12. Tax Free Flashcards
Key features of Child Trust Fund (4)
£250 contribution from government
Now closed but existing funds can continue
Belongs to child to access at 18
Can transfer into JISA or another ISA at 18
Key features of Friendly Societies (4)
Small community funds exempt from income tax or CGT
Max investment £5/w £25/m £270/y
Fund must meet qualifying rules for life assurance policies
Authorised/Regulated by FCA & FSCS applies
Requirements of EIS & VCT investments.
- company criteria (5)
- funding limites (2)
- Unquoted/AIM UK co
- Cannot use to fund acquisitions
- Must have <£15m before and <£16m after investment
- Max 249 employees (499 for KI)
- Co must be <7yo (10 for KI) unless business changed significantly or investment is <50% 5yr avg turnover
- Can raise max £5m (£10m for KI) pa
- Lifetime limit £12m (£20m for KI)
What is the criterion for being a Knowledge Intensive company for EIS/VCT?
Spend 75% of operating costs on R&D in at least 1 of previous 3 years
What are the rules for EIS? (4)
Investor cannot be connected to co (can be <30% shareholder or unpaid business angel)
Shares must be newly issued and cannot be redeemed for 3 years. No preferential rights
All funds must be used in qualifying trade or 90% sub within 2 years
Co can become listed after funding if no plans in place at time of funding
Tax treatment of EIS for investors?
Income tax, dividends, CGT
Income tax relief at 30% of investment, capped at total tax liability / £1m investment (£2m for KI)
£1m investment can be carried back to previous year
Relief withdrawn if shares disposed within 3 years
Dividends taxable
No CGT on disposal if shares held for 3 yrs
Capital losses can be used
Gains on other disposals can be deferred if reinvested in EIS (-1 - 3 yrs)
Key features of seed IES. Requirements (2) + tax treatment (3)
Co <25 employees and <£350k assets
Co can raise max £250k
50% tax relief up to £200k investment pa
Can only claim relief once co. has spent 70% of funds raised
CGT relief if other gains reinvested in SEIS (not deferred)
What are Flexible and Standard ISAs?
Flexible; cash withdrawn can be replaced without affecting annual allowance
Standard; reinvested withdrawals count towards allowance
What are the withdrawal / reinvestment rules for ISAs? (5)
- Any amount withdrawn can be fully reinvested in-yr (eg £80k from previous 5 yrs)
- Reinvestment must be into same account/provider
- Withdrawals set against current year deposits first, then previous yrs
- Reinvestments replenish previous yrs first (into original account) then current year
- Interest + divs paid out can be reinvested
What can be held in a stocks and shares ISA?
Shares on recognised world stock exchange
UK authorised unit trusts & OEICs
Investment trust & REITs
Gilts & corporate bonds
Structured/capital at risk products
Life insurance (single life)
What is an Innovative Finance ISA?
P2P lending
Key features of Help to Buy ISA (5)
Closed but existing accounts can be rinsed until 30 Nov ‘29
Bonus payable on purchase of property by 1 Dec ‘30
Purchase price up to £250k (£450k London)
Deposit £1-£200/m and earn interest
Gov adds 25% bonus up to £3k on property completion
- min bonus £400 so £1,600 investment
Key features of Lifetime ISA (6)
18-40yo, can contribute til 50
£4k p.a & counts towards total ISA limit
25% bonus credited monthly til 50
Can be withdrawn at 60 or if serious illness without penalty
- or use to buy first home <£450k (deposit)
Early withdrawals charged 25%
HTB can be transferred into LISA in limit. Can have both but only use 1 for house
Difference between approved and unapproved EIS fund?
Approved: must invest 80% in KI companies within 2 years (50% in 1yr). Tax relief received on lump sum
Unapproved: relief received on each investment
Fund must invest in 2 yrs
No restriction on no. or timing
Min investor investment £500
Key features of VCTs (5)
PLCs quoted on stock exchange
VCT itself exempt from CT
80% must be held in qualifying unquoted co’s
VCT has 1yr to invest 30% funds and 3yrs to invest 70%
Max 15% can be held in single co/group
