Personal Tax Flashcards
1
Q
What’s the difference between private pension and occupational pension in terms of calculating taxable benefit?
A
Private pension extends the BRB
Occupational pension is deducted from the taxable income along with the PA
2
Q
If you are given the taxable benefit and the list price of a car but need to find the tax how do you find it out?
A
Taxable benefit / list of car x100 = percentage scale charge
3
Q
IS IT TAXABLE BENEFIT OR TAX WORKING OUT?!?!
A
4
Q
How do you work with the annual return?
A
The HMRC rate is 2.25%
5
Q
What does CHERISH stand for in terms of SE.
A
Control
Hire Helpers
Equipment
Risk & Reward
Integration
Statutory rights
How many clients
6
Q
What are allowable expenses?
A
Expenses that are wholly exclusively and necessarily incurred for business duties
7
Q
How does mileage work?
A
Take personal mileage out from the business mileage and only use business mileage for the tax.
If their employer pays more than HMRC allows with the 45p and the 25p mileage then the extra income will be taxed! If the employer has been given less than HMRC say then then the rest can be claimed as an allowable deduction on the comp
8
Q
Company car that has personal use too, equation?
A
Benefit = relevant % x list price of car
9
Q
If not personal use on car
A
Then won’t be a taxable benefit
10
Q
What is the maximum relevant percentage?
A
37%
11
Q
What are the maximum contributions that an employee can contribute to bring down tax?
A
£5000
12
Q
If there are any repairs to the car do you add to list price or not?
A
Yes plus it before you work out taxable benefit with the percentage
13
Q
How does the contributions to a car make a difference?
A
When an employee contributes towards the cost of a car this needs to decrease the list price of car when multiplying with the scale charge pecentsge
14
Q
What does the benefit is time apportioned if the car is unavailable for 30 consecutive days mean?
A
If the car is taken for more than 30 days in one portioned then the taxable benefit will be time apportioned especially if it is split over two tax years.
15
Q
So if a employee contributes towards the list price e.g the cost of the car like a lump sum what happens?
A
This is deducted from the list price ( plus any extras like repairs) before applying the relevant percentwge
16
Q
What is the private fuel benefit equation
A
Benefit = relevant percentage x £27800
17
Q
If the employee pays for private fuel then what
A
There is no benefit
18
Q
When is the benefit time apportioned?
A
If the car is unavailable for 30 or more consecutive days
The fuel provided ceases part way through the year
The company car is shared
19
Q
So if James contributes £20 per month for private use of the car
A
Then this is deducted from the taxable benefit
20
Q
If James contributes £15 per month towards private fuel
A
Then this will not reduce anything as it is towards and not paid in full
21
Q
How do you work out the basic charge for accommodation?
A
The higher of rent paid by the employer or the annual value if the employee contributes then this can be deducted to the taxable benefit
22
Q
When an employer owns the property and costs more than 75k then what is the equation
A
An additional charge is added on top of benefit = cost - 75k x 2.25% official rate of interest
The cost includes any improvements made before the start of the tax year only. So plus on not deduct
As no rent use Basic charge as the rent for which is higher the annual value or rent
23
Q
What is the 6 year rule?
A
If the employer bought a property 6 years or more before it was available to employee then the COST of the property is replaced by market value at the date it was made available to the employee for additional charge. E.g if someone bough a property 20 years ago for £100k then today the property is worth £300k then the £300k would be used
24
Q
When moving into a property and there is furniture
A
The furniture will be deducted 20% which will be added on along with any bills etc.
25
If the accommodation is job related what does that mean for taxable benefit?
The basic charge and additional charge benefits are exempt. The ancillary benefit is still assessable but it is restricted to a maximum of employment income x 10% so just 10% of the salary. So if someone earns 25k and furniture and bills cost 3000 a year then it would restricted to £2500 as this is 10% of salary
26
What are the two methods for beneficial loans?
The average method (used in the exam)
The precise method
27
How do you work out the average method for a beneficial loan ?
