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Yahoo! Finance UK & Ireland - Tax glossary
Category: Economy and Finance > Tax
Date & country: 17/01/2008, UK
Words: 491

People who owe you money. You need to include in your business accounts any sales that you have made even if you have not collected the money for them. If you have a balance sheet, debtors will appear as an asset of your business.

Something which reduces the amount of your taxable income or your chargeable gains. A business expense, such as the purchase of stationery supplies, is a deduction that can be used to reduce the amount of your taxable business profits. Indexation allowance (to April 1998) is a deduction that can be made in the calculation of your chargeable gain on …

Deed of covenants
Regular annual payments paid using funds from your taxable income under a legally binding agreement. Most commonly used for regular payments to charities, but may also be used for certain payments in connection with your business, such as payments to retiring partners.

You can apply to the DSS (Department of Social Security) to defer payment of national insurance contributions if it is likely that you would otherwise pay more than the permitted maximum, or if some of your business income is liable to Class 1 employees national insurance contributions. Any remaining liability is collected by the DSS after the end …

Deficiency relief
Tax relief given on the maturity, surrender or sale of a life insurance policy, if the excess of the total receipts from the policy over the total premiums paid is less than the amounts that have already been taxed on partial surrenders and withdrawals in earlier tax years. The relief cannot exceed the amounts which have already been taxed.

Department of Social Security
The Department of Social Security (DSS) oversees the Benefits Agency (which deals with the payment of state benefits), and until the 6 April 1999 was responsible for overseeing the Contributions Agency (which dealt with the collection and recording of national insurance contributions).

Dependent child
Any child under 16, or a child aged 16 or over who is in full time education or who needs full time care.

Sum of money which is placed with a deposit taker (a bank for example), usually in exchange for interest on the money deposited.

Deposit takers
Bank of England approved organisations that can accept deposits generally banks, building societies and so on. (Back to top)

A deduction from business profits made to write off the cost of capital assets over their expected useful lives. Depreciation is not an allowable expense for tax purposes, but is capital allowances given an equivalent kind of tax deduction.

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.

Disabled persons tax credit
A form of social security disability benefit, payable to disabled people who are in employment and have a PAYE code. The benefit is normally awarded for a period of twenty six weeks. From April 2000 the claimant's employer is instructed to make payments with salary or wages on behalf of the Government . The employer does not know on what basis the …

Disallowable expenses
Expenses which, although charged in your business accounts, are not tax deductible. The disallowable expenses must be added on to your trading profits when you calculate your taxable profits, and hence tax liability.

Discounted securities
Certain redeemable securities that were issued at a price lower than the amount that will be paid when the securities are redeemed. The securities must have been issued after 13 March 1984 at a discount exceeding 15% of the redemption value, or ½% of the redemption value for each year between issue and redemption. Does not include ordinary shares a …

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.

Term used for the sale, gift, loss or exchange of an asset or part of an asset. (Back to top)

In general terms, money which is paid by a company or unit trust manager to a shareholder or unit holder. The distribution may be in the form of an asset rather than in cash. The payment is made out of accumulated profits.

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.

Dividend rate tax
For 1999/2000 the rate of notional tax suffered on UK dividends is 10%. An income tax credit equal to the 10% notional tax (rounded to the nearest penny) attaches to the dividend, and the amount of tax credit is advised to you on each dividend voucher. For income tax purposes your dividends are valued at 10/9 of the amount actually received, which …

Dividends cumdividend
If you sell a share just before the date you become entitled to a dividend, the share is sold cumdividend. The purchaser of the share(s) then receives the dividend.

Dividends exdividend
If you sell a share just after the date you become entitled to a dividend, but before the date the dividend is paid out, the share is sold exdividend. You are still entitled to receive the dividend.

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 dependency
Applies to children aged under 16. Their domicile (permanent home) follows the domicile of parents until they reach 16, at which time they can change to a domicile of their choice.

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.

Draw down
If you have contributed to a retirement annuity contract or personal pension plan, you can defer using the accumulated funds to purchase an annuity until you reach the age of 75. Between retirement age (usually 50) and the age of 75 you can, within set limits, draw income from your pension scheme. This is called 'income draw down'.

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

Earned income
Income deriving from an employment with an employer, office you hold (such as a directorship) or income from a trade that you perform either alone or in partnership.

Acronym for the European Economic Area.

Acronym for Enterprise Investment Scheme.

EIS deferral relief
If you subscribe for shares in an unquoted trading company, you can claim to defer all or part of a gain that you have made on the disposal of other assets. This is called enterprise investment scheme (EIS) deferral relief. There are strict conditions which must be satisfied before you can claim the relief.

The amount of income you receive from your employment. This income includes your salary commissions, and benefits such as the provision of a company car, use of a mobile phone and payments of expenses, such as travelling and subsistence costs.

If you work for someone else, then you are employed.

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

Employee contributions
If you are employed and make payments into a pension scheme, these payments are called employee contributions. This applies to contributions to your employer's pension scheme, or to your own retirement annuity contract or personal pension plan.

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.

Hospitality provided, such as dinners, parties, business lunches etc. (Back to top)

This is an adjustment which may be made if you have recently bought units in a unit trust. The first distribution you receive may be split into two parts, a dividend distribution of the income earned by your units since the date of your purchase, and an equalisation payment equal the income earned by the units before them. The equalisation payment …

Property left by a person who has died. The executors will collect all the assets of the estate and distribute them to the beneficiaries in accordance with the terms of the dead person's will, or intestacy rules if there was no will left.

Exact basis motoring costs
The exact basis of calculating your motoring costs involves adding up the total motoring expenses incurred over the tax year (such as fuel, servicing repairs and so on) and apportioning the costs between business and private use on the basis of mileage.

