Trigger & Response

Question 1

(T&R) - Pension Contributions in a trading loss question

Answer 1

The Gross pension contributions will need to be deducted to get the net adjusted income for a s.64 claim

Question 2

(T&R) - Large losses available for a sole trader

Answer 2

Restriction on the amount of losses to claim being the greater of:

£50,000
or
25% of adjusted income

Question 3

(T&R) - Capital gains being included when the sole trader has made large TRADING losses

Answer 3

This would indicate that we will want to make a s.71 claim which can be done after a s.64 claim has been made

Question 4

(T&R) - what are some additional aspects we need to consider when full income is relieved under s.64/s.71

Answer 4

These are all or nothing claims meaning that personal allowances can be wasted

Question 5

(T&R) - What do we need to consider if we have a s.71 claim

Answer 5

the amount of the claim that can be made is restricted to the lower of:

Loss available under s.71
or
the capital gain less any losses carried forward (also known as the relevant maximum)

This claim is also done before any AEA is relieved so there is a potential for this lost to be wasted

Question 6

(T&R) - Selling the business a going concern

Answer 6

Capital Gain taxable
on the goodwill of the business (Market value - value of business)

BADR relief is usually available on the sale of goodwill if to a third party

Question 7

(T&R) - all assets are given to a company upon incorporation

Answer 7

Incorporation relief will be available as this relief requires all (apart from cash) assets to be transferred.

Question 8

(T&R) - A company looks to retain some assets upon incorporation

Answer 8

Gift relief will be available if proceeds are received for less than market value

Question 9

(T&R) - A sole trader has dividend income

Answer 9

any event where income is offset by trading losses etc will mean the dividend allowance of £500 is wasted

Question 10

(T&R) - Incorporating a Sole trader who is on the accruals basis

Answer 10

1. no impact on capital allowance pools capital allowances.
2. Stock is transferred automatically at market value - unless election is made to transfer at lower of cost or market value

Question 11

(T&R) - Incorporated Sole trader on cash basis

Answer 11

1. Any stock not sold is added back as taxable profits
2. no capital allowances is available on P&M so any proceeds on sale is added back to taxable profits

Question 12

(T&R) interest payable to a close participator

Answer 12

Has this been paid within 12 months of the end of the accounting period (if so then it is a deductible expense)

Question 13

(T&R) Losses on the “start up” of a trade

Answer 13

if an individual can make an early years relief claim allowing for the first 4 years of trading losses to be setoff against the 3 previous tax years, on the earliest basis first.

Question 14

(T&R) if we have a capital allowance pool less than £1,000

Answer 14

If we have a pool that is less than £1,000 then we can make an election to claim the balance in full

Question 15

(T&R) What to consider if we have capital expenditure on a car pre Apr 21

Answer 15

Over the years the threshold for the main pool car emissions has changed, If a car is purchased before April 21 then the emissions for main pool cars is 110g/km

Question 16

(T&R) - Calculate the CGT…

Answer 16

Think about AEA and the potential for BADR

Question 17

(T&R) - when we see a potential takeover when there is an EMI share scheme in place

Answer 17

in the event of a takeover and we have shares under an EMI scheme - this will count as a non-qualifying event. what this means is that in order for the shares to still received this benefit they must be disposed off within 90 days of the takeover,

Question 18

(T&R) - CSOP scheme in place when there is a takeover

Answer 18

1. the 3 year anniversary can be ignored and the shares must be exercised within 6 months of the takeover in order to qualify
2. additional point that if the takeover was contemplated at the time of granting then this will no allow the shares to retain the tax advantaged scheme

Question 19

(T&R) We have expenditure for a “staff party”

Answer 19

This is an allowable expense for corporation tax as long as it meets the following criteria:

1. It’s for an annual event (Xmas/summer party)
2. This was open to all members of staff
3. The price her head did not exceed £150

Question 20

(T&R) We have a question on R&D

Answer 20

Are they loss making, if so they will be eligible for the SME R&D intensive scheme (given 30% of expenditure is on R&D amounts)

Question 21

(T&R) we have a question on the purchase of own shares

Answer 21

We need to think the thing we will be arguing is whether they fall into income or capital distributions

Question 22

(T&R) We have been told that someone has acquired 100% of a business

Answer 22

In this event we should realise that there has been a significant change in the structure of the business and this could mean that the losses which have been saved in the business may need to be restricted.

this would depend on whether there has been a major change in the nature and/or conduct of the trade in following 5 years since this event. in which case all losses which were incurred in the trade prior to the takeover, would not be allowed to be used following this acquisition.

Question 23

(T&R) Interest free loan on a directors loan accounts

Answer 23

Even though it is below HMRCs approved interest rate - it will be an exempt benefit and therefore not considered to be a BIK

Question 24

(T&R) Interest amounts in a sole trader

Answer 24

Interest receipt are not taxable trade amounts so will need to be removed from trading income and taxed as income tax

Question 25

(T&R) we have a partner who works less than 10 hours

Answer 25

This will make them a non-active partner which will restrict their use of losses by the amount of overdrawn profits she has

Question 26

(T&R) we have partnership profits included in the corporate accounts

Answer 26

Accounting profits are added back as an accounting adjustment but the taxable amount is included in line with the respective company chargeable period

Question 27

(T&R) We have been given a large question on gift relief and it includes the companies balance sheet

Answer 27

There is a restriction on the amount of gift relief which can be claimed and this will be with the company have chargeable non business assets.