Podcast
Questions and Answers
Which of the following is considered chargeable income?
Which of the following is considered chargeable income?
What is the maximum annual cap for trivial benefits provided by an employer?
What is the maximum annual cap for trivial benefits provided by an employer?
Which of these is NOT classified as exempt income?
Which of these is NOT classified as exempt income?
What type of income does NOT fall under exempt benefits provided by an employer?
What type of income does NOT fall under exempt benefits provided by an employer?
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Which of the following is considered exempt income under all circumstances?
Which of the following is considered exempt income under all circumstances?
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Which benefit provided by an employer is limited to a cost of less than £50?
Which benefit provided by an employer is limited to a cost of less than £50?
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Which of the following sources is explicitly categorized as chargeable income?
Which of the following sources is explicitly categorized as chargeable income?
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If an employer throws multiple social events costing £120 per head, how is the taxation applied?
If an employer throws multiple social events costing £120 per head, how is the taxation applied?
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Which expenses can be claimed by an employee for working from home?
Which expenses can be claimed by an employee for working from home?
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What is the maximum amount for non-cash long service awards per year of service?
What is the maximum amount for non-cash long service awards per year of service?
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Which of the following is considered a disallowable expense for corporation tax purposes?
Which of the following is considered a disallowable expense for corporation tax purposes?
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Which expense related to entertainment is disallowed?
Which expense related to entertainment is disallowed?
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What is the maximum allowable amount for reasonable removal expenses paid by an employer?
What is the maximum allowable amount for reasonable removal expenses paid by an employer?
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Which of the following is treated as an appropriation of profit?
Which of the following is treated as an appropriation of profit?
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What is true about the treatment of bad debts for tax purposes?
What is true about the treatment of bad debts for tax purposes?
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What is the limit for non-cash gifts received from a third party per tax year?
What is the limit for non-cash gifts received from a third party per tax year?
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Study Notes
Chargeable Income
- Includes income from employment, trading, renting property, and investments (interest, dividends).
- Taxable state benefits such as carer’s allowance, jobseeker's allowance, and state pension qualify as chargeable income.
- Other sources encompass pensions, certain social security benefits, and casual work earnings.
Exempt Income
- Interest from National Savings Certificates and ISAs (including junior ISAs) is exempt from tax.
- Winnings from betting, competitions, lotteries, and premium bonds are tax-free.
- Some social security benefits (e.g., housing benefit, child benefit) are not taxable.
- Exemptions also cover statutory redundancy pay, scholarships, income tax repayment interest, and specific apprenticeship bursaries.
- Compensation payments under qualifying schemes, such as the Windrush compensation scheme, are exempt.
Employment Income
- Exempt benefits include employer contributions to registered pension schemes and trivial benefits under £50.
- Non-work related gifts like birthday presents up to £300 annually are exempt from taxes.
- Reasonable childcare facilities and a mobile phone for personal use are non-taxable.
- Annual social events are exempt if the cost per head is £150 or less; if exceeding, the entire cost is taxable.
- Allocations for training, parking, and additional costs for remote work may also be exempt.
- Non-cash long service awards and eye tests for VDU users are tax-free.
Corporation Tax
- Capital expenditures are disallowed; it is crucial to differentiate between repairs (revenue) and improvements (capital).
- Repairing a newly acquired dilapidated asset is classified as capital.
- Use of industry-standard materials for repairs (e.g., upgrading windows) is considered revenue.
Depreciation and Disposal
- Depreciation is disallowed; profits and losses on asset disposal must be managed accordingly.
- Add back depreciation and losses on disposal, deduct profits on disposal in assessments.
Appropriation of Profit
- Disallowed items include sole trader drawings and excessive remuneration to family or friends.
- Partners' salaries may also be treated as appropriations of profit.
- Using goods for personal purposes constitutes profit appropriation.
Provisions and Bad Debts
- General provisions for bad debts or stock are allowable; specific provisions can also be permitted.
- Trade-related bad debts are deductible while non-trade bad debts are disallowed.
Entertainment Expenses
- Non-staff entertainment costs are disallowed while expenses related to staff entertaining are allowable.
Gifts
- Gifts to employees and trade samples (limited to one per customer per year) are tax-deductible.
- Gifts to customers that include advertising, and do not consist of food, drink, tobacco, or exchangeable vouchers are also allowable.
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Description
Test your understanding of chargeable and exempt income in relation to taxation. This quiz covers various income sources, including employment, investments, and social security benefits. Learn which types of income are taxable and which are exempt from taxes.
