Laws & legal concepts relevant to financial advice Flashcards
Britannia Carpets is the business of sole trader John Wilson. What are John’s tax liabilities?
Profits are liable for Income tax, CGT and Class 2 NI
Employees must pay income tax and Class 1 NI - collected by John
Secondary class 1 NI as an employer
Can each partner of a firm be held laible for the tax of other partners?
No, each are solely liable for their share
Why would a LLP (Limited liability partnership) be attractive to proffesional firms?
As the partners are not liable individuall for the debts of LLP, particularly if the firm could be exposed to large liability claims
To what level is a company resonsible for its own debts and what is the exception?
A company is only liable up to the limit of its assets.
The exception is where the company has traded knowingly that the compant was insolvent and therefore guilty of unlawful trading
What is the major difference in the taxation of limited companies and unincorporated businesses?
Limited companies pay corporation tax
Unincorporated businesses pay income tax & CGT
If a person who has a power of attorney is place, becomes mentally ill or incapacitated, what happens to the POA?
The POA would be withdrawn
What was the purpose of the Enduring Power of Attorney Act 1985?
To enable a person or persons to continue to act in the event of mental incapacity
What would a person need to demonstrate to avoid the need for a EPOA?
Understand relevant information
retain the information
Evaluate that information in making a decision
Communicate that information
When would a LPA be revoked?
Donors Bankruptcy
Death or bankruptcy of the attorney
Dissolution of marriage or civil partnership between the donor and the attorney
Attorneys incapacity (if they are the only attorney)
What conditions must be fulfilled to create a binding contract?
An offer
An acceptance (agreeing and understanding terms)
An intention and each have the power to contract
Consideration (pay or stand to pay something)
What are the additional requirements to a standard contract for a life assurance contract?
Utmost good faith - voluntarily disclose all facts acurrately and fully
Insurable interest - the proposer must have a financial interest in the assured
What were the changes to leaseholder rights under the Commonhold and Leasehold reform Act 2002?
A leaseholder has the right to buy or extend the lease provided they have lived in the property for the last two years. it also introduced a reduction in the number of leaseholders whose agreement is required to enforce the sale of freehold from 2/3 to half.
Are contracts made by someone with a mental health condition invalid?
No, although the contract may be voided by them if they were unable to understand the nature of the agreement and the other party was aware of this
Under the law of agency, what does an IFA owe a duty of care to, their client or the insurer?
Their client.
What are the alternatives to liquidation for companies?
Administration
Voluntary Arrangements
When would a will be automatically revoked?
Marriage (unless the will is made in anticipation of marriage)
Divorce (unless stated that divorce will not affect it)
What is meant by staircassing?
A housing association allows a purchaser to increase thier share in a property by buying additional shares up to 100%
Who are know as LPR’s (Legal personal representatives)?
Executors and administrators of a will/estate
A court will only consider a petition for bankruptcy where a creditor is owed at least how much?
£5K or a share of debts totalling £5K
what are the two tyeps of a Grant of representation?
Letters of administration (no will)
Grant of Probate (will held)
What might be the benefit of a trust in a lfe assurance arrangements?
They keep the policy benefits outside of a life assured or pension scheme’s estate and therefore inheritance tax is not payable on them
What are the three certiainties of trusts?
The words used must be imperative
The subject matter must be certain
The objects of the trust must be certain
What are the three certainties of trusts?
The words used must be imperative
The subject matter must be certain
The objects of the trust must be certain
What three groups of people are subject to special rules, restricting their capacity to contract?
Minors
Mental health conditions
Under the influence of drugs or alcohol
What are the three major formalities when writing a will?
Writing
Signature
Attestation
Who has legal ownership of trust property?
The trustees
Which type of trust is most life offices standard trust?
A flexible power of appointment trust
When would an ordinary POA be revoked?
Death, bankruptcy, expiry of a specified time, or the individual becomes mentally incapacitated
