Tax Dictionary
A B D E F I J K L M N O P Q R S T U V W Y Z
ACCUMULATION AND MAINTENANCE TRUSTS are a special form of discretionary trust that are set up for a stated class of beneficiaries. Under the rules of these trusts one or more of the beneficiaries will become entitled to an interest in possession in the trust property upon reaching a specified age (less than 25 years). Until then all income must be held on a discretionary basis with income only being applied for the maintenance, education or benefit of the beneficiaries. In the UK the same income tax and CGT tax rules apply as for discretionary trusts. There are however different rules for CGT hold-over relief and IHT.
ACTIVE SERVICE - DEATH ON - since the Second World War death duty legislation has been amended to exempt persons dying from wounds suffered whilst on active service. The exemption now includes the estates of those killed in the Falklands, the Gulf War and in Northern Ireland.
ADDITIONAL VOLUNTARY CONTRIBUTION (AVC) - a simple and readily available means of topping up retirement income by making addition contributions into your company pension scheme. The Inland Revenue allows you to pay up to 15% of your pensionable salary into your main company scheme and AVC scheme combined (restricted in the case of some higher earners) - most people only contribute around 6% so there is plenty of scope to add some more. AVCs qualify for full tax relief on employee contributions and the growth of the fund is tax-free. AVCs may also provide a tax-free cash lump sum at retirement if the contributions were started before April 1987.
AD VALOREM DUTIES - these are duties, for example stamp duties, that are charged as a percentage of the value of the asset concerned.
ADVANCE CORPORATION TAX - a company can choose to retain profits for investment purposes or distribute then to shareholders as a dividend. When a company pays a dividend it has to pay what is known as Advance Corporation Tax (ACT), which may be offset against its corporate tax liabilities. Recent changes to ACT regulations mean that companies will continue to pay advance corporation tax on dividends at the same rate as now. Shareholders will still be able to set off tax credits against their liability to tax on dividends, but the rate of tax credit will fall to 10% from 6 April 1999.
AGRICULTURAL BUILDINGS ALLOWANCE - the agricultural buildings allowance is a form of capital allowance given in respect of expenditure used for agricultural purposes.
AGRICULTURAL PROPERTY RELIEF - this is a relief given for inheritance tax purposes and is usually either 50% or 100% of the value of agricultural land.
ALLOWANCES - PERSONAL, AGE - much as it hurts the Inland Revenue, you don't pay tax on all your income. Every year the taxman lets you off paying tax on the first part of your earnings. How much depends on whether you are married, single, divorced or widowed and whether you are a one parent family. Elderly people on small incomes also pay less tax. This income, on which you don't have to pay tax, comes under the heading of allowances. Everyone is entitled to a personal income allowance or personal age allowance. Other allowances are given, for example, to the blind, widows and the elderly.
ANNUAL EXEMPTION - annual exemptions are given to individuals for capital gains and inheritance tax purposes - for example under the terms of the IHT small gifts exemption an individual is allowed to give away £250 to any number of people in a tax year without a tax charge being incurred.
ANNUITIES - Annuities are a system whereby paying a lump sum in advance, someone - usually someone in retirement - can buy an income for the rest of their lives. Typically the purchaser of an annuity pays a lump sum to an insurer who then promises in return to pay a fixed monthly, quarterly or annual income until death. The level of income that is paid depends mainly on the prevailing long-term interest rate when the annuity is bought as well as on calculations related to the purchaser's life expectancy, because with annuities remember the money is paid for life. Insurers will normally offer better rates to older people and women get lower annuity incomes than men of the same age because they are expected to live longer. Also people in poor health are often offered better annuity rates because insurers naturally assume they will not survive to claim many payments. Options, but with lower income, include a joint-life annuity where payments continue until the second death or one guaranteed to pay for at least 5-10 years even if you die. The annuity payment is regarded as part taxable, part return of capital. The capital part is not taxable but this amount depends on your age when you buy it. 20% tax is deducted from the taxable portion. Non-taxpayers can have it paid without deduction of tax or can reclaim it. Higher rate taxpayers have to pay extra tax on the taxable portion only; basic taxpayers pay no extra tax.
