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IRT > 4 - tax of investment and investors > Flashcards

4 - tax of investment and investors Flashcards

1
Q

Fiscal year vs financial year

A

fiscal = tax year
individuals and trusts
6/4 - 5/4, 31/1 payment deadline

financial - companies subj to corp tax
1/4 - 31/03

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2
Q

automatic overseas resident

tax liabilities and qualification

A

not UK res automatically
- pay income tax on UK income only
no CGT (only paid by UK res

Overseas tests:
1st - present in UK up to 16 in current fiscal year
2nd - up to 45 c.days in current fiscal year AND not pres in UK in last 3 fiscal years
3rd - work full time overseas AND up to 90 c.days in UK AND up to 30 working days

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3
Q

automatic UK res

liabilities and how to quali

A

UK res - pay tax on worldwide income + gains

resident tests:
1st - present in UK over 183 days in fiscal year (over half)
2nd - main home in UK AND available for use for 91+ days AND used for 30+ days
3rd - work full time in UK (no matter how much they are here)

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4
Q

Sufficient ties test for residence

A

tax residency test if u arent covered by either automatic resi or overseas

  • family tie (UK res family)
  • accommodation tie (UK property)
  • work tie (UK work)
  • 90 day tie (>90 days)
  • country tie (pres in UK more than any other)
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5
Q

sufficient ties tests - sliding scale for time spent in UK

A

Sliding scale - more time spent less ties required

UK res for 1+/last 3 fiscal years
16-45 days = 4+ ties
46-90 = 3+ ties
91-120 = 2+ ties
120+ - 1+ ties

Not UK res is last 3 tax years
46-90 = all 4
91-120 = 3+
120+ - 2+

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6
Q

who is entitled to personal allowances

A

UK residents
EEA and commonwealth, Isle of Man and Channel islands

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7
Q

Why is domicile important

A

tax of foreign income for IT and CGT
can either be of origin (acquired from father if parents married, mother if not) or choice (16+, can leave countru and settly in another - cut UK ties)

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8
Q

UK res, non-UK domiciled tax remittance basis

A

can elect for remittance basis -
overseas income and gains taxed only if remitted to UK
lose IT personal allowance
lose CGT exemption

rules:
unremitted income/gains <£2000 = can use without claiming
unremitted income/gains >£2000 = claim thoru form,

charges for long term UK residents
- 7/9 years -£30k
- 12/14 years- £60k
- 15/20 years - domicile, cant use remittance basis

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9
Q

Taxable income order of assessment

A

non savings - employment, pensions, social sec benefits
- profits from trade/partnerships, profit from property

savings income - bank and bond interest and debentures
- income portion of annuity
- received gross typically

divi income -equity investment income
received gross

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10
Q

Personal allowances (tax free income)

A

IT personal allowance - £12,570
blind persons - £2,520
Savings:
BR - £1000
HR -£500
AR - £0
Divi - £2000

Earners over £100,000
PA reduced by £1 for every £2 over £100k
>£125,140 = no personal allowance`

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11
Q

Tax rates

A

taxable income ——Non-savings Savings Divi
AR >£150,000——————-45————- 45———–39.35
HR £37,701-£150,000——–40—————40———–33.75
Basic up to 37,700————— 20————– 20———–8.75

taxable income is after removal of allowances

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12
Q

NI classes

A

class 1 - employees = primary and employers = secondary - employer responsible for payment of both

class 2 (small profits threshold) and class 4 (variable on profits) - self employed

class 3 - volutnary contributions to pop up state pension

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13
Q

state pension eligibity

A

35 years of NI payments
<35 years recieve pro rated amount for number of years of NI contributions

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14
Q

when if CGT suffered
what is exemption

A

chargeable disposal or chargeable assed by chargeable person
- selling/gifting transferring
-equity of HH
-UK resi on worldwide assets

12300 exemption
Charities and most funds do not pay tax on capital gains

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15
Q

CGT rates

A

basic = 10%
Higher/additional = 20%

can claim entrepreneurs relief to lifetime limit of 1 mili - taxed @10%

Property:
basic = 18%
higher/additional = 28%

12300 exemption

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16
Q

GCT exempt assets

A

Exempt assets:
- Main home
- Gilts and non convertible corp bronds bonds
- Venture capital trusts (VCTs)
- Enterprise investment schemes (EISs) if held for three years
- Assets in an individual savings account (ISA)

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17
Q

CGT deductions

A

cost of asset
incidental costs of purchase and sale
cap expenditurer

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18
Q

ISA info packet

A

tax efficient wrappers
must be UK res
tax free up to 20k/tax year (Across all4 ISA types)

4 types; LISA, cash, stocks and shares, innovative finance

19
Q

LISA info packet

A

gov contributes 1 for every 4 contributed by investor
pays @ year end
max 1k/year gov contribution
max gov lifetime bonus 32k

can be used to:
- buy first home up to max 450k
- plan for retirement, can withdraw at 60 or when terminally ill
- gov contributions lost if withdrawn before 60

20
Q

Who is IHT
what is NRB
what is rate

A

IHT = tax on wealth transfer paid by receiver
applicable on death and certain lifetime transfers
UK domi - worldwide assets
non UK domi - UK assets

NRB = 325k personal allowance
property NRB = +175k up to property value where receiver is direct descendent and is main res of deceased
unused percentage can be transferred to surviving spouse

remainder taxed @40%
20% if already subject to 20% lifeitme transfer charge

NRB frozen til FY 25-26 then will resume index linking

21
Q

Chargeable and potentially exempt lifetime transfers

A

Transfer to discretionary trust is CLT - taxed @20%
inherited tax free if donor dies >7 years
0-3 years = +20%
3-7 years = + sliding scale

potentially exempt transfers (PET)
- most gifts before death except via truts
- exempt if transferer survives >7 years
0-3 years = +20%
3-7 years = + sliding scale

