Stuff I didn't know from exam Flashcards
Is Critical Illness Cover and PMI treated as a benefit in kind if provided by an employer?
Yes for both
Is death in service treated as a benefit in kind?
No
What happens if someones income is over £100k in relation to Personal Allowance?
The PA decreases by £1 for every £2 they are over the £100k
What type of trusts have a CGT exemption of 50% of the main rate of CGT
What trusts do not?
Interest in possession trusts and Discretionary trusts have a CGT annual exemption of £1500 (50% of the normal exemption). The amount is reduced per trust if they have set up multiple trusts. Ie, if their is 2 trusts it is £750 each, if there are 3 its £500 per trust and so on until you get to 5 or more trusts which is where it is £500 per trust
Bare trusts have 3k because the assets are treated as if they are held directly by the beneficiary so
At CGT trust tax rates (see tax table) and look at 11.3
A company paying class 1 NICs would see these as WHAT?
NICs are deductible from the companies gross profits
What type of car out of diesel and petrol have a higher Co2 rate applied to them when they are treated as a BIK?
Diesel will have a higher C02 rate applied
In relation to benefits in kind, do new and used cars have different tax treatments?
It is based on the list price for when they are new so no.
What costs can be deducted for CGT purposes in relation to property?
Purchasing and sale costs
Enhancements to the property (ie, an extension)
FOR UNDERSTANDING:
-Repair costs CANNOT be deducted
-Insurance costs CANNOT be deducted for CGT but can be for income tax (ie rental)
-Maintenance CANNOT be deducted for CGT but can be for income tax (ie rental)
What is maintenance in relation to property and can it maintenance be deducted for CGT purposes?
What are enhancements? Same question as above
Maintenance of a property refers to the regular upkeep and repair needed to keep the property in good condition( fixing plumbing issues, painting etc) Maintenance CANNOT be deducted for CGT but can be for income tax (ie rental income)
Enhancements, refer to improvements made to increase the property’s value or appeal beyond its original condition. Enhancement costs CAN be deducted for CGT purposes
How is CGT taxed?
lOOK AT EXAMPLES
but remember it is taxed in proportion to the amount one part is in one tax bracket and the other part is in the higher tax bracket
Can the £3000 CGT exemption be carried forward?
Can the £3000 annual exemption for IHT be carried forward?
No
yes, for one year
Do you pay SD/SDRT when investing into listed shares? (ie, FTSE 100, FTSE 250)
Do you pay SD/SDRT when investing into AIM shares?
SD/SDRT is payable on listed shares
It is not payable on AIM shares?
LOOK INTO THIS IN MORE DETAIL
What can be deducted for gains arising from disposal of property for CGT purposes?
What can be deducted from the rental income from a property for income tax purposes?
Does renting out a separate annex count for rent a room relief?
What is a separate annex?
Annex’s do not qualify for rent a room relief. Rent a room relief is where a room is rented out and common areas in the property are used
An annex is an additional building or space that is attached to or located near a main structure, often serving a specific purpose.
How are onshore funds taxed?
How are offshore reporting funds taxed?
How are offshore non reporting funds taxed?
When is IHT of 36% payable
If 10% net estate is left to charity
Net estate = estate minus allowances!!!
DO CALCS ON THIS
How much of the business’s shares must you hold in order to qualify for business asset disposal relief
What is business asset disposal relief?
5%
Business asset disposal relief means gains are payable at a max rate of 10% regardless of how much the individual earns
Applies to those who dispose of whole or part of business or shares in a trading company where they have qualifying interest (atleast 5% ownership)
There is a lifetime gain limit of £1million
For VCT’s, after what period of time of owning the shares is there no CGT liability on any gains made upon disposal of the shares?
Same question but for EIS/SEIS
for VCTs in is immediately
For EIS/SEIS it is 3 years
When is an offshore trust subject to UK income tax?
An offshore trust is subject to UK income tax if the trustees are UK resident
Why would someone register for VAT despite turnover being lower than the VAT registration limit? (ie, they voluntarily register
If most of the customers are paying VAT
If customers pay VAT it means the business owner is likely paying VAT (WHY???) so by registering to pay it themself they can claim it back depending
CGT is not payable on death. True or false
True. IHT is.
Which of the following is most likely to qualify for business relief and WHY?
