Taxation: Finance Act 2010




New product available - 9780273758280
640 pages
01 SEP 2010


Taxation is the number one textbook on taxation in the UK. Now in its 16th annual edition, this excellent text has established itself as a reliable and comprehensive guide for students taking a first level course in the subject. This sixteenth edition brings the book completely up-to-date in accordance with the provisions of the Finance Act 2010.


ContentsPreface ixAcknowledgements xSummary of tax data xiPart 1 INCOME TAX AND NATIONAL INSURANCE1 Introduction to the UK tax system 3UK taxes 3Sources of tax law 4The tax year 6Structure of HM Revenue and Customs 6Administration of the tax system 7Self Assessment 7Appeals 11The HMRC Charter 12Tax evasion 13Tax avoidance 132 Introduction to income tax 15Taxable persons 15Classification of income 16Exempt income 17Structure of an income tax computation 18Married couples and civil partners 19Rates of income tax for 2010-11 19Income taxed at source 20Savings income 22Dividends from UK companies 263 Personal allowances 31Personal allowances for 2010-11 31The personal allowance 32Blind person's allowance 34Tax reducers 34Married couple's allowance 354 Payments and gifts eligible for tax relief 42Payments and gifts deductible from total income 42Eligible interest payments 48Annual payments and patent royalties 48Gifts of shares or property to charity 49Payments which are tax reducers 49Maintenance payments 50Loans used to purchase a life annuity 50Gift Aid 515 Income from property 55Definition of property income 55Basis of assessment and allowable expenditure 56Capital expenditure 57Losses 58Lease premiums 59 Rent-a-room relief 62Furnished holiday lettings 636 Income from savings and investments 67Interest received 67Dividends received 69Tax-efficient investments 70Individual Savings Accounts 70Enterprise Investment Scheme 72Venture Capital Trusts 73Community investment tax credit 74Child Trust Funds 75Income from trusts and settlements 76Miscellaneous income 797 Income from employment 82Employment and self-employment 82Basis of assessment 85Employment income 85Non-taxable employment income 86Allowable expenses 88Benefits in kind 91Benefits assessable on all employees 92Special rules for P11D employees 94Payments made on termination of employment 102The PAYE system 104Construction industry scheme 108Employee incentive schemes 1098 Income from self-employment: Computation of income 115The badges of trade 115The calculation of trading profits 117Deductibility of expenditure 118Disallowed expenditure 118Allowable expenditure 121Trading income not in the accounts 124Non-trading income in the accounts 124Expenditure not in the accounts 124Post-cessation receipts 1259 Income from self-employment: Basis periods 130The current year basis 130Commencement of trade 131Cessation of trade 134Change of accounting date 136Transitional overlap relief 140Averaging of trading profits 14110 Income from self-employment: Capital allowances 148Eligible expenditure 148Chargeable periods 148Plant and machinery 149Capital allowances on plant and machinery 151Writing down allowance 152Annual investment allowance 155First year allowance 156Balancing allowances and charges 160Non-pooled assets 160Allowances on cessation of trade 164Industrial buildings allowances 165Agricultural buildings allowances 170Miscellaneous capital allowances 17111 Income from self-employment: Trading losses 176Relief for trading losses 176Carry-forward trade loss relief 177Trade loss relief against total income 179Temporary extension of carry-back relief 182Early trade losses relief 183Terminal trade loss relief 185Post-cessation trade relief 187Transfer of a business to a company 187Losses on shares in unlisted trading companies 18812 Income from self-employment: Partnerships 191Principles of partnership taxation 191Notional profits and losses 194Change in partnership composition 195Non-trading income 197Trading losses 19813 Pension contributions 203Registered pension schemes 203Tax relief for contributions by members 205Tax relief for contributions by employers 208Annual allowance charge 210Lifetime allowance charge 213Tax relief on pension contributions as from 6 April 2011 21414 Payment of income tax, surcharges, interest and penalties 217Payment of income tax 217Surcharges 219Interest on income tax 220Penalties 22215 National Insurance contributions 225Class 1 225Class 1A 231Class 1B 231Class 2 232Class 3 232Class 4 233Annual maximum contributions 234Review questions (Set A) 238Part 2 CAPITAL GAINS TAX16 