Income Tax - Topic 1

Question 1

Which loans qualify for ‘qualifying interest’?

Answer 1

1. loan to purchase ordinary shares in, or make a loan to a close trading company
   * individual owns >5% of OCS OR
   * Owns some shares and works for greater part of their time in management of company
2. buy ordinary shares in an employee controlled company
3. Invest into a partnership
4. Make a loan to a partnership to purchase plant and machinery for use in the partnership.
   - relief available for partner in year of purchase and following three years.
5. Enable an executor to pay IHT on a death estate.

Question 2

How is qualifying interest relief given?

Answer 2

Deducted from the amount paid in the relevant tax year subject to a maximum of:

The greater of:
£50,000
25% of adjusted net income

Question 3

For spouses and civil partnerships, who jointly own assets how willl income be split and what are the exceptions?

Answer 3

50/50 unless an election is made to HMRC to be taxed on actual % ownership.

Exceptions:

Income from joint bank account split 50/50 regardless

Income from shares in a close company is taxed on actual ownership automatically

Question 4

Are children taxed?

Answer 4

Yes, under18s assessable for income tax.

Question 5

How are parental gifts to a child under 18 assessed?

Answer 5

On the parent unless the gross income received is <£100

Question 6

Give 8 examples of exempt income

Answer 6

Dividends from VCT investments up to £200k
Scholarship income
Statutory redundancy payments
State Benefits
ISA dividends and interest
NS&I Certificate account
Interest on tax repayments
Winnings and premium bonds

Question 7

When would a Personal allowance be abated? And how would this be calculated?

Answer 7

If income exceed £100,000, the personal allowance is abate.

(ANI - 100,000) /2

PA - abatement

Question 8

What are the rules for jointly owned assets?

Answer 8

Income with will split equally regardless of actual ownership unless an election is made to HMRC to be taxed according to actual ownership percentage.

Question 9

What are the exceptions to the rules for jointly owned assets?

Answer 9

Income from jointly owned bank accounts with always be split 50:50

Income from shares in a close company is automatically taxed on the individual partners according to their ownership.