6) Direct Investments - Cash and Fixed Interest Securities

Question 1

Asset Classes

Answer 1

• Cash 💰 - deposit based investments, security, convenience.
• Fixed interest securities (gilts/ corporate bonds) capital gains on gilts are not subject to CGT.
  Corporate bonds could be secured on assets called a debenture. Interest paid classed at savings income, PSA applies the taxed determined by persons gross income. Higher priority than shareholders in event of company dissolving.
• Equities, company shares 📃
• Property 🏘

Question 2

Offshore accounts

Answer 2

Based outside the UK normally offers more advantageous taxation on investments. Eg Channel Islands, Luxembourg and Cayman Islands 🏝
- Account may not be denominated in sterling 💶
- Not all offshore accounts are protected by investor protection schemes.
UK resident must declare their income to HMRC and may have to pay tax on it.

Question 3

Gilts

Answer 3

Are a direct investment known as fixed interest securities. Form of borrowing by UK government.
Redemption date - date the government must redeem the gilt by paying back its original issue value (par value)
Coupon - interest rate payable on the par value of a gilt. Fixed rate paid half yearly, gross but taxable.
Short term as defined by UK Debt Management Office - less than 7 years.
Medium term is 7-15 years.

Question 4

Eurobond

Answer 4

Bond issued or traded in a country that uses currency other than the one the bond is denominated.
The bond operates outside of the jurisdiction of the central bank that issues that currency.
Form of borrowing used by multinational organisations and governments.