Direct and indirect Investments Flashcards
How are Gilts Paid?
- Paid Gross
- Can elect for basic rate tax to be deducted
How is interest from cash deposits paid
Gross
How is interest on Corp. Bonds paid?
Gross
Benefits of Registered Pension Schemes?
- Income Tax Relief
- Free from UK Tax in the fund
- PCLS TFC
- Tax free benefits for beneficiaries (No IHT)
Can you carry forward pension annual allowance?
Yes up to 3 years
Explain LSA
- Maximum TFC from pensions
- £268,275
- Higher if have protected rights
Explain LSDBA
- Maximum lump sum benefits payable on death
- £1,073,100
- Higher if protected rights
- Includes any tax free cash taken in lifetime
- any beneficiaries taking lump sum benefits above this taxed
How are off-shore reporting funds taxed?
- Shareholder taxed on their share of the reporting funds income
- Equity distributions taxed as dividends
- Interest distributions taxed as income
- Profit on encashment is CGT
How are off-shore non-reporting funds taxed?
- Gain on disposal taxed as income
What is a qualifying and non-qualifying UK life assurance policy
Qualifying:
- Level regular premiums of at least 10 years
Non-Qualifying:
- One off premium
How are Qualifying UK Life Assurance Policies Taxed?
Life Company:
- 20% on income
- Dividends exempt
Policy Holder:
- only taxable on gains arising when paid up or surrendered withing first 10 years
- only if it falls in higher or additional rate bracket
How are Non-Qualifying UK Life Assurance Policies Taxed?
- all gains subject to income tax
What is the 5% Deferred Allowance
- Can be paid 5% of original .capital invested in investment bond can be repaid per year with no tax payable
How are offshore life assurance policies Taxed
- No tax in the fund
- Whole gain chargeable at marginal rate for individual
- reduced proportionally for any time when they weren’t UK resident since holding bond
How are life assurance policies held in trust taxed?
- Income Tax - don’t produce income
- CGT - Rarely, only if assigned for actual consideration
- IHT - Payment of premiums classed as gifts
- if bare trust PET, if other CLT and maybe periodic and exit charges
How are REITS taxed
In Fund :
- No tax on property element in the trust
- other income taxed
Distributions:
- From property element - paid with 20% tax deducted
- other element - taxed as dividend
Explain Tax relief on EIS
- 30% relief
- Up to £1,000,000 in a year (£2m if 2nd million is in knowledge-intensive companies)
- Must hold shares for 3 years or income tax relief clawed back
- Can claim deferral of any CGT by investing in EIS
What companies qualify as EIS Investments
- Gross assets < £15m before inv. and £16m after inv.
- Trading < 7 years
- Raised <£5million under EIS
- Establishment in UK
- Unlisted
- Qualifying Trade
Explain Tax relief of SEIS
- 50% income tax relief
- Up to £200,000 in one year
- Can qualify for 50% reduction in CGT if reinvesting in SEIS
What companies Qualify for SEIS
- Trading < 3 years
- Gross assets < £350,000
- < 25 full-time employees
Explain Tax relief with VCTs
- 30% Income tax relief
- upto £200,000 per year
- have to be newly issued shares
- Disposal exempt from CGT
What companies Qualify for VCT
- listed company
- not close company
- Income must come mainly from shares
- 80% of investments must be in unlisted companies
- Many other rules
