22/23 Set 3

Question 1

What is the tax position on a company paying Relocation and Removal expenses for you?

Answer 1

The first £8,000 is tax free and everything thereafter is charged as employment income

Question 2

If you contribute to a company car, how is it treated when calculating the taxable benefit?

Answer 2

Any contributions up to £5,000 are deducted from the list price of the car when calculating the taxable benefit. Everything thereafter is ignored.

Question 3

How are class 2 NICs “calculated and collected”?

Answer 3

Via. “Self-Assessment”

Question 4

How are class 4 NICs calculated and collected?

Answer 4

Via. “Self-Assessment”

Question 5

If you overpaid Class 1 NICs in employment, and then underpaid your Class 4 NICs as self-employed in the same tax year, how does HMRC solve the discrepancy?

Answer 5

1. The overpayments will be used to correct any underpayments first
2. Anything left over will be repaid to her

Question 6

If you overpaid Class 1 NICs in employment, and then underpaid your Class 4 NICs as self-employed in the same tax year, how does HMRC solve the discrepancy?

Answer 6

1. The overpayments will be used to correct any underpayments first
2. Anything left over will be repaid to her

Question 7

When is IHT due to be paid by the legal personal representatives of a deceased individual?

Answer 7

Six months after the end of the month in which the death occurred

Question 8

Non-domiciled individual resident in UK earns income in UK for that period. What is the remittance basis situation?

Answer 8

Doesn’t apply as the income is made in the UK it is subject to usual UK taxation

Question 9

What is the balancing payment?

Answer 9

• The payment due on 31st Jan
• Contains an adjustment calculated by comparing the tax paid with the tax due

Question 10

What is included in the balancing payment?

Answer 10

• Class 2 NICs
• Balance of Income Tax
• Balance of Class 4 NICs
• CGT outstanding

Question 11

What is the flat rate scheme for VAT?

Answer 11

A scheme allowing SMBs to account for VAT as a % of their taxable turnover (rather than the difference between input VAT & output VAT)
- It is restricted to low cost small businesses

Question 12

What is the primary advantage of the flat rate scheme?

Answer 12

Lower administration involved

Question 13

If you won an award of £1,000 for 25 years’ service, what is the Income Tax position?

Answer 13

It would be tax exempt because you can win an award of up £50 for every year’s service tax-free under a long service award (+20 years).

Question 14

Charles (HRT) makes the following contributions:
19/20: £0
20/21: £15,000
21/22: £20,000

What is the max contribution he can make in 22/23?

Answer 14

£85,000

You may contribute up to £40,000 p/a and may carry up to 3 years remaining allowances. However, you must contribute at least £1 in each year you would like to carry forward. Hence, he can only combine 20/21, 21/22, and 22/23. The rest follows,

Question 15

Ryan has held an onshore investment bond for 5 and a half years. How many years of 5% withdrawals does he get? How many years of top slicing does he get?

Answer 15

6 years of 5%
5 years of top slicing

Question 16

What is a local authority bond?

Answer 16

Loans to local government authorities at a fixed rate of interest

taxed same as corporate bonds

Question 17

Does a corporate bond pay interest for an open or closed ended period?

Answer 17

Closed ended

Question 18

Do you get the capital back from local authority bonds at maturity?

Answer 18

Yes, if it is bought at issue and held to maturity.

Question 19

What is the condition for a house to be considered a ‘furnished holiday let’ for tax purposes?

Answer 19

It must be available for commercial let for at least 210 days in total per tax year

Question 20

Who pays the High Income Child Benefit tax charge?

Answer 20

The higher earner

Question 21

How is the High Income Child Benefit tax charge calculated?

Answer 21

If the higher earner earns over £50,000 p.a. (adjusted) then they are charged 1% of the benefit amount for every £100 their income exceeds the allowance.

Question 22

Additional rate beneficiary of an IIP trust gets £2000 in interest. What is the tax liability?

Answer 22

He owes £625

He must have paid 45% on the gross amount. As it will have been paid net of basic rate tax it must be grossed up (£2,000 / 0.8 = £2,500) and then the 45% taken from that (£1,125). Since 20% (£500) is already paid, he owes £625.

Question 23

What is the primary condition of a bereaved minor trust?

Answer 23

The beneficiary must be given absolute interest in the trust property at 18

Question 24

What reason might a director not choose to go for a high dividend low salary income?

Answer 24

Because dividends are not deemed to be relevant earnings, your pension contributions are limited to the low income

Question 25

What are the two main conditions for the "normal expenditure out of income" exemption to apply?

Answer 25

- Must be regular - Must be from income

Question 26

What is the principal private residence exemption?

Answer 26

It's the rule that means you don't pay CGT on your only residence

Question 27

When can the principal private residence exemption apply to trusts?

Answer 27

When the beneficiary has an interest in possession in the property.

Question 28

What kind of contributions can increase your BR tax band?

Answer 28

Pension contributions and Gift aid charity contributions

Question 29

At what income does your PA start to reduce?

Answer 29

£100,000 - *Every £2 above this reduces your PA by £1*

Question 30

Charles has an income of £115,000: what are his bands?

Answer 30

£15k over the £100k threshold so PA is reduced by £7.5k 0 - £5,070 : 0% £5,070 - £42,770 : 20% £42,770 - £115,000 : 40%

Question 31

When selling a buy to let house, which of the following costs are deductible from CGT purposes: - legal fees - estate agent fees - plumber repairs

Answer 31

Legal & Estate Agent as Plumber will have already been deducted from the rent. *Ongoing / repair costs don't get double deducted*

Question 32

The earliest age you can take a pension is:

Answer 32

55

Question 33

Under the identification rules used for calculating CGT on shares of the same type and class acquired at different times, how are the shares grouped?

Answer 33

- Acquisitions on the **same day** - Acquisitions in the **share pool**

Question 34

With equities held within discretionary trusts, what two figures are used to calculate the gain?

Answer 34

The acquisition cost and the market value

Question 35

With regards to discretionary trusts, when can holdover relief be clawed back by HMRC?

Answer 35

If the settlor subsequently gains an interest in the assets

Question 36

43 revisit set 3 22/23

Answer 36

43 revisit set 3 22/23

Question 37

What is the contribution limit on Friendly Societies?

Answer 37

Maximum monthly contribution of £25

Question 38

What is the CGT position on friendly society policies?

Answer 38

They are exempt *Because they're friendly...?*

Question 39

What is the Income Tax position on friendly society policies?

Answer 39

They are exempt *Because they're friendly...?*

Question 40

Which principle is Inheritance Tax based on?

Answer 40

The 'loss to the estate' principle

Question 41

Joint life 2nd death policy under discretionary trust, how are premiums taxed (IHT specifically)?

Answer 41

Premiums *are* classed as transfers of value, however they would usually come under the normal expenditure exemption

Question 42

What conditions must a company satisfy to qualify for EIS investment?

Answer 42

- Must have a **permanent establishment** in the UK - It must be **unlisted** - Must be fewer than **250 full time employees**

Question 43

Unit trusts - shares or units?

Answer 43

Units

Question 44

OIECs - shares or units?

Answer 44

Shares

Question 45

Dividends from UTs and OEICs are paid...

Answer 45

Gross

Question 46

Trust expenses (IIP) are set against which type of income first?

Answer 46

Dividend