Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AFA > AFA 1 > Flashcards

AFA 1 Flashcards

1
Q

How to be Non-dom?

A

Domicile if Origin (birth)
Domicile of Choice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Current Non-Dom rules?

A

£30k/7/9
£60k/12/14

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Non-Dom rules mean?

A

Only pay tax on funds brought in to UK. So if choose a low tax country, can save money.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

New Non-Dom rules?

A

4yrs tax-free on moving to UK. If already Non-Dom; get 2yr transition period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Net means?
Gross?

A

After expenses accounted for.
Before expenses accounted for.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Salary at which lose personal allowance?

A

£125,140
(£100,000 + (£12,570 x2))

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Taxable income is?

A

Gross pay minus Pension, Allowable Expenses, Charity (PAC!)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Current tax rates?

A

PA: £12,570
BR: £37,700
HR: £125,140
AR: >£125,140

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Amount at which you lose starting rate band?
Best for?

A

£12,570 + £5000 = £17,570
Getting interest.
Low income, high savings e.g. pensioners.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Highest amount of money to get tax-free?

A

£18,570 (PA + SRB + PSA)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Current dividend allowance?
Tax rate?

A

£500
BR: 8.75%
HR 33.75%
AR: 39.35%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Incomes not assessable to tax?

A

Redundancy payments, Lottery wins, Gambling profits, Wedding Presents, Scholarships.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Employees pay tax on what ‘perks’?
At what cost?

A

Any readily convertible assets, including vouchers, PMI, Expenses/Living Accomodation.
‘Annual Value’ = 20% of Market Value of asset when first provided to employee.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How are’In-house work perks’ taxed?

A

Limited to marginal cost to employer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Income tax legislation?

A

Income Tax (Earnings & Pensions) Act 2003.
Income Tax (Trading and Other Income) Act 2005.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Income taxed in what order?

A

EPRSDL
Earnings, Pension, Rental, Savings, Dividends, Life Assurance (‘EPReSD Life’)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Types of national insurance?

A

1: Employees
2: Self-Employed
3: Voluntary Contributions
4: Additional from Self-Employed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Current capital gains tax allowance? Rate?

A

£3000 (£1500 for trusts)
24% Residential Property, 20% Other

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Reduced primary residence CGT if?

A

Delay in moving in after buying, esp due to building/failure to sell.
Last 9 months.
Job-Related Accomodation, before moving home.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Proportion of exempt primary residence CGT gain?

A

Total Gain x (Absences/Total Ownership)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

CGT only counts from? Acquisition cost is?

A

1982
Value in 1982

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Capital gains losses can be carried forward (not backward) by how many years?

A

Indefinitely

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is ‘bed and breakfasting’?

A

Selling and repurchasing shares immediately to allow access to many years’ annual exempt amounts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Business roll-over relief?

A

When businesses sell and replace assets, it defers CGT to ‘final disposal’.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Hold-Over relief?

A

No capital gains tax when you gift away business assets. Though receiver will pay on disposal.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Reinvestment relief?

A

Gain deferred by use of EIS (1yr pre - 3yrs post disposal)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Business asset disposal relief?

A

Lifetime limit: first £1m of gains charged at 10%.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Investors relief?

A

Reduces CGT on disposing ordinary shares from 20 to 10%.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Calculating CGT for shares?

A

Matched ‘Same day’, then within 30 days (B&Bing), then any other time (Section 104 Holding).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Life policies CGT?

A

Exempt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Are Unit Trusts/OEICs/Iv Trusts charged CGT?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Inheritance tax rate within 7 years?
In to trusts?
NRB?

A

40%
20%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

IHT allowance and remarriage?

A

Ceiling of additional 100% of each NRB at time of second death.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

IHT NRB? RNRB?
RNRB reduced if house worth over?

A

£325k +/- RNRB £175k
£2m, reduced by £1 for every £2 over this

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Types of gift for IHT?