Shares in a trading company held for less than 2 years
Shares in a listed company held for 3 years
Shares in a non-listed company held for 4 years
Shares in a non-listed company held for 4 year
BR is available where the shares have been held for 2 years. Shares in listed companies are unlikely to qualify as atleast 5% of the share capital must be held
How are Interest In Possession Trusts taxed?
How are Discretionary Trusts taxed?
How are Interest in Possession trusts taxed =
Basic rate is paid by trust if not mandated to individual. Individual pays more if HRTP or ARTP
How are discretionary trusts taxed =
Income tax and CGT is paid by trust at highest rate. 45% and 20%. Beneficiary can reclaim back to their marginal rate of tax. E.g, if you are a HRTP you can reclaim 5% back, if BRTP you can reclaim 25% etc.
How is SD & SDRT paid?
What if the shares purchased are below £1000
If someone is a non taxpayer they can reclaim the PID income that is paid from the exempt element of the REIT which is 20% net of income tax
If £100 is paid, the reclaimable amount is £100/08 = £125, so £25 is reclaimable
What does it mean if VAT outputs exceed inputs?
What if imputs exceed outputs?
What is the difference between outputs and inputs?
What does it mean if VAT outputs exceed inputs?
Money is owed to HRMC
What does it mean if imputs exceed outputs?
HMRC owe money
Reporting funds = same as UK collectives. Gains are subject to CGT and gains CGT exemption can be used
Non reporting = Pays income tax on gains. Therefore, cannot use CGT exemption
If an investment bond is created and invested into 6 years and 2 months, is the bond in its 7th year or 6th year?
(this makes a difference in relation to the 5% withdrawal amount each year)
7th year
What does it mean to wish to renounce your domicile?
Renounce means to change or abandon
What benefits do EIS/SEIS have in relation to IHT
How does this differ to VCT’s?
EIS/SEIS = IHT business relief after 2 years
VCT’s = do not have business relief at all
Why do regular unchanged premiums of £400 result in a policy being classed as non qualifying?
Because under qualifying rules the max per year is £3600
400 x 12 = £4800 which is obvs more
A personal pension contributions extends an individuals basic rate band? True or false
True
QUESTION 44
How far back can losses be brought forward for CGT purposes?
Up to 4 years after the end of the tax year that you disposed of the asset.
Eleanor is buying two properties; a flat which will be her main residence which costs £300,000 and a buy-to-let property which costs £100,000. Eleanor is NOT a first-time buyer. How much Stamp Duty Land Tax will Eleanor pay?
Steve is a skilled computer technician and works for five subsidiaries of an estate agent providing IT services for which he earns £100 a week from each.
Does he pay NICs?
Steve appears to be taking advantage of the contributions threshold by fragmenting his earnings among several associated employers. HMRC will, in fact, aggregate these earnings (pool them together) so that he will pay NICs on £500 (£100 x 5) a week, less the primary contribution threshold.
Geri has recently invested £15,000 into each of the following investments: UK listed shares using a stock transfer form, gilts and AIM shares. What amount of Stamp Duty Reserve Tax will Geri pay in total?
£0
Stamp Duty Reserve Tax (SDRT) is not payable on the purchase of gilts or AIM shares.
Stamp Duty, rather than SDRT will be paid on shares where a stock transfer form has been used. Geri will therefore have no SDRT to pay.
Sarah is a basic-rate taxpayer and in August 2015 took out a 10-year qualifying life policy as a savings plan.
For the policy to keep its qualifying status, she cannot pay more than £36,000 in premiums over the term.
True or false
True!
Andrew is self-employed with net profits of £50,000 in the current tax year. He has asked you to explain what is included in the payments on account that he has to make to HM Revenue & Customs in January and July of each tax year. You tell him they will be made up of only
Income Tax, class 4 National Insurance contributions and any high income child benefit charge.
Payments on account include Income Tax, class 4 NICs and any high income benefit charge.
Any voluntary class 2 NICs, student loan repayments and CGT due can be paid alongside the balancing payment, although any voluntary class 2 and CGT can also be paid outside of the self assessment system.
Both GILTs and Corporate bonds can be traded on the stock exchange. True or false
True
Glen receives a regular income from letting student property of around £40,000 a year
When determining the tax due on an investment bond, which of the following will be ignored when calculating the taxable income for the year and identifying the tax band the gain falls in?
Gift aid donations.
