Test Questions Flashcards
Question 1 out of 20:
A husband and wife married in 1992:
a.Can each select domicile of the other if they wish
b.Share UK domicile if the husband was UK domiciled at marriage
c.Have their own domicile
d.Share UK domicile if the wife was UK domiciled at marriage
c. Have their own domicile
Question 2 out of 20:
Where an individual does not meet the ‘automatic test’ of residency for tax purposes, they will be tested against the:
a. Habitual determination test
b. Adequacy test
c. Sufficient ties test
d. Regular and habitual test
c. Sufficient ties test
Question 3 out of 20:
Bob gives £400,000 in 2021/22 into a Discretionary Trust. Apart from using his annual £3000 allowance, this is his only transfer. What tax may be due?
a. £75,000
b. Nil
c. £30,000
d. £15,000
d. £15,000
Question 4 out of 20:
Bob is UK domiciled but not UK resident. He dies in 2021/22 leaving £1,000,000 in gilts and £325,000 of other assets. How much IHT is due?
a. £114,000
b. £400,000
c. £274,000
d. Nil
d. Nil
Question 5 out of 20:
What rate of quick succession relief applies on death three and a half years after the initial transfer?
a. 40
b. 20
c. 0
d. 60
a. 40
Question 7 out of 20:
Deano makes a part disposal of land. The value of the land disposed of is £100,000 and the value of the part kept is £250,000. The original cost was £170,000. What is the deemed purchase cost of the part sold?
a. £48,571
b. £46,229
c. £140,000
d. £121,428
a. £48,571
(100,000 / (250,000+100,000)) x 170,000
Question 8 out of 20:
Ginny has bought US$7000 in an attempt to make money from the fluctuating currency market. For CGT purposes:
a. This is exempt
b. This is exempt unless the gain is more than 10%
c. This is chargeable
d. This is exempt unless the gain is more than 20%
c. This is chargeable
As the purpose was not personal but to make money, this is a chargeable event
Question 9 out of 20:
Civil Partners are treated the same way as married people for CGT purposes
a. Only where the partnership is registered post December 2011
b. In no cases
c. Only where the partnership is registered prior to December 2011
d. In all cases
d. In all cases
Question 12 out of 20:
Matt makes a Chargeable Lifetime Transfer on 1st July 2021. When must tax usually be paid?
a, 30th April 2022
b. 5th April 2022
c. 31st July 2022
d, 5th July 2022
a, 30th April 2022
Tax due after 6 months, when transfer made between 5th April and 1st October, tax is due following 30th April
Question 15 out of 20:
No charge is made under Pre Owned Asset Tax where the cash value of benefits is less than:
a. £5,000
b. £4,800
c. £2,500
d. £3,600
a. £5,000
Question 17 out of 20:
For how long must a business interest have been owned to qualify for IHT Business Relief?
a. 2 years
b. 1 year
c. 3 years
d. 7 years
a. 2 years
Question 18 out of 20:
Mabel married Arthur in 1952. She was, at the time, Canadian domiciled while Arthur was UK domiciled. She is now:
a. UK domiciled
b. Canadian Domiciled
c. Dual UK and Canadian domiciled
d. Able to select either UK or Canadian domicile
a. UK domiciled
Question 19 out of 20:
How much can Win and Fred give their grandson on marriage as an exempt transfer for IHT?
a. £5,000
b. £7,500
c. £15,000
d. £12,000
a. £5,000
Question 1 out of 20:
Karl lives in rented accommodation. He buys a house to develop and sell on. He does not live in the house:
a.The gain is automatically exempt under the Enterprise Act 2003
b.He cannot claim principle private residence relief for CGT
c.He can claim sole property relief instead of principle private residence relief
d.He can claim principle private residence relief as he does not own another property
b.He cannot claim principle private residence relief for CGT
Question 3 out of 20:
What top rate of tax is due at the time of making a Chargeable Lifetime Transfer of £400,000 in 2021/22 assuming no other gifts in the last 7 years?
a.20%
b.40%
c.0%
d.10%
a.20%
Question 4 out of 20:
What rate of Business Relief will apply to a holding of £1,000,000 in a company quoted on the Alternative Investment Market where this has been held for two and a half years prior to death?
a.25%
b .Nil
c.50%
d.100%
d.100%
Question 6 out of 20:
In order to benefit from the transfer of Nil Rate Band for IHT purposes, the second spouse must have died after:
a.6-Apr-08
b.5-Mar-08
c.8-Oct-07
d.5-Mar-07
c.8-Oct-07
Question 7 out of 20:
Which of the following is NOT a gift with reservation for IHT?