A

PERCs:
PET: Tapered if 3-7, Exempt >7
Exempts: Charity, Spouses, Weddings, ‘Normal Expenditure’
Reservations: Living in gifted house, Interest from gifted money
CLTs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

14 Year Rule for IHT?

A

Any PETS within 7yr period, triggers prior 7 yr review of NRB-reducing CLTs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

IHT + Trusts?

A

Bare: As PETs
Discretionary: CLTs
I-in-P: CLTs
Disabled: As PETs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Additional charges for Discretionary & I-in-P trusts?

A

Regular 10yrly charge, at most 6% (Or 30% average IHT charges through lifetime of trust). Exit charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

IHT Reliefs?

A

WABS
Woodlands: 100% after 2yrs
Agricultural: 100% if held 2yrs
Business: 100/50% if held 2 yrs
Succession: ‘Quick death’ within 5yrs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What is POAT?

A

(Pre-Owned Assets Tax):
Income tax charge on Land/Chattel/Property on chargeable person still receiving benefit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

IHT paid by?

A

6mths post persons death.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Corporation Tax paid by? Covering what period?

A

Limited Companies
Accounting period (Not financial year)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

PCTCT? Which includes?

A

Profits chargeable to corporation tax.
TIC: Trading Profits, Iv Income, Chargeable Gains.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Exemption from corporate chargeable gains?

A

Disposals of substantial shareholdings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Deductions for PCTCT

A

CRI: Plant/Machinery 18%. Long Life 6%.
Capital Allowances:
R&D Reliefs: 13% of costs for large companies, 230% on SMEs.
Intangible Assets: Intellectual property/goodwill.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

If >75% shares in subsidiary what benefits?

A

Assets can be transferred, Gains/Losses balanced.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

What is a close company? Why does it matter?

A

UK, Limited company, with 5 or fewer ‘participators’.
32.5% tax on outstanding loans at accounting period end.

48
Q

VAT is? Register if? Flat rate eligible if? Uses what?

A

Input/Output tax.
>£85k/yr.
<£150k/yr, % of annual turnover

49
Q

How is VAT paid?

A

Most every 3mths electronically.
Large businesses; monthly.

50
Q

When do companies pay CT? Large companies?

A

9mths after end of accounting period.
Quarterly instalment.

51
Q

What is ‘bad debt’? Still have to make VAT payments unless?

A

When customers fail to pay invoice.
<£1.35m, Certain age etc.

52
Q

Financial Life Cycle?

A

WoRLd:
Wealth Creation
(obtainment)
Retirement
Legacy Planning
(on Death)

53
Q

Income tax planning?

A

Share Allowances
Keep <£100k
- Maximise Pension Contributions (Directly or Salary Sacrifice)
- Save 40% income tax relief, 20% reinstatement of PA

54
Q

Savings income planning?

A

ISA
Free from CCGT
Iv Bonds (with 5% withdrawals)
VCT/EIS

55
Q

CGT Planning?

A

Transfer to spouse
Spread sale of assets (Rollover/Holdover)
Nominate Residence
Crystallise losses

56
Q

IHT Planning?

A

Will
Exemptions (7yrs)
Trusts
- G&L
- DGT

57
Q

IGT: G&L Trust?

A

Gift £3000 + Loan £? to buy Iv Bond. Witthdraw 5%/yr. Iv growth remains in trust IHT free after 20yrs.

58
Q

IHT: DGT?

A

Donors fund immediately out estate.
Beneficiaries fund out after 7 yrs. If 5% withdrawals spent then no IHT on fund.

59
Q

Boom?
Recession?
Depression?
Recovery?

A

Employment –> Goods Demand –> Inflation.
Caution –> Less Demand –> Unemployment.
Big Decline.
People spend more.

60
Q

Monetary Policy?
Fiscal Policy?

A

Interest rates by BoE.
Taxation/Govt Spending by Govt.

61
Q

Offshore vs Inshore Iv Bonds?

A

Onshore: 20% tax deducted in fund, cannot use PSA.

Offshore: No UK tax deducted, may be able to use PSA.

62
Q

If Personal Allowance < Earned + Non-Savings Income < PA + NRB ?

