Taxation Of Investments

Question 1

Real Estate Investment Trusts - REIT’s

Answer 1

Can be ISA wrapped
Subject to CGT
2 income streams - dividend (paid gross) which dividend allowance can be used against
Other side is property letting which is ring-fenced from corporation tax. This side pays a property income distribution which is paid net of basic rate tax. Non-tax payers can reclaim

Question 2

Furnished Holiday Let’s

Answer 2

Must be in the UK or elsewhere in the EEA
It must be furnished
It must be let commercially to the public
It must be available for 210 days a year to the public
It must be actually let for 105 days
Periods of 31 days or more must not total more than 155 days

Question 3

Furnished Holiday Let’s

Answer 3

Income is treated as trading income which means expenses can be fully deducted from profits
CGT rollover Relief is available
Holdover Relief is available by way of a gift
Entrepreneurs Relief is available and the income is pensionable

Question 4

Rules for an EIS

Answer 4

Must be permanently established in the UK
Be unlisted when the EIS shares are issued
Have fewer than 250 employees
Have raised no more than £5m under the EIS
Carry on a qualifying trade
Have gross assets of no more than £15m and no more than £16m after

Question 5

Rent-A-Room

Answer 5

Where gross rent is not more than £7.5k, the income is not charged to tax
The property must be in the UK
The let accommodation must be used as a residence
Does not apply to unfurnished accommodation
The allowance is halved for couples

Question 6

REIT’s - the requirements

Answer 6

75% of the profits must come from the property letting business
90% of those profits must be distributed to investors within 12 months
125% of the rental income must cover interest on borrowings
Cannot be a closed company
Must be UK resident company