R03 Flashcards
Total Income - Appropriate Deductions e.g.?
=?
PACI: PCs, Allowable Business Losses, Charity, Interest Payments
Net Income
Limit on Income Tax Reliefs?
Reliefs include?
Greater of £50k, or, 25% of Adjusted Total income.
SPIT: Trade Losses, Property Loss Relief, Share Loss Relief, Interest (Qualifying Loans)
How does gift aid work?
Charity reclaims 20%, Donor has BR/HR limits increased by grossed-up amount.
Beneficial Loans rate?
Not taxable if <?
Taxable Benefit = (‘Official’ (2%) - Actual Interest Rate Charged) x Loan Amount
<£10,000: Not taxable
Married Couple’s allowance?
Reducer: Allows 10% of (£11,080 reduced by £1 for every £2 adjusted net income over £37k, Min £4280) to be deducted from income tax bill (i.e. Max £1108).
If either born before 1935.
Taxable Income Rates?
£0-£37.7k –> 20%
£37.7 - £150k –> 40%
>£150k –> 45%
Order in which income is taxed?
To remember?!
NSDO(n):
Non-Savings
Savings (+ Offshore Gains)
Dividends
Onshore
N-SDOn (N-Zone)
Child Benefit?
High income CB Charge?
£25.60, or, £16.95 for additional children.
Reduced by 1% for every £200 >£60k.
Gift Aid reciprocal benefits from charity cannot exceed?
<£100: 25% of Donation
>£100: Sum of 25% + 5% XS over £100
Tax relief of charitable giving?
Pre-Eminent Objects?
Charity: Donation Market Value taken from Taxable Income. No CGT.
Pre-Eminent: 30% of object value given as tax-reduction, against IT or CGT, or mix of both, over next 5 years.
Annual Allowance? Carry forward?
Reduced AA if?
£60k, up to 3yrs.
Tapered (AI >£260k, TI >£200), MPAA (£10k)
RElief at Source? Types of pension using R@S?
REclaimed after tax.
Personal Pensions
Net Pay arrangement? Pensions using NPA?
Paid from gross income before tax paid.
Occupational Schemes
Relief by making a claim?
RACs
Net Income - Personal Allowances =?
Tax reducers?
Taxable Income
- EIS, VCT, SEIS
Self-Employed taxation via what time periods?
How is this done over first few years?
Via ‘Basis of Assessment’ periods, do not need to coincide with tax year.
1st: Part of profits taxed
2nd: 12mths, or, accounting period ending that year
3rd: As per accounting period
Overlap from 1st/2nd Yrs as tax relief
Fringe Benefits:
Cash Equivalent/Non-Cash/Company Cards: Employee taxed at cost to employer.
Assets: Taxed at ‘Annual Value’; 20% of market value at purchase.
In-House: Marginal Cost to Employer.
‘In-House’ Benefits with No Taxable benefit examples:
Employees pay wholesale
Teachers pay 15% or more
Prof Services
Non-Displacing Rail/Bus fares
Car Benefit on?
- Electric?
- Diesel?
- Petrol?
Electric: % rate on range
Diesel: 4% surcharge if doesn’t meet RDE2 (Max 37% charge)
Petrol: Now via WLTP
Car Benefit example?
- List Price £27k
- Discounted Cost to Employer £28k
- Accessories £4.5k
- CO2 143g/km (32%)
32% x (27k + 4.5k) = 10,080
Classic cars (15 or more yrs old)?
% based on engine size X Current Market Value (Not original price)
Car benefit: Capital contribution limit?
Employee can contribute up to £5k, which will be deducted from list price before benefit calculated.
How to calculate the Free fuel for private use tax?
Car Benefit % x Fuel benefit Charge (£27,800 for 23/24)
Mileage Allowance rules?
Rates?
Commuting to usual place of work: Not taxable. Temporary place: Taxable.
Cars: 45p for 10k miles, then 25p
Motorbikes: 24p
Bikes: 20p
Passengers 5p
Taxable benefit for Company Vans?
Taxable benefit of £3500 for employees + £757 for fuel
Calculating beneficial loans?
Cheap/Interest-Free <£10k?
Difference between ‘Official’ and ‘Actual’ Interest rate.
E.g. £20,000 x (2%-1%) = £200 charged
Not taxable.
Taxable Benefit: Accommodation?
Additional charge if?
Higher of Rent paid by employer to landlord vs ‘Annual Value’(Expected Rent) used as cash benefit.
<£75k –> Annual Value (-Employee Contribution)
> £75k –> XS over £75k x ‘Official’ Interest Rate, added
(Called ‘Additional Yrly Rent’)
Owned >6yrs: XS of market value over £75k x ‘Official’ Interest Rate
Owned <6yrs: Greater of ‘Annual Value’/rent
Taxable Benefit: Furnished Accommodation?
Additional 20% of Market Value of Furniture/Equipment added
Employers Medical insurance taxation? Exemption?
Taxable, unless necessary for employee working abroad.
£500, to help employees return to work.
Examination/Screening required by employer: Not taxable
Taxation of Private Medical insurance?
Premiums subject to insurance premium tax.
Benefits paid tax free.
If employer contributes; deduction against CT. Rx as Taxable BiK.
Benefits exempt from tax?
Group IP
Meals/Phones
Long Service Awards
Relocation/Removal Expenses
Homeworking (20% on £6/wk)
Workplace Childcare
Adjusted vs Threshold Income?
Adj: includes PCs
Thresh: excludes PCs
Life assurance policy gain taxation?
Total Tax Full Gain - Deduction of Top Slice Relief
Full gain added to other income to calculate Adjusted Net Income.
Top-sliced gain i.e. difference in tax between full gain and annual gain.
Marriage Allowance?
Can backdate?
Transfer 10% PA (£1260) BR to little/no income earner.
Up to 4 years.
PA trap?
Paying effective rate of?
PA reduced by £1 each £2 over £100k.
60% (40% ‘normal’ + 20% loss of PA)
What is Married couples allowance?
Trap?
Effective rate of?
10% of Married Couples Allowance (£11,080) deducted from tax payable.
MCA reduced by £1 every £2 gross income over £37,000 down to £4280.
25% (20% BR + 5% ‘half of MCA’)
What is the Blind persons allowance?
£3070 is added to the personal allowance (Can earn more before IT payable).
Starting Rate for Savings?
Reduced by?
Where savings income falls within first £5000 taxable income.
£1 for every £1 over PA.
How do you calculate taxable Income?
‘IRPET’
Income (Total)
- Reliefs: ‘PACI’
- PA
- Extend Bands by PCs/Gift Aid
- Tax
- Reduce by ‘Tax Reducers’: MA, MCA
Parent £100 rule?
If capital from parents produces interest >£100 in child’s name, taxed as per parents. Unless sin a JISA.
Bare Trust
- Inputs in IHT eyes?
- Tax?
- £100 rule apply? Regardless, benefit may be?
PETs
Income taxed as per beneficiary’s IT, via trust income on self-ax form.
Yes.
CGT charged to minor, with their allowances.
Vulnerable Beneficiaries trusts can be?
Types of Beneficiary?
Tax rules?
Bare, Discretionary, or, IIP.