APPROPRIATE PERSONAL PENSION PLANS - a method of contracting out of a State Earnings Related Pension Scheme SERPS (see below) - open to all employees who are not already contracted-out by another scheme. SERPS is a scheme that you can join to boost your basic state pension and is paid for by national insurance contributions deducted from your monthly or weekly salary.
APPROVED PROFIT SHARING SCHEMES - these are schemes under which employees of companies may be given shares without a charge being made to income tax as long as the shares are held for a minimum of three years.
ASSETS - LOST - if an asset is lost, destroyed or has negligible value, you are treated for tax purposes as having disposed of it at that date, even if no compensation is received. As such relief may be claimed for the loss.
ASSOCIATED COMPANIES - in terms of tax these are companies controlled by the same person or groups of people.
AVOIDANCE - saving tax legally by using existing loopholes and carefully planning your tax and financial affairs is known as tax avoidance. Tax evasion however, is cheating the Inland Revenue by lies and deception. Letting the distinction between avoidance and evasion become blurred can easily lead to a stay as a guest of Her Majesty.
BARE TRUST - a bare trust is one in which the beneficiary has an absolute legal right to the capital and income of the trust, but the trustees are the legal owners and hold the property as nominees. Bare trusts are often used as a mechanism for transferring an asset to a child in a way that ensures the offspring actually gets the benefit, and in a tax-efficient way. With a bare trust the asset is automatically transferred to the child when he/she reaches the age of 18. With a 'flexible trust', the trustee decides when the child will benefit. The beneficiaries can be changed at any time to other children or to a named charity.
BASIS PERIOD - the period on which your profits for the tax year are based.
BED-AND-BREAKFAST - before Chancellor Gordon Brown changed the rules, bed-and-breakfasting was the process of selling shares on one day and then re-purchasing them on another, usually the following day, to enable investors to minimise their capital gains tax bills or to crystallise a loss.
BENEFICIAL LOANS - these are loans to employees at less than the full commercial rate of interest.
BENEFITS-IN-KIND - perks such as cars, fuel and mobile phones received by a director or employee which are taxed as employment income.
BENEFITS - NON-TAXABLE - certain benefits received by a director or employee that are not usually taxable: the most widely used tax-free benefits include luncheon vouchers, sports facilities, long service awards, the use of a pooled car, and retraining expenses.
BETTING WINNINGS - lottery prizes, football pools and betting winnings are paid tax-free.
BUSINESS ENTERTAINING - business entertainment expenses, including the VAT thereon, are not allowable for tax purposes.
BUSINESS EXPANSION SCHEMES - a tax-efficient investment scheme that ended 31 December 1993.
BUSINESS PROPERTY RELIEF - a deduction of either 50% or 100% is made from the value of business property when it is assessed for inheritance tax purposes. Capital Allowances - capital allowances are used for providing for depreciation of a wide variety of assets with respect to taxation. Such assets include plant and machinery, commercial buildings located in an enterprise zone, agricultural and industrial buildings, and hotels. Capital Gains Tax - this is a tax on the increase in the value of an asset. Capitalisation of Profits - the process where the profits of a company are converted into capital, for example, by issuing shareholders with bonus shares, rather than being paid out as dividends. Capital Transfer Tax - the predecessor of Inheritance Tax, this was a tax on the transfer of wealth during life or on death. Carbon Taxes - these are becoming more and more likely as governments seek to tax the consumption of, for example, coal, gas, and petrol, as a means of protecting the environment and restraining the consumption of non-renewable energy resources. Carry Over - a provision whereby losses in excess of those allowable in one tax year may be set against income or gains made in later tax years. Chattels - a tangible, movable asset, for example, furniture. Church Tax - found in some European countries, this is a levy made by an officially recognised religion on its members on the basis of legislation. Close Company - this is a company controlled by a small number of people. In the UK a close company is defined as one controlled by its directors, or five or fewer persons or families. Commissioners of Income Tax - these are persons appointed to hear tax appeals. General Commissioners are unpaid members of the public while Special Commissioners are usually lawyers with extensive experience of tax law. Corporation Tax - this is a tax on the income and chargeable gains made by a company. Council Tax - a local domestic property tax that replaced the much hated community charge or poll tax as it became known. Current Year Basis of Assessment - this is income charged to tax in the assessment year in which it arises. Customs Duties - these are taxes levied on imports and exports.
