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R04 > Chapter 2a > Flashcards

Chapter 2a Flashcards

1
Q

Figures for AA, MPAA, TAA and SLA

A

AA - £40,000

MPAA - £4,000 - DC only

TAA - Level depends on income

SLA - £1,073,100

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2
Q

What valuation factors are used to convert income into a capital sum for AA, TAA and SLA?

A

16:1 - AA & TAA

20:1 - SLA post A-Day

25:1 - SLA when income is in payment pre A-DAY

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3
Q

How is the TAA calculated?

A

Anyone with adjusted income of more than £240,000 and threshold income of more than £200,000 start to lose their £40,000 at a rate of £1 every £2 over the £240,000 figure

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4
Q

What can an individual get tax relief on in terms of personal contributions into an RPS?

A

Greater of 100% of gross salary and £3,600 gross annually

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5
Q

What classes an individual as a relevant UK individual?

A

Aged less than 75 and satisfy one of a possible four further rules

1 - Have relevant UK earnings chargeable to income tax for that tax year

2 - Resident in the UK at some point in that tax year

3 - UK resident in one of five year preceding tax year and UK resident in year they became a member of pension scheme

4 - Have UK taxable earnings from overseas Crown employment (or spouse)

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6
Q

What income is classed as relevant UK earnings?

A

Income from employment, bonuses, self-employed etc.

Patent Income

Overseas Crown Employment

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7
Q

What income isn’t classed as relevant UK earnings?

A

Bank and Building Society Interest

Dividend Income

Rental Income from B2L properties

Pension Income

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8
Q

Type of Contributions

A

Member

Employer

Third Party (Grandparents)

In-Specie

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9
Q

Difference between In-Specie Contribution and In-Specie Transfers

A

Contributions - counts as total pension input, must have sufficient gross earnings and tested against AA, TAA and MPAA

Both must satisfy UK individual definition

Contributions are shares into RPS, transfers are already in RPS (think Nucleus to Transact)

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10
Q

What are the conditions for tax-free cash recycling?

A

PCLS is more than £7,500 in 12 months

More than 30% of PCLS is contributed

Pension contributions increased by more than 30%

Contributions made by individual or employer

It was pre-planned

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11
Q

What tax is paid on contributions if tax relief has been over claimed?

A

Excess will be chargeable at the members marginal rate

Excess is determined as anything over salary, bonus, overtime, commission, interest and dividend payments

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12
Q

Types of pension contributions

A

Net Pay Method
Salary sacrifice - tax relief up front

Relief at Source
Paid basic rate tax relief

Relief by Making a Claim
RAC - Premiums paid gross and reclaimed through self assessment

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13
Q

When may employer tax relief be spread over different tax years?

A

Although employer contributions are unlimited, the tax relief may be spread over accounting periods

More than 210% of previous employer contribution

Excess of more than 110% of previous employer contribution

Monetary Value is more than £500,000

£500,000 - £999,999 - 2 Years
£1,000,000 - £1,999,999 - 3 Years
£2,000,000+ - 4 years

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14
Q

What is the Pension Input Period?

A

DC - Payment of first contribution
DB - Rights start to accrue

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15
Q

What is total pension input for DC?

A

Tax relievable member contributions + Other member contributions + employer contributions

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16
Q

How to calculate total pension input for a DB?

A

1 - Calculate Opening Balance

2 - Add Inflation Proofing

3 - Calculate Closing Balance

4 - Deduct 2 from 3

5 - Add PCLS and 16 x Pension

17
Q

How do you calculate gross taxable income?

A

Employer Income + Pension Income + Investment Income + Rental & Trust Income

18
Q

How do you calculate threshold income?

A

Gross Taxable Income - Employee / Other Pension Contributions - Lump Sum Death Benefits + Salary Sacrifice from July 2015

19
Q

How do you calculate adjusted income?

A

Gross Taxable Income + Employer Pension Contributions - Lump Sum Death Benefits

20
Q

What is carry forward annual allowance?

A

Contributions to an RPS can be made from the previous 3 tax years

Allowance is used up in the current tax year followed by unused allowance from the tax year from 3 years ago, then 2 years ago then the previous year

21
Q

What are the trigger events for the MPAA?

A

Funds from FAD

UFPLS

Capped Drawdown to FAD and takes income

Exceeds 150% of GAD

Short-term Annuity and flexible annuity

Stand alone lump sum using Primary Protection of more than £375,000

Received a DC scheme pension paid to less than 11 other members

22
Q

Examples of non trigger events for the MPAA?

A

PCLS

Triviality

DB scheme pension payments

Receive a DC pension paid to 12 or more members

Scheme pension from annuity provider in exchange of DC funds

Non reducing Lifetime Annuity

Capped Drawdown income lower than 150% of GAD

23
Q

What is the Alternative Annual Allowance?

A

Once the MPAA is triggered, the annual allowance for DB input is reduced to £36,000

Carry forward can be used for AAA for DB once MPAA is triggered

24
Q

What investment types do not have any taxation when held within an RPS?

A

Cash (still liable to CGT)

Fixed-interest securities

Shares

Commercial Property

Collective Investment Schemes (OEICS)

Investment Bonds

The main thing is that they are usually taxed but not when held within and RPS

25
Q

What is classed as taxable property?

A

Member could derive some people benefit

Holiday Home
Vintage Wines
Antiques
Super cars
Some B2L properties

26
Q

What unauthorised payment taxations apply when an RPS invests pension funds in taxable property?

A

Unauthorised Payments Charge - 40% of value of taxable property

Unauthorised Payments Surcharge - Additional 15% is taxable property is 25%+ of RPS total funds

Scheme Sanction Charge - RPS could face a charge of 15% - 40% of value of unauthorised payment

De-registration Charge - 40% of scheme assets if HMRC withdrawals RPS status

27
Q

What is a QROPS?

A

Qualifying Recognised Overseas Pensions Scheme

Overseas pension scheme given QROPS status by HMRC

Established outside UK in country or territory with UK double taxation

28
Q

What is a ROPS?

A

Recognised overseas pension scheme that has received UK tax relief

29
Q

What is the purpose of a QROPS/ROPS?

A

Someone retiring abroad and looking to start taking retirement income

30
Q

How is a QROPS/ROPS transfer treated?

A

Authorised payment but a BCE

From 2017, a 25% overseas charge was introduced if the member is not a resident in the same country as the QROPS/ROPS

31
Q

What is a non residence period and how RNUKS payments taxes when member returns to UK?

A

Non- Residence Period
5 years up to 5th April 2017
10 years on / after 5th April 2017

Taxation
Taxes at marginal rate on return if more than £100,000 of income is taken

R04 (2 decks)

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