Chapter 10 Flashcards
1
Q
who does the tax year apply to
A
individuals
2
Q
who does the financial year apply to
A
companies
3
Q
what is the tax year also known as
A
the fiscal year
4
Q
how is income tax collected
A
- on non savings income from employees collected by PAYE
- non savings income from the self employed collected twice a year on the account
- savings, property and dividend income is collected via the self assessment in a tax return
5
Q
what is the name given to the UK tax authority
A
the HMRC
6
Q
when are the self assessment tax deadlines for the year
A
31 October for paper submission
31 Jan for online submission and payment of the tax
7
Q
what is residence
A
where a person physically is during the fiscal year
8
Q
what is the 1st overseas test
A
present in the UK for fewer than 16 days in current fiscal year
9
Q
what is 2nd overseas test
A
non present in the UK during last 3 fiscal years
present in the UK for fewer than 46 days in the current fiscal year
10
Q
what is 3rd overseas test
A
works full time overseas
spends fewer than 91 days in the UK
no more than 30 days in the UK
11
Q
when are you deemed an overseas resident
A
when you pass any of the overseas resident tests
12
Q
1st UK resident test
A
present in the UK for 183 days in the fiscal year
13
Q
2nd UK resident test
A
their only / main home is in UK
is available for use for 91 days and is used at least 30 days
14
Q
3rd UK resident test
A
they work full time in the UK
15
Q
what is the sufficient ties test
A
the more ties an individual has to the UK the more likely that they ill be deemed to be a UK resident
16
Q
what is domicile of origin
A
acquired from parents
17
Q
domicile of choice
A
applies from age 16
when you leave country or domicile and settle into a new country
18
Q
what is deemed domicile
A
if an individual is resent in the UK for any 15 out of last 20 years
19
Q
if you are UK resident and domiciled what income are you taxed on
A
worldwide income as it arises - it does not have to be remitted into the UK to be taxable
20
Q
what are the tax rules for UK resident but non UK domicile
A
UK income taxable as it arises
foreign income - below 2k remittance basis
over 2k remittance or arising
21
Q
what does tax on a remittance basis mean
A
remittance means that you are only taxed if you bring the money into the UK to spend or to invest
22
Q
when do you have to be a remittance charge
A
when you have been in the UK for 7 out of last 9 years
23
Q
what are the remittance charges
A
annual charge £30,000 for 7 of 9
£60,000 for 12 of 14
24
Q
overseas income tax rules
A
UK income taxable as it arises
Overseas income not subject to UK income tax
25
what is non savings income
income from employment, benefits, social security benefits
income from self employment
income from property
26
what is savings income
interest from banks and bonds, gilts
27
what is personal allowance for income tax
£12,570
28
what is personal savings allowance
£1000 basic rate
£500 higher rate
0 additional rate
29
personal dividends allowance
£2000 anyone
30
what is the marriage allowance
where one partner earns less then £12,570 and the other pays tax at a basic rate then the lower earning partner can transfer 10% of personal allowance to spouse
31
when does a reduction in personal allowance kick in
income over £100,000
32
what is personal allowance 0
income over £125,140
33
what order are you taxed in
non savings income
savings income
dividends
34
what is basic tax rate
income up to £37,700
35
what is basic tax rates
non savings income 20%
savings income 20%
dividends 8.75%
36
what income is higher rate
£37,000 - £150,000
37
higher rate tax %
non savings income 40%
savings income 40%
dividends income 33.75%
38
additional rate income
over £150,000
39
additional rate %
non savings income 45%
savings income 45%
dividends 39.35%
40
what are deductible costs from tax
- donations to charity
- income paid into pension
- if money is borrowed for investing in a partnership , buying machinery for employment use, buying shares in a close company
41
what is a close company
a company controlled by 5 or fewer share holders
42
what type of NI do employees pay
class 1
43
what type of NI do employers pay
class 1a on tax benefits
class 1b on PAYE income
44
what class of NI do self employed pay
class 2 - flat rate for profits over a small threshold
class 4 - variable rate on profits
45
what class are voluntary NI payments
class 3
46
how many years of contribution to NI are needed to gain a full basic pension
35 years
47
Who is responsible for settling income tax in a trust
The trustee
48
What is standard rate band for trusts
£1000
49
What is tax % for standard rate band
20% property and savings
8.75% for dividends
50
What is the trust rate
The income above £1000 that is taxed
51
What are the trust rate %
45% for savings and property income
39.35% dividends
52
What is the order of income assessment for trusts
Non dividend and then dividend
53
Who is responsible for settling the tax for a bare trust
The beneficiary
54
What is the capital gains tax
£12,300
55
When is the CGT personal allowance applied
After any gain have been reduced by other costs and losses
56
Is there CGT on qualifying bonds
No
57
When is CGT paid
When a chargeable person disposed of a chargeable asset and makes a profit
58
UK residents capital gains tax
Taxable on worldwide gains on an arising basis
59
Overseas resident CGT tax
No liability on capital gains in the UK or elsewhere
60
What are capital gains tax %
10% basic rate tax payer
20% additional rate
Additional 8% for property
61
What are exempt assets
Primary residence
Betting and lottery wins
Holiday currency
National savings certificates, premium bonds
Private cars
Gilts and qualifying bonds
Gifts to charities
62
What are chargeable assets
Company shares and non qualifying bonds
Second or subsequent properties
Units in a CIS
Currency bought for gain
63
What are allowable costs for CGT
Fees for disposal
Advertising costs
Costs of purchase
Enhanced expenditures
64
UK domicile inheritance tax
On any transfer of worldwide assets
65
Non uk domicile inheritance tax
Transfer of uk assets only
66
What are lifetime transfers