A

o Basic Rate on Income over PA
o + Savings Interest >PA + NRB + PSA  Marginal Rate Tax

63
Q

Fixed Interest Iv?

A

GILTs
Corporate Bonds
Eurobonds: Long term, from Govt/company
PIBS: Like CBs for Building societies. Half yrly interest. Become Perpetual Subordinated Bonds if Demutualise.

64
Q

GILT types?

A

Shorts (<7yrs), Mediums (7-15yrs), longs (>15yrs), Ultra-Longs (50-55yrs), Convertible

65
Q

GILT Yield formula?

A

(Coupon/Price) x 100 = Yield

66
Q

Corporate Bonds?

A

Debentures: secured against company assets
Loan Stock (+/- Convertible: at set time/price)
Deep-Discount: Very low coupon, company can buy back
Zero-Coupon: No interest, relies on capital gain

67
Q

Are corporate bonds charged CGT?

A

No, free from CGT except Convertible loan stock.

68
Q

How are bonds/GILTs issued?

A

Direct
Auction
Tender: issue sold to those offering take-up price

69
Q

Does income from GILTs/Bonds qualify for SRB/PSA? CGT payable?

A

Yes
Nope, exempt from CGT.

70
Q

How are shares offered?

A

IPO, or, when company needs to raise capital

71
Q

How are shares sold?

A

Fixed Price
Tender (Auction)
Subscription: form of tender with reserve for predetermined number of shares

72
Q

How do existing companies raise capital?

A

Placing: via FIs
Rights Issue: offer existing shareholders to buy more.

73
Q

Adjustment issues for shares?

A

Scrip issue: Offers free shares, in place of dividends.
Share Splits

74
Q

Types of Shares?

A

Ordinary: basic, voting rights, last to be paid back.

Preference: give fixed dividend, no voting rights.
- Cumulative: Pay previous poor-profit-yrs dividends
- Participating: Receive additional proportion of profits as dividends
- Convertible: To ordinary shares at fixed price/date

Warrants: Right to number of ordinary shares in future

75
Q

Assessing share value?

A

PYND
Price-Earnings Ratio
Yield (Dividend)
Net Asset value
Dividend Cover

76
Q

Costs of dealing shares?

A

Spread: Selling/Buying price difference
Commission: From stockbroker
Stamp Duty
Panel of Takeovers/Mergers Levy

77
Q

Employee share schemes?

A

SAYE-Linked Share Options: Save then, option to buy shares

Share Incentive Plans:
- Free Shares
- Partnership: Like salary sacrifice.
- Matching: With Partnerships
- Dividend: ReIv in to shares

78
Q

Employee share schemes tax?

A

CGT liability based on value increase from date of withdrawal (Nil if immediate!)

79
Q

Derivatives are? Include?

A

Iv vehicles of underlying shares/commodities.
COWFee
Contracts for Difference: Agreement to settle opening/closing prices of shares at end of contract (open-ended)
Options: right to buy/sell asset.
Warrants: Right to buy asset at date.
Futures: like options, but must be exercised on specific date

80
Q

How is rental income taxed?

A

As per income tax rate. Received gross then paid via self assessment.

81
Q

What Special Purpose Vehicle (SPV)? Allows? Rental income taxed how?

A

Limited company. Deduct mortgage interest as an expense. As corporation tax.

82
Q

REITs? Taxed how?

A

REIT: Iv trusts for property.
-Can be exempt from CT
- Must pay out 90% profits (As Property Income Distribution)

83
Q

PAIFs vs REITs?

A

Open ended (vs Closed REITs)
100% distributed (vs 90% REITs)

84
Q

Why were REITs/PAIFs introduced for ‘property companies’?

A

Save double taxation:
- CT on rental income
- Income tax on income from company

85
Q

What are guaranteed equity/income bonds?

A

Iv instrument utilising ZCB + Call Option on chosen index to ensure payments received, even if default.

86
Q

‘Capital at risk’ products?

A

Similar to Guaranteed Products but utilise derivatives more than ZCBs.

87
Q

Taxation of Structured Products (Guaranteed Bonds, Captital-at-Risk)?

