Principles of business taxation 'Finance Act 2006'

637 Pages·2007·3.15 MB·English

by  Chris Jones

Principles of Business Taxation
‘Finance Act 2006’
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Principles of
Business Taxation
‘Finance Act 2006’
Chris Jones, BA CTA (Fellow) ATT

Amsterdam Boston Heidelberg London New York Oxford
Paris San Diego San Francisco Singapore Sydney Tokyo
Elsevier Butterworth-Heinemann
Linacre House, Jordan Hill, Oxford OX2 8DP
30 Corporate Drive, Burlington, MA 01803
First published 2007
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British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloguing in Publication Data
A catalogue record for this book is available from the Library of Congress
ISBN 10: 0 7506 8457 7
ISBN 13: 978 07506 8457 6

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CONTENTS
Preface ix
A: Introduction to the UK Tax System 1
B: Computation of Taxable Trading Profit 7
B1: Trading Income and the Badges of Trade 7
B2: Adjustment of Profit 14
B3: Capital V Revenue 23
B4: Capital Allowances – Definition 30
B5: Capital Allowances – Computation 37
B6: Industrial Buildings Allowances 47
B7: Intangible Fixed Assets 64
B8: Research and Development Expenditure 73
B9: Tax Law and Accounting Practice 84
C: Taxation of Limited Companies 91
C1: Computation of Corporation Tax 91
C2: Associated Companies 102
C3: Short Accounting Periods 110
C4: Long Periods of Account 116

C5: Corporation Tax Self Assessment (CTSA) 125
C6: Payment of Corporation Tax 141
C7: Interest on Late Paid Tax 151
C8: CTSA Penalty Regime 156
C9: Income from Property 161
C10: Loan Relationships 167
C11: Relief for Trading Losses 177
C12: Relief for Other Losses 187
C13: Corporate Capital Gains 192
C14: Rollover Relief 201
C15: Shares and Securities: Matching Rules 208
C16: Substantial Shareholding Exemption 223
C17: The Principles of Group Relief 228
C18: Group Capital Gains 241
C19: Close Company Definition 252
vi Contents
C20a: Close Company Implications – Part 1 261
C20b: Close Company Implications – Part 2 266
C21: Investment Companies 271
C22: Corporate Venturing Scheme 279
D: Employee Tax Matters 288
D1: Employed or Self Employed? 288
D2: Introduction to Employment Income & Benefits 295
D3: Company Car & Fuel Benefits 308
D4: Living Accommodation – Taxable Benefits 318
D5: Loans to Employees & Use of Assets 325
D6: Miscellaneous Benefits 335
D7: Expenses of Employment 343
D8: Calculating the Income Tax Liability 353
D9: Introduction to PAYE 360
D10: PAYE End of Year Returns 369
D11: Class 1 National Insurance Contributions 376
D12: Class 1A and 1B National Insurance Contributions 388
D13: Termination Payments 396
D14a: Occupational Pensions and Furbs 408
D14b: The Enterprise Investment Scheme 417
E: Value Added Tax 423

E1: Overview of the VAT System 423
E2: Registration 432
E3: Definition of Supplies 444
E4: Liability of the Supply 451
E5: Schedule 8 VATA 1994 – Zero Rating 455
E6: Schedule 9 VATA 1994 – Exemptions 463
E7: Deemed Supplies 470
E8: Value of the Supply 481
E9: Time of Supply 489
E10a: Input Tax: When to Recover 496
E10b: Partial Exemption 511
E11: VAT Records and Returns 527
E12: Accounting for VAT 539
E13: Bad Debt Relief 551
E14: Control Visits, Appeals and Assessments 559
E15a: Misdeclaration Penalty 571
Contents vii
E15b: Late Registration Penalty 577
E15c: Default Surcharge 583
E15d: Repeated Misdeclaration Penalty 590
E15e: Other Penalties, Interest and Mitigation 596
E16: Refunds, Repayment Supplement and Interest 611
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PREFACE
This book provides all the material you need for the CIMA Professional Development
Certificate in Business Taxation. Within each chapter you will find some examples for
you to try, to test you on the important rules covered in the chapter.
At the end of each chapter, there is a short summary which contains a “pocket digest”
of the rules covered within the chapter. These individual summaries form a
comprehensive overview of the syllabus.
As this manual has been written specifically to cover all areas of the syllabus we are
confident you will find this an invaluable tool leading to success in the examination.