Disabled or Relevant Minor.
Income/gains taxed as per beneficiaries tax position (not usual ‘relevant property’ rules).
Vulnerable beneficiaries:
- How much before proving for their benefit?
- Tax Rx?
3K/3% w/o proving for beneficiary.
Trustees income tax liability reduced by: (tax trustees would pay - tax beneficiary would pay).
LI/IIP Trust?
Trustees: Pay 20% IT for beneficiary, cannot use allowances.
Beneficiaries: Income from trust at MR, beyond 20% paid within trust. May reclaim/pay more.
Trust income form?
R185
LI/IIPs: Trustees expenses set against income before being paid to beneficiary how?
‘UFSO’
UK Dividends
Foreign Dividends
Savings income
Other Income
IIP trust definition?
A.k.a when created by will?
created on death by will?
Chargeable transfer?
Subject to periodic/exit charges? IHT?
Trustee must pass income to beneficiary as arises.
Immediate Post Death Interest (IPDI) trust.
Not if to spouse, but otherwise yes.
No. Included in Life tenants taxable estate.
IIP trusts created whilst settlor alive (‘Lifetime Trusts’) since 2006?
Charges? IHT on these charges?
In beneficiaries’ taxable estate?
CLTs in at 20%, grossed-up if by settlor (so 25% to account for trustees’ tax due).
Periodic + Exit Charges. 6%.
No.
IIP created whilst settlor alive (‘Lifetime Trusts’) BEFORE 2006?
Charges?
IHT?
Gifts were PETs.
No charges.
Within IIP beneficiary taxable estate.
LI/IIP Trust: Income tax on trust?
Direct to Beneficiary: Don’t report, no expenses deductible from income.
Via trust: Trustees pay BR IT (w/o allowances)
Interest payments are allowable deductions if?
‘SIPP’
Shares in company/close company
IHT
Partnership Iv
Plant & Machinery
Employee NICs paid from age? And to?
16 to SPA (67); no contributions thereafter even if working.
Employee NICs limits?
LEL: Get Benefits £123/wk
1 Threshold: Pay 8% over £242
UEL: Pay less - 2% over £957
Employer NICs?
2 Threshold: Pay 13.8% over £175 (£9100/yr).
Upper 2 Threshold: Pay 13.8% over £967 (£50,284)
NICs based on what time period?
Directors?
Pay periods: Wk to mth
Annual, due to irregularity.
How are NICs paid?
Both employee and employer contributions paid monthly by employer via PAYE
NIC 1A?
Trivial benefits?
Employer contributions payable on fringe benefits/redundancy payments.
<£50 are free from NICs
NICs ‘credited’ even if not paying in?
Unemployed/Sickness
Full Time Training
Mat/Pat Pay
What is meant by Annual maximum NICs?
Limit on how much NIC is at 8% between multiple employments/self-employed.
Class 2 NICs?
Nil <£6725 (Small Profits Threshold).
£3.45/wk above SPT.
Class 2 exceptional jobs?
Share fisherman: £4.10/wk
Sub-Postmasters: C1s from salary, C2+4s from trading profits
GCSE Examiners: ‘Self-Employed’ (Though ‘employed for IT)
Class 4?
Nil up to Lower Profits Limit £12,570 (PA)
6% up to Upper Profits Limit £50,270
- Max payable = £2262 = (£50,270 - £12,570) x 6%
2% beyond UPL
NICs: Annual Maximum Contributions are what?
C1 + C2?
C2 + C4?
C1 + C2 + C4?
Max NICs payable at Main Rates
C1 + C2 = £3016 (Max payable for Main Rate C1s, i.e., £37,700 x 8%).
C2 + C4 = No restriction
C1 + C2 + C4 = Separate C4 limit: Max C4 at UEL (£2262) – Main Rate C1s paid
C3 NICs?
How long after relevant year?
Voluntary
£17.45/wk.
6 Years
CGT if acquired before 01/04/82?
Market value at that date.
CGT in year of separation/not at arms length?
‘Non commercial’ transfer so market value used.
Difference in how CGT and IHT are valued?
CGT is asset valued, IHT is loss to estate. E.g. company shares may be low CGT, but high IHT if affects control.
Employed vs Self Employed contracts for?
Employed: Contract of service
Self-Employed: Contract for Services
Types of Share options?
‘SCUE’
- EMI: No IT/NICs when granted. Reduced CGT as BADR-able.
- Unapproved Options: Pay NICs - can create huge liability on start-ups.
- Company Share Option Plan: IT/NIC payable. Tax relief on difference between exercise/market value.
- SAYE: No IT/NIC when granted, but are when exercised.
Employer allowance with regard to C1 NICs? Except?
£5000 (to £10,500 after budget)
Companies where director is sole employee
Employer contributions >£100,000/yr
Married women NICs?
Receive?
Until 1977, pay reduced ‘small stamp’ rate: 1.85% on £242-£967.
Reduced Benefits
NICs if moves abroad?
Social security contributions usually in country where employee works. Though can get up to 2yrs EEA, or, 3yrs Norway period in which continue UK contributions.
Company directors with annual NIC period charged how?
£12,584 (£242 x 52) @ 0%
Up to £50,284 (£967 x 52) @ 8%
Over £50,284 @ 2%
CGT: If deferred CGT is ascertainable, but payment is >18mths since disposal?
HMRC allow payment of tax in instalments.
CGT for Chattels?
Exempt if <£6000
>£6000 chargeable gain cannot be >5/3rds of XS >£6000
Gain for property?
Gain x (Period of Occupation & Allowable Absences/Total Period of Ownership)
When selling home, after living in it with tenants;CGT Letting relief?
Where owner in shared occupancy to lesser of:
£40k
Exemption on part occupied by owner
CGT losses:
- Claimed within?
- Carried forward for?
Claimed within 4yrs
Indefinitely (Not carried back)
What are clogged losses?
Losses on transacting with a connected party. Such losses can only be set against gains with same person whilst still connected.
CGT Allowance?
Rates?
Allowance: £3000
18% on Residential Property/Others within BR Band
24% Residential Property/’Other Chargeable Assets’
28% on ‘Carried Interest’ if you manage Iv Fund
To determine PSA/SRB when have a chargeable Iv bond gain in a year?
Prior to 2021?
Main income tax calculation, it is the whole chargeable
gain and not the top-sliced gain that is used.
In the top
slicing calculation, the personal allowance, starting rate for
savings band and personal savings allowance entitlement is
recalculated based on the top sliced gain.
(PSA/SRB not recalculated with top sliced gain)
Business Asset Disposal Relief:
Eligibility?
What tax relief?
Sole Trader/>5% share in trading company for at least 2 years.
Gain taxed at 10%, to limit of £1m (14% from 04/25 - 18% from 04/26).
What is an Enterprise Mx Scheme? IT/NIC?
To get BAD Relief on EMI/S shares?
Company Assets <£30m, <250 FT employees –> No IT/NIC payable on grant/exercise of options.
Held shares for >2yrs, and, bought shares after 04/2013.
BAD relief still available if <5% shareholding?
Only if results from company raising funds by issuing new shares.
Investors relief?
Mix of BADR (A.k.a Entrepeneurs Relief) & EIS!