DEDUCTIONS - these are items that may be subtracted from gross income to give taxable income.
DEED OF COVENANT - a deed of covenant is a written commitment to pay, to another person or organisation, a specified amount of money at defined regular intervals for a specified number of years or until some other event, such as the death of one of the parties, takes place. In the past, deeds of covenant were used to avoid tax by transferring taxable income from one person to another. However, in more recent years the scope of using deeds of covenants in such a manner has been severely restricted.
DELINQUENT TAX - this is a term that describes the tax that should have been paid by a taxpayer but was not. Such a person is known as a delinquent taxpayer.
DEPRECIATION - this is defined as the reduction in the value of fixed assets over time. In most tax jurisdictions depreciation is a tax deductible expense. In the UK depreciation is taken into account through a series of capital allowances.
DESK AUDIT - a tax audit undertaken in the tax office as opposed to the taxpayer's premises.
DISCLOSURE - in most tax jurisdictions, including the UK, tax authorities have statutory powers to demand information about taxpayers and their affairs, both from the taxpayer as well as from other organisations such as banks.
DISCRETIONARY TRUST - this is a trust under which the trustees have discretion as to who should benefit from the income and capital of the trust and by how much.
DISPOSAL - although usually a sale it may also be the exchange or gift of something that has taxation implications.
DIVIDENDS - a payment made by a company to its shareholders.
DOMICILE - a complicated subject with no clear or agreed definition. In simple terms it may be considered to be the country to which a person 'belongs'. This may not necessarily be the country in which that person was born. It is often considered to be the country in which a person intends to return to.
DOUBLE TAXATION - this is a situation where the same money is taxed twice, for example where foreign earned income is taxed by both the home and foreign authorities.
DRAWINGS - these are the amounts of cash or goods a sole trader or partner takes from an unincorporated business.
DUTY - this is taxation especially of imports, exports, or the manufacture or sale of goods. The term is also applied to taxes on the transfer of property, licences and for the legal recognition of certain documents.
DUTY-FREE ZONE - a geographical area where goods may be moved without incurring customs duties or other indirect taxes.
EARNED INCOME - although including income earned from the pensions of retired employees, this term normally referred to income earned from employment or self-employment.
EFFECTIVE TAX RATE - this is the average tax rate paid by an individual or a company.
EIS - Enterprise Investment scheme - first introduced in the November 93 Budget; an investment incentive scheme intended to encourage outside investors to introduce new finance and expertise into unquoted trading companies. Fairly complex rules but, in general, relief is given at the 20% rate and the maximum amount that may attract relief is £100,000 per annum. These limits apply to husbands and wives separately.
EMOLUMENTS - this refers to the remuneration of employees for tax purposes and is defined by legislation as including all salaries, fees, wages and profits. It is seen as a reward for past services and an inducement to continue to perform these services in the future.
EMPLOYMENT - British law defines employment as a 'contract of service' as opposed to a 'contract for services', which would be the case for self-employment.
ENTERPRISE ZONE - designed to encourage business investments, enterprise zones are areas that benefit from various forms of tax relief.
ENVIRONMENTAL TAXES - coming under various guises including carbon taxes and pollution taxes, environmental taxes are supposed to help protect the environment.
ESTATE DUTY - a tax on property left at death, estate duty was an older form of inheritance tax.
ESTIMATED TAX - sometimes know as provisional tax this is tax payable in advance of the determination of a taxpayer's actual liability.
EVASION - to contrast with avoidance, evasion is the illegal manipulation of one's affairs with the intention of escaping tax.
EXCESS PROFITS TAX - a tax levied on distributed profits that are held to have exceeded some predetermined level.
EXCISE DUTY - taxes levied on goods produced for home consumption - examples include the taxation of goods such as tobacco and alcohol.
EXEMPTIONS - tax relief given for certain persons, incomes, items, or transactions.
EXEMPT SUPPLY - goods or services that are outside the VAT system.
