taxation Flashcards
self assessment tax return deadline for the year
- 31st october same year for a paper return submission
- 31st january the following year if submitted online
+ deadline for any payment of tax due
self employed paying less than 80% of last years income tax at source
- pay 31st of january in the tax year
- pay 31st of july following end of tax year
automatic oversees resident: 1. first overseas test
2. second overseas test 3. third ….
1) present in uk for less than 16 days in current fiscal year
2)not present for last 3 fiscal years, present in uk for 46 days in current fiscal year
3) work full time oversees, spend fewer than 91 days in uk, no more than 30 days spend working in uk
automatic uk resident: first, second, third resident test
1) present in uk for at least 183 days in a fiscal year
2) their only home is in uk: available for use 91 days or more and used for at least 30 days
3) work full time in uk
sufficient ties test
- family
- accommodation
- work
- 90-day tie
domicile :
origin
choice
deemed domicile
- acquired from mather or frather
- applies form age 16, leave country of domicile and settle in another country
- individual is resident in the UK for 15/20 consecutive years
residence and domicile
1. uk resident and domiciled
2. uk resident but non-uk domiciled
3. overseas resident
- taxable on their worldwide income as it arises (not have ot be remitted in uk )
- uk income taxable as it arises , foreign income (<2000 automatic remittance basis, >2000 choice between arising basis or remittance basis)
- taxable on uk income as it arises and overseas income not subject to uk tax
if remittance basis is chosen
- lose income allowances
- charge made at the following rates:
- 7/9 = £30,000 pa
- 12/14 = £60,000 pa
- 15/20 deemed domicile
taxable income:
1. non-savings income
2. savings income
3. dividend income
- income from work, pensions, social security benefits
profits from self-employment, profits from partnership
profits from property business (rent or investment into PAIF/REIT) - interest from bank, building societies, bond interest (including gilts) and debentures, income portion of purchased life annuity
- distributions to owners of company shares
income generated by capital gifted to a child under 18 ezceeding £100 pa will
be taxed as if its parents own income
starting rate band
if combined non-sabings income and savings income is below or at £17,570 then 0% taxed. if non savings income above annual personal allowance then reduced by £1 for every £1 above
NICS employees, employers, self employed
- pay class 1
- class 1a (on tax benefits e.g. company car) and 1b (PAYE income)
- class 2 (flat rate) class 4 ( variable rate)
taxation of trust
£1000 @ SRT
- 20% savings and property income
- 8.75% for dividends
>£1000 @ trust rate
- 45% savings and property income
- 39.35% for dividends
Bare trust
- taxed at individuals marginal rate
a settlor with 2 trust have a standard date band of
£500 in EACH trust
trusts CGT annual exemption
£6150
cgt applies to
Uk resident : worldwide gains
CGT exampt assets
- primary residence
- betting and lottery wins
- currency bought for holidays
- national savings certificate and premium bonds
- private motor car / classic cars
- life assurance policies
- gitls and qualifying bonds
- gifts to charity
- gifts to spouse
CGT liable assets
- company shares and non-qualifying bonds
- second propert or subsequent property
- units in CIS
- currency bought for gain
- chattels above 6000
allowable costs that can reduce gains
- fees and commissions for disposal
- advertising costs
- cost of purchase and costs associated with purchase
- enhancement expenditure e.g. extending property
IHT uk domiciled and non-uk domiciled
worldwide assets , uk assets
potentially exempt transfer (PET) (no trust)
- not taxed immediately but if person dies within 7 years of gift then chargeable
- if donor dies in 3 yrs then fully chargeable
- if 3-7 yrs then amount of gift added to estate declines at a declining rate
chargeable lifetime transfer (CLT) (discretionary trust)
- taxed at 20% immediately
- chargeable again if person dies within 7 yrs
exempt transfer for IHT
annual exemption : 3000 per fiscal year per individual
gifts in consideration of marriage : 5000 by a parent, exemption conditional on the marriage taking place
transfers to spouses or civil partners
transfers to political parties or charities
main residence nil-rate band (£175,000)
only covers transfers to ‘direct issue’ (wife, blood rleatives)
funds pay corporation tax
20% on income
tax at und level : REITS no tax on
income or gains
tax at investor level: REITS tax on
income (non-savings), witholding tax (20%), capital gain, stamp duty
tax at investor level: Equity CIS
income (dividend), capital gain
tax at investor level: debt CIS
income (savings), capital gain
tax at investor level: ITC
income (dividend), capital gain, stamp duty
tax at investor level: VCT
stamp duty
stamp duty and SDRT
- paid by buyer on aperless transactions at a rate of 0.5%
- stamp duty (paper)
certificated shares with a sale price of more than £1000
-SDRT
UK registered shares
optios on shares
uk convertible loan stock - exempt transfers
AIM/NEX shares
gilts
corporate bonds (unless convertible)
overseas securities
managers of unit trusts or OEIC surrenders units t
then PAY SDRT
SDLT payable on
purchase or transfer of property or land in UK