1/2 x outstanding at the start of the year + of outstanding at the end of the year) less interest paid by the employee = assessable benefit
28
If bob has an interest free loan from his employer of 20k at the start of year this was outstanding and bob repaid 8k what is the assessable benefit from the loan
1/2 x ( 20k + 12k*) x 2.25% = assessable benefit
12k is the amount left after it is repaid and the 2.25% is the annual hmrc rate
29
How do you work out assets loaned?
The higher of
20% of the annual value of the asset or
The rental cost paid by the employer
30
What is the annual value when an asset is loaned for p/u
It is the market value of the asset when it was first made available to the employee
31
What do you do with the assets gifted? What are the two methods
Method 1 - current market value minus price paid by employees equals assessable benefit
Method 2 - market value when first provided to employee minus amount already assessed whilst loaning the asset ( say 3 years at £100, so minus £300) minus the price paid by employees equals assessable benefit
Chose the highest benefit of them methods
32
If the asset purchased or gifted is a car or a bicycle what does that mean?
Only one method is used so likely method 1 of current market value minus price paid by employee
33
What are trivial benefits in kind?
They are benefits that are trivial and are exempt!
E.g gifts for a celebration, entertainment for a personal celebration, flowers for sympathy.
If a gift costs more than £50 per employee, are cash or cash vouchers, an entitlement or bonus/commission these are taxable.
It is not the first £50 it is if the gift costs less than £50
34
What is the maximum for a cash basis for property income?
If a property is 150k or less than the property income is taxed on cash basis
35
What does cash basis mean for property income?
This means that income is calculated from rents received during the tax year less payments for allowable expenses. Most likely one in exam unless stated otherwise
36
When does property income need to be an accruals basis?
If the property gross rents are more than £150k then it will calculated on an accruals basis
37
What is an accruals basis with property income?
It will be taxed on the income and expenses that relate to that tax year not what is actually received and paid. So less any irrecoverable debt from net rental income
38
What would be classed as capital expenditure for a property?
Extension to a property
39
For an accruals basis how do you work out an expense that is part bought for this tax year and the next
Time apportion it for the months used
40
What is the property allowance?
You can deduct £1000 from the total gross rental income. So you can either choose to claim expenses or claim the property allowance but NOT both. So if the allowable expenses are above £1000 then claim the expenses if it is below the £1000 then claim the property allowance
41
What happens if the property gross income is below £1000 interms of the property allowance?
If the property income is £900 say then the property allowance would be restricted to £900 because a loss can’t be created because of it. So it would probably be better if you claimed the expenses if it could create a loss meaning this can create a loss to c/f to offset a future profit
42
What happens if you are replacing domestic items?
Only the cost of replacing an item is an allowable expenses not the original purchase. Relief can also be given for the cost of disposing old assets and also getting the new asset.
43
What happens if there is private use by the landlord on a property?
This needs to be time apportioned by the time of the and landlord lives in. But agent letting fees won’t be time apportioned
44
How do property losses work?
Losses can only be used against property income only, and can be deducted from other property income or c/f for other property profits
45
What investment income is exempt?
ISAs are tax free for the first £20,000
SAYE
National savings certificates
Delayed income tax repayments from HMRC
46
Interest from banks
These are taxable and are received gross so tax needs to be paid on it.
Basic rate band allowance is £1000
Higher rate band allowance is £500
Additional rate band allowance is £0
47
Dividends
Dividends are received gross so need to be taxed,
There is a £500 allowance for everyone
48
What is the Personal allowance figure? And will it be reduced in the exam?
£12,570 and it is reduced when income hits £100k. Called the Adjusted net income ANI
49
How do you work out the ANI?
Take the total income minus £100k, then half this figure and then this needs to minus from £12,570 and this will give the restricted PA
50
How do you calculate income tax?
Income is split three times.
Non savings income - employment income, trading income, property income, pension etc.