EXPENSES - in a taxation context these are the costs involved in earning income and for that reason may be deducted from that income before tax is calculated and charged.
EXTRA-STATUTORY CONCESSION - a relief from taxation although one that is not specifically laid down in legislation. FA - Finance Act - the Act of Parliament that modifies the tax system, sets rates and introduces new taxes. It follows a Finance Bill based on a Budget introduced by the Chancellor.
FIDs - Foreign Income Deductions.
FIFO - First In - First Out - where assets are presumed to be disposed on in the same order that they were acquired in.
FIRST - an acronym for Fixed Interest Rate Savings, Tax-Paid. It is a means of lump sum saving in a government bond where the returns are guaranteed one year at a time. For example, the interest rate for the first year is set at the time of purchase and the interest, net of basic rate tax, is then added on at the end of the year. At the same time bond holders are notified of the next year's interest rate and if the holder does not wish to cash-in the bond the cycle continues.
FISHING EXPEDITION - a tax investigation into a taxpayer's activities prompted by some irregularity in tax returns or company accounts, or a general suspicion that all is not in order.
FLAT TAX/FLAT RATE TAX - a tax levied at a single rate.
FOREIGN EMOLUMENTS - emoluments of a person who is not domiciled in the UK and is paid by a non-resident employer.
FRANKED INVESTMENT INCOME - income received by a company that has already borne corporation tax.
FREE PAY - the amount a person can earn before becoming liable to income tax.
FRINGE BENEFITS - also known as benefits in kind, these are benefits from a job in addition to the normal wage or salary.
FRINGE BENEFITS TAX - a tax on benefits in kind.
FSAVC - Free Standing AVC - FSAVCs are occupational pensions schemes that are similar in many respects to Personal Pension Schemes in that they are offered by banks, building societies and authorised unit trust schemes. They are designed to provide benefits in addition to the benefits provided by an employer's occupational pension scheme.
FURBS - Funded Unapproved Retirements Benefit Scheme - a scheme whereby some employers make pension contributions on behalf of their employees.
FY - Fiscal Year. Gains, Capital - (capital gains tax) - this is a tax on the increase in the value of an asset. Gambling Tax - a tax on betting or gaming carried out for profit. Garnishee Order - a legal process for recovering debts, including taxes. General Commissioners - a body to which taxpayers may appeal against decisions made by the Inland Revenue. Generation Skipping - a tactic for avoiding transfer taxes by placing the asset in a trust for beneficiaries two or more generations below the benefactor. Gifts Inter Vivos - a Latin term meaning gifts made during a person's life. Gifts Tax - a tax on capital transfers made during a person's lifetime. Going Concern - a general term used to describe a business that continues to operate commercially. Golden Handshake - a lump sum payment made when a person's employment is terminated; as opposed to Golden Handcuffs, which are used to retain the services of a valued employee or, indeed, a Golden Hello - a payment designed to attract the top people to come and work for your company. Graduated Income Tax - this is an income tax that is characterised by progressively higher rates of tax on higher incomes. Green Taxes - taxes designed to safeguard the environment. Gross Income - this is income before any deductions made for expenses or other forms of tax relief. Grossing Up - the process of adding back the tax in order to calculate the original income when a payment is received net of tax. Gross Profits - in accounting terms these are sales less the costs of stock, but not taking into account the costs of running and financing the business. Havens - geographic areas (often countries) where tax rates are significantly lower than elsewhere. Hidden Taxation - taxes that are not immediately apparent because, for example, they are not itemised separately in the price of goods or services. Higher Rate Tax - usually defined as income tax rates above the basic rate of tax. Historical Cost - the original amount incurred in acquiring an asset - used in calculating depreciation and valuing assets for capital gains and other tax purposes. Hobby Farmers - not children with Lego farms! - rather taxpayers that carry out farming related activities in order to offset losses against other sources of income. Hold Over Relief - applied up to 5 April 1989 whereby a UK resident could transfer any asset to another UK resident on a no gain/no loss basis by claiming hold over relief. Holiday Lettings - special tax rules apply in the UK for furnished holiday lettings - treated as a trade so interest payment can be treated as an expense and losses offset against other income for tax purposes. Housing Investment Trusts - approved investment trusts that are allowed to invest in residential letting property. Property must be let at a low rent but housing investment trusts pay tax at the small company rate on net rental income and any capital gains are exempt.
