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R01 2023 > 3 - Laws and Legal Concepts relevant to financial advice > Flashcards

3 - Laws and Legal Concepts relevant to financial advice Flashcards

1
Q

What is a sole trader

A

Self-employed

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2
Q

What are sole trader liable for

A
  • Income Tax and CGT
  • NIC Class 2 and 4 (twice a year)
  • Secondary Class 1 NIC for employees
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3
Q

What is a partnership?

A

Similar to Soletrader but liability reflects share of business

Same tax “traditional partnership”

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4
Q

Who is liable for whos tax in a “traditional partnership”

A

Each to their own, they cannot be liable for each other tax

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5
Q

LLP?

A

Partnership is a seperate legal person so the partners are not individually liable for debts of the LLP

Limited Liability partnership pay similar tax to traditional partnerships

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6
Q

Limited Companies

A

A seperate legal entity which is registered on the Register of Companies

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7
Q

Tax differences between limited companies and unincorporated businesses

A

Major tax differences between limited companies and unincorporated businesses (businesses which are not companies). Limited companies pay neither income tax nor CGT, however do pay corporation tax on all forms of profit made (including CGT).

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8
Q

Requirements of PLC

A
  1. Two directors, two shareholders and company secretary
  2. Must state they are public and end in PLCs
  3. Require extra certificate which is only eligible of PLC gained £50,000 in shares
  4. company secretary must be member of professional body
  5. Must lay accounts before general meetings
  6. Include disclosure of shareholdings in company
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9
Q

Enduring Powers of attorney

A

Allows power of attorney to continue in the event of incapacity

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10
Q

When must enduring power of attorney have been established for it to qualify

A

Before October 2007 when the giver had full mental capacity

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11
Q

Mental capacity definition

A

An individual lacks mental capacity if they are unable to make a decision for themselves due to an impairment or disturbance in the functioning of the mind or brain

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12
Q

Which act introduced lasting power of attorney

A

Mental capacity act 2005

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13
Q

What powers do LPA give

A
  1. Health and Care decisions
  2. Financial Decisions
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14
Q

6 things for binding contract

A
  1. Offer
  2. Acceptance
  3. Understand
  4. Intention to create legally binding contract
  5. Both parties can have power to contract
  6. Consideration
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15
Q

What additional things must there be for contract to be binding - life assurances

A
  1. Good faith
  2. Insurable interest
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16
Q

Contracts on minors categories

A
  1. Contracts which are binding
  2. Contracts which are binding unless repudiated
  3. Contracts which are not binding on minor
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17
Q

In Life Insurance contract what constitutes an offer

A

Proposal form

18
Q

What constitutes acceptance in a life insurance contract

A

First premium payment

19
Q

What is Joint ownership

A

When two or more people buy a house (or other types of assets) together

20
Q

What is a joint tenancy

And relation to will

A

Joint Tenancy means neither individual can sell without the other’s agreement.

Each has an equal share of the property and when one dies, the survivor inherits the others share without probate being needed and regardless of provisions of any will.

21
Q

Tenancy in common

And Will

A

Each holds separate shares and can dispose of the shares as they wish

When they die, share goes to their estate not to the other joint owners, and is disposed according to their will or law of intestacy.

22
Q

Government schemes for housing

A
  1. First Home scheme
  2. Mortgage Guarantee scheme
23
Q

Alternative to bankruptcy

A

Individual voluntary arrangement

24
Q

What happens if an IVA is accepted?

A

IVA is added to individual insolvency registar and removed three months after it ends

Added to credit reference agency report for six years

25
Q

How much money is needed for petition for bankruptcy

A

£5000

26
Q

Who is responsible for realising and distributing an estate in individual bankruptcy

A

Trustee in Bankruptcy

27
Q

What order are debts paid in in bankruptcy

A
  1. Costs of bankruptcy
  2. Preferential debts
  3. Floating charges
  4. Unsecured creditors and other debts
  5. Debt to bankrupt’s spouse or civil partner
28
Q

How long does bankruptcy continue for under Enterprise Act 2002

A

12 month period

29
Q

Who is appointed to deal with corporate insolvency

A

Liquidator

30
Q

Alternatives to corporate insolvency (liquidation)

A
  • Administration
  • Voluntary arrangements
31
Q

Three formalities to make a will

A
  1. Writing
  2. Signature
  3. Attestation (2 witnesses)
32
Q

How do you revoke a will

A
  • Write a new one
  • Destory it
  • Marriage
  • Divorce (part)
33
Q

Laws of Succession: Intestacy laws

A
  • If you have a spouse but no issue (kids/grandkids) spouse is the sole beneficiary.
  • Spouse & issue - Spouse takes chattels plus statutory legacy of £322k plus half of balance. Remainder split amongst surviving issue on reaching 18 or marrying before then.
  • No spouse - All taken by issue.
  • No relatives - The crown or Duchy or Lancaster/Cornwall if resident of Lancaster/Cornwall.
34
Q

Laws of Succession: Personal Representatives

A

The executors and administrators are known as personal representatives.

They are personally liable for the payment of all debts and taxes fro the estate, therefore need to ensure there are sufficient funds before making any distribution of the assets.

35
Q

What are the two types of Grant of Representations

A
  1. Grant of Probate
  2. Letters of Administration
36
Q

Grant of Probate how is it obtained

A

Executors of large estates must complete an HMRC account, showing all assets of deceased and any gifts made in the last seven years.

Inheritance tax may be due if the total of the estate, plus all non-exempt gits in the previous seven years, exceeds the limit. Some of this tax if not all must be paid before Grant of Probate may be issued.

37
Q

Lists of trusts

A
  • Express
  • Implied
  • Presumptive
  • Successive
  • Constructive
  • Resulting
  • Bare or absolute
  • Power of appointment
  • Interest in possession
  • Discretionary
  • Will
  • Statuory
  • Pension Scheme
38
Q

Main use of trusts

A

Stop IHT

39
Q

3 Certainties of trust

A
  • Words must be on whole imperative
  • Subject matter must be certain
  • OBjects of trust, benefeciaries of trust must be certain
40
Q

Types of beneficaries interest

A
  • Absolute
  • Life interest
  • Reversionary interest
  • Contingent interest
41
Q

How can a beneficiaries put an end to trusts?

A

Saunders vs Vautier (1841) - if all beneficiaries are known and reach age of majority and no possibility of further beneficiaries then direct trustees to hand over trust property entirely

R01 2023 (11 decks)

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