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IMC Unit 1 > Chapter 10 > Flashcards

Chapter 10 Flashcards

1
Q

who does the tax year apply to

A

individuals

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2
Q

who does the financial year apply to

A

companies

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3
Q

what is the tax year also known as

A

the fiscal year

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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
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5
Q

what is the name given to the UK tax authority

A

the HMRC

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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

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7
Q

what is residence

A

where a person physically is during the fiscal year

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8
Q

what is the 1st overseas test

A

present in the UK for fewer than 16 days in current fiscal year

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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

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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

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11
Q

when are you deemed an overseas resident

A

when you pass any of the overseas resident tests

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12
Q

1st UK resident test

A

present in the UK for 183 days in the fiscal year

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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

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14
Q

3rd UK resident test

A

they work full time in the UK

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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

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16
Q

what is domicile of origin

A

acquired from parents

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17
Q

domicile of choice

A

applies from age 16
when you leave country or domicile and settle into a new country

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18
Q

what is deemed domicile

A

if an individual is resent in the UK for any 15 out of last 20 years

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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

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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

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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

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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

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23
Q

what are the remittance charges

A

annual charge £30,000 for 7 of 9
£60,000 for 12 of 14

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24
Q

overseas income tax rules

A

UK income taxable as it arises
Overseas income not subject to UK income tax

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25
Q

what is non savings income

A

income from employment, benefits, social security benefits
income from self employment
income from property

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26
Q

what is savings income

A

interest from banks and bonds, gilts

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27
Q

what is personal allowance for income tax

A

£12,570

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28
Q

what is personal savings allowance

A

£1000 basic rate
£500 higher rate
0 additional rate

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29
Q

personal dividends allowance

A

£2000 anyone

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30
Q

what is the marriage allowance

A

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

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31
Q

when does a reduction in personal allowance kick in

A

income over £100,000

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32
Q

what is personal allowance 0

A

income over £125,140

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33
Q

what order are you taxed in

A

non savings income
savings income
dividends

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34
Q

what is basic tax rate

A

income up to £37,700

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35
Q

what is basic tax rates

A

non savings income 20%
savings income 20%
dividends 8.75%

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36
Q

what income is higher rate

A

£37,000 - £150,000

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37
Q

higher rate tax %

A

non savings income 40%
savings income 40%
dividends income 33.75%

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38
Q

additional rate income

A

over £150,000

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39
Q

additional rate %

A

non savings income 45%
savings income 45%
dividends 39.35%

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40
Q

what are deductible costs from tax

A
  • 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
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41
Q

what is a close company

A

a company controlled by 5 or fewer share holders

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42
Q

what type of NI do employees pay

A

class 1

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43
Q

what type of NI do employers pay

A

class 1a on tax benefits
class 1b on PAYE income

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44
Q

what class of NI do self employed pay

A

class 2 - flat rate for profits over a small threshold
class 4 - variable rate on profits

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45
Q

what class are voluntary NI payments

A

class 3

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46
Q

how many years of contribution to NI are needed to gain a full basic pension

A

35 years

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47
Q

Who is responsible for settling income tax in a trust

A

The trustee

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48
Q

What is standard rate band for trusts

A

£1000

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49
Q

What is tax % for standard rate band

A

20% property and savings
8.75% for dividends

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50
Q

What is the trust rate

A

The income above £1000 that is taxed

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51
Q

What are the trust rate %

A

45% for savings and property income
39.35% dividends

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52
Q

What is the order of income assessment for trusts

A

Non dividend and then dividend

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53
Q

Who is responsible for settling the tax for a bare trust

A

The beneficiary

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54
Q

What is the capital gains tax

A

£12,300

55
Q

When is the CGT personal allowance applied

A

After any gain have been reduced by other costs and losses

56
Q

Is there CGT on qualifying bonds

A

No

57
Q

When is CGT paid

A

When a chargeable person disposed of a chargeable asset and makes a profit

58
Q

UK residents capital gains tax

A

Taxable on worldwide gains on an arising basis

59
Q

Overseas resident CGT tax

A

No liability on capital gains in the UK or elsewhere

60
Q

What are capital gains tax %

A

10% basic rate tax payer
20% additional rate

Additional 8% for property

61
Q

What are exempt assets

A

Primary residence
Betting and lottery wins
Holiday currency
National savings certificates, premium bonds
Private cars
Gilts and qualifying bonds
Gifts to charities

62
Q

What are chargeable assets

A

Company shares and non qualifying bonds
Second or subsequent properties
Units in a CIS
Currency bought for gain

63
Q

What are allowable costs for CGT

A

Fees for disposal
Advertising costs
Costs of purchase
Enhanced expenditures

64
Q

UK domicile inheritance tax

A

On any transfer of worldwide assets

65
Q

Non uk domicile inheritance tax

A

Transfer of uk assets only

66
Q

What are lifetime transfers

A

Assets transferred up to 7 years before death
Assets transferred into a discretionary trust

67
Q

What is potentially exempt transfers

A

Not taxed immediately but becomes chargeable if the person dies within 7 years of the gift

68
Q

Is a trust used for potentially exempt transfers

A

No trust used

69
Q

Chargeable transfer trust

A

Trust is used

70
Q

What is a chargeable lifetime transfer

A

Taxed half of standard rate immediately and becomes chargeable again if there person dies within 7 years