IMMOVABLE PROPERTY - the opposite to movable property such as chattels, for example, land and buildings.
IMPOST - a tax or duty - usually a customs duty.
IMPUTED INCOME - income that a taxpayer is deemed by the taxman as having been earned, even though that income is not in the form of cash.
INCOME - the sum of resources in terms of money, goods and services, and benefits-in-kind received over a given period.
INCOME-IN-KIND - income received in the form of goods and services instead of money.
INDEPENDENT TAXATION - the taxation of individuals as opposed to, for example, married couples.
INDEXATION - linking nominal values to some form of price or wages index.
INDIRECT TAX - a tax levied on one sector of the economy with the intention that it is passed on to another - for example, Value Added Tax.
INFORMATION POWERS - the power of the Inland Revenue to demand information from taxpayers and third parties.
INHERITANCE TAX - a tax levied on asset transfers on death and levied on the deceased's heirs.
INLAND REVENUE - our friend the taxman.
INTANGIBLE ASSETS - non-monetary assets that have no physical existence but still have value, for example, goodwill.
INTER-VIVOS GIFT - a capital transfer given during the life of the donor.
INTESTACY - where someone dies without leaving a will.
INVESTIGATION - an inspection of a taxpayer's affairs by, for example, the Inland Revenue.
INVESTMENT ALLOWANCES - tax relief intended to encourage capital investment.
INVESTMENT TRUST - a company that invests in other companies on behalf of its shareholders.
JOINT ASSESSMENT - a tax assessment involving the income and capital gains on a husband and wife.
JOINT RETURN - a tax return made by a husband and wife together.
JUDICIAL REVIEW - a legal procedure whereby a judicial body may assess the validity of, for example, a tax decision by a public body or lower court.
KNOW-HOW - defined in the tax regulations as any industrial information or techniques for use in a trade, manufacturing process or carrying out mining, agricultural, forestry or fishing operation. Capital expenditure for the acquisition of know-how for use in a trade qualifies for writing-down allowances.
LANDFILL TAX - introduced in 1996 this is a tax on the disposal of waste material.
LEVY - a form of taxation usually referring to money raised for a specific purpose.
LOTTERY PRIZES - these are exempt from capital gains tax.
LUMP-SUM ALLOWANCE - a tax allowance granting a fixed sum in respect of expenses that is available regardless of whether that expense amount has actually been incurred.
LVO - Local VAT Office.
MAIN RESIDENCE - also know as the principal residence. It is a person's only or 'main' residence and in some countries is treated more leniently for tax purposes.
MANAGEMENT AND CONTROL - here a company is treated for tax purposes as being resident in the country in which its management and control is exercised and not necessarily in the country where it is registered or incorporated.
MARGINAL RATE OF TAX - this is the rate of tax on a additional unit of the tax base - in the case of income tax it is the rate levied on one extra pound earned.
MARGINAL RELIEF - when income or capital exceeds the tax-free limit tax becomes payable on the whole amount. In this case marginal relief may be available for cases where income or capital only slightly exceeds the threshold of tax.
MARRIED ALLOWANCE - an addition relief given to one or both partners in a marriage.
MEDICAL EXPENSE - Although not common in the UK other tax systems all many forms of medical expenses to be deducted in the calculation of taxable income.
MIRAS - Mortgage Interest Relief At Source - tax relief given to borrowers of a mortgage loan - sadly now almost a thing of the past.
MOONLIGHTERS - individuals who are known to the tax authorities as having undeclared additional income.
NATIONAL INSURANCE CONTRIBUTIONS (NICs) - a form of social security taxation.
NOMINEE - the legal owner of an asset but who holds it on behalf of the real or beneficial owner.
NON-PROFIT ORGANISATIONS - organisation that do not set out to make a profit - often treated differently by tax authorities.
NON-RESIDENT - a person who is not resident or ordinarily resident in a country.