A

Income - Income Tax
Growth - CGT

88
Q

Types of risk?

A

Systemic Risk: Domino after one person defaults.
Systematic: Market risk, related to confidence.
Non-Systematic: Specific sectors.

89
Q

Gearing is?

A

Company borrows to invest: usually percentage of capital and reserves

90
Q

Beta? Alpha?

A

Beta: How share fluctuates against market
Alpha: return relative to risk taken

91
Q

Efficient frontier?

A

Optimum diversification in portfolio to maximise returns for level of risk.

92
Q

Efficient Market Hypothesis?
CAPM?

A

All info reflected in prices, so impossible to outperform.
Reward investor should expect for taking additional risk.

93
Q

Arbitrage Pricing Theory?

A

More complex way to assess risk and return.

94
Q

Main aspects to behavioural finance?

A

Heuristics: general rules, rather than thorough analysis
Framing: how problem expressed
Market Inefficiency: Ignoring expertise/info

95
Q

Types of investment management?

A

Advisory: individual actions
Discretionary: Acting within remit

96
Q

Core and Satellite?

A

Mix of Passive and active.

97
Q

Collective Iv vehicles?
Buying/Selling prices are?

A

Unit Trusts: Pooled Iv under trust
- Different offer/bid prices
OEICs: Pooled via law
- Same price

98
Q

How are collective Ivs taxed?

A

Exempt from CGT.

99
Q

Types of Unit Trust/OEICs?

A

Accumulation/Growth
Distribution/Income
Equity income
GILT/Bond Funds

100
Q

Total return funds?
Absolute return funds?

A
  • Use long positions
  • Use derivatives (Similar to hedge funds)
101
Q

Unit Trusts/OEICs taxed how?

A

Equity (<60% Interest bearing): As dividends
Non-Equity (>60% Interest Bearing): As interest.
Fund itself exempt from CGT, on taking proceeds, pay CGT.

102
Q

UCITS?

A

Undertakings for Collective Iv in Transferable Securities = Offshore Trust Fund/OEIC

103
Q

Offshore funds:

A
  • Reporting: Less tax
  • Non-Reporting: More tax
104
Q

Iv Trusts? If more than one type of share?

A
  • Public limited closed ended Iv companies
  • More flexible than OEICs/Unit Trust

Split Capital Trust

105
Q

Split capital trust share classes?

A

Prior Charges
Zero-Dividend Preference
Income
Ordinary Income
Capital

106
Q

What is net asset value (NAV)?

A

Market value of all trust assets, less liabilities, divided by share number.

107
Q

Exchange traded fund?

A

Allow intra day trading. Mostly passive.
Low charges vs Unit Trusts/OEICs/Iv trusts.

108
Q

Endowment? Types? Taxed how?

A

Regular-premium Iv-orientated life assurance contract paying capital on pre-determined date.
- With Profits: Conservative, use ‘smoothing’, enable ‘reversionary bonuses’
- Low Cost: with-profits + decreasing term assurance
- Maximum Iv Plans: Ten-year unit-linked endowments.
As per life policies: Qual vs Non-Qual

109
Q

Iv bond? Types?

A

A Non-Qualifying whole-of-life assurance policy, via lump sum, assurance usually no more than 101%.
Unit Linked
With Profits

110
Q

Iv bond tax?

A

Fund manager pays 20% CT, which counts as BR paid.

111
Q

Annuity types?

A

Purchase:
Compulsory Purchase: Bought with pension

Life, Temporary, Immediate, Deferred, Escalating, With/Without Proportion, Capital-Protected, Enhanced/Impaired Life, Iv Linked

112
Q

Purchase annuities tax? Compulsory Purchase annuities?

A

Capital part tax-free. Interest part treated as savings, with 20% IT deducted at source +/- HR/AR.
Taxable as per earned income.

113
Q

EIS?
VCT?
CGT?

A

EIS: Tax relief of 30%, up to £2m
VCT: Tax relief of 30%, up to £200,000
Exempt if held for 3yrs.

114
Q

AFA 1: Top 13

A

Top 12

115
Q
A

AFA (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions