Tax Compliance (UK) Flashcards

A UK company is resident for corporation tax purposes if it is:

Answer: Incorporated in the UK, or has its central management and control in the UK

UK corporation tax residency is based on incorporation in the UK (statutory test) or having central management and control exercised in the UK (common law test).

Under UK VAT rules, partial exemption arises when a business makes:

Answer: Both taxable and exempt supplies

Partial exemption occurs when a business makes both taxable (standard, reduced, or zero-rated) and exempt supplies; only VAT attributable to taxable supplies can be reclaimed.

The UK 'badges of trade' are used to determine whether:

Answer: A transaction is a capital gain or trading income

The badges of trade (subject matter, frequency, profit motive, supplementary work, etc.) are indicators used by HMRC to determine whether a transaction constitutes a trade (taxed as income) or a capital disposal.

Research and development tax relief for SMEs in the UK allows enhanced deduction of:

Answer: 130% deduction (i.e., 230% total) for periods before April 2023

Prior to April 2023, the SME R&D relief provided an enhanced deduction of 130% (total 230%) of qualifying expenditure. Post-April 2023, the merged R&D scheme applies with a 20% additional deduction.

Under UK VAT, which of the following is zero-rated?

Answer: Children's clothing and footwear

Children's clothing and footwear are zero-rated for UK VAT purposes. Adult clothing, takeaway hot food, and domestic electricity are standard-rated or reduced-rated respectively.

For UK inheritance tax, the nil-rate band is currently:

Answer: £325,000

The nil-rate band for IHT is £325,000 per individual. The residence nil-rate band (£175,000) can also apply where a main residence is passed to direct descendants, potentially sheltering up to £500,000.