Rationale
When calculating the taxable income for the year and identifying how much of the gain falls within the tax bands, gift aid donations are ignored, i.e., they do not extend the basic or higher tax bands for this calculation. Personal pension contributions still extend the bands in the normal way. The calculation takes into account both the starting rate for savings income and the personal savings allowance.
How does Jane receive basic-rate tax relief on her individual personal pension contributions?
She receives basic rate tax relief at source.
Contributions to personal pensions are paid net under the relief at source method. The pension provider will reclaim the 20% deducted at source and add it to Jane’s pension fund
What are ‘relevant property trusts’ ?
Interest in possession and discretionary trusts are both regarded as being this so therefore transfers into them are regarded as CLT’s
Tom is a trustee of the Davies family Interest in Possession trust. What rate of Income Tax will he be liable for, as trustee, on savings income?
If you have 2 spouses one UK dom and one non dom, do they have access to the residence nil rate band?
Yes as the property is being paid to a direct descendant
When must employers pay the income tax and NICs to HRMC that they deducted from their employees pay for both the electronic and manual method
The employer must pay the Income tax & NICS taken from employees to HMRC on 19th if done manually, or 22nd if done electronically
Why would HMRC issue a fixed fine in relation to someones self assessement?
If they failed to submit it on time
How do personal pension contributions work in terms of tax relief
How do occupational pensions contributions work?
How does Gift aid work?
QUESTION 1 OF 50 IN STUDY B
If you are required to live in an accommodation as part of your role is it treated as a Benefit In Kind, and therefore taxable?
Accommodation is not treated as a benefit in kind if required for your role (such as a groundskeeper) UNLESS you own more than 5% of the company which means it is.
Tell me the difference between the remittance basis and the accrual basis
Tell me me how the balancing payments work and 2 payments of account
What are inputs for VAT purposes
WHat are outputs for VAT purposes
outputs come from the outside (customers)
How does holdover relief work?
DO SOME NI CALCS!
Onshore bonds tax
Offshore bonds tax
Reporting funds/collectives tax
Non reporting fund tax
NOTE: Collectives and bonds are very similar mainly beside their taxation. Read start of 10.6
Onshore bonds tax =
Income tax is payable on chargeable gain following chargeable event (DAMPS). Treated as savings income (PSA available)
Non reclaimable 20% deemed to be paid (because the life office pays corporation tax at 20% in the bond) Can use Top slicing
Offshore bonds tax =
Income tax is payable on chargeable gain following chargeable event (DAMPS). Treated as savings income (PSA available) . No tax deemed paid internally. Can use top slicing
Reporting funds/onshore collectives tax =
Income tax on income (treated as either dividends income or savings income depending on fund). Capital Gains on disposal of fund are subject to CGT.
Note: Onshore funds and offshore reporting funds are taxed the same.
Non reporting fund tax =
Called roll up funds(as no income is paid until they are disposed). Therefore, capital gains on disposal are chargeable at income tax rates
How does it work in relation to employers paying NICS?
How do benefits in kind work if someone gets lower costs because they work in the place like a school
Look at question 10 on brand calc book for IHT
It is about agricultural relief
Rememeber:
agricultural relief is not available on the development value or for equipment (business relief may be available instead if farm is run as a business and trades)
agricultural relief is 100% on land or property if owned and occupied by person for 2 years from date of death
When doing calculations DONT FORGET ALLOWANCES!!!
Property income;
Remember: A basic rate tax deduction of 20% is given on someones full mortgage interest costs. This can then be deducted from the property income to lower taxable income
Ie, if someone has property income of 20k and pays £4000 in mortgage interest, £800 can be deducted from the 20k
SDRT is rounded to nearest penny
SD is rounded to nearest £5
LOOK AT QUESTION 4 FOR CAR EMMISSIONS FOR BIK
Remember: 16% = 55g
It rises by 1% for every 5g it goes up by to a max of 37%
Times this percenatges by the value of the car = taxable BIK value
Employers pay 0 NICS up to upper secondary threshold (£967) if employee is below 21
Employees pay NICs at same rate as normal
Employers pay 0 NICS up to upper secondary threshold (£967) if employee is below 21
Employees pay NICs at same rate as normal
What is the max class 4 NICS payable in a year for someone who is self employed and employed?
For someone who is self employed and employed, the max class 4 nics that they can pay =
Maximum payable for class 4 NICS in 6% bracket (50270 - 12570 @ 6% = 2262.00) minus the main rate class 1 NICS paid by that individual.
