IND32 Miscellaneous Provisions

Question 1

What are the four types of ISA?

Answer 1

• Cash ISAs (including Help to Buy ISAs).
• Stocks & Shares ISAs.
• Innovative Finance ISAs.
• Lifetime ISAs (used to save for buying a first home or providing for retirement)

Question 2

How much can you invest in an ISA?

Answer 2

An individual can invest up to £20,000 in ISAs in 2022/23. The investment can be split between the various types of ISAs in any combination, subject to the maximum investment in a Lifetime ISA of £4,000 per annum (and £2,400 in a Help to Buy ISA used to save for a first home). It is only possible to subscribe to one of each type of ISA in a tax year.

Question 3

Junior ISAs? Max investment?

Answer 3

A Junior ISA is available for UK resident children under 18. The maximum investment is £9,000 per annum (2022/23).

Question 4

A ‘pre-owned assets’ (POA) charge will arise where:

Answer 4

• a taxpayer gives away an asset or provides consideration for the acquisition of an asset; and
• the taxpayer can benefit from that asset after the gift; and
• the arrangement is not a ‘gift with reservation’ for IHT

Question 5

The effect of the POA rules?

Answer 5

to impose an income tax charge on the former owner equal
to the benefit they have obtained from the use of the asset.

Taxpayers can make an election to avoid a POA charge. However, the donor will instead be treated as having made a gift with reservation for IHT.

Question 6

When a policyholder cashes in a ‘non-qualifying’ life policy, this will be a …

Answer 6

‘chargeable event’. Gains on the chargeable event are chargeable to income tax.

Question 7

Chargeable event gains are treated as….

Answer 7

the ‘top slice’ of an individual’s income. The gains
are treated as savings income.

Question 8

Gains on non-qualifying life policies are deemed to carry ….

Answer 8

a notional 20% tax credit

Question 9

If a taxpayer is subject to higher or additional rate tax as a result of a gain on a nonqualifying life policy, ‘top slicing relief’ is given to reflect the number of years over which the life policy gain has accrued. There are a number of steps to follow when calculating top slicing relief, as follows:

Answer 9

1. Divide the gain by the number of complete years the policy has been held. This gives a ‘top slice’.
2. Add this ‘top slice’ to the taxpayer’s other income in the year and calculate the additional tax due on that slice.
3. Deduct notional tax at 20% on the top slice to give ‘net’ tax on slice.
4. Multiply the figure in Step 3 by the number of complete years the policy has been held. This gives the relieved tax on the policy gain.
5. Top slicing relief is the difference between the tax on the total policy gain and the relieved liability

Question 10

When calculating top slicing relief, the personal allowance

Answer 10

must be allocated to non savings income in priority.

Question 11

A policyholder can make a partial surrender of a policy (up to ……. without

Answer 11

5% per annum of the initial investment) without this giving rise to an income tax charge.

Question 12

Offshore funds will be either ….

Answer 12

‘reporting funds’ or ‘non-reporting funds’.

Question 13

UK investors in reporting funds …..

Answer 13

are allocated a share of the fund’s annual reported income.
This share is taxable income (regardless of whether it is distributed)

Question 14

Disposals of offshore reporting funds ….

Answer 14

are dealt with under the capital gains rules.

Question 15

UK investors in non-reporting funds are taxed

Answer 15

on income allocated to them. The income is ‘miscellaneous income’ (non-savings).

Question 16

Gains on disposals of non-reporting funds (called ‘offshore income gains’) are charged to _____

Losses are set against ________

Answer 16

income tax.

capital gains (not income).

Question 17

A close company is

Benefits provided to shareholders who are not directors or employees are ……

Where a loan to a shareholder is written off….

Answer 17

a company which is resident in the UK and is controlled by either five or fewer participators (shareholders) or any number of directors who are also shareholders.

taxed as dividends. The dividend is calculated using normal employment benefit rules.

the amount written off is treated as a dividend. This applies even if the shareholder is also a director or employee. If the loan is made to the participator in their capacity as an employee/director, the amount written off is treated as earnings for Class 1 National Insurance purposes.