Investments Flashcards
Tax advantages of EIS
Up to 30% tax relief on investments up to £1m a year
£2 m if £1m is in knowledge intensive companies
Income tax reduction
Disposal exempt for CGT if held for 3 years
Deferral of CGT available
Business relief after 2 years ownership provided held on death
Dividend subject to income tax
Loss relief against income and CGT
VCT tax benefits
Up to 30% tax relief on investment up to £200k
Income tax reducer
Dividends tax free
No CGT disposal
Income tax relief withdrawn if held less than 5 years
Qualification rules for SEIS CGT exemption
Reinvestment must take place in same tax year gain arises or in the following tax year
Relief can be carried back to the year of the gain
50% CGT exemption on gains that are reinvested in SEIS qualifying shares
Relief is restricted to a limit of £100,000 of gains re-invested in each tax year.
EIS reliefs?
Income tax - 30% if held for 3 years, carry back to last tax year
CGT deferral relief- must reinvest gain within a period starting 1 year before and ending 3 years after the disposal.
Can make a further qualifying reinvestment.
CGT free on exit
Loss on disposal - income tax/CGT relief @ marginal rate on net investment
IHT - 40% if shares held for more than 2 years on death
What options does a provider have for a child trust fund if the individual doesn’t take control at 18?
The CTF provider must place it into a protected account with a tax advantaged status
A matured CTF account or a cash or S&S ISA offered by the original CTF provider
No new subscriptions can be accepted into the account
What options does an individual have when taking control of a CTF?
Can encash the account
Transfer to an ISA - amount is disregarded for the ISA subscription limit unless a LISA in which case the limits are kept.
How can you avoid paying CGT on disposal of shares if moving abroad?
Would need to be sold in the tax year after moved abroad when they would become non-UK resident for tax purposes
Non-UK resident for 5 years starting from the next tax year (use specific dates in exam) to avoid paying CGT on shares
What if someone moves back to the UK after less than 5 years and had a gain on a sale is shares while abroad
Caught by temporary non-residence rules
Liable to CGT on any gain in the tax year resumes residence
What are the consequences on an ISA of moving abroad?
Can keep ISA open
Still get UK tax relief on the funds
Can’t put money into ISA after the tax year that he moves abroad
Can pay in to ISA once UK resident agains
Must tell ISA provider as soon as stops being a UK resident
What happens to a cash ISA on death?
Becomes a continuing ISA until it is closed by executors or estate admin is complete
Otherwise ISA provider will close the account 3 years and 1 day after died
Retains tax advantages but value is included in estate for IHT purposes
How are investments dealt with if sold during admin of an estate for CGT?
Treated as having been acquired at market value at date of death and subject to CGT on any increase in value from date of death and date of disposal
Any gains in excess of annual exempt amount taxed at 20% - personal representatives rate.
When must APS be used by?
Cash subscriptions must be made within 3 years of date of death or 180 days after completion of the administration of the estate which ever is latest.
In-specie transfers must be made within 180 days of the distribution of the assets
What is the tax treatment for payment of death benefits on a pension?
If before 75:
Any lump sum/dependents income is paid free of income tax if paid within 2 years of date of death (includes designation to drawdown)
No IHT liability if paid at discretion of scheme trustees
Post 75:
Lump sum or benefits Payable as income are subject to income tax under PAYE in hands of recipient.
What are ongoing requirements for EIS qualification
Gross assets not more than £15m before investment or £16m after
Permanent establishments in the UK
Unlisted when EIS shares are issued
Fewer than 250 FTE (500 for knowledge intensive)
Raised no more than £5m under EIS(£10m for KI)
Carry on a qualifying trade