Savings income - bank interest, building society interest
Dividend income - dividends and income from shares
It is taxed in this order income 1st, saving income 2nd, dividend income 3rd
51
Some employment is taxed by PAYE already so what happens with that with the computation?
We deduct this at the end when given the income tax liability so less tax will be due
52
How does occupational pension work on the tax computation?
This is paid before tax so both the employer and the employee make contributions, this is deducted from the employment income so reduces the taxable income.
53
How does private pension work with tax and the computation?
This is paid after tax as this a personal choice this is paid net, so this needs to grossed up by ? x100/80 then adding this on to the BRB to extend this so the taxable income will be taxed lower for more money.
54
What are the maximum contributions for tax for pensions
The maximum amount of under 75 years old is the higher of £3600 and the 100% of UK relevant earnings
55
How do you work out the relevant earnings?
Employment income + taxable benefits in kind + SSP + trading income + FHL income . Thee is a maximum of £60,000 known as the annual allowance for pension contributions. REMEMBER DIVIDENDS AND INVESTMENT INCOME E.G BANK INTEREST ARE NOT INCLUDED.
56
The annual allowance is what for pension contributions?
£60,000
57
What is charitable giving?
An individual can have relief from giving gift air or payroll giving (GAYE). GAYE is given the same way as occupational pension, so this will deducted from the employment income to reduce taxable income. Gift aid is the same as private pension adding onto the BRB to extend it! These are normally given net so these will need to be grossed by ? x 100/80
58
What national contributions will be tested on the exam?
Class 1 and class 1A NIC’s.
This will likely come up on the exam so definitely revise along with the drawing out tax comp and shares
59
When working out national contributions how do you go about it? If you are given a salary of 55k
For the class 1 for the employee take the 55k - the highest band so 50,270, then times by the percentage which is 2%. Then with the minus number worked out minus the original wage of 55k, then minus the lowest band which is 12,570 then percentage this to 8%
60
What is the allowance for Class 1 NIC?
£5,000 from class 1 ONLY.
61
What is capital gain tax?
This is tax on a one off event normally a profit. The sale or gift of an asset or part of an asset is taxable but there are some that are exempt
62
What are some exempt capital gains examples for loss of part of an asset?
E.g Cars including vintage and classic cars
Wasting chattels
Chattels below £6000
Loan notes,
Gilts
63
What are wasting chattels?
They are movable assets that have a life expectancy of under 50 years like a race horse or mechanical items
ANTIQUES ARE OLDER THAN 50 YEARS SO ARE NOT EXEMPT
64
What is a net chargeable gain?
This is before the Annual Exempt amount but after the capital losses b/f so yr losses put against this current years gains
65
What are taxable gain?
This is after the Annual exempt amount!
66
What are the proceeds in terms of capital gains
Normally the sales proceeds when the asset is given away or sold, but if the asset is undervalued then use market value as proceeds. The cost of disposal needs to be deducted from the proceeds figure like legal fees and auctioneer fees to come out with the net proceeds
67
What are the costs in terms of capital gains?
If you have purchased an asset then deduct the purchase price in the gain calculation and any other costs incurred at purchased like stamp duty or legal costs.
If the asset was given then use the market value to deduct with the date of the gift
If you inherited the asset then deduct the probate value ( market value at the date of death)
Also any costs on enhancing the value of the asset can be deducted BUT NOT REPAIRS
68
What happens with capital losses?
If an asset is sold in the tax year and it’s a loss then it will be offset against any current year capital gains before AEA.
69
Can AEA be lost or part wasted?
Yes! If the capital losses reduce gains to nil or below the AEA for the year. Any unused capital losses c/f can only be used for future capital gains.
70
How are brought forward capital losses used?
Capital losses b/f can be used against current years gains however the amount used is restricted to protect the AEA so the net chargeable gain cannot go below £3000
71
What does taxable income mean?
Taxable income is the income after personal allowance is deducted
72
What does taxable gain mean?
Taxable gain is the gains after the AEA is deducted
73
What are the band percentages for capital gains?