71
Q

What is inheritance tax rate

A

40%

72
Q

2021 nil rate band

A

£325,000

73
Q

Main residence nil rate band

A

£175,000

74
Q

If a gift if given to charity what is the reduced IHT rate

A

36%

75
Q

What is reservation of benefit

A

When a gift still have benefit for the donor

76
Q

What is tax on a cash indirect investment

A

Income tax

77
Q

What is the tax on Nationals acting’s and investment products

A

Variable income tax

78
Q

What is tax of gilts

A

Income tax

79
Q

What is tax on equity

A

Income tax and capital gains tax

80
Q

What is tax on primary property

A

Stamp duty

81
Q

What is tax on investment property

A

Income tax
Capital gains tax
Stamp duty tax

82
Q

What is tax for Chattels

A

Capital gains tax if selling price is over £6000

83
Q

What corporation tax on income do funds have to pay

A

20%

84
Q

What type of tax do REITs pay

A

No income and no gains tax on fund level
At investor level - income tax, withholding tax of 20%, capital gain and stamp duty

85
Q

What is stamp duty tax

A

A form of transaction tax payable on the transfer of real estate and certain securities

86
Q

What is stamp duty %

A

0.5% of purchase price of an asset

87
Q

Stamp duty tax for certificated shares

A

For a share price of more than £1000 it is rounded up to the nearest unit of £5

88
Q

What is stamp duty reserve tax due on

A

Charged on dematerialized transactions

89
Q

What are examples of dematerialized transactions

A

Uk registered shares
Options on shares
Uk convertible loan stock

90
Q

When does / does not SDRT apply for unit trusts and OEICs

A

Not apply When the investor purchases from the fund manager
Applied when the units are surrendered

91
Q

What instruments exempt from stamp duty tax

A

AIM / NEX shares
Gilts
Corporate bonds
Overseas securities

92
Q

What are the stamp duty land tax %

A

Up to 250,000 0%
250,000 to 925,000 5%
925,000 to 1,500,000 10%
Over 1,500,000 12%

93
Q

If an additional property is purchased how much a higher is the SDRT

A

An additional 3%

94
Q

First time buyers pay what %

A

Up to 425,000 0%
Then up to 625,000 5%

95
Q

What is corporation tax

A

19%

96
Q

When is corporation tax due

A

9 months after accounting year end

97
Q

Which companies pay corporation is tax quarterly

A

Companies with profits above £1.5m

98
Q

Who pays corporation tax location wise

A

Is payable by UK resident companies on their worldwide companies and by companies resident overseas on their profits arising in the UK

99
Q

What is standard VAT

A

20%

100
Q

What is reduced VAT

A

5%

101
Q

Who has reduced VAT

A

Energy prices and services

102
Q

Stock brokers VAT

A

Discretionary and advisory has standard VAT
Execution only are exempt

103
Q

What are the max yearly income contributions for a pension

A

£40,000

104
Q

What is the basic amount for pension

A

£3600
If a person has no earnings they can still put this much in and get a tax relief of 20%

105
Q

What is an uncrystallized fund pensions lump sum

A

25% tax tree lump sum from a pension

106
Q

What is the ISA allowance

A

£20000

107
Q

What investments can you put into a stocks and shares ISA

A

Shares
Bonds and gilts
Unit trusts
Investment trust schemes
REITS

108
Q

What is the junior ISA allowance

A

£9000

109
Q

What are the 2 different varieties of offshore fund

A

Reporting and non reporting

110
Q

What is a reporting offshore fund

A

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
Q

What is a non reporting offshore fund

A

Income and capital gains taxed as income
Can’t used CGT exemption

112
Q

What are life company bonds

A

When life assurance bonds offer investments to their policy holders

113
Q

What is a qualifying rules for a qualify policy

A

At least annual premiums
Term at least 10 years
Premiums totaling to less then £3600 per year

114
Q

Qualifying policies

A

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
Q

What happens with non qualifying policies

A

Proceeds are received net of 20%
The tax liability are deferred until death or chargeable event

116
Q

What is the income tax relief for a VCT

A

30%

117
Q

When do you get income tax relief for a VCT

A

You must hold for 5 years
Max investment for up to 200,000

118
Q

What does VCT shares give

A

Income tax relief on dividends

119
Q

Enterprise investment schemes tax relief

A

30% tax relief
For shares up to 1,000,000
No CGT provided if the EIS is held for 3 years

120
Q

when are you deemed UK domicile and what does that mean for your taxable income

A

15 out of 20 years
get taxed on worldwide income

121
Q

what is an example of a qualifying bond

A

one that easily converts into equity

122
Q

what is the IHT exemption per year for an individual

A

£3000

123
Q

what are the examples of the dematerialized shares that a buyer would pay SDRT on?

A

UK registered shares
Options on shares
UK convertible loan stock

124
Q

when a non natural person (company) buys a property what is the SDLT?

A

15% for properties over £500,000

125
Q

when can an annual loss be used on a CGT tax

A

after annual exemption is used up

126
Q

life policy premiums are paid from what type of income

A

net income
but proceeds are tax free

127
Q

is an EIS company diverse?

A

no

128
Q

do unit linked bonds allow control of purchases of shares

A

no
bonds do not enable control

129
Q

is there capital gains tax on an individuals main residence

A

no

130
Q

how long can losses be carried back for in a company

A

3 years

131
Q

what does the FTACA require foreign financial institutions to do

A

provide info about their US customers to the IRS

132
Q

what type of company does a VCT have a similar structure to

A

an investment trust

133
Q

what happens to financial institutions that do not take part in the FTACA

A

they are subject to a 30% withholding tax on payments of US income

134
Q

what type of transfer is a gift to a discretionary trust

A

chargeable transfer

IMC Unit 1 (11 decks)

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