10% CGT rate up to £10m on unlisted trading company share disposal. Must’ve been held for 3 years.
Cannot be connected with company.
Gift-Holdover relief?
Defers CGT liability on to receiver of gift of Business Assets or Shares.
No CGT payable, unless, sell for less than worth or make a gain on what you paid for it.
1.What is gift-holdover relief?
- Who is eligible?
- If giving away shares?
- If you give away assets or sell for less than they’re worth to help the buyer –> CGT deferred until buyer sells.
- Sole Trader/Partner/>5% Voting Rights + Use assets in business
- Not listed + Not personal company
Mechanics of holdover relief?
No CGT payable.
Donee’s acquisition cost is reduced by held-over gain –> On subsequent disposal; gain is much larger.
If receive held-over gift and leave UK?
Gain crystallises if donee ceases to be resident within 6 years
What is an EMI?
Enterprise Management initiative: Available if assets <£30m + <250 FTE employees.
Offers share options <£250k if work 25hrs/wk or 75% total working time.
Benefits: No IT/NIC, BADR for CGT.
How are EMIs tax advantaged?
Tax only incurred on award of schemes, NOT when exercised.
- No income tax on Exercising
- If held for 2yrs: CGT at 10%
For examples:
https://accountancycloud.com/blogs/everything-you-need-to-know-about-the-emi-scheme
Is gift-holdover relief available for transfers to trust?
No
Business Asset Rollover relief?
How much?
‘Deferral of CGT’ when trading-purposed assets sold, and, new assets bought 1yr pre-3yrs post sale. Up to lower of gain or amount reinvested
Incorporation relief?
Mechanics?
When sole trader (Unincorp business) sells shares (Say £125) to Ltd Company (Incorporates), there is no CGT to pay on any gain (Say £75).
- Base Cost noted as Share Value - Capital Gain from Assets (i.e. £50k)
On selling shares in Ltd Company (Say £250k), the original base cost is used (i.e. £50k), i.e. gain is deducted from the sale value.
EIS Shares reinvestment?
Relief if gain invested in to EIS shares bought 1yr pre-3yrs post sale.
- Defers gain until EIS share disposal
- Original gain then taxable, EIS gain usually exempt
- Could get 10%, 18%, 20%, 28% CGT relief, as well as 30% IT relief
SEIS reinvestment?
Reinvested gains NOT deferred, but 50% reinvested gains are exempt (‘Reinvestment Relief’). Other 50% chargeable to CGT.
Limited to £100k reinvested/yr.
Types of Share acquisitions?
- Bonus/Scrip: Free additional shares to existing shareholders. Rx as acquired on original holding.
- Rights Issue: ‘Right’ to buy more. Cost added to share pool
- Scrip dividends: Dividend offered as shares instead of cash.
What is
- Bonus/Scrip issue?
- Rights?
- Scrip Dividend?
Bonus shares given
Rights: right to buy more.
Scrip Dividend is dividend received as shares
Employee share schemes: employees may wish to elect unapproved to be sold first as?
Approved/EMI have lower base cost, therefore larger gain, which can be taxed later.
CGT paid when during the year?
Except for?
31st January
Residential property payable within 30 days
Trusts which are NOT Relevant Property Trusts?
- Bare Trusts
- IPDI & Pre 2006 IIPs (IIPs since are)
- Bereaved Minors/Young Persons Trusts
- Charitable Trusts
Relevant Property Trust types?
Discretionary
Lifetime IIP Trusts - Since 2006
Discretionary Trust: CGT on putting assets in to trust?
Can you holdover?
Rx as a disposal at market value.
Can holdover if not a bare/IIP trust; acquire at settlor’s base cost.
Discretionary Trust: CGT on disposals during life of trust?
Allowance?
Rates?
Allowance £1500 (Shared between settlors’ trusts, minimum 1/5th)
24% All Assets
Discretionary Trust: CGT on transfers out of trust?
If transfers chargeable assets to beneficiary: market value treated as disposal to calculate gain.
CGT tax allowance for Vulnerable/disabled trust?
How does the Trust pay CGT? Likely rate?
£3000 Allowance
Trustees charged as though beneficiaries’. Likely 18% (24% on Property Disposals).
Bare Trusts: CGT within trust?
Disposal by selling/transfer to beneficiary?
Treated as though beneficiaries’ - at marginal rate.
No CGT on disposal if already absolutely entitled.
IIP Trust: CGT on creation for:
- Settling lifetime Cash/Bonds?
- Anything else in lifetime?
- Can it be held over?
- On Death?
Lifetime Cash/Bonds –> No CGT
Lifetime Others –> Disposal with gain on settlor.
Yes if it is a CLT.
On death: No CGT (IHT’d).
IIP Trust: CGT on disposal from trustees?
CGT on death of life tenant of pre-2006 trust?
Chargeable at trust (higher) rates (24%).
Assets within trust revalued at market value on death of life tenant (so, Tax-Free uplift). Heldover gains will be included in IHT however.
IIP: CGT on death of life tenant of LIFETIME trusts post 03/06?
Which trusts retain the benefit as per pre 03/06?
No CGT uplift; trust subject to IHT, so gains wiped out and acquisition cost reset to value on death.
IPDI
Bereaved Minors
Death before 18 in ‘18-25’ trust
Vulnerable/Disabled Trusts
A&M Trusts:
1. What was one?
2. CGT when beneficiary becomes absolutely entitled to trust assets at specified age?
3. Can holdover?
- Hybrid between DT/IIP; beneficiaries absolutely entitled to income at specified age <25. Capital gains could be postponed indefinitely.
- Rx as disposal from trustees
- Yes, unless had prior right to income.
Share Matching rules to work out CGT when disposing of shares?
Same Day
Within 30 days (Countering B&B)
In Share Pool
IHT >£2m does what?
Tapers RNRB by £1 for every £2 (Lost at £2.3m)
RNRB: when property left to:
- Discretionary Trust?
- IPDI?
Unavailable, as no one ‘closely inheriting’ i.e. direct descendants.
Available as direct descendants have IIP
IHT ‘£3m’ limit?
???
Conditions to qualify for Gifts out of normal expenditure?
Form?
Must be from income, not affecting standard of living.
IHT 403
Lifetime Transfers include?
Exempt
PETs: Individual, Bare Trust, Disabled Trust
CLTs: Others
PET £338k, after 2yrs CLT £150k, after 2.5yrs dies.
What’s the IHT?
PETs not counted towards NRB in lifetime. So:
PET chargeable: £13k (out of NRB) x 40%, -40% (taper) = £3120
The PET has then used the NRB up, £150k chargeable: £150k x 40% = 60000
CLT £400k, six years later £200k, two years later dies. What is the IHT?
£400k -£325k x20% = £15k paid at the time, no further tax as >7yrs before death.
At the time: £200k x 20% = £40k. Then further 20%/£40k due to death within 7yrs.
Seven year cumulation: £200k. Therefore £325k - £200k = £125k can be set against estate on death.
Deductions allowed from estate for?
Reasonable Funeral expenses.
IHT: Borrowing for Business/Agricultural relief does what?
E.g. borrowing £600k, to buy £800k BR?