BRB 10%
HRB 20%
74
What is Sarah’s capital gains tax payable? Sarah has taxable gain of £16,000 and taxable income of £29,000 for this tax year 24/25
Use the income first as this is prioritised first! The AEA and the PA have been deducted already!
BRB = £37,700 - £29,000 = 8700 BRB left for gain
Gain amount to be taxed as £8,700 is at 10%= £16,000 - £8,700 = £7,300 will be at 20%
8700 @ 10% = £870
7300 @ 20% = £1,460
CGT Payable = £2,330
75
What is a chattel? And what is a wasting chattel?
A chattel is a tangible moving property. This normally has life expectancy of over £50
A wasting chattel is a chattel that has a life expectancy of under 50 years like machinery or race horses
76
What is the £6000 rule for chattels?
This is for non wasting chattels only.
If cost less than £6000 but proceeds are greater than £6000 then it is EXEMPT
if cost is greater than £6000 and the proceeds are greater than £6000 then it is limited loss
If cost less than £6000 and the proceeds are less than £6000 then it is a restricted gain
if cost is greater than £6000 but the proceeds are less than £6000 then it is a normal calculation
77
What is a limited loss in the £6000 rule
Used deemed gross sales proceeds of £6000
78
What’s is the restricted gain in the £6000 rule?
Calculate the gains as normal but it is restricted to 5/3 x gross proceeds - £6000
79
If cost less than £6000 but proceeds are greater than £6000 ?
Restrict gain to 5/3 x gross proceeds - £6000
80
if cost is greater than £6000 and the proceeds are greater than £6000?
Treat as normal
81
If cost less than £6000 and the proceeds are less than £6000
Exempt
82
if cost is greater than £6000 but the proceeds are less than £6000
Make £6000 the proceeds
83
What do you do with part disposals of assets?
Cost x market value of part disposed of / market value of part disposed + market value of part retained
If there are enhancements, substitute the enhancement for the cost in the equation
84
Why do we do a calculation for disposing part of an asset?
Because the sold may have a greater value, e.g planning permission for a field sold
85
What are the rules if an asset is sold to a connected person e.g. a child
Disposals are always deemed to have been made at the open market value, regardless of the actual proceeds that may change hands
86
What are direct taxes
Imposed directly on the taxpayer such as PAYE and Income tax
87
What are indirect taxes?
Tax that is part of the economy and passed on to authorities later such as VAT
88
What is progressive tax?
Progressive tax is taking an increasing proportion of income as income revised E.G income tax 20%, 40%, 45%
89
What is proportional tax?
Takes the same proportion of income as income rises e.g inheritance tax @ 40%
90
What is regressive tax?
Takes a degreasing proportion of income as income rises e.g NIC up to £50,270 @ 8% , above £50,270 @ 8%
91
Is the exception if transfers are made between spouses,
It would take place as a no gain/ loss basis
92
short what happens if a vase worth £11k is sold to a sister in law for £9000 which originally costed £6500?
As it is sold to a connected person then the proceeds would be the market value of £11k to be used
93
What happens if a loss arises on a disposal?
The loss can only be offset against the gains arising on disposals to the same connected person
94
What is Private residence relief?
It is the relief given if an individual sells a property that they have lived in as their only main residence
95
How do you would out PRR relief?
Gain on disposal x (Period of occupation/ period of ownership)
96
What happens if an individual sells a house that the6 have resided in for the entire period of ownership?
Then the full gain is EXEMPT
97
What happens if someone buys a second private residence?
The person must elect within 2 years from the date of purchase which house to put PRR for CGT purposes or HMRC will decide.
98
What is deemed occupation for last 9 months of ownership?
Must have occupied the residence at some point during the ownership period
99
What is deemed occupation for up to 3 years of absence for any reason?
Must have lived in the residence at some point BEFORE AND AFTER absence
100
What is deemed occupation for up to 4 years of absence whilst working elsewhere in the UK?
