Taxation of Small Businesses 2023/2024

Malcolm James is the Head of Department of the Accounting, Economics and Finance Department at Cardiff Metropolitan University and has lectured widely on the subject of taxation on both professional and undergraduate courses. He has also lectured for the Chartered Institute of Taxation and written a number of articles for their journal Tax Adviser and is the Chief Examiner for taxation by the Institute of Financial Services. Before becoming a lecturer he worked for several large firms of accountants and also in industry.

• PrefaceAbout the authorContentsList of abbreviationsChapter 1. Income Tax Computation1.1. Aggregation of Taxpayer's Income1.2. Interest1.3. Limit on Deductions from Adjusted Net Income1.4. Payments to Charities1.5. Personal Allowances Deducted from Net Income1.6. Computation of Tax1.7. Tax Reducers1.8. Tax Retained on Interest, Royalties and Gift Aid donations1.9. Comprehensive Example1.10. Death and Separation1.11. Married Couples – Joint Property1.12. Minor Children1.13. High Income Child Benefit ChargeChapter 2. Taxation of Trading Income2.1. Introduction2.2. Statutory Definitions of Trading2.3. Statutory Trades2.4. Case Law2.5. Gambling and Speculation2.6. Illegal Activities2.7. Individuals Trading in Shares2.8. Definition of Trading – National Insurance2.9. Mutual Trading2.10. Election to Use Cash Basis2.11. Capital and Revenue Receipts2.12. Receipts not Received in Course of Trade2.13. Other Receipts2.14. Capital and Revenue Payments2.15. Expenditure Incurred in the Course of a Trade2.16. Duality of Purpose2.17. Repairs and Maintenance2.18. Replacement of Assets2.19. Depreciation and Amortisation2.20. Subscriptions and Donations2.21. Sponsorship2.22. Bad Debts2.23. Provisions2.24. Payments to Employees & Appropriations of Profit2.25. Entertainment2.26. Gifts to Customers and Samples2.27. Gifts to Educational Establishments and Charities2.28. Cost of Leasing Cars2.29. Legal and Professional Fees2.30. Fines and Payments Against the Public Interest2.31. Interest and Bank Charges2.32. Pre-trading Expenditure2.33. Indirect Taxation2.34. Compensation and ex gratia Payments to Former Employees2.35. Redundancy Payments2.36. Removal Expenses to New Business Premises2.37. Premiums for Insurance2.38. Payments to Employees for Restrictive Undertakings2.39. Staff Training and Development2.40. Counselling Courses in Connection with Termination of Employment2.41. Payments to Secure Release from Unprofitable Contracts2.42. Payments to Political Parties2.43. Preservation of Goodwill2.44. Payments on the Cessation of Trade2.45. Post-cessation Expenditure2.46. Rent2.47. Lease Premium2.48. Patents and Intellectual Property2.49. Telephone2.50. Business Rates and Council Tax2.51. Security Expenditure2.52. Loan Guarantee Payments2.53. Use of Home2.54. Website Expenditure2.55. Expenses Connected with Foreign Trades2.56. Valuation of Stock2.57. Overseas Aspects of TradingChapter 3. Capital Allowances on Plant and Machinery3.1. Introduction3.2. Definition of Plant and Machinery3.3. Assets Deemed to be Plant and Machinery3.4. Definition of Expenditure3.5. Date of Expenditure3.6. Disposal of Assets3.7. Allowances3.8. Calculation of Capital Allowances3.9. Short-life Assets3.10. Cessations and Successions3.11. Hire Purchase and Leasing3.12. Fixtures3.13. Disposal of Fixtures3.14. Anti-avoidanceChapter 4. Other Allowances4.1. Business Premises Renovation Allowance4.2. Patents4.3. Know-howChapter 5. Basis Periods5.1. Current Year Basis (CYB)5.2. Opening Year Rules5.3. Closing Year Rules5.4. Tax Planning on Commencement5.5. Tax Planning on Cessation5.6. Change of Accounting Date5.7. Period Less than 12 Months5.8. Period More Than 12 Months5.9. Two Accounting Dates in