Reduces value of assets.
£800k - £600k = £200k included in estate (Prevents double benefit of deductible loan + 100% IHT relief)
Excluded property prior to budget?
Pension Funds
Non-UK Property/UTs/OEICS for Non-Dom
Reversionary Interest Trusts
IHT maximums? For BR? For AIM?
£1m for NRBs
Currently:
- No BR/AR Limits
- AIM 100% Relief
From April 2026:
- £1m Shared BR/AR 100% Relief per taxpayer, with 50% Relief over £1m
- AIM only 50% relief (Effective 20%)
- Lifetime Transfers applies from 30/10/24. So gift and death <7yrs = PET & 50% relief.
Reduced Rate IHT for charitable giving?
Leave 10% net estate to charity, pay only 36% to HMRC.
IHT: Quick Succession Relief?
% relief, on net increase in estate of second ro die, where period between transfer of property and death is <5yrs.
QSR Formula
IHT Paid x QSR x (Increase to Estate/(Increase to Estate + Tax))
Individuals dying simultaneously?
Beneficiary dies <6mths after testator?
For IHT purposes; died at the same time.
Avoid double charge via provision in will, for beneficiary surviving certain time.
IHT: Transfer of NRB?
When should claim be?
Up to 100% NRB gained from married spouse.
Claim should be made within 2 yrs (or 3mths of becoming PRs) by PRs on 2nd death.
100% BR available for?
Unincorporated Businesses
Shareholding in Unquoted
EIS/SEIS (NOT VCTs!)
50% BR available for?
Controlling Shareholdings in Fully Listed Companies
AIM
Land/Buildings/Plant//Machinery in connection with Business
BR ownership conditions?
For >2yrs. If inherited on death of spouse, inherit original date of ownership.
Agricultural Relief available on?
Not?
Land (Not development land), Growing Crops, Farm Buildings
Not Animals, Equipment
Not XS of open market value over agricultural value (Deemed 70%).
100% Agricultural Relief?
50%?
100%: Owner-Occupied Farms/Tenancies (also land let under tenancies exceeding 12mths starting after 31/08/95). I.e. OWNED/Vacant Possession in 24mths..
50%: Interests of Landlords in Let Farmland. I.E. LET/No Vacant Possession in 24mths.
Where both BR & AR available, which is applied?
Farm with property development?
Agricultural Relief
Agricultural Relief on Agricultural value, BR on enhanced value.
Woodland Relief?
What may be better?
Relief/deferral of tax on timber from death until sale.
If occupied from commercial purposes: claim BR at 100% (Better than WR i.e. deferral)
GwR cannot result in double charge from ? as?
Initial gift e.g. House to Kids
Cease interest e.g. moving out
Tax paid on original gift, offset against tax payable at death.
IHT: is an Interest free loan from parent treated as a GwR?
Not a GwR, as lender/parent has ability to demand immediate repayment. Remains in lenders estate.
POAT for
- Land?
-Chattels?
-Tangible Property?
None if?
Land/Chattels must be revalued when?
- Land: based on market rentals
- Chattels: 2.25% of capital value
- Intangible Property: Receipt of income: 2.25% of capital value
Cash value of benefits <£5000
Every 5 years
POAT: could catch what?
Exclusions?
Any asset disposals since 18/03/1986 (IHT conception)
- Former owner by virtue of will/intestacy subsequently varied
- Enjoyment is ‘incidental’ e.g. ill health, disability
- LA policies where return of premium retained, balance in trust for otherd
Form IHT 500 for?
Electing asset to be subject to IHT, to avoid POAT.
IHT: If
1. Shares
2. Land to unconnected persons within 3-4yrs
sold for less than the equivalent IHT paid on estate before selling what happens?
Relief by recalculating IHT due.
Loss in XS of £1000/5% valuation on date of death.
(Must have been sold by Executors, within 4yrs, loss claimed within 7yrs)
- IHT: Value of life policies if transferred during lifetime?
- Special Valuation Rule?
- When might this rule NOT apply?
- Market/Surrender Value.
- Cannot be less than Premiums Paid - Sums Paid Out. (Market value still used if higher).
- Term <3yrs, or, Premiums >2/3rds term + Premiums in any year does not exceed double any other year.
IHT: Lifetime (CLT) Transfers usually charged on who? by when?
Transferor. Payable by 6mths post-transfer, or, if Apr-Oct, by Following April.
IHT: CLTs tax due when after transferor dies?
Tax for chargeable events due 6mths after end of death month
IHT: If transferor wishes to pay IHT on CLT?
“Gross up’ the CLT. E.g. Gift with 20%.
E.g. £10,000 net of tax: Pay £12.500.
- IHT: If transferor pays tax: £350k net gift, tax payable?
- What are these ‘Grossed Up’ values used for?
- (£350k - £325k) x 0.25 = £6250
So, paying £356,250 nets £350k.
OR ((£350k - £325k) /0.8) x 0.2 - Used for future cumulations.
IHT: Gifts to Bare trust?
Who is liable to IHT?
PET
Beneficiary liable for any tax on ‘failed’ PETs.
IHT: Gifts in to Disabled Trust are?
Can settle themselves if potentially disabled in future?
PETs
No periodic/exit charges, nor tax if settlor makes it 7 yrs.
Yes ‘Self-Interest’ Trust.
IHT: Gifts to LiT/IIP Trusts?
Pre-2006: PET
Post-2006: CLT; charges involved
- Unless IPDI
IHT: Gifts to DTs?
20% >£325k
DT: Periodic Charge?
10yrly regular charge based on 30% of average IHT charges through trust lifetime
- Max 6% of total trust value
DT: Exit Charge?
Max 6% XS (30% of Lifetime Rate 20%) above NRB
IIP Trusts: Transfer of value on?
Life Tenant Death
Appt under Flexible Trust
Beneficiary Death
DT: Broadly speaking 10yrly exit periodic charge is?
(Trust Value - Available NRB) x 6%
CLT tax for £425k in to DT, if paid by:
Trustees?
Transferor?
Trustees: £100k x 20% = £20k
Transferor £100k/0.8 x 20% = £25k
DT at 10 yrs worth £525, periodic charge?
Effective Rate?
£500k - £325k = £200k
£200k x 30% x 20% = £12,000
£12k/£525k = 2.2857%
All £600k distributed to beneficiaries on 11th anniversary, last periodic effective rate 2.2857%. Exit charge?
£600k x 4/40 (Whole-Quarters since Anniversary) x 2.2857% = £1371
£400k in 18-25 trust, absolute interest at 25, exit charge?
(£400k-£325k) x 6% x 28/40 (Whole quarters from 18th birthday) = £3150
What were A&M trusts?
Type of pre-2006 DT, transfers in were PETs, exempt from charges.
A&M Trust options after 2008?
- Income/Capital to beneficiary at 18 - No Charges
- Capital to beneficiary at 25, - Only Exit Charge
- Unchanged, capital to beneficiary after 25 - Periodic & Exit Charges
IHT legislation in?
Inheritance Tax Act (IHTA) 1984
Automatically not resident?
- <16 days in UK/year
- <46 days if not resident for previous 3 years
- Works full-time overseas
Automatically UK Resident?
