Chapters 1-7 Flashcards
Name 8 examples of exempt income
-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
What is the order for tax reducers?
VCT
EIS
SEIS
SITR
MCA
MA
What can BR and HR bands be extended by?
Gift aid and personal pension contributions x 100/80
what does the 0% starting rate for interest income apply to?
when NSI is under 5000
What are scrip/stock dividends?
When they reinvest rather than giving you stocks/shares.
How are individuals taxed on scrip dividends?
on the amount of cash they would have received (dividend foregone) had they not chosen the stock alternative
when is the shareholder taxed on the MV of the share capital?
where the difference (low or high) between the cash div alternative and the share capitals market value is 15% or more.
What is the £1000 trading allowance deductible against?
Casual earnings (can also deduct expenses)
How is profit received on the sale of patent rights taxed?
as NSI
Income from a discretionary trust
deemed to have received net of 45% tax at source
How is income from an interest in possession trust treated?
As if recieved net of interest or dividend income at the basic rate
Who is the income received from a settlor-interest trust taxable on?
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.
What is a settlor interested trust?
Arise when the person who sets up the trust (settlor) or their spouse/civil partner can benefit from the income/assets from trust.
What about when a parent provides funds to a child?
Any income arising will be taxed on the parent. (unless under £100- then taxable on child but will be covered by allowances).
Unit trust income?
Taxed as dividends/interest and NO NEED to gross up
Company loan stock interest?
received net of a 20% tax credit= grossed up.
What can couples not do when making an election re joint income?
Do it any old way. If making the election split would need to be in line with ‘beneficial entitlement’.
What is specifically excluded from the 50:50 rule?
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.
Who is MCA available to?
1 spouse born before 6 april 1935
How much is the MCA?
9415 x 10% (tax reducer)
MCA before dec 2005?
goes to the husband- after that it is to the person with the highest income
What is the MCA restriction?
1/2 adjusted net income exceeding 31400
when is MCA time apportioned?
year of marriage, but NOT year of death/ separation
How does MA work?
1260 of PA is transferred at 20%= 252
Is there a requirement for the couple to be living together in MA or MCA?
mca
Who is the MA not available to?
Higher/additional rate tax payers
What is the minimum MCA?
3640 x 10%
What should you do when time apportining MCA?
Include april 2023 as a whole month! (time apportioned for whole or part months married).
what is the cap on relief for qualifying loan interest?
Deduction is capped at higher of 50k or 25% adjusted total income. (total income less gross pension contributions)
Loans for ee’s to take out plant and machinery?
qualifying loans! BUT only in the year of purchase and THE NEXT 3 TAX YEARS. Does not apply to cars
What are the rules around close company qualifying loan relief?
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
When is deduction on close company loans not available?
If individual or spouse has already made CGT or IT relief claims under SEIS or EIS.
Loans to invest in cooperative?
Qualifying
Loans to purchase shares in EE owned company?
Qualifying provided it is in an EEA member state/UK and is unquoted.
Loans to buy into a partnership?
Qualifying
What are the recovery of capital rules around the qualifying loans?
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)
