Copy of `Yahoo! Finance UK & Ireland - Tax glossary`

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Yahoo! Finance UK & Ireland - Tax glossary
Category: Economy and Finance > Tax
Date & country: 17/01/2008, UK
Words: 201

A person whose job it is to prepare accounts and give you tax advice. They can also liaise with the Inland Revenue on your behalf.

Accounting and audit fees
Fees paid to an accountant for preparing business accounts for an audit. These fees are tax deductible.

Accounting period
The period for which accounts are prepared. An accounting period should not normally be longer than 18 months. A common accounting period is from 6 April to 5 April.

Accumulation units or shares
You receive extra units or shares instead of a cash distribution. You need to declare the dividend as though you received it in cash. This amount is the capital gains tax base cost of the extra units or shares that you have received.

Term used when you buy (acquire) something.

Additional voluntary contributions
You can make 'additional voluntary contributions' to enhance your pension if you belong to an employer's pension scheme. You can pay these additional contributions into your employer's pension scheme or your own FSAVC Scheme (Free Standing Additional Voluntary Contributions). There is generally a maximum limit of 15% of remuneration in the case of …

Agency worker
Someone who is provided by an employment agency to work for a third party. The contract for the work is between the agency and the third party. The agency worker is taxed as an employee of the agency.

A payment made to a former spouse following divorce or a legal separation.

Allowable business expenses
Expenses incurred in the running of your business which you may deduct from the gross trading income before calculating the taxable profit and loss.

Allowable deductions
Inland Revenue approved deductions that you can deduct from your net income to reduce your tax liability.

Annual percentage rate (APR)
This is a formula intended to give you the true cost of borrowing money. It is calculated as the interest that would be charged over the course of a year.

Approved share schemes
Share schemes approved by the Inland Revenue that have various tax advantages. These include 'Approved Discretionary Share option' schemes. 'Approved Savings Related Share option' schemes and 'Profit Sharing' schemes.

Arising basis
This term means that you are taxed on (foreign) income based on the date when the payment is due. You do not have to receive it to be taxed on it. People who are UK Domiciled are usually taxed on the arising basis.

Acronym for 'Additional Voluntary Contributions'. You can make 'additional voluntary contributions' to enhance your pension if you belong to an employer's pension scheme. You can pay these additional contributions into your employer's pension scheme or your own FSAVC Scheme (Free Standing Additional Voluntary Contributions). There is generally a ma …

Balancing allowances
A type of capital allowance that may be given if you sell an asset for less than its tax written down value. Balancing allowances are not given on items of plant that are included in the general capital allowances pool until the business ceases.

Balancing charge
Withdrawal of some or all of the capital allowances previously given. They arise when fixed assets stop being used in your business. Balancing charges may be made on the general capital allowances pool if the proceeds of sale of pooled assets exceed the tax written down value of the whole pool.

Base rate
Most interest rates are linked to the Base Rate. The Bank of England meets monthly to decide what the base rate should be set at. The base rate determines how much other banks and building societies pay for loans they take out from the Bank of England. These base rates in turn affect the interest rate you pay for loans.

Blind person's allowance
An extra allowance you are entitled to if your sight has failed and you are registered as blind (registers do not exist in Scotland or Northern Ireland).

Building society
Similar to a bank but owned by members of the building society rather than shareholders in a company (bank).

Business expenses
Expenses of a business incurred in earning the profits of the business. Not all business expenses are allowable for tax purposes.

Business losses
Losses made by a business where business expenses exceed business income. You need to adjust business losses to arrive at allowable losses for tax purposes.

Business start up allowance
A government benefit paid to assist unemployed people in setting up their own business. Payments are taxable. Now more commonly known as Enterprise Allowance.

Capital gains
If you sell a chargeable asset for a profit (after deducting expenses and releifs see capital gains calculation) you make a capital gain.

Capital gains tax
Tax charged on capital gains that you have made.

Casual earnings
Income you get from irregular work.

Charitable covenants
Regular payments made to a registered charity under a written deed. The charity reclaims the basic rate tax you have deducted and you receive higher rate tax relief if you have sufficient income.