- 183 or more days in UK (Days counted as midnight)
- Home in the UK:
o Own for 91 days, present in it for 30 in tax year
o If also has overseas home: present for <30 days - Full-time work in UK
Resi/Dom: Split Year if?
If coming/going for work, selling UK home, then may be ‘split’
No automatic test, then, sufficient ties test:
3/5 if leaving, 4/5 if arriving of:
- UK Spouse/Children
- Accommodation in UK
- Substantive work (>40 days/yr)
- >90 days during either two previous years
- More time in UK than any other country
Resi/Dom: ‘Exceptional Circumstances’: Up to?
60 days may be excluded due to births/deaths/sudden or life-threatening illness
Deeming Rule?
- If >2 UK ties, >30 ‘daytimes’ in UK, >1 yr resident out of 3, then any days beyond 30 ‘qualifying days’ are deemed days of presence
Domicile: Automatically adopt?
Fathers
- Deemed Domicile if?
- Lose domicile for IT/CGT if?
- Lose domicile for IHT purposes if?
- Resident for 15/20 tax years
- Leave for 6yrs.
- Leave for 4yrs.
Resident in UK taxed IT/CGT/IHT on?
Worldwide assets
Not resident in UK:
- IT?
- CGT?
IT: Only UK duties. SP taxable.
CGT: Not liable. Free after 5yrs.
Remittance Annual Tax Charge?
£30,000 if resident 7/9 years
£60,000 if resident 12/14 years
Exceptions: Age <18, <£2000, Not Electing for Remittance
Exceptions for remittances out of foreign income?
Personal effects
<£1000, For Repair
In UK for <275 days
Art for Public Display
Offshore Trusts: set up by people not domiciled in the UK
- Tax?
IT: If UK Resident Trustee: subject to UK IT.
Gains by Trustees; CGTable
Settlor to overseas trust; IHTable
Who Self-Ax?
Self-employed
Company directors
Extra Income/Taxes
High Income Child Benefit Charge
Taxes under Self Ax?
IT
C2 + C4 NICs
CGT
Self-Ax Tax return timelines?
Online: 31/01 after tax year
Paper: 31/10 after tax year
Payments on Account when?
None required if?
1st Payment: Due 31/01
2nd Payment: Due 31/07
IT payable <£1000, >80% IT liability deducted at source/PAYE
Balancing Payments when?
Due 31/07. Includes C2s, CGT, Student Loans
Late payment from taxpayer?
Unpaid tax beyond 30 days after balancing payment?
Return not submitted by 31/01?
>3mths late?
>6mths late?
Repayment interest for overpayments?
Base Rate + 2.5%
5% penalty if unpaid tax beyond 30 days after balancing payment
- £100 Fixed Penalty
£10 daily penalty, for max 90 days
Higher of £300/5% Outstanding
BR -1% (‘Minimum Floor’ of 0.5%)
Dates:
31/01?
03/03?
31/05?
06/07?
31/07?
05/10?
31/10?
31/01: Online Self-Ax returns & 1st Payment on Account due.
03/03: Everybody who has not paid tax due (To avoid 5% penalty).
31/05: Employers should have issued P60s (Shows tax paid).
06/07: Expenses/benefits on P11D issued to employees.
31/07: 2nd Payment on Account.
05/10: Deadline to tell HMRC you need to complete a return and not sent one before.
31/10 Paper Self-Ax Tax returns due.
PAYE K Code?
Where taxable benefits in kind/deductions > Allowances
Month-End Procedures:
Tax month dates?
HMRC must be paid PAYE, NICs, Student Loans by ?
Eligible employers can deduct ?NIC allowance if?
6th – 5th.
22nd
Employment allowance £10,500 deducted if NIC <£100k prev yr
Year-End Procedures:
P11D?
P11D (b)?
Employees given P60/P11D by?
P11D: For each employee with taxable benefits/expenses
P11D (b): NICs on expenses/benefits
Employees employed at EOTY given P60 & P11D by 31/05
Overseas Tax Affairs: HMRC has ? to Ix offshore non-compliance
12 yrs
Failure to disclose income/chargeable gains penalties:
- Countries auto-sharing information?
- Countries sharing on demand
- Countries not exchanging
- Hide wealth by diverting to secretive jurisdictions
- Same
- 50% higher
- Double
- Further 50%
What is the Ramsay principle?
Courts can look at end result of series of transactions for tax
Finance Act 2004: firms marketing tax avoidance schemes must?
Register with HMRC as per Disclosure of Tax Avoidance Schemes (DOTAS)
General Anti-Abuse Rule (GAAR)?
General Anti-Abuse Rule (GAAR) applies if ‘yes’ to:
1. Tax arrangement giving benefit?
2. Relate to GAAR tax (All but VAT)?
3. Main purpose was obtaining tax advantage?
4. Abusive under ‘Double Reasonableness Test’?
- Tax-geared penalty up to 60% of counteracted tax
What happened to Disguised Renumeration Schemes: paid scheme users via never-repaid loans?
Loan charges accumulated and taxed as income spread across 3yrs (Retrospective punishment)
When do you need to tell HMRC you need to complete a tax return by if you haven’t before?
5th October following relevant EOTY
Main legislation for tax evasion?
Criminal Finances Act 2017
SDLT paid within?
14 days of ‘Effective Date of Transaction’ (Usually completion)
Residential Leasehold Property SDLT?
Lease Premium (Like freehold SDLT) at:
0% <£250k
5% £250k - £925k
10% £925k - £1.5m
12% >£1.5m
+
Net Present Value (NPV)
0% <£150k
1% of NPV >£150k
Present Value = Annual Rent x Yrs of lease, then apply discount factor
Non-Residential Leasehold Property SDLT?
Lease Premium (Like freehold SDLT) at:
0% <£150k
2% £100k
5% XS Over £250k
+
Annual Rent/NPV
0% <£150k
1% <£4.85m
2% on XS beyond £5m
Anti-Avoidance Rate of ? on Companies/Collective Iv buying properties
15%
Non-UK Residents/Companies: Additional ? SDLT surcharge
2%
Additional properties surcharge:
SDLT?
LBTT/LTT?
3% - Now 5%
4%
No relief for first time buyers in which UK country?
Land Transaction Tax in Wales
Refund can be claimed if replacing main home and sold within ? mths (SDLT/LTT), or ?mths LBTT
36
18
Stamp Duty: Payable on documents transferring ownership of?
How much?
Shares, stocks, UTs
0.5% of consideration paid for shares (SDRT paid to HMRC by stockbroker)
Shares, pay:
- SD if over ? rounded to?
- SDRT on any consideration, rounded to?
Are they deductible for CGT?
If over £1000. Rounded up to nearest £5.
Rounded to nearest penny.
Yes.
VAT: tax on?
Usually paid how often?
When annual accounting used, when are returns due?
Output on goods and services provided/Input tax on those purchased
Quarterly.
By 7th day of month, after month of VAT period ending.
VAT: Registration Threshold?
Deregistration threshold?
Within 30d if turnover >£90,000, or, expected to go over within 30 days.
- Deregistration threshold £88,000
VAT: Rates? on what?