Must have occupied the residence at some point before absence ( but no need to reoccupy if work prevents so after)
101
What is deemed occupation any period when an employee is require to work overseas?
Must have occupied the residence at some point before absence but no need to occupy after if work prevents you doing so
102
What’s are the principles of the tax system?
neutrality
Efficiency
Certainty and simplicity
Flexibility
Effectiveness and fairness
103
What is neutrality ?
A neutral tax is one that does not create incentives for organisations to change their behaviour
104
What is Efficiency?
Keeping admin, compliance and collection costs as low as possible for business and government
105
What is certainty and simplicity?
Guides and help to ensure taxpayers are clearly informed about their taxes and why they are that level
106
Flexibility ?
To assist with long term tax planning, taxes should be stable and predictable and should not change too often and should be flexible for new technology
107
Effectiveness and fairness?
The right amount of tax at the right time and should be fair
108
What is horiszontal and vertical equity?
Horizontal equity is everyone is in the same sitatuion pays the same tax
Vertical equity is the more you earn the greater the proportion of the income is paid in tax
109
What is duty of confidentiality?
Confidentiality continues even after ceasing a client, it can only be overridden if authority is given by CLIENT only, or legal duty to
110
What is PCRT
this is a document given to help with how to act with tax work as their are ethical principles
111
What are the share matching rules?
1. Same day acquisitions
2. Acquisitions in the rolling 30 days
3. All other share acquisitions which have been pooled. Share pool
112
What is the share pool?
The shares are in the pool if there aren’t in the other two rules. They are mixed and lose their identity and when they are disposed of use AVCO.
So number of shares disposed of x total cost of all shares / total number of all shares
113
How do bonuses with capital gains shares work
Bonus issues are free shares given by a company to existing shareholders. They are added to the pool to dilute the value of the total shareholding so more shares but no costs added
114
Rights issues are what?
There are offered to existing to shareholders to buy additional shares but at a discounted price. These are added to the pool share on the price paid per share e.g rights issue of 1:4 for £3 per share, then the shareholder can purchase 1 share for every 4 already owned and will only pay £3 per share, but the market price will be much higher than this
115
116
Rights issue of 1 for 2 rights issue at £2.50 per share of 6000 shares total now.
So take 6000 shares x 1/2 = 3000 no. Of shares @ £2.50 = £7,500 cost
117
How do you work out the disposal cost of the capital gains shares
Disposal shares number divided by total shares overall x total shares cost overall.
MINUS DISPOSAL FIGURES FROM TOTSL OVERALL FOR BALANCE C/F
118
When should a tax return be filed if given an issue?
Within 3 months of the filing date.
If you have not been issued with on then you need to notify HMRC by 5th October following the end of the tax return
119
When do you need to file a paper tax return?
By the 3ish October after the end of the tax year so 31st October 2025 for tax year 24/25
120
When do you need to file an electronic tax return?
By 31st January after the end of the tax year so 2024/25 would be 31st January 2026 which is the actual filing date
121
How long does someone have to amend a tax return?
12 months of the due filing date but HMRC have 9 months of the actual filing date
122
Filing after a due date penalty?
£100 immediate whether tax is paid
123
Filed more than 3 months late penalty?
£100 from immediate AND £10 per day for a maximum of 90 days so £900 max
124
Filed more than 6 months late penalty?
£100 from immediate AND £10 per day for a maximum of 90 days so £900 max AND 5% of the tax due £300 MIN. So even if it’s a rebate £300 still
125
Filed more than 12 months late penalty?
£100 from immediate AND £10 per day for a maximum of 90 days so £900 max AND 5% of the tax due £300 MIN. So even if it’s a rebate £300 still and additional 5% of tax due or HMRC can add 100%, 70% if deliberate etc.
126
How long should a self employed person keep business records for?
5 years and 10 months after the end of the tax year
127
How long should records be kept for personal tax ?
22 months after the end of the tax year
128
What happens if you fail to keep records for the length of time?
