Short Answers Flashcards
What are the criteria for rent-a-room relief
- furnished room in a main domestic residence.
- gross rents £4,250
- normal property income calculation
- unless elect for excess over £4,250 to be taxed ( with no deduction for expenses).
Real estate investment trusts (REITs)
- quoted property investment trust.
- dividends received by individual from REIT:
- treated as property income
- received net of 20% tax
What is the premium for granting short leases only?
A = premium x 51 - n
———-
50
Where n = number of years of leases
SAYE
£500 per month
- Invest 3 or 5 years,
- open to all, service restriction
- e’ee can use savings to buy shares of just take cash
- no tax on grant or exercise if option >80% of MV (20% discount)
- set up admin cost allowable for e’er
- gain on eventual sale of share liable for CGT only
- cost for CGT is the option price
CSOP
- Selected employees
- must own = MV at time of
Limit £30k unexercised at a time. No Tax on grant or exercise. CGT on disposal
What are the details of the accrued income scheme
- Accrued interest at the date of sale is taxes as savings income, rather than capital disposal
- the buyer is only taxed on the element of interest accruing after purchase.
- not apply if NV of security this year or last year
What are the details of Principal private residence relief?
Gain x period of occupation
—————————–
Total period of occupation
Deem Occupied Conditions
—————–———————————————-
Last 18 month of ownership — Must live in house at some point
Up to 3 yrs for any reason — Must occup. Before after absence
Up to 4 yrs wen req to work
else were in UK — Must occup b4 absence no need
to reoccup if work prevents
Any period were req to work
overseas — Must occup b4 absence no need
To re-occupy after absence if
Work prevents
What are the details of roll over relief ?
Individuals and company who replace and asset can defer (rollover) the gain on sale of the old assets
Conditions
‘’’’’’’’’’’’’’’’’”’
-> Old and new assets must be used in a trade or trades carried on by the taxpayer
- > Does not have to be the same trade
- > New asset must be purchased in 4-year window running from 12 months before to 36 months after sale of the old asset.
————–> qualifying assets
Land & Building
Goodwill - GW for Co. not a QA as intangible
Fixed plant and machinery
Ships, aircraft and hovercraft
Satellites, space stations and spacecraft
Shares not a QA no RR on purchase or sale of shares
What are the details and conditions for gift relief ?
Gifts and sales at under-value is deemed to have been sold at MV
——–>Relief is available for certain qualifying assets
______________________________________________________________
—> Assets used in a business - no minimum period of ownership
Shares in an unlisted (inc. AIM) trading co, no min %
—> shares in quoted trading Co. if doner owns at least 5% of voting rights - no need to own shares for 12 months, or work for Co.
The relief
- deemed sold at MV
- the gain deducted from MV to arrive at base cost of asset in hands of transferee.
- joint election required within 4 years after tax year of gift
- transferor realises a chargeable gain on the difference between the actual proceeds and the original cost
- the base cost to the donee is the MV less and gain deferred
If and individual becomes non-resident within 6 years of receiving gift was subject to gift relief, the gain held over becomes subject to CGT immediately before his departure from the UK.
What are the details and conditions for incorporation relief?
—-> Automatic if conditions are met
__________________________________
- -> treated as a sale of individual assets to a Co. for MV
- -> Gains are rolled into the base cost of the shares acquired from the co.
- -> transfer as a going concern
- -> all assets (except cash maya be retained by owner) must be transferred
- -> consideration must be wholly or partly in shares
Gain x Share consideration
‘’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’’
Total consideration
–> Deduct relief from the MV of the shares received from the co.
- take advantage of A.E.A and ER relief
- consider taking a proportion of relief as cash or loan
- added benefit is the delay of taking a salary from the co which would be subject to PAYE + class 1 N1 (e’er & e’ee)
Other points on IR
- balance allowance/charge on sale to the Co. Unless tax payer elects to transfer at TWDV ( are connected parties)
- ER relief 12 month clock starts again
- transfer is outside the scope of VAT unless transfer as going concern
What are the details and conditions of Entrepreneurs’s relief ?
- Assets owned for > one year
—- > Qualifying assets
- business assets (including goodwill) by sole trader or partner
- shares in a trading co where e’ee shareholding is >5% prior to disposal, for > = to 1 year.
- if share aqu’r under EMI
- ownership begins when shares granted (not acquire)
- no min 5% ownership.
Associated disposal of assets used personally but not used in partnership/personal trading Co., sold same time as partnership/Co. sold.
- no business relief on investments
- given after gift and incorporation relief (if claimed)
- applies to first £10m of qualifying gains during life time
- gains taxed at 10%
- gains qualifying for ER must be taken into account when establishink which rate applies to other capital gains
- keep ER gains separate
- deduct losses + AEA from other gains before gains qualify for ER
what are the details and consideration of IHT transfer of value?
—> Quoted shares and security
value for CGT at the lower of ;
====> “1/4 up” - from bid (buying) to offer (selling) price
====> Average of highest and lowest “marked bargains” (deals done during the day)
e.g. shares close at 495-515p, with average bargains marked at 480p, 510p and 530p
we take the lower of;
495 + 1/4 (515-495) = 500p, or
480 + 530 = 505p
‘’’’’’’’’’’’’’’’’’’’’’’
2
What are the details and consideration of Business Property Relief (BPR)?
