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Ro3 Personal Taxation > Indirect Investments > Flashcards

Indirect Investments Flashcards

1
Q

What is the potential tax relief on pensions?

A

Upto 45% on the way in depending on your tax status.

£3,600 per annum in contributions even for non-tax payers

Tax free on growth besides withholding tax.

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2
Q

What are the trade-off to pensions.

A

No access before 55 (due to rise) except extreme illness.
25% lump sum can be taken tax-free but counts as earned income. (Think thresholds)
Has annual and lifetime allowance levels. (Lifetime allowance charge removed)

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3
Q

What are the age restrictions for lifetime ISAs?

A

18 - 40 to open
60 to take out

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4
Q

When can help to by ISAs run till?

A

30th November 2029
Bonus must be claimed no later than 1st December 2030

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5
Q

What property values can a help to buy ISA be used for?

A

£250,000 to £450,000

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6
Q

What is the bonus for help to buy ISAs?

A

£50 up to a maximum bonus of £3000

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7
Q

How much can be invested in a junior ISA per year?

A

£9000

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8
Q

Where can the standards for offshore funds be found?

A

In the EU directive undertak8ng for collective investment and transferable securities. (UCITS)

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9
Q

What is the most common offshore fund?

A

SICAV this is what the OEIC is based on.

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10
Q

With a reporting fund set up as a company, what will taxpayers usually pay?

A

Dividend tax. Unless non tax payer or bellow the £1000 tax free.

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11
Q

How are non-reporting funds taxed?

A

Calculated for CGT as per normal, then charged charged as income tax on UK residents and domiciled.
20% 40% 45%

No CGT exemption.
No savings or div allowance.

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12
Q

How is tax on an offshore fund handled depending on residence or domiciled?

A

Non UK res or dom. Offshore will be free UK taxation.
UK res non dom. Taxed on an arising basis on all UK and non-uk income and gains, unless eligible for remittance basis

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13
Q

What are the general rules for qualifying life insurance?

A

Run for 10 years or more
Regular payment
Offer certain tax benefits

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14
Q

What do non-qualifying life policies offer?

A

Different tax treatment to qualifying but no limit on duration and can be regular payment or lump sum.

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15
Q

Who specialises in overseas policies?

A

Overseas life assurance businesses. OLAB

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16
Q

What life polices are liable to corporation tax?

A

The fund manager of both qualifying and non qualifying funds based on gains and income.

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17
Q

What is the tax rate of life funds charged at?

A

The basic rate
20%
No ability for non-taxpayers to reclaim

18
Q

What is the annual premium limit on qualifying policies?

A

£3600pa per person

19
Q

What happens if premiums exceed the annual limit on qualifying policies?

A

They lose their qualifying status and are taxed as non-qualifying.

20
Q

What would a policy happen to a policy that ammends itself after its premiums exceed the £3600 annual limit?

A

It becomes a restricted relief qualifying policy with premiums above £3600 being charged as non qualifying.

21
Q

What are the disadvantages of qualifying life assurance policies?

A

The need to maintain premiums and charges associated with the policy.
Maintain the minimum level life assurance to maintain tax treatment of the policy.

22
Q

How are non-qualifying policies taxed?

A

20% in
Further tax for higher and additional taxpayers to the extent that the gain exceeds their personal savings allowance.

23
Q

How is top slicing calculated?

A

Divide gain by the number of years the policy has run.
Calculate the amount above the higher rate.
Charge by the percentages in each band.
Multiply tax by years policy has run.
Take of personal savings allowance.

24
Q

When does a fund manager pay tax, and when does the policyholder pay tax?

A

Fund mager on an arising basis
Policy holder on an chargeable event.

25
Q

What are chargeable events?

A

Death
Surender
Maturity
Certain part surenders
Policy loans prior to 1982
Assignment for money or moneys worth.

26
Q

On a chargeable event, what should happen?

A

The policy holder should be sent a chargeable event certificate and the HMRC if the gain exceeds half the basic rate band.

27
Q

What are the rules for the 5% withdrawal?

A

Cumulative
Based on full and part years
Taken from the original investment.
Withdrawals above taxed that year and not added back in at maturity.

28
Q

What are the tax implications for trading endowment policies?

A

No tax on the original policy holder as long as the policy has run for more than 10 years or 3/4 of the policy term if shorter.

The buyer pays capital gains rather than income tax using the purchase price as acquisition cost and premiums after as allowable deductions.

29
Q

What are personal portfolios bonds?

A

Offshore bonds where the policy holder controls the underlying investment.

30
Q

What are personal portfolio bonds taxed at?

A

15% per year, regardless of an actual gain with other complex rules.

31
Q

What is it called when someone buys annuity with a lump sum of non pension capital?

A

Purchased life annuity.

32
Q

What is purchased life annuity called when it is set up to run for a term regardless of lifespan?

A

Purchased annuity certain.

33
Q

How are purchased life annuities and purchased annuity certain taxed?

A

Part taxed as return of capital and tax free.

The remaining part is treated as interest (PLA) or investment income (PAC) and taxed accordingly.

Interest of PLAs are taxed 20% at source.

Non tax payers can request interest to be paid gross.

34
Q

What are the rules for EIS

A

30% income tax relief
No CGT
Early withdrawal before 3 years loses CGT and may lose relief.
1m max invest (2m knowledge intensive)
Tax roll-over deferral available.
Must have explicit risk to capital to apply

35
Q

Explain rules for SEIS

A

£200,000pa max investment
Tax relief 50%
CGT roll-over 50% non defered
IHT relief is available after 2 years
Hold for 3 years

36
Q

What are the rules for a VCT?

A

£200000pa max
30% income relief
Hold for 5 years for 30% relief
No dividend tax
No CGT, no min period
No rollover

37
Q

What are the qualifying rules for real estate investment trusts

A

75% gross profits form letting profits
Interest on borrowing at least 125% covered by rental income
At least 90% rental profits paid to investors within 12 months of accounting period

38
Q

Where a real estate investment trust qualifies how tax handled

A

Tax-free for investment trust on property income in tax free pot. (Though taxable in the hands of investor)
Payment from non-tax free pot classed as dividend

39
Q

If a REIT develops property, how much are gains taxed?

A

30% unless property is completed and held for 36 months.

40
Q

What are special purpose vehicles (SPVS)

A

Limited partnerships (usually offshore) used to finance specific projects.
Capital growth only and highly geared.
Usually, the underlying asset is commercial property
Only marketed to experienced investors.

41
Q

What are the rules for disclosure of tax avoidance schemes? (DOTAS)

A

Registered DOTAS does not convey HMRCs aproval
Using a scheme before approval may be issued with accelerated payment notice (90 days)
The general anti abuse rule is a statutory rule established to target anti avoidance schemes.

Ro3 Personal Taxation (14 decks)

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