20% Standard
5% Reduced Rate: Heating fuels, Contraception
0% Food, Drink, Water/Sewage, New Build Contractors
Exempt: Finance Products, Education
‘Partially Exempt Business’ is?
VAT claimed?
Business makes both exempt and taxable supplies.
Can recover input tax for exempt supplies if total value <£625/mth AND <half total VAT.
VAT: Special Schemes?
‘SCAF’
- Second Hand: VAT 16.67% on difference between buy/sell price (‘Margin Scheme’)
- Cash Accounting: Output VAT when customer pays, not when invoiced. Up to £1.6m.
- Annual Accounting: If taxable supplies >£1.35m. x9mthly/x3q returns
- Flat Rate: if expected turnover <£150k. VAT as %annual turnover. Must leave if last 12mths turnover was >£230k.
Agricultural VAT?
Flat Rate: 4% ‘Flat Rate Addition’ on sales to VAT-registered customers. No need to submit returns.
- Cannot if Non-Farming Activities >£90,000
Imported Goods VAT?
‘Postponed VAT Accounting’: Declare Import VAT, reclaim as Input tax on same return
(‘Reverse Charge Procedure’)
VAT: Bad debt relief?
If customer fails to pay, business still must make VAT payment, except:
o Turnover <£1.35m
o Debt >6mths old, <3.5yrs old
o If debt written off, to separate bad debt account, or, handed to factoring company
o If company did not charge more than normal selling price for items
VAT: Late penalties?
1st: Surcharge Liability Notice; if late during 1yr surcharge period Surcharge
- Again: Default Surcharge of 2% Unpaid VAT (Smaller businesses after 3rd default)
- Again: Increasing penalties of 5/10/15% of unpaid VAT
CT calculation?
‘DECOLA’
- Net Profit
+ Depreciation/Entertaining/Chargeable Gains
- Other income/Losses (Capital)/Allowances (Capital)
= - PCTCT
CT: Charged for what periods?
Accounting periods: never longer than twelve months.
CT: Rates?
Rates, per profits:
- Small Profits Rate of 19% for <£50,000
- Marginal Taper for £50,000 - £250,000
- 25% for >£250,000
CT: Chargeable gains eligible for BAD relief?
No
CT: Can losses be carried back?
Claimed within?
Limit to ‘Unused Losses’?
Can be offset against other income/gains of same period, or, previous 12mths.
- Claimed within 2 yrs
- Losses made during final year of trading, carried back 3 years
- Unused losses: Carried forward but only 50% of XS over £5m in current period
- Change of ownership may prohibit
CT: Self Ax by when?
If late?
12mths after accounting period, or, 3mths after notice of return.
- £100 for 1/7 late, further £100 for 3/12 late
- +10% of CT Bill at 6mths late
- Further + 10% of CT Bill at 12mths late
CT: Payable when?
<£1.5m: CT payable 9mths after accounting period
>£1.5m: Quarterly Payments
- Starting 6mths 13d after accounting period, then 3mthly
- >£20m pay 4mths earlier than above
- Interest charged on underpayments: taxable, deductible against CT profits
CT: When might a company + 51% companies need to pay CT quarterly?
If Profits > (£1.5m/No 51% Companies + 1)
CT: Company tax returns submitted when?
CT payable when?
Within 12mths of accounting period.
SME/Mediums: 9mths post end of accounting period.
Larges: Quarterly
What is a close company?
5 or fewer shareholders, or, controlled only by shareholder-directors (then called participators).
Charge on Loans made by close company to ‘participators’ (i.e. Shareholders)?
33.75% on amounts outstanding at 9mths post accounting period.
- Prevents lending post tax profits to shareholders instead of paying (IT’able) salary/dividends.
Interest on loans to buy close company shares deductible?
Yes - Allowable deduction for IT.
Subject to UK CT on worldwide income and chargeable gains if?
Incorporated in UK
Or Management/Control in UK
NSI Products?
- Premium Bonds?
- Direct Saver?
- Guaranteed Inc/Gr Bonds?
- Income Bonds?
- Interest in Monthly Prizes
- Easy Access, Yrly interest
- Fixed rate savings paying mthly income/reinvested
- Easy access savings, Mthly interest
(If bonds in the name; monthly interest)
1.How are GILTs taxed?
2. What is accrued interest scheme?
3. Accrued interest on sale proceeds IT’able if?
1.Fixed-interest, 6mthly, paid gross, taxable as ‘Savings Income’.
CGT free.
- Reclaiming IT relief on portion of ‘accrued interest’ priced in on buy, but ultimately still taxed on.
- Nominal Holding >£5000 any day during tax year.
Corporate Bonds tax?
Taxed as savings interest
Exempt from CGT
- What is a deeply discounted security/bond?
- Amount payable on maturity will exceed issue price by more than 0.5%/yr.
- Lower of 0.5%/yr or 15%.
How are deep discounted bonds taxed?
The gain is IT’d on transfer/redemption.
- Losses may be relieved against income
- To prevent double taxation; exempt from CGT
- Permanent Interest Bearing Share (PIBS): Issued by ? How do they pay interest?
- How is the interest taxed?
- On demutualisation become?
- Used to be by Building Societies.
Pay fixed interest gross on 6mthly basis. No redemption date. (‘Undated Stock’) - Taxable as savings income, eligible for SRB/PSA. No CGT.
- Become Perpetual Subordinated Bonds (PSBs).
Costs when:
1. Buying Shares?
2. Selling Shares?
3. Dividends?
- SD (Paper)/SDRT (Electronic)
- 0.5% paid for shares (SDRT paid to HMRC by stockbroker) - Subject to CGT
- Marginal IT Rate beyond allowance
How is income from an Investment Trust taxed?
Income usually as dividends.
Rx as Savings Income.
IT over allowance.
Rental income:
1. How is it taxed? Via Cash Basis usually if less than how much? What does this mean?
2. Is there an allowance? If claimed you cannot?
3. Does it count as relevant earnings for PCs?
1.Taxed as IT. Expenses accounted for when money paid/received, not when income/expenses incurred. When <£150k.
2. Annual Property Allowance £1000. Cannot claim expenses.
3. Not ‘Relevant UK Earnings’ for PCs (Unless Furnished Holiday Let until April 2025)
Rental Property mortgage interest?
Interest: Now receive 20% tax credit on mortgage interest paid
- Currently excludes Furnished Holiday Lets (Ending April 2025!)
- Excludes Non-Residential property
- What are capital allowances?
- Types?
- Replacement Furniture Relief?
- Tax relief for businesses for Equipment, Machinery, Business Vehicles (Collectively called ‘Plant & Machinery’).
- ‘FAW’t about cpt allwncs
First year: 50% or 100%.
Annual Iv Allowance: 100% up to limit of £1m.
Writing Down: 18% (6% on certain things like ‘Integral Features’, Solar Panels etc).
Replacement Furniture Relief: Deduction for replacement of furnishings in residential dwelling, beyond reasonable modern equivalent
o Includes white goods
o Baths, toilets etc covered under ‘repairs’
How do you inform HMRC of, and pay, property income?
Self-Ax.
Premiums on Short Leases: where lease/sub-lease is <50yrs?
