Tax Flashcards
Tax: Maximum penalty for errors in tax
30% of the lost tax revenue (can be reduced for genuine mistakes)
Tax: Who can take advantage of the residence nil rate band?
Lineal descendants
Tax: What is the basic tax point?
- usually the delivery date of goods/services or the ship date
- but if VAT invoice issued within 14 days after that date, then the date of the invoice.
Tax: When does personal allowance get tapered? (1 per every 2 of income over this amount)
$100,000
Tax: Marriage allowance criteria
- both basic rate taxpayers
- married or partners
- transferring partner’s income is less than personal allowance
Once that’s established, they get basically the marriage allowance as a tax reduction
Tax: Allowance for savings income
Basic rate TP - $1000
Higher rate TP - $500
Additional rate TP - none
Tax: Allowance for dividend income
$2000 for ALL TP
Tax: 4 options for taking trading losses as a sole trader or partnership (not company tax)
- use in current year and/or prior year and use leftover losses to offset CGT
- carry it forward to offset trading income (not any other sort of income)
- carry forward to offset profit income when business is incorporated
- when person stops operating company, then can offset profit income from the last 3 years
Tax: Standard to see if someone is tax dodging
if HMRC can prove that the arrangement cannot reasonably be regarded as a reasonable course of action
Tax: Generally there’s no gift tax in the UK, but if you die within 7 years, then that gift is treated as if you were trying to avoid inheritance tax. But what gifts made during lifetime are always tax-free?
- gifts to spouse (except if the gift is to a non-UK domiciled spouse)
- gifts to charities
- the entire gift is under $250 each
- gifts on marriage (parent 5000, grandparent 2500, bride/groom 2500, everyone else 1000)
- regular or habitual gifts
- the first $3000 of any gift (can be carried forward one year too)
Tax: Tax rate for property transferred to a trust if paid by:
- the trust
- the settlor
- 20%
- 25%
Tax: Procedure for calculating lifetime tax
- identify the value transferred using the loss to donor rule
- deduct annual exemptions (up to $6000)
- identify the nil rate band and subtract any transfers that we made within the last 7 years from the nil rate band
- multiply the amount over the nil rate band by 20% or 25%
Tax: Business tax relief for inheritance tax
- Have you held the property for over 2 years?
- Is the business trading and not just an investment company?
- Is it a sole trader/partnership interest or private company? Then 100% relief.
- Is it shares in a quoted trading company that you have voting control of or land/buildings/plant and machinery of a company you control? Then 50% relief.
Tax: I am transferring land and buildings that I used to rent out to a farmer, is that eligible for relief from inheritance tax?
100% relief if held for 7 years (or 2 years if I were the actual farmer gifting land instead)
Tax: Inheritance tax rate
40%, unless at least 10% of the estate was left to charity, then it’s 36%
Tax: Unused percentage of nil rate band can be transferred to spouses, but what if I have 3 ex-husbands?
You can only transfer nil rate band from 2 spouses and only up to 100% total (so total nil rate band can only ever be 2x current nil rate band).
Tax: What is the residence relief with respect to inheritance tax?
If family home is willed to lineal descendants or spouses of such descendants, then can add up to $175,000 to the nil rate band for the house. Tapers for estates exceeding $2M. Can be transferred to spouses (same rules for other transfer of nil rate band apply)