Types of asset
“”””””””””””””””””
==> unincorporated business e.g. ST or shares in partnership - 100%
==>shares in unquoted (incl. AIM) trading Co. - 100%
==>shares in quoted trading company if transferor has control - 50%
==> Land, Buildings, P&M owned personally and used in a partnership, or a company controlled by individual - 50%
- related property taken into account when deciding control
- trading excludes dealing shares in land and building
- property anywhere in the world.
Time Limit
“”””””””””””””
—> Owned for at least 2 years or,
—> Asset or any replacement property owned 2 out of last 5 tax years.
—> property inherited on death of spouse deemed acquired when spouse first acquired.
—> inherited property not from a spouse, acquisition is deemed to be on donor’s death.
Excepted assets
“”””””””””””””””””””
- BPR not available if assets not used wholly in business for last 2 year or not required to for running the business.
- Rules exist to prevent owners stuffing Co. with investment and claiming 100% BPR when Co. pass to done
value transferred X relevant business property in Co.
“””””””””””””””””””””””””””””””””””””””””””
Total assets of Co. (ignore liabilities)
What are the details and consideration of Agriculture Property Relief (APR) (100% relief )?
—-> available on agriculture value of agriculture property in the EEA.
—-> the relief also applies to cottages, farm house, agricultural buildings and woodlands
—–> the relief available on shares in farming Co. controlled by donor.
Time Limits
“”””””””””””””
–> Owned and famed by owner - Min 2 yrs ownership
–> Owned and farmed by someone else - Min 7 yrs ownership.
INTRERACTION WITH BRP
“””””””””””””””””””””””””””””””””””
—> ARP takes priority
—> BRP than applies to balance not eligible for ARP if it qualifies for BRP.
Details of CGT and Trust
- Transfer into a trust is a chargeable disposal
- Proceeds are deemed to be MV
- Gift relief is available
Trust makes a gain when assets leave the trust, deemed proceeds = MV - Gift relief available to trustees and beneficiary
Income from Trust
- Income from a discretionary trust is received net of 45% tax & treated as non-savings income
- gross this up by 100/55
- there will be a 45% tax credit
income from life interest trust is receive net of 20% or 10% tax depending if it is paid out of trust’s non-savings or divided income.
Details of substantial share holding exemptions (SSE)
- Sale by one trading Co. of shares in another trading Co. (UK or Overseas) is EXEMPT where…
- –> seller owns >= 10% of shares being sold for at least 12mths continuously over 2 yrs preceding sale.
—> 12 month rule applies if assets owned by Co. being sold were used in a trade carried on by a “75% groups” before being sold.
—-> NO GAINS NO LOSSES available if shares sold at a loss.
What are the VAT partial Exemption rules ?
— If trader makes taxable and exempt supplies
1 - Calculate input tax on taxable outputs
2 - Calculate input tax on exempt supplies
3 - Calculate residual input tax =
(Taxable turnover/total turnover excl. VAT)X100%
irrecoverable VAT is assessed using the 3 de-minimises test need to satisfy one.
1) –> Total input tax no more than £625/mnth on Avge
value of exempt supplies no more than 50% of value of all exempt supplies.
2) –> Total input tax LESS input tax directly attributable to taxable supplies no more than £625/mth on Avge
value of exempt supplies no more than 50% of value of all supplies
3) —> Input tax relating to exempt supplies is no more than £625/mnth on Avge and no more than 50% of total input tax.
What are Trust
Trust: “A trust (also known as a settlement) is an arrangement in which a property is transferred to a group of persons (known as the trustees) by a person (known as the settlor) for the benefit of other persons (known as the beneficiaries).”
The powers and duties of the trustees and the wishes of the settlor are laid out in the trust deed.
Types of Trust: The main types are discretionary Trust and interest in possession trust (also known as life tenant trust).
What is a discretionary trusts
Discretionary trusts:
It is an arrangement whereby:
Settlor transfers legal ownership of property to a trust for the benefit of person/persons (known as beneficiaries’).
During the life of trust, the
beneficiaries have no legal right to receive any income or capital from the trust fund.
Any payment of income or capital out of the trust fund is at the discretion of the trustees, and subject only to the powers and duties specified in the trust deed.
Conditions to qualify for a FHL
Situated in UK, furnished and let commercially.
Available for letting for ≥210 days in a tax year.
Actually let for ≥105 days in a tax year.
Available for short term letting (≤31 regular days). If let
on long-term then total of such letting should ≤155 days
Benefits of FHL
Loss of FHA is set off from income of same FHA
FHA income Qualifies for personal pension scheme.
CGT roll-over & entrepreneur relief is available.
Capital allowances available on plant and machinery
including furniture and furnishings.
Real Estate Investment Trust (REIT)
- A trust which is quoted/ listed in stock exchange and it holds diversified portfolio of investment property to earn
rentals and capital appreciation. - Dividend received from REIT is net of 20% tax and not treated as dividend income instead it will be treated as property income and grossed up by 100/80
C/F Trading loss
• Trading loss may be carry forward and set-off from first available future trading profits from same trade.
• Losses may carry forward for indefinite number of years until all the loss is relieved.
• Partial claim is not allowed.
• Claim must be made to carry forward trading losses
within 4 years from the end of year of loss. E.g until 5
April 2017 for losses arising in 2012/13.
