22/23 Set 3 Flashcards
What is the tax position on a company paying Relocation and Removal expenses for you?
The first £8,000 is tax free and everything thereafter is charged as employment income
If you contribute to a company car, how is it treated when calculating the taxable benefit?
Any contributions up to £5,000 are deducted from the list price of the car when calculating the taxable benefit. Everything thereafter is ignored.
How are class 2 NICs “calculated and collected”?
Via. “Self-Assessment”
How are class 4 NICs calculated and collected?
Via. “Self-Assessment”
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?
- The overpayments will be used to correct any underpayments first
- Anything left over will be repaid to her
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?
- The overpayments will be used to correct any underpayments first
- Anything left over will be repaid to her
When is IHT due to be paid by the legal personal representatives of a deceased individual?
Six months after the end of the month in which the death occurred
Non-domiciled individual resident in UK earns income in UK for that period. What is the remittance basis situation?
Doesn’t apply as the income is made in the UK it is subject to usual UK taxation
What is the balancing payment?
- The payment due on 31st Jan
- Contains an adjustment calculated by comparing the tax paid with the tax due
What is included in the balancing payment?
- Class 2 NICs
- Balance of Income Tax
- Balance of Class 4 NICs
- CGT outstanding
What is the flat rate scheme for VAT?
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
What is the primary advantage of the flat rate scheme?
Lower administration involved
If you won an award of £1,000 for 25 years’ service, what is the Income Tax position?
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).
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?
£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,
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?
6 years of 5%
5 years of top slicing
What is a local authority bond?
Loans to local government authorities at a fixed rate of interest
taxed same as corporate bonds
Does a corporate bond pay interest for an open or closed ended period?
Closed ended
Do you get the capital back from local authority bonds at maturity?
Yes, if it is bought at issue and held to maturity.
What is the condition for a house to be considered a ‘furnished holiday let’ for tax purposes?
It must be available for commercial let for at least 210 days in total per tax year
Who pays the High Income Child Benefit tax charge?
The higher earner
How is the High Income Child Benefit tax charge calculated?
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.
Additional rate beneficiary of an IIP trust gets £2000 in interest. What is the tax liability?
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.
What is the primary condition of a bereaved minor trust?
The beneficiary must be given absolute interest in the trust property at 18
What reason might a director not choose to go for a high dividend low salary income?
Because dividends are not deemed to be relevant earnings, your pension contributions are limited to the low income
What are the two main conditions for the “normal expenditure out of income” exemption to apply?
- Must be regular
- Must be from income
What is the principal private residence exemption?
It’s the rule that means you don’t pay CGT on your only residence
When can the principal private residence exemption apply to trusts?
When the beneficiary has an interest in possession in the property.
What kind of contributions can increase your BR tax band?
Pension contributions and Gift aid charity contributions
At what income does your PA start to reduce?
£100,000
- Every £2 above this reduces your PA by £1
Charles has an income of £115,000: what are his bands?
£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%
When selling a buy to let house, which of the following costs are deductible from CGT purposes:
- legal fees
- estate agent fees
- plumber repairs
Legal & Estate Agent as Plumber will have already been deducted from the rent.
Ongoing / repair costs don’t get double deducted
The earliest age you can take a pension is:
55
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?
- Acquisitions on the same day
- Acquisitions in the share pool
With equities held within discretionary trusts, what two figures are used to calculate the gain?
The acquisition cost and the market value
With regards to discretionary trusts, when can holdover relief be clawed back by HMRC?
If the settlor subsequently gains an interest in the assets
43 revisit set 3 22/23
43 revisit set 3 22/23
What is the contribution limit on Friendly Societies?
Maximum monthly contribution of £25
What is the CGT position on friendly society policies?
They are exempt
Because they’re friendly…?
What is the Income Tax position on friendly society policies?
They are exempt
Because they’re friendly…?
Which principle is Inheritance Tax based on?
The ‘loss to the estate’ principle
Joint life 2nd death policy under discretionary trust, how are premiums taxed (IHT specifically)?
Premiums are classed as transfers of value, however they would usually come under the normal expenditure exemption
What conditions must a company satisfy to qualify for EIS investment?
- Must have a permanent establishment in the UK
- It must be unlisted
- Must be fewer than 250 full time employees
Unit trusts - shares or units?
Units
OIECs - shares or units?
Shares
Dividends from UTs and OEICs are paid…
Gross
Trust expenses (IIP) are set against which type of income first?
Dividend
