Taxation Of Investments Flashcards
EIS details
Maximum £1million a year
Can carry back contributions to previous tax year
30% income tax relief
Free of CGT if held for 3 years
Dividends taxable
Qualifies for business relief if held for two years
SEIS details
100,000 limit
No carry back
50% relief tax reduced
Clawback in first 3 years
Free of CGT after 3 years
50% CGT exemption
Dividends taxable
Loss relief
Business relief
Venture capital trusts
200,000 maximum
30% tax reducer
Clawback 5 years
No carry back
No CGT deferral
CGT exempt immediately
Dividends tax free
No loss or business relief
REIT to qualify
75% of profits must come from property rental income
75% of assets must be involved in property rental
Bond top slicing short method, when to use and how to calculate
To be used if investor has used PSA. Do not use if investor has remaining PSA.
Divide gain by number of policy years bonds been held
Add to income
If all top slice within BRB, no tax. If some goes over, multiply the amount that’s over the band by number of years held.
This is chargeable amount and taxed at 20%.
Top slicing method long - basic into higher rate
• Identify if any PSA of £500 is available for the gain. If not you can use”short method”
• If full amount is available, calculate liability on full gain using PSA and remaining basic rate band
• Deduct tax credit (full gain @ 20%). This is relieved liability on gain (A)
• Calculate slice and tax £500 @ 0%, balance of basic rate band @ 20% and balance at 40%
• Deduct tax credit (slice @20%) and multiply by years held. This is relieved liability on slice (B) Top slice relief is Amount A less Amount B
• If amount B is less than zero, TSR is amount A
Taxation of offshore bonds
All rules are the same
No UK Tax within the fund so investor must pay full rate on gain
Top slicing relief calculated same way but it is deducted from the gross tax payable on the gain
Woodlands
Profits exempt from income tax
IHT - postpone as long as owned 5 yrs
CGT exempt
REIT conditions and distributions
Uk tax resident
Closed ended
Interest on borrowing must be 125% covered by rental
At least 90% profits paid out as dividends
Tax exempt ELEMNT. - classed as property income and taxed at 20%
Non exempt element - dividend payment paid gross
REIT subject to CGT
