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Dec 2012 Sophia Wong Question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Dec 2012 Sophia Wong Question

  • This topic has 5 replies, 2 voices, and was last updated 9 years ago by Tax Tutor.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • September 2, 2015 at 3:45 pm #269587
    lakshmana iyer krishnan
    Member
    • Topics: 14
    • Replies: 46
    • ☆☆

    This question gave the details of a self employed person’s tax (Income tax and NIC liability) and asked what will be tax payable if the business is registered as a company and 1) the profits are given as Director’s salary or 2) Profits are distributed as dividend. The same question is amended solved in BPP Kit Page 179.
    My doubt is why there is no NIC in the second option.
    Is it because the entire profit is distributed as dividend and we have to assume that there is no director or employee in the company?

    September 3, 2015 at 4:17 pm #269707
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    There is no NIC as although there IS a director, the owner manager of the company, he / she is NOT paying themselves a salary but instead taking everything as a dividend and of course there is no NIC on dividends!

    September 4, 2015 at 12:42 pm #269828
    lakshmana iyer krishnan
    Member
    • Topics: 14
    • Replies: 46
    • ☆☆

    Thank you so much.
    So if a company has zero salary director, there is no need to pay NIC either by the company or by the director who receives the same profit as dividend instead of salary.

    September 6, 2015 at 11:49 am #270048
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    The director’s salary does not have to be zero for no NIC to be payable – the salary simply needs to be below the primary threshold below which NIC are not payable!

    September 7, 2015 at 4:27 am #270142
    lakshmana iyer krishnan
    Member
    • Topics: 14
    • Replies: 46
    • ☆☆

    Yes agreed. Thanks once again.
    So many fine points and threshold figures like 31,865 basic tax rate, 100K for PA, 7956 for NIC, 11,000 Annual exemption for capital gain, Class 1 and 1A and Class 4 NIC, 75000 value of house calculation, 325K Nil Band for IHT etc, 18% and 28% tax for capital gain, 18% and 8% capital allowance etc. etc. threshold dates for filing return, 1/400 factor for Marginal relief, 6,000 threshold for chattel with 5/3 rule, 20% and 21% tax for corporates, 40% IHT and 20% IHT for chargeable life time transfer, special calculation for premium paid on lease, F6 paper requires memorizing quite a lot of points.

    September 7, 2015 at 12:57 pm #270201
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    Indeed it does require a lot of learning, but most of the points you list are of course given to you on your rates and allowances pages at the front of the exam so they do not need to be learned they simply need to be applied!

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
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