SDLT tax bands on main residence if additional residential properties bought then +3% in each band
up to £250,000 , 0
250,001-925,000, 5%
925,001-1,500,000, 10%
> 1,500,000, 12%
first time buyers of residenntial proeprty
0% on 425,000
5% on 425001 to 625,000
> 625,000 NO RELIEF USUAL RATES APPLY
non-residential purchase price and SDLT rate
150,000, 0%
150,001-250,000, 2%
>250,000, 5%
SDLT based on net present value charged at
1% of NPV on properties:
>125,000 for residenital properties
>150,000 - 5,000,000 for non-residenital properties
> above 5,000,000 2%
SDLT : purchases of property by non-natural persons
15% for properties over £500,000
corporation tax payment
- normally 9 months + 1 day after accounting year end
- large companies pay quarterly (firms with profits above £1.5mill)
Trading losses : company’s trading losses can be offset agianst
- income and gains from the same accounting period
- income and gains from the previous year
- trading profits from the same trade in future years
taxable supplies (vat)
standard rated (food), 20%
zero-rated(childerns clothers, raw food, printed books), 0%
reduced (energy products / services) , 5%
businesses making taxable supplies can
reclaim vat e.g. butcher shop 0% vat on products because raw can reclaim vat on electricity
discretionary and advisory services VAT
standard rated (20%)
execution only services VAT
exempt
tax relief is at
taxpayers marginal tax rate
investments in a stocks and shares ISA
- SHARES
- bonds and gilts
- unit trusts/ITs/OEIC/REIT
help to buy ISA
DEPOSIT 1200, THEN MONTHLY PAYMENTS OF 200
endned 2019
lifetime ISA
available to adults under 40
annual invesmtent limit 4000
offshore funds : reporting funds
- granted by HMRC provided and investors:
reports its income to HMRC and investors
complies with the reporting fund rules - dividends received from offshore funds are taxable to UK residents
- any capital gains taxed as capital gain
offshore funds : non-reporting funds (‘roll up funds’)
- income and gains taxed as income
- cannot use annual CGT exemption
- losses cannot be offset agianst gains
life assurance: qualifying vs single preimum
qualifying rules:
- at least annual premiums
- temr at least 10 yrs
- premiums totalling less than £3600 per year
qualifying policies:
- proceeds non-taxable
non-qualifying policies
- proceeds received net of 20%
- taxable at margin rate of income tax
tax deferral on life company bonds:
- life company bonds are single-premium, non-qualifying policies
>tax liability deferred until death or encashment (chargeable event)
> up to 5% of the capital may be withdrawn per year
> tax liability deferred until chargeable event
- gains are trated as savings income
income from porperty i.e commercial or REITs is taxed at but cots can be offset against property income such as
-non-savings income
- loan interest costs
qualifying bonds are
bonds that pay coupon interest
gilts
corporate bonds
local authority bonds
permanent-interest bearing bonds (PIBS)
eurobonds
transfer of assets between spouses does
not incur CGT
CGT on porperty that is not main property
18% for BRT
28% for HRT , ART
disposal of certain business assets CGT of
10%
ISA’s can include
property
gilts and corporation debt pay
pay no stamp duty
tax at fund level:
CIS
Investment trusts
REITS
- pay corporation tax at 20% on income and no tax on gians
- pay standard rate of corporation tax on income and no tax on gains
- pay no tax on income or gains
SDRT is payable on
- shares in UK company
- shares in foreign company with a share register in UK
- options to buy shares
- purchases of the right to shares
- UK convertible loan stock
stamp duty and SDRT exemption
- gilts
- corporate bonds and debentures until converted
- units in unit trusts and OEIC shares
- shares traded on the AIM, HGS of LSE , AQUIS
- bearer securities
- overseas securities
- new issues
no SDRT when purchasing unit trusts and OEICS . when fund manager surrenders then
SDRT
persons exempt from stamp duty and SDRT
- recipient of gifts
- registered charities
- LSE member firms (who are not fund managers) and are granted intermediary status by the LSE
profits made by sole traders and by partnerships are
taxed according to income
business making exempt supplies
cannot reclaim VAT
can offset costs and expenses against property income
loan interest costs
interest from borrowed money can offset income for qualifying activties
- buying plant or machinery for employment use
- buying an interest in an unquoted employee-controlled company
- investing in a partnership
- investing in a co-operative
- buying ordinary shares or lending money to a close company
entrepreneurs relief
- CGT 10%
SEIS
-50% INCOME TAX RELIEF ON 100,000 invesmtent per year
- 50% of gains reinvested in SEIS
COMMON REPORTING STANDARD sets out
- financial account info to be exchanged
- financial institutions required to report
- different types of accounts and taxpayers covered
- common due diligence procedures to be followed by financial institutions
gains from unit trusts incur CGT
BRT - 10%, HRT & ART - 20%
qualifying policy: endownment
can suffer short fall risk
non qualifying policies examples
Investment bonds/insurance bonds
* Unit-linked bonds and with-profit bonds
* Distribution bonds
Offshore life assurance bonds
same as non qualifying policies
but do not pay
corporation tax on income and gains within the fund
withholding tax on dividends is not
reclaimable
