IncomE TAx comPuTATIon by by654321

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									                                                                                                                          PAPER F6   1
                                                                                                     DECEMBER 2009 REVISION COURSE
IncomE TAx comPuTATIon
Mr. A
Tax Year 2008/09

                                                             Non Savings                  Savings                 Dividends

Trading Income                              W1


Employment Income                           W4


Property Income                             W5


Bank Interest × 100⁄80

Building society Interest × 100⁄80

Other Interest received gross

Dividends × 100⁄90

Total Income

Less: Reliefs

Qualifying interest

Loss Reliefs

Net Income

Less Personal Allowance (Note 1)                               (6,035)

Taxable Income




Note 1
PAA 65 + 9,030
         75 + 9,180
Abated if Net income > £21,800




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                                                                                                                          PAPER F6   2
                                                                                                     DECEMBER 2009 REVISION COURSE
TAx cAlculATIon
Non Savings
34,800          @ 20% (Note 2)
>34,800         @ 40%


Savings (Note 3)
(After Non savings)
34,800           @ 20%
>34,800          @ 40%


Dividends
(After Non Savings & Savings)
34,800 @ 10%
>34,800 @ 32 ½%


Add
Income tax @ 40% on excess pension contributions


Less Tax deducted @ source
         Dividends
         Bank Interest
         Building society interest
         PAYE


Tax Payable / (Repayable)




Note 2
Extend Basic rate band by gross contributions to charity under the Gift Aid scheme and gross contributions to a
private pension scheme.
Note 3
A special starting rate of 10% applies on savings income only, if taxable non-savings income < £2,320




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                                                                                                                         PAPER F6    3
                                                                                                    DECEMBER 2009 REVISION COURSE
TAx cAlculATIon
W1 Trading Income
     Adjusted Profit                  W2

     Less Capital allowances          W3
                                                                                 Assess using Current Year
     Trading Income
                                                                                 Basis / opening year rules /
                                                                                 change of accounting year
                                                                                 rules / closing year rules




W2 Adjusted profit
     Net Profit per Accounts
     Add back Expenses Disallowed for tax
     Deduct Income assessed elsewhere or not taxed
     Adjusted profit




W3 Capital Allowances
                                                                                               % = business
                                                                                                   use
                                                  General Pool    Special rate   Expensive car Private use Short life asset   Allowances
                                                                     Pool                         Asset
  WDV b/f
  Additions qualifying for AIA/FYA
  - long life assets
  - integral features of a building
  - thermal insulation on a business building
  [MAXIMUM £50,000 p.a] - Balance goes into
  special rate pool

  - Plant & machinery (Balance of the maxi-
  mum £50,000 p.a. if not on above)
  Balance goes into general pool
  Other additions not qualifying for AIA/FYA
  Cars
  Disposals

  WDA @ 20%
  WDA @ 10%
  WDA restricted (3,000 pa)
  Balancing (allowance) / charge

  Additions qualifying for FYA @ 100%
  Low emmision cars

  WDV c/f


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                                                                                                                         PAPER F6   4
                                                                                                    DECEMBER 2009 REVISION COURSE
TAx cAlculATIon
W4 Employment Income
        Salary
        Bonus
        Benefits
        Expense Payments


        less
            Allowable Deductions

           Employment Income

W5 Property Income
Rental Income accruing                                             X
Less: Allowable expenses                                          (X)
Wear & tear allowance for furnished property                      (X)
Property Income in the year                                        X
Less: Property losses b/f                                         (X)
Property Income assessed                                           X


Note:
(a)     Property may be classified as furnished holiday letting
(b)     If a lodger in main residence :
        Lower of:
              •     normal calculation (above) or
              •      Rental Income                                                       X
                     Less: rent a room relief                                         (4,250)
                     Property Income                                                    (X)




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                                                                                                                      PAPER F6   5
                                                                                                 DECEMBER 2009 REVISION COURSE
cAPITAl GAIns TAx - IndIvIduAls
1   Basic computation
    Disposal proceeds                                                  X
    Less: incidental costs of disposal                                (X)
    Net proceeds                                                       X
    Less: Acquisition costs                                           (X)
    Enhancement expenditure                                           (X)
    Capital Gain                                                       X
    Less reliefs                                                      (X)
    Revised Capital gain                                               X


    Note:
    Special rules for share disposals, part disposals, chattels, damaged and destroyed assets.
    Gain may be reduced by Entrepreneurs’, Rollover, Holdover, Gift, Incorporation or Principle Private Residence
    Relief



3   Capital Losses
    Disposal proceeds                                                  X
    Less: incidental costs of disposal                                (X)
    Net proceeds                                                       X
    Less: Acquisition costs                                           (X)
    Enhancement expenditure                                           (X)
    Capital loss                                                      (X)