Up to £3000 per year affected
129
When are POA not required?
If the tax liability is £100 or less the prior year or 80% of the total income tax liability deducted at source
130
What is the balancing payment and the POA?
The POA are two payments split in half of the previous years tax liability paid in Jan and July
The balancing payment is the payment difference between the two years tax liability.
131
When can POA be reduced?
If the current year liabilty is expected to decreased but fraudulent behaviour will be penalised
132
When are Class 1 NIC’s paid?
By the employer to HMRC by the 19th of each month or 22nd for some electronic payments
133
When does the payment of CGT need to be made?
By the 31st January following the end of the tax year
134
What is the penalty for late payment of tax for 30 days?
5% of overdue tax
135
What is the penalty for late payment of tax for 6 months?
10% overall
136
What is the penalty for late payment of tax for 12 months late?
15% overall
137
What is tax planning?
Involves paying the correct amount of tax when due and LEGAL. But being tax efficient, so paying private pension to increase tax band
138
What is tax avoidance?
Is seeking LEGALLY minimising tax liability but by loopholes and exploitation not in the intended way. Such as diverting money to countries with better tax rates, not in the spirit of the law
139
What is tax evasion?
This is ILLEGAL by giving false or inaccurate information about tax such as a person having multiple businesses but only declaring some income.
140
What are some tax planning strategies?
ISAs
Property allowance,
Dividends allowance
Savings allowance
Pension contributions
Charitable giving
Transfers between spouse
PA
141
how can transferring between spouses be good for tax planning?
You can transfer assets prior to disposal which means both AEA can be used and lower rates of CGT will be taxed with hopefully one being in BRB or below PA
142
Can you contribute towards fuel to reduce tax liability?
NO, pay in full or not at all, paying a little doesn’t affect tax at all
143
What is the general rule for inheritance tax?
Inheritance tax is charged on a transfer of value of chargeable property by a chargeable person and happens when someone dies, lifetime gifts where the donor dies within 7 years from the date of the gift and some lifetime gifts which are taxed at the date of the gift
144
How is the value of the gift for inheritance tax calculated ?
It is calculated using the diminution in value concept
145
What are the 3 types of lifetime gifts?
Exempt
Potentially exempt transfer (PET)
Chargeable lifetime transfer (CLT)
146
What does exempt mean for lifetime gifts?
The gift will be exempt if the gift is to a UK domiciled spouse, to charity or to a political party. These also apply to assets in the death estate
147
What are NB gifts ?
Nil band rate gifts made from normal expenditure are exempt if it does not impact the donors standard of living and is a regular pattern e.g paying nephews school fees
148
What is PET?
Potentially exempt transfers, which are transfers to individuals, during lifetime there is NO tax payable at the point of gift. But if the donor dies within 7 years of the gift then it will be taxed
149
What is CLT?
Chargeable lifetime transfer is anything that is not exempt of PET ( normally a gift to a trust)
This is taxed immediately when the gift is made. Possible extra IHT may be payable if donor dies within 7 years of the gift
150
What are the allowances that will bring down the value of lifetime gifts for IHT purposes?
Marriage exemption
Small gifts
Annual exemption
151
What is marriage exemption?
A gift made upon marriage, where there are maximum limits that are exempt for IHT
Parent £5,000
Grandparent £2,500
Party to marriage £2500 each
Others £1,000
152
What is the small gifts exemption?
Gifts of £250 or less per person per tax year are exempt from IHT.
if it exceeds £250 then full amount is chargeable
153
What is annual exemption?
The first £3000 is the annual exemption to be taken from life time transfers gifted. Any unused AE can be carried forward to the next year only. AE should be applied after any other exemptions available.
154
What happens when spouses transfer between each other in terms of IHT
Transfer between spouses are exempt.
155
What are chargeable lifetime transfers?
An individual making a gift to a trust then this a CLT, and lifetime inheritance tax is payable IMMEDIATELY.
Each CLT should be calculated separately. This is for CLTs only, there is no lifetime tax payable on PET.