NOTHINGS - a term sometimes used to describe intangibles such as goodwill.
NOTICE OF CODING - the document sent to you by the Inland Revenue to inform you of your tax-free allowances.
OFFER - where back taxes are owed to the Inland Revenue, a taxpayer may be in a position to make an offer in respect of full settlement of tax liability, interest and penalties.
OFFICIAL ERROR - rather a lot of these seem to be occurring these days - especially since the introduction of self-assessment - the official polite definition is an error on the part of the Inland Revenue.
OFFSHORE FUNDS - investment schemes operated abroad, usually to avoid or delay UK taxation.
OPEN MARKET VALUE - the price an item might be expected to fetch if sold freely on a market in which anyone may participate.
OPTION - the right to buy or sell something at an agreed price at some in the future.
OUTPUT - goods or services produced for sale by an enterprise.
OVERDUE TAX - tax remaining to be paid after the date on which it was due.
OWN USE - the private use of a firm's output by a firm's owner or employees.
OWNER OCCUPIED - a building, usually a home, occupied by its owner.
PAYE CODE - The Pay As You Earn (PAYE) code enables your allowances to be taken into account when calculating the tax to be deducted from your pay under the PAYE scheme.
PAYMENT ON ACCOUNT - A tax payment made during the current tax year "on account" based on the tax owed for the prior tax year.
PAYROLL GIVING - A scheme which gives you tax relief for payments you make directly from your salary to a registered charity.
PENSION - Pensions are designed to pay you an income after you retire - there are three broad classifications of pension schemes in the UK: the State scheme, personal pension arrangements and occupational schemes. Approved pension schemes can include tax relief on contributions, tax-free growth, tax-free lump sums, a wide choice of underlying investment strategies and large pooled funds to reduce risk.
PEP - Personal Equity Plan - a PEP is basically an annual investment allowance that allows anyone over 18 years-of-age to invest up to £9,000 every year without any liability to income or capital gains tax. With PEPs you are allowed to invest in the ordinary shares of UK or EU listed companies, unit trusts, investment trusts, cash deposits, corporate bonds, preference shares as well as some types of convertible shares. The maximum amount of £9,000 is split into £6,000 in a general PEP and £3,000 in a single company PEP. For a married couple the allowance is doubled to £18,000. Your PEP must be managed and administered by a registered manager approved by the Inland Revenue.
PERKS - Benefits given to you by your employer.
PERSONAL ALLOWANCE - Every taxable person is entitled to receive an amount of income before being liable to tax.
POLLUTION TAX - A tax designed to make polluters pay for the social cost of their pollution. PPP - Personal Pension Plans - these are schemes where the final benefits paid on retirement are determined by the contributions paid and the investment growth performance. PPPs can take the form of life assurance or pension policies provided by life assurance companies or they may also be offered by banks, building societies and authorised unit trust schemes. Taxpayers are eligible to make contributions to a PPP where they are in receipt of earnings from non-pensionable employments, or from businesses, professions, partnerships etc. Tax relief is available and there is a maximum amount of earnings (that varies with age) that may be paid into a PPP.
PRE-TAX PROFIT - The figure reported by the company in its Profit and Loss Account reflecting the results of all business activities and decisions for the financial period.
PROBATE - The official proving of a will.
PROCEEDS - The amount you receive from selling something.
PROFIT - The amount of income received after deducting all the expenses paid out in earning that income.
PROPERTY - The assets of individuals or companies - most commonly land and buildings.
PROVISIONAL TAX - The payment of tax in instalments in advance of assessment.
QUALIFYING LOANS - A loan on which the interest you pay qualifies for tax relief.
QUESTIONABLE PAYMENTS - Bribes or so-called 'secret commissions' paid to obtain contracts.
QUICK SUCCESSION RELIEF - A reduction in liability to inheritance tax (IHT) where a person dies soon after receiving an inheritance that has already been taxed.
RATEABLE VALUE - Business premises are liable to business rates which are based on a value agreed for each property, known as the rateable value.
REAL PROPERTY TAX - A tax on land and buildings.
REBATE - Money you get back from the Inland Revenue when you have paid too much tax.
