Investments Flashcards
1
Q
ENTERPRISE INVESTMENT SCHEMES - Tax Relief, how - How long to be held - Carry back - Deferral , conditions - CGT , conditions - Loss IHT
A
Tax relief - 30% tax reducer
£ 1,000,000 max investment (£2m KIF)
Held 3 years or relief (-)
investment can be carried back 1 year
Deferral - no max amount, gain chargeable on disposal. No more than 1 year before or 3 years after disposal
CGT exempt if held 3 years and IT relief at outset
Loss on deferred can be (-) from other CGT or income (less income tax relief given)
IHT relief- after 2 years
2
Q
EIS - Conditions company need satisfy to qualify
- 7 possible
A
- Company unlisted when shares issued (AIM is ok)
- Permanent in UK
- 250< employees (500 KIF)
- Gross assets no more £15m/ £16m after investment
- Qualifying trade
- Can’t raise >£5m (£10m KIF) in past 12 mths from EIS
- £12m cap (£20m KIF) total investment
- Invest in new issued full risk ordinary shares in qualifying company or through EIS fund in a number of qualifying companies - individual still owner of shares.
- Maximum investment is £1M /£2m minimum - £500
- Can’t be connected eg partner,director or employee or financial interest (over 30% share capital)
3
Q
SEIS
- Maximum investment
- Tax relief
- How long to be held
- Carry back
- When can income tax relief claim be made
- Deferral , exempt amount
- CGT
- Conditions (5)
- Max employees
A
Max investment £100k Tax relief 50% Held 3 years or relief (-) Relief can be carried back 1 year IT relief claim can be made up to 5 years after 31 Jan following tax year of investment Deferral exempt 50% straight away CGT exempt after 3 years
Conditions - trading <2 years, Gross assets
Max employee 25
4
Q
Furnished Holiday Lettings
Qualification Rules (6) on
A
Rules:
- UK or EEA
- Furnished
- let on commercial basis
- Available 210 days
- Let 105 days
- Continuous periods - >31 days, no more than 155 days
- Doesn’ty need to be holiday resort, tenants do not have to be holiday makers
5
Q
Holiday Lettings
Tax Advantages (3)
A
- Treated as trading income (losses can only be offset against other holiday lets)
- Relevant earnings
- CGT 18/20%. Rollover, holdover & Entrepreneur relief relief available
Restriction on finance costs relating to residential let’s doesn’t apply to furnished holiday lets.
Benefits of trading income
- losses can be offset against other types of income
- Counts for pension purposes
- Rollover, Holdover and entrepreneurs relief for CGT
- Business relief may be available for IHT
6
Q
5 Step Process for Top slicing calculation
A
Step 1. - Calculate taxable income
Step 2 - Calculate tax due on gain across each tax band + deduct 20% BR
Step 3 - Annual equivalent . Gain dividend by N
Step 4 - Calculate tax due on annual equivalent + deduct 20% BR open annual equivalent x by N
Step 5 - Deduct step 4 from step 2 = Top Slicing Relief
7
Q
Rent a Room Relief
Who available to
- Rent up to £x not chargeable to tax
- Couple?
- What if rent more than limit
A
- Available toUK property owners who rent out a furnishes room(not self contained)to residential purposes
- Rent up to £7,500 (landlord can choose for normal property income rules to apply -useful if loss made. Need to do this within 12 months after 31st January following tax year
- Couple split £7,500
- If more than £7,500, landlord can choose to be taxed on normal basis of rental income less expenses or gross receipts less £7,500 without deduction for expenses.
8
Q
Woodlands
- profits
- IHT situation
- Commercial managed woodland
A
- Profits exempt from income tax
- IHT postponed until tress cut or timber sold - must be owned 5 years
Commercial managed woodlands exempt from CGT
9
Q
Pensions- Annual Allowance Taper
- Where. …….. …….. is in excess of £x
- ( Over how much would floor apply)
- Taper only applies if ………. ……… is over £x
- Annual allowance is tapered by
- Floor £x
A
- Applied where Adjusted Income in excess of £150k
- Floor of £10k applies to Adjusted total income of £210k +
- Taper only applies if Threshold income over £110k (does not include employer contributions)
10
Q
- ISA Tax Advantages
- Eligibility
A
- Tax advantage- income or gains not taxable
- Do not use up PSA/DA/ Annual except amount.
- No reporting to HMRC
- ISAs provide greatest benefit to cash/fixed int holders & those who would otherwise pay CGT
Eligibility
- Individual contract
- UK Res or Non Res Crown employee overseas(spouse)
- If become non res, no further conts but can keep accrued tax free
- £20k max across ISAs ( £4K can be invested in Lifetime ISA)
- Only invest with one provider per ISA type
- Cash can now be withdrawn and replaced in tax year (provider dependant)
- ISA-can be passed on to spouse by additional ISA allowance (doesn’t count towards own limit)
- ISAs can be transferred between ISAS of same type. Money saved in previous years doesn’t affect current year limits
11
Q
- Cash ISA
- JISA
- Help to Buy ISA
- Stocks & Shares ISA
- Lifetime ISA
A
- Cash ISA 16 + parental settlement rules apply. 16/17 can contribute full amount to both cash & JISA
- Help to buy = type of cash ISA. Every £200 saved, £50 bonus up to maximum of £3,000 on £12,000 savings. Paid by Government. Restricted to 1st time homes under £450kLondon £250 k elsewhere
- S&S ISA 18+. OEIC, UT, UCITS or Investment Trust
- LISA Under 40s. Save up to £4K each tax year with 25% bonus on contributions at end of tax year. Can be used to fund first home or retirement.
JISA - Annual limit £4,638. Can be contributed by parents, family & friends.Money inaccessible until 18 when can withdraw. Cash or S&S
12
Q
- Offshore Collectives
- Reporting Funds
- Non Reporting Funds
A
- Reporting Funds = Full details of income tho HMRC. Investor reports share of income to HMRC via self assessment. (Fund would need to apply to HMRC for reporting status)
- Fund retains reporting status all time it follows rules
Income gross and taxable as savings or dividend income (even if income not distributed). PSA/DA can be used to offset savings and div income. CGT on encashment as usual
-subject to income tax on any income arising, whether distributed or not - Usual CGT rules on sale
Non Reporting - Taxed on encashment only .Gain calculated on CGT principle, but no annual exempt amount. Tax is charged at income tax rates however ie 20%, 40% 45%. PSA and DA do not apply
13
Q
Qualifying rules 7
A
- Secure capital sum old maturity
- Min term 10 years
- Premiuns annual or more frequent
- term policies sum assured no less than 75% premiums payable for term
- Whole of Life sum assured no less than 75% premiums payable should death occur at 75
- Premiums in one year not more than twice premiums in any other year and no more than 1/8 of total premiums payable over term (first 10 years for W.O.L)
- Premiums no more than £3,600 pa
14
Q
Chargeable Event (5)
How is fund in onshore policy deemed to have been taxed
A
- Death
- Assignment for money or moneys worth
- Maturity
- Partial surrender min excess of 5%
- Surrender
Onshore policy
- No tax on dividend income, 20% on interest, rental and offshore income
- Capital gains at 20%
- Tax paid by life office
15
Q
Friendly Society Policy
A
- Underlying fund is tax exempt and tax free proceeds as long as :
- Annual premiums under £270, £25pm (£300 pa)
- Limit across all Friendly Society policies an investor holds
- Baby Bond can be taken out for under 18s
- If qualifying breached, taxed as per non qualifying policy with no credit for tax paid at source
