Tax Glossary
Welcome to the TWD Accountants Tax Glossary. To help you interpret the jargon that you can come across in dealing with your tax, our team of experts have written a brief explanation for hundreds of technical terms. Click on a letter to show entries.
This allows royalties from publishing, of books and songs etc, to be taxed in more than one year. If this could not be done, all the tax on royalties would be paid in one year, and could even lead to a higher tax bill. Also, tax on lump sum advances may be spread forward over a number of years
Money owed that has not been paid to you after a period of time is commonly known as a bad debt.
Business assets depreciate in value, and the cost can be claimed as an expense. This is known as a capital allowance. Over the life span of the asset, the amount claimed should cover the depreciation.
When an asset is sold though, the actual depreciation may be more than capital allowances claimed already. If so, a balancing allowance can be claimed. This will be equal to the actual depreciation less capital allowances already given.
Business assets depreciate in value, and the cost can be claimed as an expense. This is known as a capital allowance. Over the life span of the asset, the amount claimed should cover the depreciation.
When an asset is sold though, the actual depreciation may be less than capital allowances claimed already, and thus, effectively excessive expenses have been claimed.
In this case, a balancing charge will be shown in the accounts. This will be equal to the capital allowances already given, less actual depreciation.
This is where an asset is held in Trust by someone other than the owner. Any income still remains taxable on the actual owner.
The standard rate of interest, set monthly by the Bank of England.
It is the basis of the official interest rate for a tax year. This is used when calculating taxable benefit on low interest loans from an employer.
The standard percentage of tax that you pay, is currently 20% from 6 April 2008. This means you pay 20p for every £1 taxable at the basic rate.
A method of accounting which basically includes income earned and expenses incurred during your accounting period, even though you may not have received or paid the cash.
A method of accounting where only the income actually received is shown.
For example, accounts are prepared to 5 April. Income from work done before that date but received afterwards would not be shown until the next set of accounts.
(This basis cannot be used for any set of accounts which began on or after 6 April 99.)
This is the period for which your profits are taxable. Usually, this is the same as the accounting period, because you are taxed on the profit shown on your accounts.
Special rules apply in a) the first three years of business, b) when you finish business, or c) if you change your accounting date.
These rules mean the profit on which you are taxed is not always calculated from one set of accounts, and the basis period can be different than the accounting period.
Loan granted to employees at a low rate of interest may give rise to a taxable benefit. These are know as beneficial loans.
Not all employer loans are taxable. If the total of all loans that would not qualify for tax relief elsewhere is below £5000 there will be no charge.
If chargeable, tax is due on the difference between the interest paid and the interest payable at a standard rate.
As a final point, if loan qualifies for tax relief on the interest paid, relief may also be due on the taxable element (see Deemed Interest).
This is the person who benefits from something. The term is most commonly used for someone who receives income from a Trust or from the Estate of a deceased person.
When your employer gives you something other than salary, it is often deemed to be a taxable benefit. Common examples include company cars, medical insurance, accommodation etc. Where this happens your employer will provide you with a form P11d at the end of each tax year reporting the taxable benefit provided for the year. This information is also provided to H M Revenue & Customs and needs to be included on any self assessment tax return.
This allowance is available if you are registered blind. The only requirement for a claim is that you are registered blind with your local authority. The exception is for residents of Scotland and Northern Ireland, where this is not possible. In this case, just tell your tax office accordingly.
This is where extra shares are given at no cost to existing shareholders.
Sometimes the cost of books used for work can be claimed against taxable income. In all cases, it must be proved that the books were solely for your business. Employees must also prove that the job could not be done without the books, which is often difficult to do.
Also, H M Revenue & Customs publishes a list of allowable professional journals. If a journal is on the list, the cost is allowable.
Effectively, any time trade is carried out with the intention of making a profit, it constitutes a business.
In grey areas where profit are made from what could be considered to be a hobby, each case must be looked at individually.
Many, but not all, outgoings of a business can be set against total income when arriving at taxable profits.
Any form of income received by the business may be taxable.
This usually comes in the form of sales or fees etc, but also includes all other sources of income, such as investments or capital gains.
A potential relief available against Inheritance Tax when ownership of a business property is transferred by way of a gift. The property must have been owned for at least two years. The amount of relief depends on the type of business property owned. Relief due is:
Business or interest in a business - up to 100%
Unquoted shares in a trading company - up to 100%
Shares in a quoted company which
the donor had control of before the gift - up to 50%
Asset of a quoted company which
the donor had control of before the gift - up to 50%
Quick Links
- Accountancy Services
- Limited Companies
- Capital Gains Tax
- About Us
- Tax Return Service
- Partnership Tax
- Our Partners
- Tax Refund Service
- Business Services
- Company Ethos
- Tax Review Service
- Useful Tax Tools
- Running Your Business
- Pricing Policy
- Tax Advice
- Understanding Tax
- Planning Your Business
- Testimonials
- Online Bookkeeping
- Glossary
- Managing Your Business
- Meet The Team
- Overseas
- Tax Tips
- Useful Numbers
- Contact Us
- Self Employed Tax
- Tax Calculators
- Business Startups
- Affiliate Scheme
- Landlords Accountancy
- Tax Q&A