4   Summary
    Revised Capital Gains in the year                                   X
    Less: Capital Losses in the year                                   (X)
    Net Capital Gains in the year                                       X
    Less: Capital losses brought forward                               (X)
    Net Capital Gains                                                   X
    Less: Annual Exemption                                           (9,600)
    Taxable Gains                                                       X
    CGT @ 18%                                                           X
    Due                                                             31/1/10




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                                                                                                                        PAPER F6   6
                                                                                                   DECEMBER 2009 REVISION COURSE
coRPoRATIon TAx comPuTATIon
ABC Limited
Accounting period ending…



Trading Income W1

Interest Receivable W5

Property Income W6

Overseas Income W7

Chargeable Gains W8
less
   Gift Aid payments

PCTCT

Corporation Tax W9

Due Date

Filing Date




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                                                                                                                      PAPER F6   7
                                                                                                 DECEMBER 2009 REVISION COURSE
coRPoRATIon TAx comPuTATIon
W1 Trading Income

    Adjusted profit W2

    less

       Capital Allowances W3

       Industrial Buildings allowances W4



    Trading Income




W2 Adjusted Profit

           Net Profit Before Taxation per Accounts

           Add back Expenses Disallowed per tax

           Deduct Income assessed elsewhere or not taxed

           Adjusted Profit




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                                                                                                                      PAPER F6        8
                                                                                                 DECEMBER 2009 REVISION COURSE
coRPoRATIon TAx comPuTATIon
W3 Capital Allowances
                                                                          Special rate
                                                          General Pool                   Expensive car Short life Assets Allowances
                                                                             Pool
    WDV b/f
    Additions qualifying for AIA/FYA
    - long life assets
    - integral features of a building
    - thermal insulation on a business building
    [MAXIMUM £50,000 p.a] - Balance goes into special
    rate pool

    - Plant & machinery (Balance of the maximum
    £50,000 p.a. if not on above)
    Balance goes into general pool
    Other additions not qualifying for AIA/FYA
    Cars
    Disposals

    WDA @ 20%
    WDA @ 10%
    WDA restricted (3,000 pa)
    Balancing (allowance) / charge

    Additions qualifying for FYA @ 100%
    Low emmision cars

    WDV c/f




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                                                                                                                     PAPER F6   9
                                                                                                DECEMBER 2009 REVISION COURSE
coRPoRATIon TAx comPuTATIon
W4 Industrial Buildings allowances
    Full industrial use:
    WDA = Cost x 3% p.a., if in industrial use on the last day of the accounting period
    On Sale - No WDA or balancing adjustment in the accounting period of sale.


    Non-industrial use
    Notional allowance for accounting period where non-industrial use on last day of the accounting period

    On Sale - No WDA or Balancing adjustment in the accounting period of sale




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                                                                                                                        PAPER F6   10
                                                                                                   DECEMBER 2009 REVISION COURSE
coRPoRATIon TAx comPuTATIon
W5 Interest receivable
    Interest receivable
    less
    Interest payable on non trading loans


W6 Property Income
    Rental Income
    less
    Allowable Expenses
    (including wear & tear for furnished property)


    Also Premium on short lease (≤ 50 years)


                    51− n
    Premium ×                       n = term of lease
                     50



W7 Overseas Income
    Oversees income grossed up for
    –       withholding tax
    –       underlying tax if ≥ 10% voting power




W8 Chargeable Gains
    Disposal Proceeds
    less incidental costs of disposal
            Net Sales Proceeds
    less
            Acquisition costs
            Enhancement Expenditure


    Unindexed Gain
    less Indexation allowance
         Chargeable Gain
         less reliefs
    less Capital loss
         Capital loss b/f
    Net Chargeable Gains
    (to go into the corporation tax computation)


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                                                                                                                      PAPER F6   11
                                                                                                 DECEMBER 2009 REVISION COURSE
coRPoRATIon TAx comPuTATIon
Capital loss:
     Disposal proceeds
     less Incidental costs of disposal
     less Acquisition costs
           Enhancement Expenditure
     Capital loss


     Note: Special Rules for shares, chattels, part disposals, damaged & destroyed assets.
           Gain may be reduced by Rollover or Holdover Relief




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                                                                                                                         PAPER F6   12
                                                                                                    DECEMBER 2009 REVISION COURSE
coRPoRATIon TAx comPuTATIon
W9 Corporation Tax
“Profits” = PCTCT + FII
Financial Year
Limits
Compare “Profits” to limits    W10

Calculation of Tax


PCTCT × tax rate                             X
less Double tax relief
Lower of – UK tax                           (X)
           – overseas tax
Corporation tax payable                      X


W10
             0

                     21%

         300,000

            28% less marginal relief

      1,500,000

                     28%

      marginal relief

                                 PCTCT
Fraction×[limit −"Profits"]×
                                "Profits"




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