Stuff I didn't know from exam

Question 1

Is Critical Illness Cover and PMI treated as a benefit in kind if provided by an employer?

Answer 1

Yes for both

Question 2

Is death in service treated as a benefit in kind?

Answer 2

No

Question 3

What happens if someones income is over £100k in relation to Personal Allowance?

Answer 3

The PA decreases by £1 for every £2 they are over the £100k

Question 4

What type of trusts have a CGT exemption of 50% of the main rate of CGT

What trusts do not?

Answer 4

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

Question 5

A company paying class 1 NICs would see these as WHAT?

Answer 5

NICs are deductible from the companies gross profits

Question 6

What type of car out of diesel and petrol have a higher Co2 rate applied to them when they are treated as a BIK?

Answer 6

Diesel will have a higher C02 rate applied

Question 7

In relation to benefits in kind, do new and used cars have different tax treatments?

Answer 7

It is based on the list price for when they are new so no.

Question 8

What costs can be deducted for CGT purposes in relation to property?

Answer 8

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)

Question 9

What is maintenance in relation to property and can it maintenance be deducted for CGT purposes?

What are enhancements? Same question as above

Answer 9

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

Question 10

How is CGT taxed?

Answer 10

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

Question 11

Can the £3000 CGT exemption be carried forward?

Can the £3000 annual exemption for IHT be carried forward?

Answer 11

No

yes, for one year

Question 12

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?

Answer 12

SD/SDRT is payable on listed shares

It is not payable on AIM shares?

LOOK INTO THIS IN MORE DETAIL

Question 13

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?

Question 14

Does renting out a separate annex count for rent a room relief?

What is a separate annex?

Answer 14

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.

Question 15

How are onshore funds taxed?
How are offshore reporting funds taxed?
How are offshore non reporting funds taxed?

Question 16

When is IHT of 36% payable

Answer 16

If 10% net estate is left to charity

Net estate = estate minus allowances!!!

DO CALCS ON THIS

Question 17

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?

Answer 17

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

Question 18

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

Answer 18

for VCTs in is immediately

For EIS/SEIS it is 3 years

Question 19

When is an offshore trust subject to UK income tax?

Answer 19

An offshore trust is subject to UK income tax if the trustees are UK resident

Question 20

Why would someone register for VAT despite turnover being lower than the VAT registration limit? (ie, they voluntarily register

Answer 20

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

Question 21

CGT is not payable on death. True or false

Answer 21

True. IHT is.

Question 22

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

Answer 22

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

Question 23

How are Interest In Possession Trusts taxed?

How are Discretionary Trusts taxed?

Answer 23

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.

Question 24

How is SD & SDRT paid?

What if the shares purchased are below £1000

Question 25

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

Question 26

What does it mean if VAT outputs exceed inputs?

What if imputs exceed outputs?

What is the difference between outputs and inputs?

Answer 26

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

Question 27

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

Question 28

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)

Answer 28

7th year

Question 29

What does it mean to wish to renounce your domicile?

Answer 29

Renounce means to change or abandon

Question 30

What benefits do EIS/SEIS have in relation to IHT

How does this differ to VCT’s?

Answer 30

EIS/SEIS = IHT business relief after 2 years

VCT’s = do not have business relief at all

Question 31

Why do regular unchanged premiums of £400 result in a policy being classed as non qualifying?

Answer 31

Because under qualifying rules the max per year is £3600

400 x 12 = £4800 which is obvs more

Question 32

A personal pension contributions extends an individuals basic rate band? True or false

Answer 32

True

Question 33

QUESTION 44

Question 34

How far back can losses be brought forward for CGT purposes?

Answer 34

Up to 4 years after the end of the tax year that you disposed of the asset.

Question 35

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?

Question 36

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?

Answer 36

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.

Question 37

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?

Answer 37

£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.

Question 38

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

Answer 38

True!

Question 39

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

Answer 39

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.

Question 40

Both GILTs and Corporate bonds can be traded on the stock exchange. True or false

Answer 40

True

Question 41

Glen receives a regular income from letting student property of around £40,000 a year

Question 42

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?

Answer 42

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.

Question 43

How does Jane receive basic-rate tax relief on her individual personal pension contributions?

Answer 43

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

Question 44

What are ‘relevant property trusts’ ?

Answer 44

Interest in possession and discretionary trusts are both regarded as being this so therefore transfers into them are regarded as CLT’s

Question 45

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?

Question 46

If you have 2 spouses one UK dom and one non dom, do they have access to the residence nil rate band?

Answer 46

Yes as the property is being paid to a direct descendant

Question 47

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

Answer 47

The employer must pay the Income tax & NICS taken from employees to HMRC on 19th if done manually, or 22nd if done electronically

Question 48

Why would HMRC issue a fixed fine in relation to someones self assessement?

Answer 48

If they failed to submit it on time

Question 49

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

Question 50

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?

Answer 50

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.

Question 51

Tell me the difference between the remittance basis and the accrual basis

Question 52

Tell me me how the balancing payments work and 2 payments of account

Question 53

What are inputs for VAT purposes

WHat are outputs for VAT purposes

Answer 53

outputs come from the outside (customers)

Question 54

How does holdover relief work?

Question 55

DO SOME NI CALCS!

Question 56

Onshore bonds tax

Offshore bonds tax

Reporting funds/collectives tax

Non reporting fund tax

Answer 56

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

Question 57

How does it work in relation to employers paying NICS?

Question 58

How do benefits in kind work if someone gets lower costs because they work in the place like a school

Question 59

Look at question 10 on brand calc book for IHT

It is about agricultural relief

Answer 59

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

Question 60

When doing calculations DONT FORGET ALLOWANCES!!!

Question 61

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

Answer 61

Ie, if someone has property income of 20k and pays £4000 in mortgage interest, £800 can be deducted from the 20k

Question 62

SDRT is rounded to nearest penny

SD is rounded to nearest £5

Question 63

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

Question 64

Employers pay 0 NICS up to upper secondary threshold (£967) if employee is below 21

Employees pay NICs at same rate as normal

Question 65

Employers pay 0 NICS up to upper secondary threshold (£967) if employee is below 21

Employees pay NICs at same rate as normal

Question 66

What is the max class 4 NICS payable in a year for someone who is self employed and employed?

Answer 66

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.