If you sell a share just after the date you become entitled to a dividend, but before the date the dividend is paid out, the share is sold exdividend. You are still entitled to receive the dividend.

Income that is not taxable. For example, prizes from the National Lottery or winnings from gambling.

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.

Expense payments received
Payments received by employees from employers to reimburse them for expenses that they have incurred in carrying out their employment. Includes payments for travel, subsistence, business phone calls and so on.

Outgoings you incur in the running of your business, employment, property letting and so on or on the purchase or sale of an asset.

Filing date
The date by which you must file your Tax Return. The normal filing date is the 31 January following the tax year, but this is revised to 3 months after the issue of the Tax Return if later. If you wish the Inland Revenue to complete your selfassessment, you should file your Tax Return by the earlier date of the 30 September, or two months after the …

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.

FIRST option bonds
These Bonds are bought from the Post Office or direct from National Savings. Interest is paid to you annually, net of tax (tax deducted).

First year allowances
Capital allowances that you can claim on items of plant and machinery in the year that you acquire them. For expenditure from 2 July 1998 the rate is 40%. First year allowances are not available to large businesses, nor are they available on cars (except in a car hire business).

Fixed deduction
If you buy and maintain special clothing and tools that you have to use in your employment the expense is tax deductible. Instead of claiming a deduction for the actual amount you spend, you can claim a fixed deduction. The amount of the fixed deduction depends on the nature of your employment and is agreed between the Inland Revenue and your trade …

Foreign companies
Companies which are not resident in the UK.

Foreign dividend
A dividend paid by an overseas company, unit trust or other investment fund.

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 earnings remitted
The amount of income that you have brought into the UK out of your earnings from employment which was done outside the UK. This term is used for people who are not UK Domiciled, and certain people who are not ordinarily resident in the UK, who are taxed on the foreign earnings only when the income is brought into the UK.

Foreign income arising
Means that you are taxed on foreign income when it is due to you even if you have not received it in the UK. You are, for example, taxable on interest credited to your foreign bank account even if you do not withdraw the interest from the account. Applies to people who are UK Domiciled, apart from certain people who are not ordinarily resident in t …

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 income remittance basis
You are taxed on foreign income only when you bring it into the UK, directly or indirectly. Applies to people who are not UK Domiciled and certain people who are not ordinarily resident in the UK.

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

Foreign service
Employment abroad, provided that:

Foreign tax paid
Tax paid in a foreign country on income (or gains arising in that country). You may claim tax credit relief for foreign tax paid. If you do not claim tax credit relief you may deduct the foreign tax paid from the foreign income (or gains), so that your taxable income (or gains) is the net amount (the foreign income (or gains) less the foreign tax p …

There are many types of forms which are issued by the Inland Revenue for completion in certain circumstances. These include Tax Returns, P60's, P45's and so on.

Forms mode
The Forms mode enables you to type information directly into electronic versions of Inland Revenue forms. Unless you are extremely comfortable completing Inland Revenue forms, it is best to use the Step by Step Interview to complete your return.

In business on your own, selling your own services. A freelance writer, artist, plumber and so on.

Friendly society
An organisation set up to accept savings from individuals. The policies offered by the friendly society are generally tax free, but there is a limit on the amount you may invest. You may be able to claim limited tax relief for contributions to certain older policies providing a combination of sickness and death benefits.

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.

Furnished holiday lettings
The letting of holiday accommodation which is taxed as if it were a trade. The property must be furnished, available for commercial letting for at least 140 days per year, let commercially as holiday accommodation for at least 70 days per year and not be occupied for a continuous period of more than 31 days by the same person for at least 7 months …

Profits that are made on the disposal of investments (such as shares) and other assets. The profits made are normally liable to capital gains tax, but in some cases are liable to income tax.

Gambling profits or losses
Profits or losses that are received as a result from gambling. Unless you are a professional gambler, you are not taxed on any profits and nor do you receive tax relief on losses.

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

General commissioners
A panel of individuals, usually businessmen and people of highstanding in the local community, who adjudicate on certain disputes between taxpayers and the Inland Revenue.

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.

Something, which is received, or made, voluntarily.

Treasury stock and other loan stock issued by the Government. These stocks are known as Giltedged securities (Gilts) because the Government guarantees the repayment of your capital. Interest will be paid to you, normally at a rate fixed when the gilts were issued. Some gilts are index linked. The interest on these, and the amount of the loan, incre …

Give as you earn
A scheme which gives you tax relief for payments to charity. The payments are deducted from your wages by your employer and paid to a charitable agency. You can then choose which charities you wish to make donations to. For tax year 1999/2000 up to £1,200 may be given under the scheme. From 6 April 2000 there will be no upper limit on donations mad …

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.

Gratuities and tips
Amounts paid to you by customers as a reward for your services. Often received by waiters and waitresses, hairdressers and so on. Tips and gratuities should be included in your taxable income even when not paid by your employer.

The amount of money (wages for example) you receive before tax is then deducted. Some income may be received gross, without tax having been deducted.

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:

Higher rate tax
For 1999/2000, the higher rate of income tax is 40%. You pay tax at the starting rate (10%) on the first £1,500 of your taxable income (the starting rate band), at the basic rate (23%) on any income between £1,500 and £28,000 (the basic rate band), and tax at the higher rate (40%) on any income in excess of £28,000. However, you do not pay basic ra …

Holdover relief
If you give an asset away for no monetary gain and a capital gain arises, in some circumstances you can elect for the gain to be heldover or deferred. The donee (the person you gave the asset to) inherits your original base cost of the asset. When the donee disposes of the asset, the donee's gain will include the gain held over on your gift, and th …