Child minding expenses
Fees paid for someone to look after your children whilst you are at work. They are not tax allowable.

Clogged losses
Clogged losses are losses which can only be set against gains of certain types. These are

Commonwealth citizen
Someone who is a citizen of a Commonwealth country.

Company car
A car which is provided for you by your employer. (Back to top)

A sum of money you receive if you give something up such as your employment or the right to use an asset.

You are contractedin if you are not a member of your employer's contractedout pension scheme and do not contribute to an appropriate personal pension plan. You will receive a state earnings related pension if your earnings exceed the national insurance lower earnings limit.

Corporate bonds
These are issued by companies when they want to raise capital. They are loans to the company which are repayable at or between set dates.

Council tax
Payable to your local council in return for services and amenities. The amount payable is determined by the value of your house and what council tax band it falls into.

If a deferred gain is crystallised it becomes chargeable to capital gains tax. A deferred gain will be crystallised if one of several defined events occur. For example a gain deferred under the enterprise investment scheme (EIS) deferral relief scheme will crystallise if you sell your EIS shares.

Someone who is appointed to a position high up in a private or public company and 'directs' how the business is run.

Directors' fees
Fees paid by a company to its directors. May be paid in addition to salary and other benefits.

Discretionary trusts
Trusts where the trustees can choose how to allocate the income and/or capital between the beneficiaries. They may also have the power to accumulate income rather than paying it out to beneficiaries every year. The trustees' powers are specified by the trust deed.

An agreement between an employer and the Inland Revenue that particular expenses paid to employees are genuine business expenses. The expenses are not reported on the forms P11D or P9D and must not be included on the employees' own Tax Returns.

Money which is paid by a company or unit trust manager to a shareholder or unit holder. The payment is made out of accumulated profits.

Dividend distributions
Open ended investment companies (OEICs) and unit trust managers make dividend distributions to shareholders from the dividends that they have received from their underlying investments.

Dividends stock or scrip dividends
A dividend which you have elected to receive in shares instead of cash.

An Inland Revenue questionnaire that helps determine your domicile (the country where you intend your permanent home to be).

Your domicile is the country where you intend your permanent home to be. This can be different from the country you currently live in. The rules for determining where you are domiciled can be complicated and if you live in the UK but think you may be domiciled elsewhere you should consult a Tax Advisor.

Domicile of choice
The country you have chosen as your permanent home but which is different from your domicile of origin or dependency.

Domicile of origin
: This will normally be the domicile (permanent home) of your father (sometimes your mother) when you were born.

Double taxation agreement
An agreement between governments of two countries to resolve taxation issues. They are designed to stop income being taxed twice.

Double taxation relief
Taxation relief given where income would otherwise be taxed in two countries.

Dual resident
A term used to describe you if you are resident in two or more countries at the same time.

Acronym for the European Economic Area.

Acronym for Enterprise Investment Scheme.

A person who is employed by an employer under a contract of service whether written or implied. (Back to top)

Employee loans
Loans made by a company to an employee. These loans might be interest free or at a low interest rate.

Someone who employs you to do a job under a contract of service.

Employer's pension
A pension you receive from a previous employer.

Employment income
The earnings you receive from your office (directorships and so on) or employment. It includes salary and commission as well as benefits provided by your employer (company car and so on).

Queries which the Inland Revenue may raise and investigations they may make into matters connected with your Tax Return.

Enterprise allowance
A Government benefit paid to assist unemployed people to start their own business. Payments made by the government to recipients are included in their taxable income. Previously called Business Startup Allowance.

Enterprise investment scheme
The Enterprise Investment Scheme is an Inland Revenue approved scheme that encourages individuals to buy shares in unquoted trading companies. Tax relief is due on the investment. There are many detailed rules applying to this scheme.

Enterprise zone trust
An Inland Revenue approved trust which builds and lets commercial property in certain designated areas (Enterprise Zones). You receive tax relief on your share of the building costs and then you receive a share of rents. This is a very longterm investment.

Exempt assets
Assets that are specified in the tax legislation as being free from capital gains tax such as motor cars.

To take up an option to buy something usually a share. (Back to top)

An exgratia payment is one made freely where there is no obligation to make any payment. Often made by employers to leaving employees.

