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Taxation: Finance Act 2013 [Paperback]

Alan Melville
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Table of Contents

Preface   ix

Acknowledgements    x

Summary of tax data    xi

Part 1 INCOME TAX AND NATIONAL INSURANCE

1   Introduction to the UK tax system    3

UK taxes    3

Sources of tax law   4

The tax year    6

Structure of HM Revenue and Customs    6

Administration of the tax system    7

Self Assessment 7

Appeals   11

The HMRC Charter    12

Tax evasion 13

Tax avoidance    13

2   Introduction to income tax   15

Taxable persons    15

Classification of income 16

Exempt income   17

Structure of an income tax computation   18

Married couples and civil partners 19

Rates of income tax for 2011-12 19

Income taxed at source    20

Savings income 22

Dividends from UK companies 26

3   Personal allowances    31

Personal allowances for 2011-12   31

The personal allowance   32

Blind person's allowance    34

Tax reducers    34

Married couple's allowance 35

4   Payments and gifts eligible

  for tax relief   42

Payments and gifts deductible from

total income    42

Eligible interest payments 48

Annual payments and patent royalties    48

Gifts of shares or property to charity    49

Payments which are tax reducers 49

Maintenance payments   50

Loans used to purchase a life annuity 50

Gift Aid    51

5   Income from property 55

Definition of property income    55

Basis of assessment and allowable expenditure   56

Capital expenditure 57

Losses 58

Lease premiums    59

"Rent-a-room" relief   62

Furnished holiday lettings    62

6   Income from savings and investments    67

Interest received   67

Dividends received    69

Tax-efficient investments   70

Individual Savings Accounts 70

Enterprise Investment Scheme   72

Venture Capital Trusts 73

Community investment tax credits   74

Child Trust Funds   74

Income from trusts and settlements   75

Miscellaneous income 78

7   Income from employment (1) 81

Employment and self-employment   81

Basis of assessment   84

Employment income   84

Non-taxable employment income 85

Allowable expenses   87

Payments made on termination of

employment    90

The PAYE system   92

Construction industry scheme   96

Employee incentive schemes   97


8   Income from employment (2) 102

Benefits in kind   102

Benefits assessable on all employees    103

Special rules for P11D employees 105

9   Income from self-employment:

  Computation of income   115

The badges of trade    115

The calculation of trading profits 117

Deductibility of expenditure 118

Disallowed expenditure    118

Allowable expenditure   121

Trading income not in the accounts    124

Non-trading income in the accounts   124

Expenditure not in the accounts    124

Post-cessation receipts    125

10   Income from self-employment:

  Basis periods 130

The current year basis   130

Commencement of trade   131

Cessation of trade    134

Change of accounting date    136

Transitional overlap relief   140

Averaging of trading profits 141

11   Income from self-employment:

  Capital allowances 148

Eligible expenditure 148

Chargeable periods 148

Plant and machinery    149

Capital allowances on plant and

machinery   151

Writing down allowance 152

Annual investment allowance 156

First year allowance    157

Balancing allowances and charges   161

Non-pooled assets   161

Allowances on cessation of trade    166

Industrial buildings and agricultural

buildings    167

Miscellaneous capital allowances    169

12   Income from self-employment:

  Trading losses   174

Relief for trading losses    174

Carry-forward trade loss relief 175

Trade loss relief against total income 177

Early trade losses relief 180

Non-active traders    182

Terminal trade loss relief 182

Post-cessation trade relief   184

Transfer of a business to a company 185

Losses on shares in unlisted trading companies  185

13   Income from self-employment:

  Partnerships   188

Principles of partnership taxation 188

Notional profits and losses    191

Change in partnership composition    192

Non-trading income    194

Trading losses    195

14   Pension contributions 200

Registered pension schemes    200

Tax relief for contributions

by scheme members   202

Tax relief for contributions

by employers   205

Annual allowance charge    207

Lifetime allowance charge   210

15   Payment of income tax, interest

  and penalties   215

Payment of income tax   215

Late payment penalties 217

Interest on income tax    219

Penalties   220

16   National Insurance contributions   224

Class 1   224

Class 1A   230

Class 1B   230

Class 2   231

Class 3   231

Class 4   232

Annual maximum contributions 233

Review questions (Set A) 237

Part 2 CAPITAL GAINS TAX

17   Introduction to capital gains tax   247

Chargeable persons    247

Chargeable assets    248

Chargeable disposals 249

Basis of assessment    250

Rates of CGT    251

Relief for capital losses 253

Relief for trading losses    255

Administration of CGT 257

18   Computation of gains and losses 261

Layout of a CGT computation 261

Disposal value    262

Allowable expenditure   262

Part disposals   264

Assets with negligible value    266

Assets held on 31 March 1982    267

19   Chattels and wasting assets    271

The chattels exemption 271

Chattels disposed of at a loss 273

Part disposals of chattels    273

Wasting chattels   276

Wasting assets   277

Leases   279

20   Shares and securities 288

The share matching rules    288

The Section 104 holding   290

Bonus issues    293

Rights issues    294

Capital distributions    296

Takeovers   298

Gilts and qualifying corporate

bonds    300

21   Principal private residences   305

Principal private residence 305

Partial exemption    306

Deemed residence    307

Letting relief 309

Business use    311

22   CGT reliefs 314

Damaged assets 314

Destroyed assets   317

Replacement of business assets    318

Gift of business assets 321

Transfer of a business to a limited company 323

Entrepreneurs' relief    324

Reinvestment into EIS shares   327

Loans to traders 328

Review questions (Set B) 331


Part 3 CORPORATION TAX

23   Introduction to corporation tax 339

Scope of corporation tax 339

Accounting periods    340

Chargeable profits    341

Trading income   342

Income from property    349

Income from non-trading loans   349

Miscellaneous income   349

Franked investment income   351

Qualifying charitable donations 351

Loan relationships    352

Long periods of account 356

24   Corporate chargeable gains   361

Chargeable disposals and chargeable

assets    361

Basis of assessment    362

Computation of gains and losses 362

Indexation allowance 363

Assets held on 31 March 1982    366

The rebasing election    369

Assets acquired before 6 April 1965   369

Disposals of shares or securities   370

25   Computation and payment of

  the corporation tax liability 383

Corporation tax financial years    383

...

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