22
Q

IHT exempt transfers

A

exempt lifetime transfers:

annual exemption first 3k/year - carried forward 1 year (not with 250)
small gifts <250/donee
normal expenditure of disposable income (not liquidated assets)
wedding/civil partnership gifts = 5k/parent, 2.5k/grandparent, 1k/other

totally exempt transfers
- between spouses if recipient is UK domi
- political party (2+ MPs elected or MP >150k votes)
- charities and national benefit (over 105 of estate left to chairty then IHT reduced to 36%)

23
Q

Gifts with reservation taxation

A

e.g. giving house to daughter but living in it rent free
- added back to estate on death

POAT - preowned asset tax (on gifts with res >5k) - choice between POAT and IHT
if donee dies within 7 years IHT paid pro rata for amount of POAT paid

24
Q

valuations used in IHT

A

quoted securities = lower of
- value on quarter up basis of bid/offer spread
- avg of highest and lowest intraday prices

unit trusts - bid price
life policies - includes proceeds of policy (if no trust is used, with trust IHT is avoided)

25
Q

difference between administrator and executor

A

administrator - legator died intestate - no valid will - write letters of administration

executor - died testate - will receive a grant of probate
calculates IHT and liquidates assets to pay

26
Q

Death intestate

A

either no will or invalid

if no will - distribution of assets according to intestacy rules
if invalid will then attached to letters of administration

27
Q

intestacy rules

A

is there a surviving spouse/civil partner or issue (kids)?

yes - they inherit estate
spouse gets first 270k
remainder split between spouse and issues

no - are there distant relatives?
if yes they inherit

if no - estate passed to bona vacantia division of gov

unmarried partners, friends etc cannot inherit via intestacy rules - NEED WILL

28
Q

who is responsible for trust tax

A

CGT and income tax calculated by trustee unless beneficiaries include
- settlor
- settlor’s spouse/civil partner
- settlors minor children/step children

then settlor is responsible

29
Q

trust tax rates

A

can liquidate trust assets to pay tax
20% CGT, 28% property CGT

£6150 exemption (half individual exemption)

30
Q

interest in possession trust tax

A

life tenant - income
remainderman - receives capital when life interest dies

trustee = income tax @ basic rate 20%
life interest = income taxed whether paid out or reinvested (cannot liquidate trust assets or capital - only entitled to income)
life interest = income received net of basic rate - entitles to credit based on trustee payment, can claim back if BRT

31
Q

discretionary trust tax

A

trustee has powers of appointment over trust assets and absolute discretion to distribute income to beneficiaries

trustees =
first £1,00@ basic rate (20% savings and rental income, 8.75% divi)
>£1,000 = @AR (45% rental/savings, 39.35% divi)

beneficiaries=
only liable if income paid out not if it is reinvested
received net of tax

32
Q

bare trust tax

A

beneficiary has full access to income and capital, trustee obeys beneficiary

tax falls on beneficiary at their own rates

33
Q

Trusts for the vulnerable

A

type of discretionary trust
either disabled or minor predeceased by a parent

can elect to be taxed on beneficiary rate to utilise allowances
CGT exemptions exists for trusts where beneficiary is disabled

34
Q

Trusts for the vulnerable

A

type of discretionary trust
either disabled or minor predeceased by a parent

can elect to be taxed on beneficiary rate to utilise allowances
CGT exemptions exists for trusts where beneficiary is disabled

35
Q

personal rep of a deceased person

A

between period of death and execution of wills
liable for settlement of outstandimng tax liabilities of deceased (@ original rate charge) and liabilities that arise during administration (@basic rate)

36
Q

different between stamp duty and SDRT

A

tax on purchase of certain UK securities

stamp duty = paper transfer
0.5% rounded UP to £5 for transactions over £1,000

SDRT = electronic
0.5% rounded up or down to nearest 1p

37
Q

residential SDLT

A

paid by buyer on purchase of UK land/property

up to 125k = 0%
next 125k (to 250k) = 2%
next 675k (to 925k) = 5%
next 575k (to 1.5m) = 10%
remainder >1,5m = 15%

2nd home = +3%
overseas buyers = +2%

500k and above = 15% when purchase by corp bodies

38
Q

Non residential SDLT

A

first 150k = 0%
150,001 - 250k = 2%
over 250k = 5%

39
Q

1st time buyer SDLT

A

up to 300k = 0%
300k-500k = 5%
>500k = normal rates

5% to 925k
10% next 575k to 1.5m
15% remainder over 1.5m

40
Q

who pays VAT
what is it

A

sales tax businesses add to price of taxable goods/services

firms with turnover over 85k/12 months

41
Q

goods /services exempt from VAT

A

essential expenditure, healthcare prods/services, charity fundraising

42
Q

charging and reclaiming VAT

A

standard :20%
reduced: 5% (e.g. energy, smoking cessation)
0%: e.g. baby clothes

firms can offset VAT they pay for goods and services

43
Q

corp tax rates
and who pays

A

19%
20% of unit trusts and open ended investment companies

charge profits taxed = pre tax profit - franked income - cap allowance

tax on companies- not sole traders/partnerships (non savings IT on profits 2x a year - payments on account)

44
Q

international tax compliance

A

CDOT - crown dependencies and overseas territorites fin insititutions must collect tax residences of investors for AMLR

Qualified intermediaries regime - Non US fin. institutions report annually to IRS on US assets (US persons reported separately and non US collectively)

FATCA - foreign account tax compliance - non US fin. instit collect info on US persons with offshore assets and must disclose

CRS - common reporting standard - fin. instit in over 90 jurisdictions. OCED backed multilateral info xc

IRT (9 decks)

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