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RO3 Keys > 10 - Indirect Investments > Flashcards

10 - Indirect Investments Flashcards

1
Q

What ISA is the only age 18+? And what is age limit of most others?

A

Stocks and shares ISA

16+ other than JISA

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2
Q

ISA limit for tax yr?

A

£20k

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3
Q

HTB ISA

A

Max. 1st payment of £1,200

Max. £200pm

£12k max. balance

25% bonus

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4
Q

Lifetime ISA

A

Max. £4k per yr

Counts towards £20k annual limit

Over 18, must be under 40, stop contributions at 50, can get from age 60

25% bonus for FTB purchase or retirement

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5
Q

What is main difference between HTB ISA and LISA?

A

LISA bonuses added as you go where as HTB ISA is on completion

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6
Q

JISA max annual contribution and rule

A

£9k per annum

Must make one payment per tax yr

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7
Q

Benefit from age 16 - 18 for having a JISA?

A

Can contribute £20k + £9k as this limit is on top of normal ISA limit

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8
Q

What happens to an ISA on death?

A

Lose tax exempt status and form part of the estate for IHT

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9
Q

What if there is a delay to closing the ISA?

A

Keep tax exempt status on gains during delay

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10
Q

What if spouse dies and they had an ISA?

A

Partner then gets their ISA sum added to their ISA limit. Have 3yrs to use allowance from date of death.

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11
Q

What is the withdrawal limit on an ISA?

A

No limit

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12
Q

Can you withdraw and add cash back into cash ISA without a tax implication?

A

Yes, providing it is within the same tax yr

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13
Q

Child trust fund

A

Given £250 at start and supposed to receive further £250 at age 7 but most didn’t

£9k contribution limit per birth yr

Not taxed

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14
Q

Can you have a JISA and a CTF?

A

No, one or the other.

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15
Q

Stakeholder pension

Personal pension plan

Self invested personal pension (SIPP)

A

Stakeholder pension - low cost simplified advice process but do not offer drawdown facility and cannot buy commercial property

Personal pension plan - wide range of funds, easy to understand can can be transferred but often do not offer a drawdown facility and cannot buy commercial property

Self invested personal pension (SIPP) - most hands on and offers widest range of options and can drawdown. Usually expensive and most complex.

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16
Q

Pensions income tax, CGT & IHT

A

IT - Can withdraw 25% tax free and get £3,600 tax relief on at source contributions

CGT - tax free

IHT - vast majority do not suffer IHT as written in discretionary trust

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17
Q

At what age can you draw pension?

A

Age 55

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18
Q

Annual contribution allowance towards pension

A

£40k limit however can use unused allowance from previous 3yrs but limit on this as max tax free possible can be 100% of annual earnings

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19
Q

Unit trust and OEIC:

  • non equity collective
  • equity collective
A
  • non equity collective - atleast 60% of assets are interest bearing
  • equity collective - less than 60% of assets are interest bearing
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20
Q

Unit trust and OEIC - Income tax, CGT & IHT

A

IT

Non equity based

  • Tax on income tax bands and has personal savings allowance of £1k, £500 or £0

Equity based - Taxed as dividends using dividend tax bands and has dividend allowance of £2k

CGT - subject to usual CGT rules

IHT - If not written in trust then form part of the estate

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21
Q

SICAV

A

A type of offshore fund

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22
Q

Offshore collectives/funds - Income tax, CGT & IHT

A

Reporting:
- IT - Usual IT rules for equity and interest distributions with income and dividend rules and allowances

  • CGT - Usual CGT rules
  • IHT - Form part of the estate unless in trust

Non-Reporting:

  • IT - tax arises only on disposal and is taxable on accumulated return using standard CGT principle but without the exemption. The gain is then liable to IT brackets and rates
  • CGT - Gains taxes as income within IT so no CGT due
  • IHT - Form part of the estate unless in trust
23
Q

Real estate investment trust aim

A

Provide a liquid market within property investment and be widely available as a close ended company

24
Q

Ring fenced and non-ring fenced real estate investment trust sums up taxation for REIT

A

Ring fenced - property letting and exempt to corporation tax

Non-ring fenced - all other activities other than letting. Subject to corporation tax

25
Q

Real estate investment trust taxation for investor - income tax, CGT, IHT

A

IT

  • Taxed at income tax bands but deducting 20% as use property income distribution (PID) and no allowances or exemptions allowed because of this.
  • Dividend income taxes with usual bands and £2k allowance is allowed

CGT - Gains subject to CGT

IHT - A part of estate unless in trust

26
Q

Property income distribution (PID)

A

Tax paid by REIT meaning that investor is allowed 20% reduction on income tax but no allowances can then be used for income, only dividends.

