An A to Z of Tax from...
Tax Glossary
Welcome to the Taxbuddies glossary. To help you interpret the jargon
that you can come across in dealing with your tax, our team of experts
have written a brief explanation for hundreds of technical terms. Click
on a letter to show entries.
| Capital Allowances : | When an asset is used for business purposes, the purchase cost is not normally allowable as an expense. This is because the asset still has a value after it has been used. However, the value of the asset will decrease over time. An allowance to reflect this depreciation can be claimed instead. This is known as a Capital Allowance. |
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| Capital Gains - costs : | Costs taken into account when calculating CGT include : Acquisition and disposal costs: Such as the associated costs of buying and selling the asset (e.g.broker's fees for shares). Enhancement costs: Any amounts spent on improving the asset. | |
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| Capital Gains - declaration : | A CGT declaration is only obligatory where there is a chargeable gain of more than the annual exempt amount (2007/08 = £9200 and 2008/09 = £9600), or where assets were disposed of which were worth more than four times that amount in the year. | |
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| Capital Gains - Indexation Allowance : | In relative terms, £100 was worth more ten years ago than today. Indexation adjusted for this increase in the cost of living within CGT calculations by reducing the profit in real terms, based on changes in the Retail Price Index.
Up to 5 April 2008 for gains on disposals by individuals an indexation allowances was given up to 5 April 1998 and taper relief applied thereafter. For disposal on or after 6 April 2008 indexation allowance and taper relief will no longer be available. |
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| Capital Gains - Relief : | There are various reliefs that may be available to reduce the Capital Gains Tax liability on the sale or gift of an asset. You should seek professional advise to determine whether any relief is due. | |
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| Capital Gains Tax : | If you own an asset that has gone up in value which you sell for a profit, you may need to pay Capital Gains Tax (CGT).
On its most simple level, CGT is the tax payable on the increase in value of an asset over the period it is owned. (see Capital Gains Tax - Calculations.) CGT is not strictly the same as Income Tax, although it is dealt with at the same time. Gains arising after 5 April 2008 are charged at a standard rate of 18% (10% for some - see entrepreneurs relief). For earlier tax years gains were treated as the top slice of income and charged at 10%, 20% or 40%. |
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| Capital Gains Tax - calculations : | CGT is charged on profits made when something is sold - essentially the selling price less purchase price. Adjustments are made to this amount for amounts spent improving the asset, and costs incurred buying or selling the asset. After working out the profit, or chargeable gain, the annual exempt amount is deducted. Tax is payable only if the profit exceeds this amount. |
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| Capital Losses : | When an asset is sold for less than the acquisition cost, a Capital Loss has arisen.
This loss can be carried forward to set against future capital gains. In some cases, though not commonly, it can be set against other income in the same year. |
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| Cash Equivalent : | Unlike salary or wages, when an employee receives a taxable company benefit, there is no money on which tax can be calculated. Instead, the employer works out the cash equivalent of the benefit. This may be the cost to the employers, but in many cases it is the result of a complex calculation. The employee pays tax on this amount as though it was actually cash. |
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| Casual Earnings : | When you do a job on an irregular basis, the earnings are classed as casual earnings.
This should not be confused with the term "black economy", which refers more specifically to undeclared irregular earnings. |
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| Certificate of Tax Deposit : | It is possible to pay a large tax bill in advance by purchasing a Certificate of Tax Deposit from H M Revenue & Customs. This gives a good rate of interest, running from the date of purchase to the date the tax is due. Unfortunately, the interest is still taxable | |
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| Chargeable Assets : | Capital gains tax only applies if the item sold is a chargeable asset. The most commonly sold chargeable assets are shares. Other such assets include, properties held for rental, business assets, second homes and other assets worth more than £6000. Non-chargeable assets include your main home, your own car, investments held in PEPS, and personal assets worth less than £6000. |
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| Chargeable Event Gains : | Confusingly, this has nothing to do with Capital Gains Tax.
A chargeable event happens when money or other benefits are paid out from a life insurance policy, and the payment is deemed taxable. (Most payments from qualifying life insurance policies are not classed as chargeable event gains) The rules are complex, but the insurance company should advise if a chargeable event has arisen, and how much the taxable element is. In any event, a tax credit is given on the chargeable gain, and only those liable to higher rate tax on their total income including this will pay additional tax |
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| Chargeable Gains : | This is the profit made on disposal of an asset.
Any amount over and above the annual exemption limit (currently £9600) will be charged to capital gains tax. |
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| Charitable Covenants : | Tax relief is available on payments made to approved charities. In the past, if this was done via a covenant, specific criteria had to be met. From 6 April 2001 though, all payments to charity are treated in the same way. See Charitable Gifts Relief. | |
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| Charitable Gifts Relief : | Tax relief at the payers top tax rate is available for charitable donations under the gift aid scheme. To qualify for the relief donors are required to make a declaration. Donations are treated as being net of basic rate tax, but in order to retain the tax relief, donors must be liable to pay an equivelent amount of income tax. For Gift Aid donations made on or after 06/04/2003 a taxpayer may claim to be treated as if the donation had been made in the previous tax year. A claim must be made no later than the date the tax return for the previous year is filed BUT filed no later than 31 Jan | |
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| Civil Partner : | A party to a formal civil partnership. | |
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| Civil Partnership : | A formal partnership between same sex couples. A civil partnership is treated in the same way as a marriage for all tax purposes. | |
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| Close Company : | There are a number of classes of company.
To be a close company, it must be controlled by no more than 5 shareholders. This covers most private companies in the UK. The term applies in such areas as capital gains and when claiming tax relief on a loan to buy shares in the company. |
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| Commonwealth Citizen : | In most cases, if you are not resident in the UK, no tax allowances are available to you. However, Commonwealth Citizens, including British Citizens, qualify for full allowances even when overseas. Perhaps the most common way this affects people is where a pension is paid in the UK to a person who has retired overseas. |
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| Commuting : | Every day travel to work is not usually allowable for tax purposes.
Exceptions may apply when a workplace is temporarily moved, or where a person works from home and travels to various customers. |
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| Company Car : | When your employer provides you with a car that you can use for your own private use, a taxable benefit arises. Special rules are used to work out the amount of the benefit. | |
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| Compensation : | There are many forms of compensation, some of which will be subject to tax, and others which will not. | |
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