Matt - Capital taxation - Level 1

Question 1

What is the principal legislation behind Inheritance Tax?

Answer 1

Inheritance Tax Act 1984

Question 2

Where can the definition of market value be found within the Inheritance Tax Act 1984?

Answer 2

Section 160

Question 3

What is Inheritance Tax?

Answer 3

A tax on the estate of someone who’s died.

Question 4

What is the principal legislation behind Capital Gains Tax?

Answer 4

The Taxation of Chargeable Gains Act 1992

Question 5

Where can the definition of market value be found within the Taxation of Chargeable Gains Act 1992?

Answer 5

Section 272

Question 6

What is Capital Gains Tax?

Answer 6

A tax on the profit when disposing of an asset

Question 7

What is the principal legislation behind Stamp Duty Land Tax?

Answer 7

Finance Act 2003

Question 8

Where can the definition of market value be found within the Finance Act 2003?

Answer 8

Section 118

Question 9

What is Stamp Duty Land Tax?

Answer 9

A tax when purchasing building and land

Question 10

What is UK VPGA 15?

Answer 10

It is a section of the U.K. National Supplement to the Red Book which covers capital taxation so IHT, CGT, SDLT and ATED.

Question 11

Can you name some reliefs for Inheritance Tax?

Answer 11

1. Agricultural relief
2. Charitable relief
3. Business property relief
4. Fall in value relief
5. Quick succession relief

Question 12

Can you name some exemptions for Inheritance Tax?

Answer 12

1. Annual exemption up to £3,000 per annum for gifts
2. Donating to charity
3. Donating to political parties

Question 13

Can you name some reliefs for Capital Gains Tax?

Answer 13

1. Principal private residence relief - no CGT for your main home and up to 0.5 hectares
2. Rollover relief

Question 14

Can you name some exemptions for capital gains tax?

Answer 14

1. Your car
2. Items with a value below £3,000
3. Lottery winnings
4. Shares in an ISA/PEP

Question 15

What is the difference between the definition of market value as contained within VPS 4 of the Red Book and that contained within UK VPGA 15?

Answer 15

The definition of market value is similar, however the key difference is that in the text, it does not assume that the market value will be reduced from the market being flooded.

Question 16

What are the thresholds for Stamp Duty Land Tax?

Answer 16

For residential properties it is:

1. Up to £250,000 (0% rate)
2. £250,001 to £925,000 (5% rate)
3. £925,001 to £1,500,000 (10% rate)
4. Anything above £1,500,000 (12% rate)

Question 17

What are some reliefs for Stamp Duty Land Tax?

Answer 17

1. First time buyers
2. Multiple dwellings
3. Building companies buying an individuals home
4. Local authorities making compulsory purchases
5. Right to buy properties

Question 18

What are some exemptions for Stamp Duty Land Tax?

Answer 18

1. Property is left to you in a will
2. No money or other payment changes hands for a land or property transfer
3. Property is transferred because of a divorce or dissolution of a civil partnership

Question 19

What is Annual Tax on Enveloped Dwellings?

Answer 19

It is a tax paid on corporations that have a portfolio of residential properties with a value over £500,000.

It was brought in to plug a hole of SDLT avoidance, and bring more of these properties back in to residential owner hands rather than corporations.

Question 20

What is the current IHT threshold?

Answer 20

£325,000

Question 21

What are the tax rates for Inheritance Tax?

Answer 21

40%

36% if more than 10% of estate is left to charity

Question 22

What are the tax rates for Capital Gains Tax?

Answer 22

This depends on whether you’re a basic rate taxpayer or higher rate taxpayer.

If you’re a basic rate taxpayer then it’s 10% or 18% for residential.

If you’re a higher rate taxpayer then it’s 20% or 24% for residential.

Question 23

What are the different thresholds for inheritance tax?

Answer 23

1. £325,000 (Basic threshold)
2. £500,000 by leaving your home to direct descendants like children or grandchildren (using £175,000 residence nil rate band)
3. £650,000 if inheriting your spouse/ partners threshold
4. £1,000,000 if inheriting your spouse/partners threshold and residence nil rate band