TC

Question 1

Stage 1 IHT Proforma - Chargeable Amount

Answer 1

transfer
less BPR
less marriage exemption
less AE - CY
less AE - PY

Question 2

Stage 2 IHT Proforma - Lifetime Tax (CLTs)

Answer 2

chargeable amount
less NRB available
= taxable amount
lifetime tax (25% donor/20% donee)
= GCT (IHT + chargeable amont if donor/chargeable amount if donee)

Question 3

Stage 3 IHT Proforma - Death Tax

Answer 3

GCT
less fall in value relief
less RNRB
less NRB available
= taxable amount
IHT (40%/36% if charity > 10%)
Tapered amount
Less QSR
Less lifetime tax paid
= Death tax

Question 4

Formula for net chargeable estate to check for 10% charity legacy

Answer 4

Taxable estate + charitable legacy + RNRB

Question 5

How to value shares for IHT purposes

Answer 5

Lower of:
- lower quoted price + 1/4*(higher quoted price - lower quoted price)
- average of highest & lowest marked bargains

Question 6

6 steps for calculating transitional trading profits (23/24)

Answer 6

1) calculate p/l for standard part
2) calculate p/l for transitional part
3) deduct overlap profits from transitional part
4) sum the 1 & 3 (if 3 or 4 -, finish here)
5) transitional profit = lower of 3 & 4 * 20%
6) Taxable income = step 5 if step 1 was loss, sum of step 1 + 5 if step 1 was profit

Question 7

How to value an asset transferred to an employee

Answer 7

Use benefit (asset value * 20%)

Plus

Gift benefit - higher of:
1. market value when gifted
2. market value when first loaned less 20% tax each year

Question 8

Relief of finance costs for letting residental property by an individual is the lower of what 3 figures?

Answer 8

20% * lower of:
1. finance costs
2. property profits
3. taxable NSI

Question 9

formula for the market value of gifted shared for capital gains purposes

Answer 9

market value = lower price + 1/2 * (higher price - lower price)

Question 10

PCRT 5 standards for tax planning

Answer 10

1. Client specific - should be tailored to clients
2. Lawful - realistic interpretation of the law, draw clients attention to material legal uncertainties
3. Disclosure & transparency - any disclosure must fairly represent all relevant facts
4. Tax planning arrangements - accounts must act in public interest, should not try to achieve results contrary to intention of Parliament, and should not make highly artifical and exploitative tax plans.
5. Professional judgement and appropriate documentation - some judgement needed, so documentation required for rationale behind decisions

Question 11

How to calculate adjusted total income and what is it used for?

Answer 11

Total income + payroll giving donations - grossed up personal pension contributions

Cap on income tax reliefs

Question 12

When do you freeze capital gain if replacement asset is depreciating?

Answer 12

Earlier of:
1. disposal date
2. 10 years from acq’n date
3. when it ceases to be used in business

Question 13

Substantial shareholding exemption criteria

Answer 13

• disposal of substantial (>10%) of shares
• trading company
• have been held for 12 months out of last 6 years