a.Giving away a freehold interest in land but keeping a lease granted 2 years before the gift
b.Giving away money but not the interest from the money
c.Giving away a house but remaining living there
d.Giving a painting to a son living next door
d.Giving a painting to a son living next door
Question 8 out of 20:
Dean was given an asset by his brother in March 2003. No money changed hands. He is now selling the asset. For CGT purposes the base cost is:
a.The market value at the date he acquired it LESS the costs of disposal
b.The market value at the date the original owner acquired it, PLUS purchase costs
c.The market value at the date his brother acquired it
d.The market value at the date he acquired it
d.The market value at the date he acquired it
Question 11 out of 20:
Danny emigrates to Australia. He keeps UK domicile for:
a.Life
b.7 years
c.3 years
d. 5 years
d. 5 years
Question 12 out of 20:
The adding back of previous gifts when calculating death IHT is know as:
a. The accumulation principle
b. The cumulation principle
c.The PET principle
d. The transferor principle
b. The cumulation principle
Question 15 out of 20:
Nicky bought a painting in June 1976. For CGT purposes, the base value is:
a. The value at 6th April 1998
c. The value at 5th April 1982
c. The value at 31st March 1982
d. The value at June 1976 rolled forward with inflation
c. The value at 31st March 1982
Question 16 out of 20:
Ant makes a Chargeable Lifetime Transfer of £200,000. Three years later he makes a PET of £1m. After a further 5 years he dies leaving nothing of value. For IHT:
a. Tax will be due on £1,000,000 less the Nil Rate Band and with taper relief applicable
b. Tax will be due on £1,200,000 but with taper relief applicable
c. There is no tax due
d. Tax will be due on £1,200,000 less the Nil Rate Band and with taper relief applicable
d. Tax will be due on £1,200,000 less the Nil Rate Band and with taper relief applicable
Question 17 out of 20:
In respect of CGT, losses:
a.Can be carried forward but must be used AFTER losses from earlier years
bCan no longer be carried forward
c.Can be carried forward but must be used BEFORE losses from earlier years
d.Can be carried forward and offset with gains from earlier years according to the individual’s wishes
c.Can be carried forward but must be used BEFORE losses from earlier years
Question 18 out of 20:
Alan comes to the UK from the USA to take up a 7 year full-time teaching post. He will be UK resident:
a.Only if he buys a UK property or marries a UK resident
b.After 5 years
c.From the start of the next tax year
d.From arrival
d.From arrival
Question 19 out of 20:
Jack is UK domiciled but his wife Sunita is not. When Jack dies leaving an estate of £1m, how much of the estate (aside from the nil rate band) is exempt for IHT?
a.£55,000
b.£325,000
c.£1,000,000
d.Nil
b.£325,000
Question 20 out of 20:
For how long does a gift with reservation remain in the donor’s estate?
a.14 years
b.It is always in the estate
c.7 years
d.It is immediately outside of his estate
b.It is always in the estate
Question 1 out of 20:
Which of the following is NOT an exempt transfer for IHT purposes?
a. £100,000 gift to the Labour Party
b. £1,000,000 to the Red Cross
c. £10,000 gift from Louis to his son on his wedding
d. £20,000 to the National Trust
c. £10,000 gift from Louis to his son on his wedding
Question 2 out of 20:
Which of the following is not usually taken as evidence of employment rather than self employment when looking at National Insurance?
a. Work done is an integral part of the business
b. Work is for more than six months
c. A contract of service
d. Substantial control over when and how the work is done
b. Work is for more than six months
Question 4 out of 20:
When calculating an individual’s total income what should be deducted?
a. Bank and Building Society Interest
b. Pension Contributions
c. Personal Allowance
d. None of these
d. None of these
Question 6 out of 20:
A citizen of the Republic of Ireland receives a personal allowance for UK income tax
a. Only if he is over 65
b. By special concession after 3 years in the UK
c. In no instances
d. Automatically
d. Automatically
Question 8 out of 20:
Which of the following will not receive credit toward National Insurance Contributions?
a. Someone who is unemployed and claiming benefits
b. Someone who is in full time training
c. An unemployed person
d. Someone who is self employed but not earning enough to pay class 2 contributions
d. Someone who is self employed but not earning enough to pay class 2 contributions
Question 9 out of 20:
Within how long of starting self employment must the individual notify HMRC for National Insurance Contribution purposes?
a. 2 months of the end of the month in which the self employment starts
b. 3 months of the start of the month in which the self employment starts
c. 3 months of the end of the month in which the self employment starts
d. 2 months of the start of the month in which the self employment starts
c. 3 months of the end of the month in which the self employment starts
Question 1 out of 20:
James is resident in the UK for 30 days in 2021/22, having previously not been resident. Will he be resident?
a. He will be resident if he has 4 or more ‘UK ties’
b. He will be automatically NOT resident
c. He will be automatically resident
d. He will be resident if he has 3 or more ‘UK ties’
b. He will be automatically NOT resident
Question 3 out of 20:
Alan comes to the UK from the USA to take up a 7 year full-time teaching post. He will be UK resident:
a. Only if he buys a UK property or marries a UK resident
b. After 5 years
c. From arrival
d. From the start of the next tax year
c. From arrival
Question 4 out of 20:
For CGT purposes, a Universal rebasing election:
a. Revalues all assets held at 31st March 1982 using their 31st March 1982 value
b. Revalues all assets whenever bought to a date elected by the member
c. Revalues all assets to the 5th April 1998 value for taper relief purposes
d. Revalues all assets as at the date of the election and sets new base values for the future - tax may be due
a. Revalues all assets held at 31st March 1982 using their 31st March 1982 value
Question 6 out of 20:
Holdover relief for CGT is given where:
a. Both parties to the transaction claim it
b. The Revenue deem it appropriate
c. The recipient claims it
d. The donor claims it
a. Both parties to the transaction claim it
Question 9 out of 20:
Sharon dies leaving an estate of £2,000,000. Half goes to charity and half to her nephew.