Final version
The definitive end product which is produced after an initial drafting stage. You can print a draft version of your Tax Return from the program before asking for a final version.

Foreign companies
Companies which are not resident in the UK.

Foreign earnings deduction
A deduction from your earnings that you could make if you worked abroad and were outside the UK for a continuous period of at least 365 days. It has been abolished for earnings paid on or after 17 March 1998 (unless you are a seafarer).

Foreign earnings paid
Income from an employment where the work was done outside the UK.

Foreign income dividends
Some multinational companies include a foreign income dividend element in the dividend they pay. This is because they pay foreign taxes on the foreign profits. The tax credit is not repayable.

Foreign life insurance policies
Life insurance which is with an insurance company which does not have any presence in the UK.

Fringe benefits
Benefits provided to you by an employer in addition to your salary.

Acronym for Free Standing Additional Voluntary Contributions.

FTSE 100 share index
An index run by the London Stock Exchange which monitors the performance of the top 100 UK quoted companies on the London stock exchange.

Game or quiz show winnings
Winnings or prizes that are received as a result from game shows or quiz's. These winnings are taxfree.

Gift aid
One off payments of more than £250 made to a registered charity. The charity reclaims the basic rate tax you have deducted and you receive higher rate tax relief if you have sufficient income. Under the millennium gift aid scheme the £250 limit is reduced to £100 for payments to participating charities for the benefit of third world countries.

The value put on a business's customer base and organisation. It is the difference between the total of the values of the individual business assets and the value of the business as a going concern.

Grant of option
An option is granted to you when you are given the right to purchase shares (or other assets) at a price specified in the option agreement.

The term given to the process of adding back the tax deducted to the net income to calculate the gross income liable to tax. Formulas for converting net income at the appropriate rates to the gross figure are detailed below:

The place where you normally reside.

Acronym for the Income and Corporation Taxes Act 1988.

Acronym for Independent Financial Advisor. You may need to use an IFA to help with your general financial planning along with pension options.

Incapacity benefit
A government benefit paid if you are unable to work due to an accident or illness.

Income for tax purposes
Income which is liable to tax. Some forms of income are tax free such as winnings from gambling (providing you are not a professional gambler) or the National Lottery.

Indexation allowance
An allowance to ensure that you are only taxed on capital gains made after adjusting for the rate of inflation. The indexation allowance has been frozen at 5 April 1998 and replaced by taper relief.

Something you receive from a deceased relative or friend. Inheritances are received free of income tax and capital gains tax and should not be entered on your Tax Return.

Money you pay on a loan or receive if you have cash deposits. Note that personal overdraft interest or credit or charge card interest is not tax deductible.

Interest distribution
Payments by a company or unit trust in the form of interest rather than as a dividend distribution. Your tax voucher will specify the nature of the distribution.

Invalid care allowance
This allowance is paid if you spend at least 35 hours per week caring for a disabled person who receives certain state benefits. It will not be paid if you are also working and earning over £50 per week.

Legal expenses
Some legal costs qualify as allowable expenses for income tax or capital gains tax purposes. You should ask your solicitor or a Tax Advisor for help if you are not sure what legal costs qualify.

Land or property leased to another person.

Acronym for London Inter Bank Offered Rate. This is the rate charged by banks on loans between themselves.

Literary income
Income received by an author.

Living together
A man and woman living together in the same manner as a married couple would.

A sum of money lent to another party who agrees to repay the capital lent over a period of time and usually to pay interest on the outstanding balance.

A loss arises when the income or proceeds received are less than the expenses or cost. There are detailed rules on how tax relief can be claimed on losses.

Main residence
The place where you normally live and consider to be your home. You can only have one main residence for capital gains tax purposes.

Market value
The price which you can obtain for an asset if you sold it freely on the open market.

A man and woman legally living together as man and wife.

Married couple's allowance
An extra tax allowance you are entitled to if you are married.

Master-servant relationship
Means that you are told what your daily or weekly duties are. Often determines whether you are employed or self employed.

Mileage allowance
An allowance paid to you by your employer for travelling. It is based on the number of business miles you travel and is paid at a rate fixed by your employer.