Introduction to capital gains tax 247Chargeable persons 247Chargeable assets 248Chargeable disposals 249Basis of assessment 250Rates of CGT 251Relief for capital losses 253Relief for trading losses 255Administration of CGT 25717 Computation of gains and losses 261Layout of a CGT computation 261Disposal value 262Allowable expenditure 262Part disposals 264Assets with negligible value 266Assets held on 31 March 1982 26718 Chattels and wasting assets 271The chattels exemption 271Chattels disposed of at a loss 273Part disposals of chattels 273Wasting chattels 276Wasting assets 277Leases 27919 Shares and securities 288The share matching rules 288The Section 104 holding 290Bonus issues 293Rights issues 294Capital distributions 296Takeovers 298Gilts and qualifying corporate bonds 30020 Principal private residences 305Principal private residence 305Partial exemption 306Deemed residence 307Letting relief 309Business use 31121 CGT reliefs 314Damaged assets 314Destroyed assets 317Replacement of business assets 318Gift of business assets 321Transfer of a business to a limited company 323Entrepreneurs' relief 324Reinvestment into EIS shares 327Loans to traders 328Review questions (Set B) 331Part 3 CORPORATION TAX22 Introduction to corporation tax 339Scope of corporation tax 339Accounting periods 340Chargeable profits 341Trading income 342Income from property 349Income from non-trading loans 349Miscellaneous income 349Franked investment income 351Qualifying charitable donations 351Loan relationships 352Long periods of account 35623 Corporate chargeable gains 361Chargeable disposals and chargeable assets 361Basis of assessment 362Computation of gains and losses 362Indexation allowance 363Assets held on 31 March 1982 366The rebasing election 369Assets acquired before 6 April 1965 369Disposals of shares or securities 37024 Computation and payment of the corporation tax liability 381Corporation tax financial years 381Rates of corporation tax 382Marginal relief 385Corporate Venturing Scheme 388Due date of payment 388Self Assessment 390Interest on underpaid and overpaid corporation tax 392Penalties 39325 Income tax and advance corporation tax 397Income received net of income tax 397Payments made net of income tax 398The quarterly accounting system 399Tax suffered in excess of tax deducted 401ACT before 6 April 1999 403Abolition of ACT 406Shadow ACT 40626 Corporation tax losses 412Relief for trading losses 412Carry forward of trade loss relief 413Unrelieved charitable donations 414Trade loss relief against total profits 416Repayments of corporation tax 420Anti-avoidance legislation 421Choice of loss relief 422Non-trading losses 42227 Close companies and companies with investment business 426Close companies 426Definition of a close company 426Exceptions 429Consequences of close company status 430Close investment-holding companies 433Companies with investment business 433Unincorporated business vs close company 434Incorporation 43928 Groups of companies and reconstructions 442Associated companies 442Transfer pricing 44451% groups 44475% groups 446Group relief 447Transfer of chargeable assets within a group 450Capital losses 452Consortia 454Company reconstructions 456Review questions (Set C) 459Part 4 MISCELLANEOUS29 Value added tax (1) 469The principle of VAT 469Taxable persons 470Taxable supplies 470Exempt supplies 472Reduced rate supplies 473Zero rate supplies 473The value of a supply 474Imports and exports 477Reverse charge procedure in the UK 478Registration 479Deregistration 48430 Value added tax (2) 486Accounting for VAT 486The tax point 487Tax invoices 487Accounting records 488Special schemes 489Bad debts 492Non-deductible input tax 493Partial exemption 495Retail schemes 497Administration of VAT 500Penalties, surcharges and interest 50231 Inheritance tax 507Chargeable transfers of value 507Exempt transfers 509Potentially exempt transfers 511IHT payable on chargeable lifetime transfers 513IHT payable on death 515Valuation 520Business property relief 522Agricultural property relief 523Administration of IHT 52432 Overseas aspects of taxation 527Residence, ordinary residence and domicile 527Income tax - general rules 530Double taxation relief 531Income from employment 532Trading income 534Income from property and investments 535Capital gains tax - general rules 536Inheritance tax - general rules 537Corporation tax - general rules 537Controlled foreign companies 540Double taxation relief for companies 541Review questions (Set D) 549Part 5 ANSWERS Answers to exercises 557 Answers to review questions 609Index 621