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

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

3. 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

4. Standard approach: Homework
Make notes from chapter(s)
End of chapter questions
Problems?
Make a note to ask next lesson or

5. 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

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

7. 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)

8. The Tax System
HMRC was formed in 2005
Introduction

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

10. Interpretations & Explanations
Extra Statutory Concessions
HMRC Statements of Practice
Guides and Help Sheets
Introduction

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

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

13. Corporation Tax Rates 16/17
See tax data
Introduction

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

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

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

17. 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

18. 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

19. 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

20. 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

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

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

23. 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

24. 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

25. 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

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

27. 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

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

29. 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

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

31. 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

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

33. 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

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

35. 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)