Chapters 1-7

Question 1

Name 8 examples of exempt income

Answer 1

-Maintenance payments
-Scholarship award (from the school itself, i.e not if and employer gives it to you)
-NS&I certificates
-Winnings on premium bonds
-Lottery winnings,
-First 200k of VCT dividends
-Social security benefits (excluding state pension and job seekers allowance)
-Div on an ISA, interest received on a cash ISA

Question 2

What is the order for tax reducers?

Answer 2

VCT
EIS
SEIS
SITR
MCA
MA

Question 3

What can BR and HR bands be extended by?

Answer 3

Gift aid and personal pension contributions x 100/80

Question 4

what does the 0% starting rate for interest income apply to?

Answer 4

when NSI is under 5000

Question 5

What are scrip/stock dividends?

Answer 5

When they reinvest rather than giving you stocks/shares.

Question 6

How are individuals taxed on scrip dividends?

Answer 6

on the amount of cash they would have received (dividend foregone) had they not chosen the stock alternative

Question 7

when is the shareholder taxed on the MV of the share capital?

Answer 7

where the difference (low or high) between the cash div alternative and the share capitals market value is 15% or more.

Question 8

What is the £1000 trading allowance deductible against?

Answer 8

Casual earnings (can also deduct expenses)

Question 9

How is profit received on the sale of patent rights taxed?

Answer 9

as NSI

Question 10

Income from a discretionary trust

Answer 10

deemed to have received net of 45% tax at source

Question 11

How is income from an interest in possession trust treated?

Answer 11

As if recieved net of interest or dividend income at the basic rate

Question 12

Who is the income received from a settlor-interest trust taxable on?

Answer 12

The settlor. They can get a tax credit for the tax paid by ee’s. BUT any tax repayment must be repaid to the trustees.

Question 13

What is a settlor interested trust?

Answer 13

Arise when the person who sets up the trust (settlor) or their spouse/civil partner can benefit from the income/assets from trust.

Question 14

What about when a parent provides funds to a child?

Answer 14

Any income arising will be taxed on the parent. (unless under £100- then taxable on child but will be covered by allowances).

Question 15

Unit trust income?

Answer 15

Taxed as dividends/interest and NO NEED to gross up

Question 16

Company loan stock interest?

Answer 16

received net of a 20% tax credit= grossed up.

Question 17

What can couples not do when making an election re joint income?

Answer 17

Do it any old way. If making the election split would need to be in line with ‘beneficial entitlement’.

Question 18

What is specifically excluded from the 50:50 rule?

Answer 18

FHL. Initially split in terms of beneficial entitlement. If they want to change this they can sign a form but would need to be able to prove the split as HMRC could challenge under anti-avoidance ‘settlement’ rules.

Question 19

Who is MCA available to?

Answer 19

1 spouse born before 6 april 1935

Question 20

How much is the MCA?

Answer 20

9415 x 10% (tax reducer)

Question 21

MCA before dec 2005?

Answer 21

goes to the husband- after that it is to the person with the highest income

Question 22

What is the MCA restriction?

Answer 22

1/2 adjusted net income exceeding 31400

Question 23

when is MCA time apportioned?

Answer 23

year of marriage, but NOT year of death/ separation

Question 24

How does MA work?

Answer 24

1260 of PA is transferred at 20%= 252

Question 25

Is there a requirement for the couple to be living together in MA or MCA?

Answer 25

mca

Question 26

Who is the MA not available to?

Answer 26

Higher/additional rate tax payers

Question 27

What is the minimum MCA?

Answer 27

3640 x 10%

Question 28

What should you do when time apportining MCA?

Answer 28

Include april 2023 as a whole month! (time apportioned for whole or part months married).

Question 29

what is the cap on relief for qualifying loan interest?

Answer 29

Deduction is capped at higher of 50k or 25% adjusted total income. (total income less gross pension contributions)

Question 30

Loans for ee’s to take out plant and machinery?

Answer 30

qualifying loans! BUT only in the year of purchase and THE NEXT 3 TAX YEARS. Does not apply to cars

Question 31

What are the rules around close company qualifying loan relief?

Answer 31

Can get a deduction if buying shares, or if got money to use in the business.
-5% share capital OR
-be an EE
to qualify
Needs to be UK or EA company

Question 32

When is deduction on close company loans not available?

Answer 32

If individual or spouse has already made CGT or IT relief claims under SEIS or EIS.

Question 33

Loans to invest in cooperative?

Answer 33

Qualifying

Question 34

Loans to purchase shares in EE owned company?

Answer 34

Qualifying provided it is in an EEA member state/UK and is unquoted.

Question 35

Loans to buy into a partnership?

Answer 35

Qualifying

Question 36

What are the recovery of capital rules around the qualifying loans?

Answer 36

If sell the shares/asset the loan is for, are deemed to have paid back the loan so interest relief will be restricted from then on. A gift of shares is also included in this (proceeds=mv of shares at date of gift to tax payer OR spouse)