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ACCA F6 UK lectures Download F6 notes
August 17, 2015 at 8:59 pm
Please can you advise: if tax suffered on dividends is not repayable, why we decrease the tax liability using the dividends as tax credit..( example 6)
tax deducted at sourse:
August 21, 2015 at 5:07 am
From the note, Tax credit on dividend is notional, meaning that, even though its grossed up in arriving at our Total income, It was not actually deducted nor remitted to HMRC in the real sense.
Back to your question. In example 6, tax liability is decreased using Dividend tax credit (2000*10%=200) because grossing up d dividend interest (100/80 X8000=10000) to arrive at our Total Income would have overstated our Total Income. (He received 8,000 bank interest but after grossing up, we used 10,000). Hence, the increase in income due to the grossing up is deducted from tax liability to avoid double taxation.
However, the statement “tax suffered on dividends is not repayable” is not completely true.
Tax suffered on dividends is not repayable only if tax credit exceeds the tax liability.
that is why notional tax credit on dividend is deducted first before PAYE and Bank deposit Interest tax credit from tax liability to arrive at Tax Payable/Tax repayable.
July 30, 2015 at 11:29 am
I think I got it now. Are we only deducting figures for items that have actually been deducted/suffered at source?
August 21, 2015 at 5:10 am
July 30, 2015 at 11:07 am
I would like to thank you and Open Tuition for all the great lectures that help us in our studies.
Would you be kind to explain the following please.
I noticed that when there is an employment income we deduct PAYE to get the figure for tax payable. However when there is a trading profit we do not deduct. The only items deducted in this case is tax credits for building society/bank deposit interest and dividend so far. Obviously there is no PAYE for trading profit but are we supposed to deduct anything? As both income will be taxed regardless whether they are from employment or self-employment.
Many thanks in advance.
August 21, 2015 at 5:39 am
Referring to the previous question, we only deduct figures for items that have actually been deducted/suffered at source, such as PAYE(deducted by employer at source to be remitted to HMRC on behalf of the employee), Increase in Bank deposit Interest as well as Dividend interest as a result of grossing up if received net (its assumed to be received net if not stated otherwise in the question). Note however that nothing will be grossed up nor deducted from tax liability if Bank deposit Interest and/or Dividend interest if stated in your question to have been received gross).
Obviously, since there is no Tax credit for trading profit (meaning that nothing was removed at source)logically, it means we ARE NOT supposed to deduct anything form Tax liability.
The logic behind the deduction of tax credit from tax liability is to avoid double taxing the taxpayer. (It was deducted at source, we added it back(grossed up) in our computation to know the actual amount he should have received if the tax credit was not removed at source, then we later deduct it again to avoid double taxation)
Refer to the first question and reply for more explanation.
July 9, 2015 at 8:52 pm
March 13, 2015 at 7:39 am
example 5 is confusing why should we take only 1880 from saving income
May 15, 2015 at 6:09 pm
dear please note below
1000* 20% 200
1880 * 10% 188
18120 * 20% 3624
March 10, 2015 at 2:43 pm
i have a question,is personal pension contribution(PPC) only deducted if the net income exceeds 100,000?if suppose it is 90,000 than PPC wont be deducted?
May 20, 2015 at 11:20 am
Hi. yes that is correct because we only work out ANI if Net Income > 100,000
March 7, 2015 at 8:12 am
I have a problem in calculating the Tax liability for the Savings Income. Why on the answer it was split 20,000 each and not subtracting the BR (31,865) for 40,000.
Thank you so much,
May 20, 2015 at 11:25 am
remember you have to deal with Non-savings income first before savings income. non-savings income of 130,000 is greater than 31,865 & has therefore used up the basic rate (i.e. 31,865).
maybe go back & watch the 2nd lecture video to see how different rates apply
hope that helps
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