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CTA-Personal > Chapter 32 Misc provisions > Flashcards

Chapter 32 Misc provisions Flashcards

1
Q

what do national savings certificate guarantee?

A

fixed return over 3-5 yrs. Interest is tax free

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2
Q

How much can individuals hold in premium bonds?

A

Up to 50k each and a minimum of £25

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3
Q

what do premium bonds not guarantee?

A

A return- it works more like a raffle

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4
Q

what are the 4 types of ISA?

A

cash, stocks and shares, innovative finance, lifetime

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5
Q

who must ISA registers be?

A

UK tax residers and 18 or over (16 for cash ISA)

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6
Q

What was the max contribution to an ISA in 22/23?

A

20K (split between ISA’s in any combination)

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7
Q

What is max that can be invested in lifetime ISA?

A

4k per annum

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8
Q

When can funds be withdrawn?

A

at any time

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9
Q

What is a flexible ISA?

A

can withdraw funds and then replace them without the replacement counting towards the ISA allowance

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10
Q

when spouse dies? (MUST HAVE BEEN LIVING TOGETHER AT DATE OF DEATH)

A

partner entitled to additional ISA= to the value of the deceased’s ISA savings at death or when the ISA is closed

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11
Q

what is tax free bonus on LISA?

A

25% tax free bonus (on houses up to 450k)

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12
Q

if LISA is withdrawn before 60th birthday?

A

5% charge and bonus lost

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13
Q

what is a child benefit?

A

tax free payment for children under 16 (stops 1 august after 16th birthday UNLESS in study such as GCSE, NVQ, A-level). DEFO no payments after 18th birthday

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14
Q

what is child benefit tax charge?

A

claws back child benefit if adjusted net income of claimant or partner >50k

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15
Q

what is the adjusted income for this purpose (and the for the PA)?

A

Net income less gross gross personal pension contribs, less gross giftaid donations

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16
Q

what is the child benefit charge?

A

1% of the benefit for every £100 of adjusted net income in excess of 50k.

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17
Q

how much is child benefit?

A

21.80 for oldest and then 14.45 for the rest

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18
Q

can people elect not to have the child benefit?

A

yes

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19
Q

what is important for cash planning?

A

to equalise income between partners/ think about making pension contributions to prevent benefit charge

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20
Q

Why were the pre-owned asset rules introduced?

A

to stop IHT avoidance (gift with reservation of benefit etc) giving assets away to avoid IHT but still using them

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21
Q

when do the pre owned asset rules most commonly apply?

A

donee receives cash from the donor and then uses that money to buy an asset for the donor to use (most commonly land and buildings also chattles)

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22
Q

how do we calc the benefit obtained from the pre owned asset rules?

A

annual rental value (if they were to rent to a third party) less any rents received from the donor. Apportioned for the value of the property (if greater than the value of the cash gift) and any time apportionment.

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23
Q

how to calc the notional income of a POA of a chattel

A

value of chattel x HMRC interest rate
(after 5 yrs need to get a new value for the chattel).

24
Q

no poa charge…

A

annual value of everything under POA is under 5k

25
Q

what can people elect for poa?

A

not to have it treated as poa but to remain in their estate (must be by 31st Jan following tax yr) and is on an asset by asset basis.

26
Q

what is a qualifying insurance policy?

A

long term policy with regular premium

27
Q

what is a non qualifying insurance policy?

A

funded by a single premium

28
Q

what is good about a long term policy?

A

no tax when the policy matures unless cancelled within 10 yrs or before 3/4 of the term

29
Q

when are non qualifying policies taxed?

A

taxed on maturity under rules for life insurance gains

30
Q

if a non qualifying life insurance policy is cashed in?

A

chargeable event (taxed as top slice of income, after divi income).

31
Q

what are the gains on life insurance policy taxed as?

A

savings income

32
Q

what are life insurance gains deemed to carry?

A

20% tax credit (this can not be paid back but can reduce income tax liability). this means no extra tax for basic rate tax payer

33
Q

what is a partial surrender of non qualifying life insurance?

