Income Tax

Question 1

4 items that would indicate someone would be treated as EE rather than SE

Answer 1

• Company has high degree of control
• Contract of service
• Set hours/set pay
• Long term, single employer

Question 2

4 items that would indicate someone would be treated as SE rather than EE

Answer 2

• Company has low control
• Contract to provide service
• Fee basis and can subcontract
• Risks own money - own tools, equipment etc

Question 3

What is the trading allowance?

Answer 3

• Trading income less than £1,000 before expenses is exempt - doesn’t need to be declared

Question 4

Name 4 qualifying loan purposes

Answer 4

• To pay an IHT bill - restricted to 1 year from making the loan
• To invest in a partnership
• Share purchase in borrower’s company or loan to company
• Purchase of plan or machinery for use in partnership

Question 5

Tax charge on a beneficial loan?

Answer 5

• If loan exceeds £10k

- Taxable benefit is difference between rate charged and 2.5%

Question 6

Employee Accommodation Charge

Answer 6

• Annual rent

- Plus if ER owned and valued in excess of £75k then charge is 2.5% of the excess

Question 7

Bare/Absolute Trust - what tax rates apply and to whom?

Answer 7

• Trustee = None
• Beneficiary = Taxed at their rate, PA, PSA and DA can offset
• Settlor - Parental Settlement rules apply

Question 8

IIP Trust - what tax rates apply and to whom?

Answer 8

• Trustee = Charged at Basic Rate only with no allowances
• Beneficiary = Taxed at their rate, PA, PSA and DA can offset. Trustee tax reclaimable as required
• Settlor - Parental Settlement rules apply

Question 9

Discretionary Trust - what tax rates apply and to whom?

Answer 9

• Trustee = SRB = £1k (divided by up to 5), thereafter Basic and Higher and AR apply
• Beneficiary = Benefits carry 45% tax credit, no further tax to pay, can claim credit for tax paid by Trustees
• Settlor - Parental Settlement rules apply

Question 10

What is the rate of relief for mortgage interest?

Answer 10

• For 18/19 only 50% available at highest rate

- 50% capped at Basic rate

Question 11

Rent a room relief - features (3)

Answer 11

• Available for UK properties who rent out FURNISHED room

- Rent of up to £7.5k tax free!

Question 12

Furnished Holiday Let - q’ing features (5)

Answer 12

Must be in UK
Furnished
Let on Commercial Basis
Available 210 days a year
Let for 105

Question 13

Tax Advantages for Furnished Holiday Let

Answer 13

• Treated as trading income
• Income counts as relevant earnings
• CGT - rollover, holdover and ER available

Question 14

Woodlands tax position

Answer 14

• Profits exempt from income tax
• IHT postponed until trees cut and timber sold
• Commercially managed woodlands exempt from CGT