Cii Practice Test 2 Flashcards
Define a capital allowance
Items that might be used in business over several years.
Generally items that will have a useful life e.g. more than two years. (e.g. computer/car)
Define an allowable expense
Costs paid with the sole purpose of earning business profits (e.g. stationery)
What revokes a will?
Making a new Will (with the intention of revoking a previous Will).
Marriage/CP unless Will has specifically been made in expectation of marriage/CP.
Destruction of existing Will, with the intention to revoke.
What makes a will valid?
The Will must be in writing.
Signed by testator who must have capacity.
Witnessed by at least two people
Witnesses and their spouses/CPs cannot be beneficiaries.
What happens to an estate is the executor has died?
Will remains valid & assets distributed in accordance with his wishes.
As there is no executor alive an administrator/executor will be appointed by the court/Probate Registry.
One of the beneficiaries may petition for appointment.
How does an estate get the reduced rate of IHT?
To qualify for the reduced rate of Inheritance Tax of 36% at least 10% of the net value of the estate must be left to a registered charity/sports club association.
What does “net estate” mean/include in terms of getting a reduced rate of IHT?
The sum of all the assets after deducting any debts/liabilities;reliefs or exemptions and any available/transferred nil-rate band(s).
When does POAT (pre-owned assets tax) not apply?
POAT is an income tax charge.
If someone stays no more than 4 weeks over a 5 year period.
Regardless of contributions made.
State the circumstances that could result in the loss of Business Relief in respect of shareholdings in an unlisted company.
Company is wholly or mainly dealing in securities, stocks or shares.
Company primarily trades in land or buildings.
The business is subject to a binding contract for sale at the time of death/transfer.
Shares/Assets have not been held/used in the business for the past two years.
Assets not used/required for future use in the business at the time of the transfer.
Company becomes listed.
Ceases to engage in a qualifying trade.
List the three components of an estate that will be used to calculate an estate’s qualification for the reduced rate of IHT due to a charitable gift.
Survivorship.
Settled Property/Trust.
Remaining estate.
Conditions of an FHL
The accommodation must be situated in the UK or EEA.
Doesn’t need to be on a holiday park.
Let on a commercial basis.
Available for letting to the public for periods of at least 210 days in total in a tax year.
Let for at least 105 days in any tax year.
Accommodation may be let for continuous periods over 31 days; but such periods should not be for more than 155 days in any tax year.
What are the tax advantages of an FHL?
FHL regarded as a trade and would qualify for
Earnings regarded as qualifying earnings for pension contributions.
Income classed as trading income, not investment income so expenses can be fully deducted from profits.
Capital allowances can be claimed and losses can be used to reduce Income Tax.
Entrepreneurs’ relief on disposal.
Rollover relief/holdover relief/loss relief available for CGT.
BR could be available on death if qualifying period and conditions are met.