Assets transferred up to 7 years before death
Assets transferred into a discretionary trust
67
What is potentially exempt transfers
Not taxed immediately but becomes chargeable if the person dies within 7 years of the gift
68
Is a trust used for potentially exempt transfers
No trust used
69
Chargeable transfer trust
Trust is used
70
What is a chargeable lifetime transfer
Taxed half of standard rate immediately and becomes chargeable again if there person dies within 7 years
71
What is inheritance tax rate
40%
72
2021 nil rate band
£325,000
73
Main residence nil rate band
£175,000
74
If a gift if given to charity what is the reduced IHT rate
36%
75
What is reservation of benefit
When a gift still have benefit for the donor
76
What is tax on a cash indirect investment
Income tax
77
What is the tax on Nationals acting’s and investment products
Variable income tax
78
What is tax of gilts
Income tax
79
What is tax on equity
Income tax and capital gains tax
80
What is tax on primary property
Stamp duty
81
What is tax on investment property
Income tax
Capital gains tax
Stamp duty tax
82
What is tax for Chattels
Capital gains tax if selling price is over £6000
83
What corporation tax on income do funds have to pay
20%
84
What type of tax do REITs pay
No income and no gains tax on fund level
At investor level - income tax, withholding tax of 20%, capital gain and stamp duty
85
What is stamp duty tax
A form of transaction tax payable on the transfer of real estate and certain securities
86
What is stamp duty %
0.5% of purchase price of an asset
87
Stamp duty tax for certificated shares
For a share price of more than £1000 it is rounded up to the nearest unit of £5
88
What is stamp duty reserve tax due on
Charged on dematerialized transactions
89
What are examples of dematerialized transactions
Uk registered shares
Options on shares
Uk convertible loan stock
90
When does / does not SDRT apply for unit trusts and OEICs
Not apply When the investor purchases from the fund manager
Applied when the units are surrendered
91
What instruments exempt from stamp duty tax
AIM / NEX shares
Gilts
Corporate bonds
Overseas securities
92
What are the stamp duty land tax %
Up to 250,000 0%
250,000 to 925,000 5%
925,000 to 1,500,000 10%
Over 1,500,000 12%
93
If an additional property is purchased how much a higher is the SDRT
An additional 3%
94
First time buyers pay what %
Up to 425,000 0%
Then up to 625,000 5%
95
What is corporation tax
19%
96
When is corporation tax due
9 months after accounting year end
97
Which companies pay corporation is tax quarterly
Companies with profits above £1.5m
98
Who pays corporation tax location wise
Is payable by UK resident companies on their worldwide companies and by companies resident overseas on their profits arising in the UK
99
What is standard VAT
20%
100
What is reduced VAT
5%
101
Who has reduced VAT
Energy prices and services
102
Stock brokers VAT
Discretionary and advisory has standard VAT
Execution only are exempt
103
What are the max yearly income contributions for a pension
£40,000
104
What is the basic amount for pension
£3600
If a person has no earnings they can still put this much in and get a tax relief of 20%
105
What is an uncrystallized fund pensions lump sum
25% tax tree lump sum from a pension
106
What is the ISA allowance
£20000
107
What investments can you put into a stocks and shares ISA
Shares
Bonds and gilts
Unit trusts
Investment trust schemes
REITS
108
What is the junior ISA allowance
£9000
109
What are the 2 different varieties of offshore fund
Reporting and non reporting
110
What is a reporting offshore fund
Fund reporting managers report tax income to the HMRC
Dividends received from offshore funds are taxable to UK residents
Any capital gain is taxed as capital gain
111
What is a non reporting offshore fund
Income and capital gains taxed as income
Can’t used CGT exemption
112
What are life company bonds
When life assurance bonds offer investments to their policy holders
113
What is a qualifying rules for a qualify policy
At least annual premiums
Term at least 10 years
Premiums totaling to less then £3600 per year
114
Qualifying policies
Proceeds are non taxable
I.e when the fund meets the qualifying rules than there is no further tax to be paid on payout
115
What happens with non qualifying policies
Proceeds are received net of 20%
The tax liability are deferred until death or chargeable event
116
What is the income tax relief for a VCT
30%
117
When do you get income tax relief for a VCT
You must hold for 5 years
Max investment for up to 200,000
118
What does VCT shares give
Income tax relief on dividends
119
Enterprise investment schemes tax relief
30% tax relief
For shares up to 1,000,000
No CGT provided if the EIS is held for 3 years
120
when are you deemed UK domicile and what does that mean for your taxable income
15 out of 20 years
get taxed on worldwide income
121
what is an example of a qualifying bond
one that easily converts into equity
122
what is the IHT exemption per year for an individual
£3000
123
what are the examples of the dematerialized shares that a buyer would pay SDRT on?
UK registered shares
Options on shares
UK convertible loan stock
124
when a non natural person (company) buys a property what is the SDLT?
15% for properties over £500,000
125
when can an annual loss be used on a CGT tax
after annual exemption is used up
126
life policy premiums are paid from what type of income
net income
but proceeds are tax free
127
is an EIS company diverse?
no
128
do unit linked bonds allow control of purchases of shares
no
bonds do not enable control
129
is there capital gains tax on an individuals main residence
no
130
how long can losses be carried back for in a company
3 years
131
what does the FTACA require foreign financial institutions to do
provide info about their US customers to the IRS
132
what type of company does a VCT have a similar structure to
an investment trust
133
what happens to financial institutions that do not take part in the FTACA
they are subject to a 30% withholding tax on payments of US income
134
what type of transfer is a gift to a discretionary trust
chargeable transfer