27
Q

SPV

A

Limited company set up for finance specific projects

28
Q

What is a life assurance investment/bond

A

Collective investment which has an extra 1% on top of the fund value as a death benefit which then changes the taxation treatment

29
Q

5 Qualifying rules for a life assurance policy

A

Max. annual premium of £3,600 per individual

Premiums must be atleast annual

No more than 1/8 of total contributions in a year

Premiums no more than 2x last year

Death benefit atleast 75% of previous year

30
Q

Taxation of onshore life policy for individual

A

Fund deemed to have already paid 20% tax so deduct this from income tax bracket and that is the rate to use for tax. Tax paid already cannot be reclaimed.

31
Q

When is the only time a life policy will cause a chargeable gain and tax implication?

A

Upon surrender or partial surrender above 5% cumulative allowance, encasing investment

32
Q

What allowance can an individual use when calculating tax income for life policy?

A

Personal savings allowance of £1k, £500 or £0 as classed as savings income

33
Q

Is 5% allowance for withdrawing original investment in a life policy tax free or taxable?

A

Taxable at 0%

34
Q

How do you calculate timeline when calculating tax on full and part surrenders of a life policy?

A

Part surrender - include both full and part years

Full surrender - calculate using full years only

35
Q

Segmentation of a life policy

A

Segments of an investment with different categories which are identical in value.

When part cash in investment can either cash in a whole segments or set % of every segment

36
Q

Offshore life policies taxation rules and can you use PSA?

A

Can use personal savings allowance of £1k, £500 or £0

Taxable on gains with usual income tax brackets

37
Q

Are endowment policies taxable?

A

No, unless sold then the buyer pays CGT on gain

38
Q

Friendly society policies maximum premium

A

£270 per annum or £25 per month

39
Q

Age limit on friendly society policies

A

None

40
Q

Are friendly society policies taxable for the individual?

A

No tax

41
Q

Annuity

A

Pay a lump sum to receive a set income whilst alive

42
Q

Types of annuities and their tax implications:

  • purchased life annuity
  • purchased annuities certain
  • pension annuity
  • deferred annuity
  • annuities for beneficiaries
  • immediate needs annuity
A
  • purchased life annuity - paid from lump sum til death and pays capital and interest element - taxed only on interest received and can use PSA to reduce tax liability
  • purchased annuities certain - paid for a set term regardless of death - same tax as PLA (above)
  • pension annuity - paid as a result of a pension scheme - taxable in full as earned income
  • deferred annuity - capital is handed over but annuity does not begin for set period - same tax as PLA (above)
  • annuities for beneficiaries - paid as per trust or will - taxable in full as savings income
  • immediate needs annuity - often used to fund care home fees and pay larger annuity payments as shorter life expectancy - if paid directly to care home then no tax liability
43
Q

Close-ended investment account taxation rules

A

Taxed as dividend income and subject to usual CGT rules

44
Q

Listed bonds & medium term notes and how are they taxable

A

Fixed term contracts issued by banks

Taxable with income tax brackets and allowed PSA of £1k, £500 or £0

Subject to usual CGT rules

45
Q

EIS max. Contribution in one year

A

Limit is £2m however can carry backwards for previous year so can invest max. of £4m in one year

46
Q

EIS, SEIS, VCT income tax reduction % and limits of each

A

EIS - 30% income tax reduction of original investment after held for 3yrs - £1m limit

SEIS - 50% income tax reduction of original investment after held for 3yrs - £100k limit

VCT - 30% income tax reduction of original investment after held for 3yrs (no losses claimable) - £200k limit

47
Q

What are eligible shares for EIS tax relief (qualifying company)

A
  • unlisted company
  • fewer than 250 employees
  • gross assets of less then £15m
  • less than £5m in venture capitalist investment in last 12months
  • company less than 7yrs old or 10yrs if considered knowledge intensive
48
Q

Out of EIS, SEIS, VCT which one has exempt dividend income tax for the individual?

A

VCT

49
Q

EIS, SEIS, VCT are they subject to CGT?

A

EIS - 3yr minimum holding period for CGT exemption. No exemption but pay upon disposal of share

SEIS - 3yr minimum holding period for CGT exemption. 50% exemption on CGT.

VCT - Subject to CGT immediately and no exemption

50
Q

Social enterprise - what is this? And what are the below?

tax relief %
max investment
minimum holding period
Carry back contributions allowed?
CGT deferred until disposal?
Minimum holding period for CGT exemption
Eligible for business relief?

A

Government give tax benefit known as social investment tax relief for those that invest in social enterprises and some community projects

30% tax relief
£1m max investment
3yr minimum holding period
Yes, carry back contributions allowed
Yes, CGT differed until disposal
3yr minimum holding time for tax exemption
Yes, eligible for business relief

51
Q

Which of EIS, SEIS, VCT are eligible for business relief?

A

EIS & SEIS

52
Q

When is a collective investment classes as interest bearing or an equity collective fund?

A

60%+ interest bearing - non-equity collective

<60% interest bearing - equity collective

53
Q

Can an ISA be written in trust?

A

No

54
Q

Requirements to be classed as a REIT (3)

A

Atleast 75% of assets and gross profits from ring fenced element

90% of profits must be distributed within 1yr of end of accounting period

Initeredt on borrowing must be covered by 125% by rental profits

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