Tax Year5.10. No Accounting Date in Tax Year5.11. Transitional Overlap Relief5.12. Changes in Size and Nature of Operations5.13. Death of Trader5.14. Mergers and Demergers5.15. Date of Commencement and Cessation5.16. Successions5.17. Trader Becoming, or Ceasing to be, UK ResidentChapter 6. Trading Losses6.1. Introduction6.2. Offset Against Future Trading Income6.3. Transfer of Business to a Company6.4. Offset Against Total Income and Carry-back6.5. Offset Against Capital Gains6.6. Losses in the Early Years of Trading6.7. Terminal Loss Relief6.8. Tax Planning and Loss Relief6.9. Restriction of Loss Relief6.10. Late ClaimsChapter 7. Property Income7.1. Introduction7.2. Basis of Assessment7.3. Dilapidations7.4. Lease Premiums7.5. Sale with Right of Conveyance7.6. Expenditure Deductible7.7. Sea Walls7.8. Mutual Business7.9. Relief for Capital Expenditure7.10. Losses7.11. Furnished Holiday Lettings7.12. Rent a Room SchemeChapter 8. Employment and Self-employment8.1. Introduction8.2. Benefits of Self-employment8.3. Definition of Employment and Self-employment8.4. Tests for Employment8.5. Workers Supplied by Agencies8.6. Non-executive Directors8.7. Self-employment or a Number of Separate Employments8.8. Provision of Services Through an Intermediary – Income Tax8.9. Managed Service Companies8.10. National Insurance – Deemed Employment8.11. National Insurance – Deemed Self-employment8.12. National Insurance – Persons Deemed not to be EmployedChapter 9. Employment  Income9.1. Income Tax – Introduction, Charging Legislation and General Definitions9.2. National Insurance Contributions – Charging Legislation and General Definitions9.3. Income Tax and National Insurance – a Comparison9.4. Time of Receipt9.5. Cash Payments to Employees9.6. Payments Arising by Reason of Employment9.7. Payments on Termination of Employment or Variation of Employment Terms9.8. Damages and Compensation Paid to Employee9.9. Sick Pay and Sickness and Other Benefits9.10. Commission, Cashbacks and Discounts9.11. Tax-free Lump Sum Payments9.12. Payment of Expenses to Third Parties on Behalf of Employee9.13. Payments for Clothing9.14. Directorships Held by Partners9.15. Payment of Employee's Tax by Employer9.16. Income Tax – Deduction of Expenses9.17. Reimbursement of Expenses9.18. Qualifying Travel Expenses9.19. Entertainment9.20. Expenses Incurred by Homeworkers9.21. Other Deductible Expenses9.22. Payments and Benefits Exempt from Income Tax and Class 1 National Insurance ContributionsChapter 10. Benefits in Kind10.1. Valuation of Benefits in Kind10.2. Benefits – Definition of Cost10.3. Lower-paid Employment10.4. Benefits in Kind and National Insurance Contributions10.5. Payment of Expenses by Employer10.6. Gift of Assets to Employees10.7. Cash Vouchers, Non-cash Vouchers and Credit Tokens10.8. Payment Made to a Registered Pensions Scheme for the Benefit of Two or More People10.9. Waiver of Loan10.10.  Job-related Accommodation10.11.  Assets Available for Private Use10.12.  Expenses Connected with Living Accommodation10.13.  Cars10.14.  Fuel for Private Use10.15.  Pool Cars and Vans10.16.  Vans and Heavier Commercial Vehicles10.17.  Emergency Vehicles10.18.  Beneficial Loans10.19.  Scholarships10.20.  Relocation Packages and Guaranteed Selling Price Schemes10.21.  Medical Treatment and Medical InsuranceChapter 11. National Insurance ContributionsNational Insurance Contributions and Employees11.1. Earnings Period11.2. Aggregation of Earnings11.3. Rate of Class 1 National Insurance Contributions11.4. Class 1A Contributions11.5. Calculation of Contributions11.6. Class 1A Charge Where Benefits Provided by Third Parties11.7. Earners over Pensionable Age11.8. Notional Payments of Class 1 Contributions11.9. Annual Maximum ContributionsNational Insurance Contributions and the Self-Employed11.10.  