| Q1. |
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Considering his changed status, how should Mr Lee file his income in the tax return for the year 2007? |
| A1. |
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He has two incomes to report: (1) employment income from his previous employer up to the date he left the company and (2) income from his consulting business. For the employment income, he can refer to the copy of his former employer's return given to him when he left the company. For his income from the consulting business, he should prepare accounts from the date he commenced the business to the accounting year-end based on his business records which are required to be kept for seven years for tax purposes. |
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| Q2. |
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If Mr Lee suffered losses in his consulting business during the past financial year, can he use his losses to offset his previous employment income on his tax form? |
| A2. |
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His employment is assessed under Salaries Tax, while his business profit (or loss) is taxed separately under Profits Tax. If he suffered losses in his consulting business, the business loss in 2007 will be carried forward to future years to offset his profit from the same business. Alternatively he can elect for Personal Assessment this year. Under Personal Assessment all his incomes (or losses) for the same year will be assessed together and hence his business loss will be used to offset his employment income. Once the business loss is used to set off his other income in the year, the loss will no longer be carried forward under Profits Tax. |
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| Q3. |
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Can Mr Lee get tax relief for the interest he paid on his home loan? |
| A3. |
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Interest paid on the mortgage on his home is deductible from his assessable income under Salaries Tax or from his total income under Personal Assessment if so elected. The maximum is HK$100,000 per year and he is entitled to such deductions for 10 years depending on his preference.Therefore, he may claim the interest deduction in 2007/08. However, since he bought the house in 2007, the interest is likely to amount to less than 12 months. Although he may claim deduction of less than 12 months' interest, he is regarded as having been allowed the deduction for a year of assessment and used one of his 10 years' entitlement. Therefore, he should consider whether he wants to claim mortgage interest in 2007/08 taking into account that he may obtain better tax benefits by claiming more interest in later years. |
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| Q4. |
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Can he file his tax return via the internet? |
| A4. |
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The Inland Revenue Department (IRD) has provided electronic tax return filing for individuals for a few years. This year the IRD has a new electronic platform called "e-tax" for filing individual tax returns. The new platform allows taxpayers to have their e-return data saved and taxpayers will be able to access this information online. People interested in using this platform can apply through the IRD. If they file their tax returns online, they can have the deadline of return submission extended to 2 July 2008. |
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* Views expressed cannot be construed as a recommendation by ACCA.
ACCA shall not be held liable for damages arising from any person's reliance upon this information. |
New electronic platform offers flexibility and ease of use