Direct and indirect Investments

Question 1

How are Gilts Paid?

Answer 1

• Paid Gross
• Can elect for basic rate tax to be deducted

Question 2

How is interest from cash deposits paid

Answer 2

Gross

Question 3

How is interest on Corp. Bonds paid?

Answer 3

Gross

Question 4

Benefits of Registered Pension Schemes?

Answer 4

• Income Tax Relief
• Free from UK Tax in the fund
• PCLS TFC
• Tax free benefits for beneficiaries (No IHT)

Question 5

Can you carry forward pension annual allowance?

Answer 5

Yes up to 3 years

Question 6

Explain LSA

Answer 6

• Maximum TFC from pensions
• £268,275
• Higher if have protected rights

Question 7

Explain LSDBA

Answer 7

• 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

Question 8

How are off-shore reporting funds taxed?

Answer 8

• 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

Question 9

How are off-shore non-reporting funds taxed?

Answer 9

• Gain on disposal taxed as income

Question 10

What is a qualifying and non-qualifying UK life assurance policy

Answer 10

Qualifying:
- Level regular premiums of at least 10 years

Non-Qualifying:
- One off premium

Question 11

How are Qualifying UK Life Assurance Policies Taxed?

Answer 11

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

Question 12

How are Non-Qualifying UK Life Assurance Policies Taxed?

Answer 12

• all gains subject to income tax

Question 13

What is the 5% Deferred Allowance

Answer 13

• Can be paid 5% of original .capital invested in investment bond can be repaid per year with no tax payable

Question 14

How are offshore life assurance policies Taxed

Answer 14

• 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

Question 15

How are life assurance policies held in trust taxed?

Answer 15

• 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

Question 16

How are REITS taxed

Answer 16

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

Question 17

Explain Tax relief on EIS

Answer 17

• 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

Question 18

What companies qualify as EIS Investments

Answer 18

• Gross assets < £15m before inv. and £16m after inv.
• Trading < 7 years
• Raised <£5million under EIS
• Establishment in UK
• Unlisted
• Qualifying Trade

Question 19

Explain Tax relief of SEIS

Answer 19

• 50% income tax relief
• Up to £200,000 in one year
• Can qualify for 50% reduction in CGT if reinvesting in SEIS

Question 20

What companies Qualify for SEIS

Answer 20

• Trading < 3 years
• Gross assets < £350,000
• < 25 full-time employees

Question 21

Explain Tax relief with VCTs

Answer 21

• 30% Income tax relief
• upto £200,000 per year
• have to be newly issued shares
• Disposal exempt from CGT

Question 22

What companies Qualify for VCT

Answer 22

• listed company
• not close company
• Income must come mainly from shares
• 80% of investments must be in unlisted companies
• Many other rules