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Digita - Finance Glossary Category: Economy and Finance Date & country: 19/01/2008, UK Words: 512

indexed gain-loss
The profit and loss on the sale of an asset after adjusting for indexation. Since 30 November 1993, it is not possible for indexation to create, or enhance, a loss.

indexation allowance
An allowance which reduces the taxable element of gains to allow for the rate of inflation. The indexation allowance has been frozen at 5 April 1998 and replaced by taper relief.

independent taxation
Since 6 April 1990, husbands and wives have been taxed separately.

independent financial adviser
An independent financial adviser is someone who can give you advice about a wide range of financial products. They must be authorised to give advice, and are regulated by the Personal Investment Authority. They must be distinguished from tied financial advisers, who can only give advice on investment products offered by a specific company.

income tax
A tax on the income you receive. For 1999/2000, there are five different rates of income tax (10%, 20%, 23%, 32.5% and 40%) based on how much income you earn and from what source.

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

income limit
For some reliefs and allowances there is a limit to the amount of the relief or allowance that you can claim which is related to the amount of your taxable income. This applies, for example, if you are aged 65 or over. Your age related allowances will be restricted if your total income exceeded £16,800 in 1999/2000.

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.

income
Something you receive from working (past or present), from assets you own such as shares, or a government benefit paid to you.

income bearing asset
An income bearing asset is one which gives you an income, such as shares which pay dividends, land which pays rent, and so on.

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

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

ICTA
Acronym for the Income and Corporation Taxes Act 1988.

home office
If you mainly work from home, you may have set aside a room which you normally use as an office.

home to work travel
Travel from your home to your place of work. This travel expense is not generally allowable for tax purposes unless you can show that your home is your business base, or your permanent workplace if you are an employee.

home
The place where you normally reside.

hold-over 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 held-over 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 or in certain cases when the donee leaves the UK, the donee's gain wi …

hobby
Income from a hobby is not taxable and related expenses are not allowable. There are criteria to differentiate between a business and a hobby. If in doubt, contact the Inland Revenue, accountant or Tax Adviser.

higher rate tax
For the current tax year, the higher rate of income tax is 40%.

grossing-up
The term given to the process of adding back the tax deducted to the net income to calculate the gross income liable to tax.

gross
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.

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.

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.

goodwill
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.

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 …

gifts
Something which is received, or made, voluntarily.

gilts
Treasury stock and other loan stock issued by the Government. These stocks are known as Gilt-edged 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, incr …

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. From …

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

game or quiz show winnings
Winnings or prizes that are received as a result from game shows or quiz's. These winnings are tax-free.

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.

gains
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.

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 …

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.

FSAVC's
Acronym for Free Standing Additional Voluntary Contributions. If you are in an employer's pension scheme you can make extra pension contributions, called additional voluntary contributions. These may be made into your employer's scheme, or into a separate pension scheme of your choice. Contributions to your own scheme are called free-standing addit …

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

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.

freelance
In business on your own, selling your own services. A freelance writer, artist, plumber 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 InterviewGL_StepbyStepInterview to complete your return.

forms
There are many types of forms which are issued by the Inland Revenue for completion in certain circumstances. These include Tax Returns, P60s, P45s and so on.

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 …

foreign service
Employment abroad, provided that: * the employee is not resident or ordinarily resident in the UK, or * the employee is entitled to claim the foreign earnings deduction (or would have been had the deduction not been abolished from 17 March 1998).

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

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 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 …

foreign earnings remitted
The amount of income that you have brought into the UK out of your earnings from employment which was performed 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 earnings paid
Income from an employment where the work was done outside the UK.

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).

fixed profit car scheme
The Inland Revenue's scheme which sets out the maximum rates at which a mileage allowance can be paid tax free to employees. There are reduced reporting requirements for employers who apply to use the Fixed Profit Car Scheme. Employees may use the Fixed Profit Car Scheme rates to claim a deduction for motoring costs (the simpler basis), rather than …

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 …

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).

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).

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.

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 self-assessment, you should file your Tax Return by the earlier date of the 30 September, or two months after th …

farmers' averaging
A relief that enables farmers to even out fluctuations in income. Pairs of years are viewed together. Full averaging is allowed if the profits of one year are less than 70% of the profits of the other year, and partial relief if the profits are between 70% and 75%.

extra statutory concession
Something which the Inland Revenue allows in practice, although it would not strictly be allowed under the terms of the tax legislation. For example luncheon vouchers of up to 15p per day are tax free under an Inland Revenue concession.

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

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.

exercise
To take up an option to buy something - usually a share.

exempt
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 private motor cars.

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.

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

ex-dividend
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 ex-dividend. You are still entitled to receive the dividend.

estate
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.

entertainment
Hospitality provided, such as dinners, parties, business lunches etc.

equalisation
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 …

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 long-term investment.

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

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 Start-up Allowance.

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

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).

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

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

employee
A person who is employed by an employer under a contract of service whether written or implied.

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.

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

emoluments
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.

elections
You can make an election if you want your income or gains to be taxed in an alternative way. There are strict time limits for elections, and you must normally satisfy specific conditions before you can use the revised treatment. Elections that you can make include the allocation of the married couple's allowance between spouses (this is restricted …

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.

EEA
Acronym for the European Economic Area.

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

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.

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

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'.

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

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

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
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 Adviser.

DOM 1
An Inland Revenue questionnaire that helps determine your domicile (the country where you intend your permanent home to be).

dividends - ex-dividend
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 ex-dividend. You are still entitled to receive the dividend.

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

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 …

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

dividend
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.

distribution
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.