- E.g. Paul leases Peter 25 yr for £30k premium, rent of £400/mth
Taxed as if rent; with premium reduced by 1/50th
-Premium Amount x (50 – Yr of Lease)/50
- £30,000 x (50-24)/50 = £15,600
Paul declares as property income
Granting of a lease?
Lessor and Lessee get what types of interest?
When property owner enters lease transaction with lessee.
Lessor: “Freehold interest” in property
Lessee: “Leasehold interest”
Sum received (Premium) on granting a lease of <50yrs taxed how?
E.g.
Part taxed as though it is income.
Amount of premium reduced by 1/50th for each year of lease after the 1st.
40yr lease for £100k:
E.g. Premium - ((Yrs-1)/50) x £100,000
If married intestacy rules?
Spouse: Chattels +£322k +/- Any estate beyond £322
- Children (Adopted Children): Half Estate beyond £322
If not married Intestacy mnemonic?
Rules?
Cash Poor Siblings Have Got A Hand
Everything shared equally between Children, Parents, Siblings, Half Siblings, Grandparents, Avunculi, Half Avunculi
EIS companies must have assets of?
<£15m before, or, <£16m after any Iv
Must hold EIS for how long before CGT Exempt?
3yrs
Quick Succession relief rates?
100% if death was within one year of the original transfer
80% within two years
60% within three years
40% within four years
20% within five years
Short Lease Premiums:
1. If lessee trades on premises?
2. If lessee sublets?
‘Rent’ deductible as trading income.
‘Rent’ deductible as property income.
‘Reverse Premium’ is?
Tax rx?
Sum paid by landlord to induce tenant to take a lease.
Tenant subject to income tax (‘Receipt of a Revenue Nature’).
Losses on property letting handled how?
Automatically carried forward, no claim needed.
Benefit of offering ‘substantial services’ as a landlord?
Taxed as a trade, meaning:
- Profits count for PC Tax Relief
- Allowable expenses
- CGT/IHT reliefs
Letting part of home: Letting relief is?
CGT relief when selling a property; the lower of:
- Same amount of Private Residence Relief
- £40,000
- Same amount as gain made while letting part of home.
‘Rent a Room relief’ limit?
If over?
£7500 Tax free
Normal basis e.g. Income - Expenses, or, Tax on XS over £7500 with no deduction for expenses.
Conditions for ‘Rent a Room’ relief?
At least 1 person receiving rent e.g. for a couple relief reduced to £3750pp.
Cannot be self-contained/unfurnished.
Must be residential.
What qualifies a furnished holiday let?
Available 210d/yr
Let 105d/yr
Total lettings >31 days is less than 155 days.
04/24 furnished holiday let rule changes?
No more BADR (CGT relief @ 10%).
No more capital allowances e.g. furniture/white goods
Rental income not PCable (No tax relief)
Woodlands relief?
No IT/CGT.
If owned >5yrs: IHT postponed until trees cut/sold.
Maximum contributions/AA?
If AI >£260k + TI >£200k:
-Reduced by £1 for every £2 ‘adjusted income’ > £260k, to minimum £10k
- Therefore, only £10k if adjusted income >£360k
Capped drawdown and MPAA?
If don’t exceed ‘Maximum Income’, they retain full AA (Does not trigger MPAA).
Investment Rules in Pension Schemes?
- Residential property, Tangible Movable Assets may trigger penal charges
- Borrowing to fund property/other Iv cannot exceed 50% net value of fund
Offshore Collectives tax rx?
Reporting Funds: Tells investor/HMRC about income and if distributed. Must be declared on self Ax. IT/CGT paid accordingly.
Non-Reporting: Taxed on all distributions (Not undistributed income) as per income tax (whether income or capital gains).
- Can be higher e.g. 45% vs 25%
Protected/Guaranteed/Structured Growth/Income Equity Products?
How to use for IHT?
Equity returns with some guarantee.
Taxed as Income/Gains.
E.g. £100k, worth £80k probate, pay more on redemption. Save 40% of £20,000 IHT.
Tax vehicles tax:
1. Offshore CEICs?
2. Listed Bonds/Medium Term Notes?
- Income as dividends, Gains CGT’d, ISA-able.
- Income as Savings, Gains CGT’d, ISA-able.
Life Assurance Investment types?
- Qualifying (i.e. Life Policies): regular level premiums annually for ten years (limit £3.6k)
-Non-Qualifying (i.e. Iv Bonds): Single Premium Policies as Ivs
UK Life Policies taxation?
Life fund: 20%
Policyholder: Policy profits IHT’d
Iv Bonds chargeable events? Taxed to which regime?
DAMPS
Death
Assignment (For Money)
Maturity
Part Surrender
Surrender
Savings
Qualifying Life policy chargeable events?
Surrender/Assignment/paid-up within ‘time-served’
- 10 yrs from when made
- Or 75% if sooner (i.e. ¾ of expected term)
Iv Bond: Tax on part surrenders?
IT on withdrawal exceeding 5% limit.
Chargeable events as part surrenders occur when?
End of each policy year, rather than each part surrender made.
Termination of a life policy?
Final Year is last policy anniversary to death
- If begins/ends in same tax year, the final and penultimate together
- ‘Sweep-up calculation’ to tax total profit under the policy
- If final proceeds + partial surrender > Total premiums paid (- deductible expenses)
- Chargeable Gain
- So withdrawals <5% deferred, rather than tax-free
Top Slicing relief calculation?
- Establish Gain (e.g. £50k - £80k) made over 10yrs.
- Establish Top Slice i.e. £3k
- Add top slice to income
- Multiply XS over BR by N. of years.
- Pay difference of HR/AR to BR (Paid within fund)
When cashing in a bond, how does this influence the personal allowance?
Must add WHOLE (Not top sliced) gain to clients other income to determine personal allowance.
When cashing in bond consider?
Inter-spouse transfer; Utilise spouse’s PSA/SRB or less marginal rate.
Traded Endowment Policies (TEPs)/Secondhand Endowment Policies (SHEPs) Taxation?
- No IT if premiums paid for 10yrs/>75% term
- May be capital gain
- Non-Qualifying/Sold <75% term
- Chargeable Event: E.g. HR +20%, AR +25%.
Friendly Societies ‘Exempt Policies’: free of UK tax on Iv income/capital gains limited to?
Limited to £270/yr, or, £25/mth premium level per individual (inc all policies)
Tax for?
1. Purchased Life?
2. Deferred Annuities?
3. Annuities for beneficiaries under wills/trusts?
4. ‘Structured Settlements’ for damages/personal injury ?
5. Immediate Needs Annuity?
- Part Savings(‘Interest part’)/Tax-Free (‘Capital’ Part)
- As per purchased, when taken
- Savings income
- Tax-Free
- Tax-Free
Iv Bond: How is each segment taxed?
SWPE
(Surrender Value + Withdrawals) - (Premium Paid + Previous XS Events)
(S+W)-(P+E)
If partial surrender >5%s –> Counted as withdrawal above (XS tax paid)
Arguably the best two benefits about Iv bond?
5% Withdrawals
Policy can be gifted
How is a purchased annuity certain different to a purchased life annuity?
Tax deducted from ‘Interest Part’ at?
