Surrey International Institute
Dongbei University of Finance and Economics
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MAN3102 – Advanced Taxation
Lecture-2 Week-12
Academic year 2022 – 2023; First semester
November 15, 2022 1 / 11
Property Income
Main types :
lease premiums from short leases
(i.e. leases which do not exceed 50 years in length)
income from the letting of �xed caravans and
permanently-moored houseboats
Property Income Allowance (PIA)1 = ¿ 1,000 per year
IF Gross Property Income ≤ ¿ 1,000
THEN the taxpayer does not pay any tax
IF Gross Property Income > ¿ 1,000
THEN the taxpayer can choose either:
(1) Deduct the PIA from Gross Property Income, or
(2) Deduct the allowable expenses from Gross Property Income
He/she can not do both (1) and (2)
It make sense that the taxpayer should select the
higher of PIA and expenses
1PIA is in addition to the Personal Allowance
November 15, 2022 2 / 11
Property Income: Basis of assessment
Property income is normally assessed on a cash basis
landlords with gross receipts 6 ¿150,000 may choose
the accruals basis
landlords with gross receipts > ¿150,000 ⇒ accruals basis
IF a taxpayer lets more than one property
THEN all income and expenses from property letting
are pooled together
. . . this implies that a loss on one property can be o�set
against a pro�t from another property
IF an overall loss is incurred
THEN it is carried forward and o�set against the
�rst available property income in subsequent tax years
Note: Please be kind enough to review the “Accruals Concept”,
one of the pillars of Accounting.
November 15, 2022 3 / 11
Property Income: Allowable expenses
Allowable expenses:
incurred wholly and exclusively for the purposes of a property business
For example:
repairs and maintenance but not improvements
the cost of providing services to tenants
administrative and management costs
business rates, water rates and council tax,
if paid by the landlord
Repairs and Maintenance = Revenue Expenditure
Improvements = Capital Expenditure
The di�erence between Revenue Exp. and Capital Exp.
is extremely important in the �eld of Accounting
(including Auditing and Man. Accounting)
November 15, 2022 4 / 11
Property Income: Interest
interest on loan about letting property ⇒
not a tax deductible expense
interest is treated as a “tax reducer” at 20% (=basic rate),
that is the “reduction” is deducted from the I. Tax Liability
the “tax reduction” is limited to:
20% x the lowest of
the loan interest paid
the taxpayer’s property income
the taxpayer’s “adjusted total income”
November 15, 2022 5 / 11
“Rent-a-room” relief
IF a taxpayer lets furnished accommodation,
which forms part of his or her main residence,
THEN gross rents ≤ ¿7,500 a year are tax exempt
IF gross rents > ¿ 7,500
THEN a taxpayer may choose to be assessed on either:
1 gross rents less ¿7,500, or
2 gross rents less allowable expenses
November 15, 2022 6 / 11
Tax Relief: Payments and Gifts
Interest payments on “eligible loans”, such as:
1 loan to purchase Plant and Machinery
2 loan to purchase ordinary shares in a close company
3 a loan to purchase shares in an employee-controlled company
or an interest in a partnership
4 a loan to pay Inheritance Tax
Certain “annual payments”
Gifts of listed shares, securities, land, or buildings to a charity
The amount of the gift =
gift’s market value at the date of the gift
plus any incidental costs of the donor
less the value of any bene�ts received by the donor
November 15, 2022 7 / 11
Gift Aid Donations
The Gift Aid Scheme provides a tax incentive for individuals
to make charitable donations
The gift is treated as if paid net of 20% tax
In other words, I. Tax at 20% on the Gross Amount is
deducted at source (Gross = Net + I.Tax)
The charity receives the Gross Amount:
Net from the donor2 plus the I.Tax from HMRC
Gift Aid donations are not deducted from the donor’s income
when calculating taxable income
Gift Aid donations are not deducted from the donor’s Income Tax
(i.e. they do not act as a tax reducer)
2’Donor’ is a person who makes a charitable donation.
November 15, 2022 8 / 11
Gift Aid Donations: Tax Incentive
(1) the donor must pay total Income Tax ≥ I.Tax deducted at source
(2) IF total Income Tax < I.Tax deducted at source THEN Personal Allowance is reduced to ensure that Condition (1) is valid (3) The donor's Basic Tax Band (¿1 - ¿ 37,700) and Higher Tax Band (¿ 37,701 - ¿ 150,000) are increased by the Gross Amount of the Gift November 15, 2022 9 / 11 Examples and Exercises Example 4.5 Example 5.3 Exercise 6.1 November 15, 2022 10 / 11 Thank you very much for attending this lecture It is time for questions, comments, and suggestions. (www.menti.com, code: 35 21 20 6 ) November 15, 2022 11 / 11 程序代写 CS代考 加微信: powcoder QQ: 1823890830 Email: powcoder@163.com