Investment Taxation Flashcards
1
Q
How are Gilts taxed?
A
Paid gross unless investor elects to have paid net
CGT exempt
2
Q
How are Local Authority Bonds taxed?
A
Paid net
CGT exempt
3
Q
How are directly held Corporate Bonds taxed
A
Paid net
CGT Exempt
4
Q
Explain Rent a Room Relief
A
- Available to owners of UK Properties
- If they rent out a furnished room
- Rent of up to £7.5k NOT chargeable to tax unless landlord elects to do so - if there is a loss!
5
Q
Furnished Holiday Lettings - Q’ing Criteria (6)
A
- Located in UK or EEA
- Furnished
- Let on commercial basis
- Available for 210 days per tax year
- Let for 105 days per tax year
- May be let for more than 31 consec days but NOT MORE than 155 consec days in a tax year
6
Q
Furnished Holiday Lettings - Tax Advantages (3)
A
- Treated as trading income - losses can be offset
- Income counts as relevant earnings
- CGT - Rollover, Holdover, BPR and Ent Relief available
7
Q
Woodlands - tax position (3)
A
- Profits exempt from Income Tax
- IHT postponed until trees cut/timber sold if woodland owned for 5 years
- Commercially managed woodland exempt from IHT
8
Q
Reporting Funds - tax position (4)
A
- Income paid gross
- Must be declared
- DA and PSA available
- Gains subject to CGT
9
Q
Non Reporting Funds - tax position (4)
A
- Taxed on encashment only
- Gain calculated on CGT principles but NO allowance
- Subject to income tax
- No PSA available
10
Q
Investment Bond Gain - top slice or full gain added to income?
A
- Full gain added for PA, MCA, Child Benefit charge
- Top sliced gain for Income Tax liability on encashment
11
Q
VCT Tax Position (5)
A
- Income relief of 30% up to max investment of £200k (hold for 5 years)
- Dividends up to £200k tax free
- Exempt from CGT on disposal
- CANNOT defer a gain
- No BPR
12
Q
EIS Tax Position (5)
A
- Income relief of 30% up to max investment of £1m
- £2m if KIF
- Must hold for 3 years
- Exempt from CGT on disposal
- Can be used to defer a gain
- BPR available after 2 years if held at death
13
Q
What is a REIT
A
- A single company or group that owns and manages commercial or residential property on behalf of shareholders
- Company must be UK Resident, closed ended and quoted on a recognised stock exchange
14
Q
Taxation of a REIT (5)
A
- If at least 75% of total profits comes from property letting AND
- Interest on borrowing is at least 125% covered by rental profits then company is exempt from CT
- At leasr 90% of profits must be paid out to investors within 12 months of the end of the accounting period
- Payment from the tax exempt element is paid net of 20% - further tax or reclaim available
(((((OR)))))
- Dividend from non-exempt element is paid gross and taxable
15
Q
VAT - registration process (3)
A
- If TAXABLE SUPPLIES - in the last 12 months exceed £85k
- Trader must inform HMRC within 30 days of the end of the month when exceeded
- Registered on the 1st day of MONTH 2
16
Q
EIS Qualifying Conditions (6)
A
- Company must be unlisted when shares are issued
- Company must have a permanent establishment in UK
- Must have fewer than 250 employees full time
- Gross assets must not exceed £15m pre and £16m post investment
- Must be carrying on a qualifying trade
- Cannot raise more than £5m in past 12 months from EIS or VCT
17
Q
VCT Qualifying Conditions (7)
A
- Must not be a close company
- Must be listed on an EEA stock exchange
- Income must be mainly or wholly derived from shares
- At least 70% of shares must be qualifying unlisted trading companies
- At least 10% of investments in any company musy be in ordinary, non-pref shares
- Company must have no more than £15m pre/£16m post investment assets
- Maximum annual investment by VCT = £5m
18
Q
Seed EIS Qualifying conditions
A
- Company must have been trading for less than 2 years, carrying on a genuine trade and have gross assets of less than £200k and less than 25 employees
- Company must be unquoted at time of share issue
