Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CISI Inv Risk & Tax > Tax 2 > Flashcards

Tax 2 Flashcards

1
Q

What assets are exempt from CGT?

13

A
  • an individual’s principal private residence (PPR)
  • gifts between spouses and civil partner
  • gifts to registered charities
  • government and qualifying corporate bonds
  • premium bonds
  • assets held in ISAs, junior ISAs (JISAs) and child trust funds (CTFs)
  • most pension investments
  • proceeds from most life policies, written in trust or in the hands of the original owner
  • chattels (tangible moving objects) where the disposal proceeds do not exceed £6,000
  • a chattel which is deemed a ‘wasting asset’ (ie, it has an expected useful life of less than 50 years)
  • private motor vehicles
  • betting, lottery or pools winnings
  • foreign currency, when for own personal use out
  • shares in venture capital trusts (VCTs), provided the company maintains its VCT status and certain specified criteria have been satisfied
  • shares in enterprise investment schemes (EISs) and seed enterprise investment scheme (SEIS),
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the CGT exemption?

A

For 2024–25, this allowance is £3,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are CGT rates?

A

10% for basic rate taxpayers

20% for higher and additional rate taxpayers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are CGT rates for additional residential properties?

A

18% for basic rate taxpayers

24% for higher and additional rate taxpayers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How does Business asset disposal relief (BADR) work?

A
  • reduces the rate of CGT to 10% on all gains on qualifying assets, up to a maximum asset value of £1 million over an individual’s lifetime.
  • an individual has to be a sole trader or business partner of a company that they have owned for at least two years
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the CGT exemptions for trustees of trust and how much CGT is payable?

A
  • For personal representatives of deceased persons and trustees of certain settlements for vulnerable people, it is the same as for individuals (ie, £3,000).
  • For most others, though, it is half the level for individuals (ie, £1,500).
  • Gains above the allowance are taxed at 24% on residential property and 20% on all other assets.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How can losses be offset against CGT?

A
  • losses must be used first in the year in which they are realised, before applying any portion of the CGT allowance.
  • Any remaining losses that are not used in that specific year can then be carried forward indefinitely
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

CGT for OEICs, Unit Trusts and ETFs?

A
  • Capital gains made within an OEIC are exempt from tax.
  • Capital gains made by a taxpayer on any disposal of the OEIC are liable for CGT
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

CGT for Investment Trusts?

A
  • Providing they comply with the relevant rules, investment trusts do not pay CGT on internal gains.
  • An investor in an investment trust may be liable to CGT on any gains they make on disposal of it.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

CGT for REITs?

A
  • REITs are not subject to CGT on gains made on the disposal of property, providing that they distribute at least 90% of their profits each year to shareholders as dividends.
  • Investors disposing of a holding in a REIT may be liable to CGT on any gains made
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How are transfers of wealth into trusts treated for IHT?

A
  • Transfers of wealth into bare/absolute trusts are treated as potentially exempt transfers (PETs), (seven years rule)
  • A transfer of wealth into IIP & DISCRETIONARY trusts are CLTs = 20%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How much is IHT?

A

40% (or a reduced rate of 36% if more than 10% of the net estate is left to a registered charity).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the NRB and the RNRB?

A

£325,000 (frozen until 2025–26) - Any unused NRB is transferred to any surviving spouse or civil partner.

£175,000 (frozen until 2025–26) (The RNRB is tapered for estates with a net value over £2 million by £1 for every £2 over this threshold. This means that an estate valued at £2.35 million or above will not benefit from the RNRB)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the annual exemption for lifetime transfers?

A

£3,000 per tax year (can be carried forward one year only.)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the small gifts exemption for lifetime transfers?

A

£250

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the marriage gifts exemption for lifetime transfers?

A

£5,000 from a parent

£2,500 from a grandparent or great-grandparent

£1,000 from any other person

17
Q

What are the qualifications for gifts to political parties?

A

A political party qualifies if they have at least

  • two MPs in the HoC, or
  • one MP in the HoC and 150,000 votes

at the last election before the gift was made.

18
Q

What is the quarter up rule for quoted shares and securities in regard to IHT?

A

Taking the bid (lower) price plus a quarter of the difference between it and the offer price

19
Q

How are life policies treated for IHT if assigned to another?

A
  • If an individual takes out a policy on their own life, pays some premiums, and then decides to give the policy to someone else by assignment or by declaration of trust, they make a PET.

The value transferred the greater of =

  • the premiums or other consideration paid before the transfer of the policy, and
  • the open market value of the policy at the date of transfer.
20
Q

What is the difference between a deed of variation and a disclaimer?

A
  • a disclaimer effectively puts the inheritance back into the estate, meaning it will pass to the next eligible beneficiary
  • a deed of variation can actually divert property to any person(s) nominated by the individual who inherited under the will.
21
Q

How is IHT treated for the creation of discretionary and IIP trusts?

A

a) This will be a chargeable lifetime transfer (CLT) with tax payable at 20% if it takes the settlor’s cumulative total over the NRB.

b) Some trusts may utilise the RNRB, but not all.

c) If the settlor dies within seven years, then the full 40% rate of IHT will be payable.

22
Q

What are periodic IHT charges for discretionary and IIP trusts?

A
  • Periodic charges arise on every ten-year anniversary of the trust creation.
  • They apply to the trust, not the settlor; and whether or not the settlor is alive.
  • The charge is 30% of the current lifetime rate; in other words, it is 6% of the value of the trust fund (ie, 30% of 20%).
23
Q

What are the exit IHT charges for discretionary and IIP trusts?

A
  • It is taxed at 30% of the effective rate from the start of the trust; or, if it is after ten years, the effective rate from the last periodic charge.
24
Q

How are bare trusts treated for IHT when created?

A
  • The creation of a bare trust is a potentially exempt transfer (PET).
  • The trust will only be taxable if the settlor dies within seven years.
  • If the beneficiary dies, the trust will be included in their estate for IHT purposes.
25
Q

What are the intestacy rules?

A

Surviving spouse or civil partner entitled to:

  • statutory legacy of £322,000, which is index linked
  • personal chattels
  • half of the residue absolutely.

Children entitled to remaining half of the residuary estate at 18

CISI Inv Risk & Tax (17 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions