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.
Meaning a lower limit before something takes effect.
For example, a de minimis of £5000 applies to certain low interest loans made by employers. If the total of these loans to an individual is below this de minimis limit, there is no taxable benefit.
People who owe you money are termed "debtors". When accounts are prepared, even if payments are oustanding from debtors, the details will still be shown.
If you are both self employed and employed you will be liable to pay Class 1, 2 & 4 national insurance contributions. However there is a maximum figure above which contributions will be refunded.
If the contributions for the year are expected to exceed the maximum, you can apply to defer payment of contributions. You should seek advice from H M Revenue & Customs or your tax advisor to calculate whether you are eligible.
During the term of a Life Insurance Policy, it is possible to receive taxable income from it.
Any payout on termination of the policy should be more than paid in. If this amount is less than the amounts on which tax has already been paid, it follows that too much tax was paid. (ie tax has been paid on more income than has been received.) Corresponding deficiency relief can be claimed in these cases.
This is a Government department dealing with state benefits and pensions.
An asset used in a business on an ongoing basis retains a residual value. However, this value will reduce over the lifespan of the asset. This reduction in value is the depreciation and can be claimed as a deduction from business profits.
Depreciation is claimed in accounts as Capital Allowances.
For tax purposes, directors` income is treated in the same way as other employees, although there are differences in the way National Insurance and company benefits are dealt with.
The accounts of a business come in two forms - business accounts and accounts for tax purposes.
In the former, all income and expenses will be shown, to reflect the exact financial situation. These accounts are prepared first and then used as the basis of the calculation of your profits for tax purposes.
In the latter, some expenses will then be disallowed as they do not qualify for tax relief. When the tax accounts are prepared, these disallowable expenses are added back on to net profits to find the net taxable profits.
Special rules apply to all securities issued at a discount to private investors. Securities are discounted where their issue price is lower than the redemption price by more than 0.5% per year between the issue and redemption. If the peiod exceeds 30 years then its by more than 15%.
These provisions do not cover shares, gilt edged securities , indexed securities linked to the value of a share index, life assurance policies and capital redemption policies.
There is no capital gains tax charge but instead a charge to income tax arises in the tax year of disposal or redemption on the profit made.
A Trust where the Trustees have discretionary power over the distribution of income and assets and no-one has a specific right to them.
All payments to employees are taxable - including business expenses. Strictly an employer should advise H M Revenue & Customs, followed by a separate claim by the individual for tax relief. A dispensation removes the requirement to do this.
An employer reaches an agreement with the Tax Office that only valid business expenses will will be reimbursed to the employee and no report or claim is necessary.
This refers to the sale, loss, gift, theft or swap of an asset.
This is a term used for the money paid out on investments such as shares, unit trusts etc.
A notional tax credit of 10% is shown as deducted on the voucher, which is not refundable. However, if you are liable to tax at the higher rate an additional charge of 22.5% of the gross dividend is due. Or if you are liable to tax at the additional rate an additional charge of 32.5% of the gross dividend is due.
Where shares are offered as an alternative to a cash dividend, it is known as a stock or scrip dividend.
Broadly speaking you are domiciled in the country considered to be your permanent home. It is distinct from nationality or residence and you can only have one domicile at any given time.
- Domicile of Origin - inherited from father
- Domicile of Choice - can change domicile of origin by behaviour. Factors for deciding domicile of choice are, burial arrangements, location of assets, membership of clubs, visits or links with a country
- Domicile of Dependency - follows that of the person on whom you are legally dependent.
Where the same income is liable to be taxed in both the UK and another country, relief may be available under the specific terms of a double tax agreement between the UK and that other country. This ensures the income is only taxed once.
It is possible to be resident in more than one country at a time for tax purposes. The term for this is dual residence. This does not necessarily mean that tax is paid twice as Double Taxation rules may apply.