Level 6 Tax and Trust Flashcards
What is a Junior ISA?
ISA funded by parent for children less than 16 years old. Money is locked away until child is 18 years old and then it’s theirs.
What happens to a ISA funded by a parent for child 16 yrs +?
Tax applies on interest over £100 to the parents
How to reduce capital gains tax?
- Annual exemption amount
- losses from the sale of assets in the current and previous years
- business asset disposal relief
4.business asset rollover relief - incorporation relief
- gift hold-over relief
What are wasting chattels?
Tangible assets with a predictable useful life of 50 years or less, and their value ‘wastes away’ as they age like cars, livestock, machinery, copy wrights
- Are exempt from CGT
What are non-wasting Chattels?
Tangible & moveable assets, such as jewelry, art and antiques, with a predictable lifespan of more than 50 years. They are exempt from CGT if the disposal proceeds do not exceed £6,000. Limit is per item
What is the CGT on Non-Wasting Chattels?
- The gain as five-thirds of the amount by which the disposal price exceeds £6,000.
- The gain is calculated using the standard CGT method: the disposal price minus acquisition price and additional cost
Calculate CGT on Current value - £55k, disposed £25k, acquisition is £30k
Percentage of market value by disposal: £25/£55k = 45.45% . . . 45.45% of original (£30k) = £13,636.36 . . . . Total gain: £25 - £13,636.36 = £11,364
What is business asset disposal relief?
- qualifying will allow 10% up to lifetime limit of £1M per individual(spouses can share)
- Qualify: own 5% ownership/profits
-owned 2 years
-Diposed at least 3 years before business ceases
-Trust - only beneficiary can claim to their lifetime limit, trust can’t(discretionary are disqualified altogether)
What is a resident ? Non Resident?
- How much time you have spent in the UK in a tax year - 183days = resident
- Only home is in UK
- Were you a resident in the previous 2 years?
Automatic Overseas Test
Automatic UK Tests
Sufficient Ties Test
What is domicile?
Only one domicile - Home country
Domicile of origin, choice, deemed domicile(resident 15 of past 20 years)
What would automatically make a person a non resident?
- An individual who is in the UK for fewer than 16 days in the tax year.
- An individual who is in the UK for fewer than 46 days in the current tax year and was not resident in the previous 3 tax years.
- An individual who has left the UK to take up full-time work abroad and is in the UK for fewer than 91 days in the current tax year, of which a maximum of 30 days are spent working in the UK.
What would make an automatic resident?
- An individual who is in the UK for 183 days or more in the tax year.
- An individual whose only home is in the UK.
- An individual who works full-time in the UK.
The residence status of someone who does not meet the criteria of the automatic tests is determined by the time spent in the UK and a number of UK ties.