REDUNDANCY PAYMENTS - Payments made to employees who leave after being made redundant (compulsory or voluntarily).
REGRESSIVE TAX - A tax that takes a higher proportion of low incomes than it does from high incomes.
RELIEF - Something which reduces your taxable income.
RENT-A-ROOM SCHEME - A scheme under which you can receive an income of up to £4,250 from letting out rooms in your own home tax-free.
RENT - Amount paid for occupying land and/or property owned by someone else.
RETIREMENT RELIEF - Capital gains tax relief given when under certain conditions you sell your business or shares in your family company, provided you have worked full-time for the business or company.
RETURNS - Declaration of income and other information required by the tax authorities.
RING FENCE - A mechanism to isolate some activities from other activities for tax purposes.
ROLL-OVER RELIEF - Capital gains tax relief given when you sell certain assets used in your business and purchase new assets.
RULINGS - Official interpretations of legislative provisions.
SALARY AND WAGES - Regular amounts of income paid to you by your employer.
SALES TAX - taxes on goods and services at the point of sale. </p>
SAYE - An acronym for Save As You Earn.
SCHEDULES - Taxation is assessed and collected under different schedules. In the UK the schedules are:- Schedule A: - income from land and buildings Schedule B: - income from commercial woodlands (abolished April 1988) Schedule C: - interest on government securities Schedule D: - income from self-employment and other business or property income. Schedule E: - income from employment Schedule F: - income distributions subject to higher-rate tax.
SECURITIES - The general name for stocks, shares and bonds issued by the company to investors.
SELF ASSESSMENT - The system under which you are required to complete a tax return and calculate your tax liability for the year.
SERPS - State Earnings Related Pension Scheme - this is a scheme that you can join to boost your basic state pension and is paid for by National Insurance contributions deducted from your monthly or weekly salary. The benefits that you will receive when you retire are based on the contributions that you have made over you entire working life. Figuring out how much you will receive is a fairly complex process but you can get an estimate by filling in form BR19 from the DSS. If you wish you can opt out of SERPS. The main advantage of doing this is that part of your National Insurance contributions will be rebated for you to invest as you wish in, for example, a company pension or a personal pension plan.
SETTLEMENTS - An arrangement whereby property is held under a trust.
SETTLOR - A person who transfers assets into a trust, or who makes a settlement. SI - A statutory instrument.
SIN TAXES - The old reliables - taxes on alcohol, tobacco and other activities that 'big brother' considers may not be good for us.
SINGLE PARENT'S ALLOWANCE - A tax allowance that you can claim if you are single, separated, divorced or widowed and have a child living with you.
SMALL COMPANIES' RATE - A special lower tax rate for smaller companies.
SOFT LOAN - A loan with an interest rate below the usual commercial rate.
SOLE TRADER - An unincorporated business owned by a single person.
SPECIAL COMMISSIONERS - These sit as a tribunal to hear disputes between the Inland Revenue and taxpayers.
STAMP DUTY - A tax on certain transactions evidence of payment of which is provided by a stamp on the relevant legal document.
SUBMIT - Supplying a tax return to the Inland Revenue.
TA - The Income and Corporation Taxes Act.
TAKE HOME PAY - Income from employment less tax and National Insurance Contributions (NICs).
TANGIBLE ASSETS - Physical assets such as plant and machinery and stocks.
TAPER RELIEF - Capital gains tax relief given by scaling down the gain on the disposal of an asset by reference to the period of ownership of that asset after 5 April 1998.
TAX - a compulsory payment made to the authorities for which no direct good or service is received.
TAXABLE BENEFIT - A benefit or perk that is included as part of your taxable income, and is liable to income tax.
TAXABLE INCOME - Income which you are taxed on by the Inland Revenue.
TAX CREDIT - Although tax is not actually deducted from certain types of income, you may be given a tax credit as if tax had actually been deducted.
TAX EXILE - Someone who lives abroad in order to avoid taxes.
TAX-FREE - Income and gains are tax-free if they are exempt from income tax and capital gains tax.
TAX-FREE INCOME - Income which is not liable to income tax.
TAX HAVEN - Countries or specific areas where taxes are considerably lower that a person or company might experience elsewhere.
