tobacco, gift vouchers Charitable donations: small, local charities allowable, otherwise Gift Aid payment Trading profits

Beware of these…. Certain legal expenses Illegal payments Writing off non-trade loans Trading profits

Allowable expenditure Normal cost of sales Normal business expenditure Interest on trade loans Bank interest and charges Staff entertainment Specific bad debts Employees parking fines when on company business Trading profits

Income not assessable as trade income Capital Receipts Rent, interest, etc Trading profits

Income taxable but not included in Income statement a/c Applies only to Sole Traders and Partners Goods appropriated for own use The Market Value is included Goods at cost may already have been transferred to drawings Need to transfer profit element as well. Trading profits

Long Period of Account (Companies) 2 Chargeable Accounting Periods Time-apportion the tax-adjusted profit Question 1.5

Homework Tutorial book questions 1.1(amended), 1.4,1.5, 2.1, 2.2, 2.4,1.6 (amended), 2.3 Make notes from chapters 1 and 2 (Ignore losses)