A

can partially surrender and not have a tax charge but only if this does not exceed 5% of initial investment per policy year. (e.g after 3 years could be 15%)

34
Q

what is an offshore fund?

A

overseas investment similar to a unit trust

35
Q

what is a reporting fund?

A

offshore fund granted hmrc approval

36
Q

what must a reporting fund do?

A

provide tax payers with the information necessary to complete SA returns

37
Q

what is the UK investor in an reporting fund allocated?

A

share of income taxable in the UK. dividends taxed as dividends, interest taxed as interest (think eliza hui and convo with jeremy!!)

38
Q

if a non reporting fund is transparent?

A

tax treatment the same as reporting funds- i.e dividends taxed as div, interest as int (like a unit trust)

39
Q

how is opaque funds income taxed?

A

this is misc income so it is taxed as NSI. if individual is UK non dom this is ‘relevant foreign income’ and can be taxed on remittance basis.

40
Q

if someone disposes of units in a non reporting fund?

A

charged to uk income tax rather than as a capital gain (can be taxed on remittance basis). Loss on sale is treated as income of nil (can be offset against capital gains)

41
Q

if an investor in non reporting fund dies?

A

to be reported as income tax and tax will be paid by executors

42
Q

what is the proforma for working out the gain on a life insurance policy?

A

Proceeds
Add part surrenders
Less cost of investment
= gain
(dont forget taxed as top slice and 20% notional tax credit received).

43
Q

Who are LISA’s available to?

A

18-40 yr olds

44
Q

what is the max investment per annum into a junior isa?

A

9k-withdrawal not permitted until 18

45
Q

When is there no POA charge?

A

when the annual rental value does not exceed 5k

46
Q

How do you do top slicing relief?

A

Divide the life insurance gain by n.o years had the policy, calculate tax due (as top slice of income), deduct notional tax at 20%, x that by n.o years policy held, then deduct this from the tax payable (difference between tax on total policy gain (calculated with the PA MUST go to NSI in priority) and relieved liability).

47
Q

How is the PA calculated for the purposes for top slicing relief?

A

By only taking into account the slice of chargeable event gain rather than the full amount

48
Q

How are benefits to participators taxed?

A

If not an EE or a director, taxed as dividends. The write off of a loan is treated as divi income even if the participator is also an ee. But if they are an EE it will also be subject to class 1 sec and prm NIC’s.

49
Q

Learnings from Stewart Fraser ltd versus HMRC?

A

Where a loan is made to a participator in their capacity as shareholder rather than ee or director- no NICs due.

50
Q

when is top slicing relief relevant?

A

When the gain makes someone go from a basic to higher rate payer or higher rate to additional rate.

51
Q

When are individuals taxed on accumulated gains within and fund (not just distributed gain) and what happens if capital gain includes accumulated income?

A

If the fund is reporting, taxed regardless of if it is distributed ‘allocated a share of profit in the fund’, if it is not reporting then only taxed if it is distributed. If reporting then there would be a capital gain on sale and would get a deduction for any accumulated income already taxed to income tax.

52
Q

Does the HICB charge apply to non married couples who live together?

A

No

53
Q

Is there capital gains tax on the disposal of an ISA?

A

No

54
Q

What are withdrawals from ISA’s deemed to be?

A

From current year investments in priority. Replacements are deemed to replace previous years in priority. (replacement has to take place by the end of the tax year of withdrawal)

55
Q

Is a LISA and a help to buy ISA different?

A

Yes. Help to buy ISA can contirbute max of 200 per months and get 25% bonus for buying first home (250k in Uk and 450k in London) bonus max is 3k. They are not available anymore but can contirbute until Nov 2029.

56
Q

When do the POA rules apply?

A

Taxpayer gives away and asset or provides consideration for the acquisition of an asset, taxpayer can benefit from that asset after the gift and the arrangement does not fall in the ‘gifts with reservation’ rules for IHT.

CTA-Personal (10 decks)

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