Payable for a set term, regardless of death of annuitant.
20%
Tax rx if purchased annuity certain is paid to someone other than the person purchasing?
No tax-free element as deemed not ‘return of capital’.
Annuity paid as a result of a pension scheme tax rx?
Taxable in full, via PAYE.
Annuity for beneficiary under trust/will tax rx?
BR tax deducted from annuity payment.
If from will, beneficiary can demand capital value of annuity. Could buy a purchased life annuity then.
Form R89 used for?
Payment of annuity without deduction of tax as below PA.
Offshore life policies: ‘Time apportionment relief’?
(No. Days resident/No. days yet to run) x Chargeable Gain
£100,000 Iv bonds tax for AR?
Onshore: £20k within + £20k withdrawal (25% of Net Gain)
Offshore: £45k (45% of £100k)
Offshore life offices must appoint a UK tax rep if?
Policies paid >£1m in premiums
What is a Personal portfolio bond?
How are they taxed?
Single premium bond able to invest into private assets e.g. land, buildings, intellectual property.
Like Iv bond but deemed gain is 15% premiums paid in that and previous years. (i.e. additional 15% each year).
No top slicing.
Overseas Life Assurance Business (OLAB) taxed on?
So can grow faster than?
Writing business, NOT income/gains.
So can grow faster than UK BLAGAB: Basic Life Assurance and General Annuity Business
Life Policy in trust - if immediately before chargeable event:
1. Settlor Alive?
2. Settlor dead?
3. Non-Resi Trustees?
4. Minors?
- Gain as settlors income
- UK trustees chargeable on gain at trust rates (45% >£500 tax free limit)
- UK Beneficiaries taxed at their MR
- Parent as settlor, income/gains as parent(s) IT
IHT on Life Insurance Policies in trust?
Way round?
Premiums rx as transfers of value. (Could be G.O.N.E)
Bare: PETs
Others/IIPs: CLTs
POAT with regard to Life Policies in trust?
E.g. Charge does not ‘bite’ until total interests >£200k
- 2.5% x £200,000 = £5000
What is a Specially Purposed Vehicle?
Limited company, often in Channel Islands
-Allow Ivs from SIPPs, SASS, Charities
- Usually highly geared, up to 90%, over Iv period 3-7yrs
- Classed as ‘Non-Mainstream Pooled Ivs (NMPIs) only marketed to authorised persons and experienced investors
REITs conditions?
Closed Ended
75-90-125 Rules
>75% profits from lettings
>90% rental profits must be paid as dividend to investors within 12mths of end of accounting period
>125% Borrowing interest covered by rental profits
REITs distributions?
‘Tax-Exempt Property income’: Paid net 20% (Non-Taxpayers can reclaim excess deducted)
‘Non-Exempt’ Dividend Income
- Taxed as per dividends
CGT payable as normal
EIS Conditions?
£15m
Normal: <7yrs, <250, £5m (<£12m)
KI: <10yrs, <500, <£10m (<£20m)
Gross assets <£15m pre-Iv (No more than 16m post-).
Trading <7yrs from £200k turnover, <250 employees (Knowledge Intensive: <10yrs, <500 employees)
<£5m capital raised via EIS/VCT, with <£12m total Iv (Knowledge Intensive: <£10m, with <£20m total Iv)
EIS Tax Relief?
Unavailable if has what shareholding?
Max IT/CGT relief if gains reinvested?
Normal: 30% relief on Iv up to £1m, clawed back if sold in 3yrs
- Up to £2m, if >£1m in KI
30% Shareholding in company.
30% (IT) + 28% (CGT) = 58%.
SEIS Conditions?
<3yrs, <25, <£350k, <£250k
Start-up companies trading <3yrs
<25 employees with assets <£350,000
-Cannot raise >£250,000 through SEIS
SEIS relief?
Max Relief?
50% tax relief for Iv up to £200,000
- Cannot claim until company has spent 70% money raised
If re-Iv in same/next yr –> 50% gain is CGT exempt:
50% IT + 20% CGT on 50% Re-Iv gain
VCT conditions?
80%, <£5m, <£12m, <7yrs, <250
Minimum 80% of fund in ‘qualifying’ unlisted trading companies
- Max 15% in one company
- >10% of any Iv in a company must be in ordinary shares
- >70% of Iv by value in new ordinary/certain preference shares
- Companies must asset <£15m (Or <£16m after Iv)
<£5m capital raised via VCT, with <£12m total Iv (KI:<£10m, with <£20m total Iv)
Trading <7yrs from £200k turnover, <250 employees
- <10yrs for knowledge intensive, <500 employees
- Unless Iv is >50% average turnover
VCT Tax Relief?
30% relief on investments up to £200,00, clawed back if sold in 5yrs
Pension Tax Rates inclusive of TFC?
BR: 15%
HR: 30%
AR: 34%
NICs on Share Options?
1. Unapproved + Readily Convertible to Cash>
2. Approved?
- NICs payable
- NIC free
Eligible for taxation via remittance basis?
Income from outside the UK.
Earnings from employment overseas in that, and, 2 following years
Trading Losses and NIC C4s?
Class 4 NIC trading losses can only be carried forward (Indefinitely) and set against future profits from the same trade.
When is IHT payable?
6mths after the end of the month in which death occurred.
When is CLT tax payable?
Unless?
6mths after the end of the month in which death occurred.
05/04 - 01/10: 30th April following year
VAT Flat Rate available if turnover is?
<£150,000
Submit your online return by ? if you want HMRC to automatically collect tax you owe from your wages and pension.
30 December
Budget changes to NICs?
ER Contributions
- Secondary threshold reduced from £9,100 to £5,000.
- Secondary Rate to 15%.
- Maximum Employment Allowance from £5,000 to £10,500.
= (ER reduction in NICs if total NIC payable is <£100k)
Trading assets are ? for purposes of holdover relief on gifts.
Assets used by personal company.
Shares/Securities of trading company if:
- Not quoted on stock exchange
- Donor holds >5% voting rights in company
Tax consequences if held EIS shares for 2 years, then bought out by larger listed company?
EIS qualification lost; IT relief lost wholly/in part, gains on disposal may be CGT’able.
If buy shares from relative, initially invested via VCT what are the tax consequences?
Cannot claim IT relief, Shares exempt from CGT disposal.
CGT deferral for:
VCT?
EIS?
SEIS?
VCT: None
EIS: Reinvesting gains from other Iv into EIS. On selling EIS; original CGT payable, profit made on rolled over gain is tax free (if held 3yrs).
SEIS: 50% of original gain invested is written off, 50% deferred.
- When freehold property owner grants a lease to a new tenant, how is this usually paid?
- Tax treatment if lease…?
<2yrs?
2-50yrs?
>50yrs?
- Lump Sum (‘Premium’) Upfront
+ Mthly/Quarterly Rent
2.
<2yrs: Premium treated as rent
2-50yrs: Split Premium
>50yrs: Premium treated as a disposal of part of the property
How to remember salary/tax/NIC breakdown?
‘GPs TNT’
Gross - Pension - PA
Taxable Income - NICs - Tax
Employer NICs: Pay 13.8% (Soon 15%) on any Gross Pay >£9,100