TAX LOOPHOLE - An often unintended feature of tax legislation that allows taxpayers to reduce their tax liability.
TAX LOSS - A loss, usually limited, that is determined for the specific purposes of calculating taxable income.
TAX OFFICE - Inland Revenue offices situated around the UK.
TAX POINT - The date whereby a transaction becomes liable to VAT.
TAX RAIDS - The entry and inspection of a taxpayer's premises.
TAX REBATE - A refund of tax due to you.
TAX RELIEF - Something which reduces your taxable income.
TAX RETURN - Declaration of income and other information required by the tax authorities.
TAX YEAR - A year running from 6 April one year to 5 April the following year.
TESSA - Tax Exempt Special Savings Accounts - first introduced in the 1990 Budget to provide a longer term tax-free means of savings. Every person over 18 years of age is allowed one TESSA lasting for five years after which a new TESSA may be opened. You are allowed to put a total of £9,000 in a TESSA either by monthly payments of £150 or by lump sum payments of £3,000 at the start of the first year followed by up to £1,800 in the next three following years and up to £600 in the final year. During the five year period interest is credited net of basic rate tax. At the end of the five year period a bonus - equivalent to the basic rate tax that you have paid - is credited to the account. In this way if you keep the TESSA for its full term the interest on it is tax-free. No new TESSAs were allowed to opened after 5 April 1999, but you may continue to contribute to an old TESSA after that date. Replaced by Individual Savings Accounts.
TRADE - A business by any other name - any activity commercially run with a view to making a profit will normally be treated as a trade.
TRAVEL AND SUBSISTENCE - Payments made to you for the cost of travelling whilst on business and for the cost of meals, refreshments and accommodation on business trips.
TRUST - An arrangement where trustees (those responsible for the trust) hold assets for the benefit of particular people (the beneficiaries). The trust deed will set out how the trustees must deal with the income and capital of the trust.
TRUSTEE - A person legally responsible for another person's investment or other assets.
UNAPPROVED SHARE OPTION SCHEMES - Share option schemes where you may be granted options to buy shares, but which have not been approved by the Inland Revenue.
UNEARNED INCOME - Income which you have not earned by working and includes dividends from shares, interest on savings and most income from land and property except income from furnished holiday lettings.
UNILATERAL RELIEF - Tax relief on income already taxed in another country.
UNIT TRUST - An open-ended collective investment vehicle, not quoted on the Stock Exchange, but investing in stock market listed securities. Units can be redeemed at will, thereby reducing the pool of funds available for investment by the investment managers of the trust.
UNPAID TAX - Tax which has not been paid to the Inland Revenue although it is due.
VALUE ADDED TAX (VAT) - A tax which must be charged by registered businesses on goods and services that are supplied.
VENTURE CAPITAL TRUST - Companies listed on the Stock Exchange which specialise in investing in small, higher-risk, unquoted trading companies of the same kind as those which qualify under the EIS. By investing in a VCT, individuals are able to spread the risk over a number of such qualifying companies. The investor is entitled to various income tax and capital gains tax reliefs.
WEAR AND TEAR - A deductible tax allowance for the cost of furniture and fittings provided in furnished dwellings.
WITHHOLDING TAX - Foreign tax in income which is deducted in the foreign country.
WITH PROFIT - In the case of with-profit policies regular premiums are placed in a large pooled fund managed by a life assurance company. Your policy grows in value from the payment of bonuses from this fund based on its performance. There are two types of bonus:- Reversionary bonuses are a share in the life assurance company's profits and are paid annually. Once given they cannot be taken back. The second type of bonus, called a terminal bonus, is given when the policy matures and is based only on the performance of the fund over the last year or two.
WRITE OFF - The removal of an asset from a company's accounts that is now considered worthless.
YEAR END ADJUSTMENT - Modification of figures after the end of the tax year to take account of information not previously available.
YIELD - The annual dividend or interest income relative to the value of the underlying security on which it is received, usually expressed as a percentage. Z
ZERO-RATED SUPPLIES - In the UK zero-rated supplies are counted within the VAT system but the tax rate applying to them is zero.