Class 2 Contributions11.11.  Class 4 ContributionsChapter 12. Pensions12.1. Introduction12.2. Scope of Regime12.3. Registration of Pension Schemes12.4. Payments by Registered Pension Schemes12.5. Pension Payments12.6. Contributions12.7. Purchase of Shares in Sponsoring Employer12.8. Loans to Employers12.9. Unauthorised Payments ChargeChapter 13. Capital Gains Tax13.1. Scope of Capital Gains Tax (CGT)13.2. Exemptions13.3. Residence13.4. Capital Losses13.5. Offset of Trading and Other Losses against Capital Gains13.6. Capital Gains Tax Rate13.7. Disposal Consideration13.8. Date of Disposal13.9. Allowable Costs13.10.  Indexation Allowance13.11.  Taper Relief13.12.  Assets Owned at 31 March 198213.13.  Married Couples and Civil Partners13.14.  Disposal to Connected Parties13.15.  Valuation of Assets13.16.  Negligible Value Claim13.17.  Value Shifting13.18.  Disposal by Way of Security13.19.  Hire Purchase Transactions13.20.  Appropriations to and from Trading Stock13.21.  Series of Transactions13.22.  Options13.23.  Debts13.24.  Compensation13.25.  Asset Derived from another Asset13.26.  Location of Assets13.27.  Chattels and Wasting Assets13.28.  Part Disposals13.29.  Leases13.30.  Loss or Destruction of Asset13.31.  Restoration of Assets13.32.  Replacement of Business Assets13.33.  Gift Relief13.34.  Transfer of Assets to a Limited Company13.35.  Entrepreneurs' Relief13.36.  Losses on Loans to Traders13.37.  Loan GuaranteesChapter 14. Corporation Tax14.1. Scope of Corporation Tax14.2. Trading income14.3. Loan relationships14.4. Intangible Fixed Assets14.5. Derivative Contracts14.6. Property income14.7. Chargeable gains14.8. Indexation Allowance14.9. Indexation and Losses14.10.  Assets Owned at 31 March 198214.11.  Assets Owned at 6 April 196514.12.  Rollover Relief14.13.  Dividends Received14.14.  Payments to Charities14.15.  Distributions14.16.  Chargeable Accounting Periods14.17.  Computation of Tax Liability14.18.  Corporation Tax – Interaction with Income Tax14.19.  Losses and Corporation Tax14.20.  Groups and Consortia14.21.  Close Companies14.22.  Companies with Investment Business14.23.  Close Investment-holding Companies14.24.  Demergers14.25.  Purchase of Own SharesChapter 15. Incorporation, Disincorporation and Choice of Business Medium15.1. Introduction15.2. Incorporation15.3. Disincorporation15.4. Disincorporation Relief15.5. Choice of Business Medium15.6. Comparison of Tax Treatment of Companies and Sole Traders15.7. Salary vs DividendsChapter 16. Special Classes of Taxpayers16.1. Construction Industry Scheme16.2. Farmers and Market Gardeners16.3. Authors, Artists and Composers16.4. Actors, Musicians and Entertainers16.5. Entertainers – Other Workers16.6. Builders16.7. Care Providers16.8. Barristers16.9. Bookmakers16.10.  Breweries and Licensed Premises16.11.  Doctors and Dentists16.12.  Motor Dealers – Valuation of Used Vehicle Stocks16.13.  Fishermen16.14.  Franchising16.15.  Solicitors16.16.  Sub-postmasters16.17.  Video and DVD Traders16.18.  Clubs, Societies and other Mutual Organisations16.19.  Charities16.20.  Credit Unions16.21.  Friendly Societies16.22.  Housing Associations16.23.  Self-build SocietiesChapter 17. Partnerships17.1. Definitions17.2. Limited Partnerships17.3. Limited Liability Partnerships17.4. Allocation of Profits17.5. Assessment of Partnerships17.6. Other Income of Partnership17.7. Non-trading Partnerships17.8. Post-cessation Receipts17.9. Losses17.10.  Notional Losses17.11.  Mergers and Amalgamations17.12.  Restriction on Loss Relief for Limited and Non-Active Partners17.13.  Partnership Property Income17.14.  Corporate Partners17.15.  Partnerships and Capital Gains Tax17.16.  Roll-over and Gift Relief - LLPsIndex