156
What is the NRB?
This is the nil rate band, everyone is entitled to a tax free amount for both lifetime gifts and gifts on death. This amount is £325,000 and it is used on a 7 year cumulative basis
157
How do you calculate a lifetime IHT on a CLT?
Calculate the gross chargeable amount of the CLT
So transfer of value minus any annual exemption equals gross able chargeable amount
Then calculate the amount of the nil band rate available after deducted g any other CLTs that were made in the last 7 years. Ignore PETs.
Then calculate the tax on the excess of the nil rate from before.
If the donor pays the tax the transfer value for IHT purposes is the gross gift e.g CLT of £350k and lifetime of £31k then the gross gift is £381k
158
What are the tax for donors for IHT
For donors 25%
For donees 20%
If in the exam not told which assume the donor will pay the tax
159
160
161
If there is a property purchased for £100k in 2018, an employee moved in in 2023 at the market value £220k and the annual value of the property was £1000 what is the equation?
£100k - £75k x 2.25% = accomodation benefit. Then add the annual benefit for the total benefit
162
What is the exempt benefit for interest free and low interest loans?
If they do not exceed £10,000
163
What does within 6 years have to do with employers letting employees live in the accommodation?
If it is within 6 years then the original cost of the house plus improvements up to the start of the tax year can be used rather than the market value when the employer moved in.
164
Do you need to time apportion employee accommodation benefit?
Yes but not if the accommodation was available for the whole tax year.
165
166
If an employee was give
167
Connect persons use the market value or cost?
Market value
168
Can a tax payer have more than one private residence?
No they can only have one private residence at one time and one between one marriage.
169
When is the annual exempt amount deducted ?
It is deducted from chargeable gains before allowable losses b/f
170
How do work out capital gains tax?
Find the net capital gains ( gains - loss) - £3000 which is the annual exempt amount equals capital gains tax
171
How do you work out capital gains tax payable?
Take income, minus brb from taxable income, tax the left for brb by 10% minus the capital gains tax then the rest at 20%
172
Nil rate band transfers?
The nil rate band can be transferred to a surviving spouse for only the final estate but not the lifetime transfers
173
If a partner dies and they did not use the residence nil band can they transfer and how much is the max?
Residence nil rate band each is £175k so two total £350k which is the maximum for estate
174
What is the use of asset benefit?
20% of the market value when it was first made available to employee. This needs to be time apportioned if necessary!
175
What happens if an asset was previously used by an employee is sold or given to them?
Then it is the higher of:
Market value of asset at date of transfer LESS price paid by employee
Or
Original market value when first supplied LESS amounts taxed as a benefit to date LESS Price paid by employee
176
How do ancillary benefits work?
Use of furniture x 20% plus bills like electricity
BUT the maximum limit is 10% of salary.
177
If the employer owned a house for more than 6 years when the employee moved in what happens?
The expensive accomodation benefit is calculated so original market value -£75k x2.25% then plus the answer with annual value, and time apportion it if necessary less any rent paid
178
What is the beneficial loan benefit?
Outstanding loan x difference between interest and 2.25% = taxable benefit TIME APPORTION IF NECESSARY
179
Can a payment of £800 be exempt if employees in the office attend a computer skills course?
Yes
180
Talk a bit about long service awards.
The award must not be cash. Or it will be taxable.
And they can’t have had a reward in the last 10 years from the employer
In order for it to be exempt the must be no more than £50 per year provided service is at least £20
181
How do you calculate the average loan balance?
1/2 x (opening balance + outstanding loan balance) x 2.25%
182
When does the van fuel benefit arise?
If the employer pays for fuel
183
Will a zero emissions van decrease tax compared to a 150 emission?
Yes! As it is nil so has £0 benefit
184
What reduces the van benefit?
A monthly contribution towards private use reduces the van benefit
185
What does not reduce the van benefit?
Contributions towards the capital of the van does not reduce van benefit as this is a flat rate and not based on a list price
186
What does deemed proceeds used mean?
It means that the market value of the asset will be used instead of actual sale proceed.
This will be used for a gift to any person, a disposal to a connect person or a sale at undervaluation to any one EXCEPT SPOUSES
187
188
Is this a gain loss or exempt? A race horse bought for £4000, and sold for £7500
Exempt as this is a wasting chattel
189
Is this a gain loss or exempt? A necklace bough for £5900 plus £200 auction costs and given away when it’s market value was £8000.
Gain as both the cost and the proceeds were more than £6000
190
Is this a gain loss or exempt? An antique case bought for £3000 and sold for £8200?
Gain! As cost less than £6000 but sold for more than £6000 so would do normal calculation
191
Is this a loss gain or exempt? A painting bought for £3000 was sold for £5900?
Exempt as both costs and proceeds are below £6000
192
True or false? No gain or loss arises if insurance proceeds are received for a painting destroyed in a fire
False the destruction of an asset is a disposal with the insurance received as the proceeds figure
193
Can annual exempt amount be carried forward or backwards?
No it is wasted if it cannot be used, neither can it be given away
194
195
Which of these are included in capital enhancement? Repairs to roof, extension, replacing a kitchen.
Only the extension, replacing and repairing are repairs/ maintenance so not allowable as not s capital expenses
196
Can brought forward capital losses be offset after the annual exempt amount
Yes!
197
Can allowable losses be transferred to spouses?
No they can’t be transferred at all
198
199
Is this true or false?the annual exemption can be carried forward for one year but cannot be used until the annual exemption for the current year has been used?
True!
200
Is this true or false? Chargeable lifetime transfers may give rise to two separate liabilities to inheritance?
True because there may be a charge at the time of gift and also another charge if the donor dies within 7 years
201
Is this true or false? The taper relief will reduce a transfer of value made more than three but less than 7 years prior to the donor’s death
False! Because the taper relief REDUCES the inheritance tax due and not the transfer of value
202
Is this true or false? An exempt transfer may give rise to an inheritance lptax liabilty if the donor dies within in 7 years?
False because there cannot be inheritance tax liability where the transfer is EXEMPT! it is a potentially exempt transfer which may give rise to inheritance tax liability if the donor dies within seven years
203
What is the rate of tax if a donor pays the inheritance tax for a chargeable lifetime transfer?
25%
204
What is the inheritance tax rate if the donee pays on chargeable lifetime transfer?
20%
205
What is the inheritance tax rate on death?
40%
206
Is this CLT, PET or exempt? £310 from Sharon to her husband?
It is exempt as transfers to spouses are under the spouse exemption
207
Is this CLT,PET or exempt? A house worth £510k to a trust?
A gift to a trust is CLT!
208
Is this CLT, PET or exempt? £4000 from John to his grandson on his wedding day?
PET,the exempt part would be up to £2500 as he is the grandparent.
209
True or false? The small gifts exemption is £250 per donor per tax year?
False! It is per transferee/donee NOT donor, the rest is correct though,
210
Is this true or false? No inheritance tax liability arises in respect of a gift made more than seven years prior to death?
False! Because inheritance tax liability can arise in respect of a chargeable lifetime transfer at any time in the donors lifetime.
211
True or false? An individual who has always lived in America and is not domiciled in the UK may still be liable to pay inheritance tax in the UK?
True! The person doesn’t have to be domiciled in the UK to be subject to UK inheritance tax as they have assets situated in the UK!
212
True or false? The inheritance tax due in respect of the residue of a death estate is paid by the residuary legatee.
False! Because although the inheritance tax due is respect of the residue of a death estate is suffered by the residuary legatee, it is paid by the PERSONAL REPRESENTATIVES
213
True or false? The annual exemption cannot be deducted from the death estate even if there have been no gifts in the year of death?
True!
214
How much is car contribution maximum
£5000
215
How much car percentage is the max.
37%
216
How much is employment allowance
£5000
217