a. The Nil Rate Band does not apply as the gift to charity is greater than the Nil Rate Band
b. The nephew gets the full Nil Rate Band for IHT
c. The charity and the nephew each get half of the Nil Rate Band for IHT
d. The charity gets the full Nil Rate Band for IHT
b. The nephew gets the full Nil Rate Band for IHT
Question 11 out of 20:
Bill and Ben are in a same sex relationship but are NOT married or in a registered civil partnership. They each own a property:
a. They can only claim one principle private residence and HMRC will decide which is their main residence
b. They can claim the special exemption under the Gender recognition and discrimination act 2003
c. They can elect for only one of the properties to be their principle private residence and will receive the relief on this property
d. They can each claim principle private residence relief for CGT purposes
d. They can each claim principle private residence relief for CGT purposes
Question 12 out of 20:
When an asset is sold, the date of disposal for Capital Gains Tax is:
a. The date the money is exchanged
b. The date the sale is fully completed
c. The date of the contract for sale
d. The date the sale is started
c. The date of the contract for sale
Question 13 out of 20:
Holly dies leaving an estate of £1,000,000. She did not make any lifetime transfers. How many £3000 annual exemptions may be deducted from her death estate?
a. One per year from the age of 18 to her death
b. Two
c. One
d. None
d. None
Question 16 out of 20:
How many potential UK ties form part of the test for UK residence?
a. 3
b. 7
c. 5
d. 9
c. 5
Question 2 out of 20:
Which of the following is NOT a deductible expense for CGT purposes?
a. Repair Costs
b. Agents Costs
c. Legal Costs
d. Stamp Duty
a. Repair Costs
Question 5 out of 20:
Mike dies in 2021/22 leaving a UK estate of £1m. Half of this is a clothing company he has owned for 20 years. He also leaves a Spanish villa worth £325,000. He has no spouse and leaves everything to his next door neighbour. What Inheritance Tax will be due?
a. £400,000
b. £514,000
c. £286,000
d. £200,000
d. £200,000
Feedback: The clothing company should qualify for business relief and is therefore not taxed. This leaves an estate of £825,000. The Nil Rate Band is £325,000. The remaining £500,000 is taxed at 40%. He would not be eligible for residence nil rate band as he does not leave his estate to a direct descendent.
Question 6 out of 20:
Which of the following is NOT a form of Lifetime Transfer for IHT purposes?
a. Exempt Transfer
b. Capital Reduction Transfer
c. Chargeable Lifetime Transfer
d. Potentially Exempt Transfer
b. Capital Reduction Transfer
Question 8 out of 20:
What rate of Business Relief will apply to a holding of £1,000,000 in a company quoted on the Alternative Investment Market where this has been held for 18 months prior to death?
a. Nil
b. 25%
c. 100%
d. 50%
a. Nil
Must be held for at least 2 years
Question 1 out of 15:
Jenny invested £200,000 into a non-qualifying investment bond. She has taken 5% per annum as “income” and has received a total of £70,000 in this manner. She now surrenders the bond for £300,000. How much more tax will be due if she is a Higher Rate taxpayer? (Ignore any potential impact on her personal allowance)
a. £20,000
b. £34,000
c. £22,000
d. £37,400
b. £34,000
Tax due on £170,000 at 20%
Question 3 out of 15:
Jeff dies in October 2020, leaving a house valued at £2.4m and other assets of £1.2m. He leaves everything to his daughter. He lived with his partner Mary for 40 years until her death but was never married. What IHT will be due?
a. £1,310,000
b. £1,230,000
c. £1,140,000
d. £1,060,000
a. £1,310,000
Due to size of estate only £325,000 is available, and tax of 40%
Question 9 out of 15:
Danny emigrates to Australia. He keeps UK domicile for:
a. 7 years
b. Life
c. 5 years
d. 3 years
c. 5 years
15 out of last 20 years
Question 10 out of 15:
Multiple Response Question:
James and Sean are married. They own a large property as joint tenants. This is their main residence. The property has a basement that they let to a student couple. They estimate that the basement accounts for 25% of the total space within the property. They are about to sell the property and estimate that the overall gain will amount to £400,000. They have asked whether they will be liable to Capital Gains Tax and, if so, how this would work. They are both basic rate taxpayers. They should be aware that:
a. As they own the property as joint tenants, any gain will be split equally between them for tax purposes
b. Any taxable amount may be reduced by £40,000
c. The rates of tax due on residential property are 8% higher than the rates due on non-residential property
d. The rate of tax applicable to the gain will be determined by their other income in the tax year
a. As they own the property as joint tenants, any gain will be split equally between them for tax purposes
c. The rates of tax due on residential property are 8% higher than the rates due on non-residential property
d. The rate of tax applicable to the gain will be determined by their other income in the tax year
Question 11 out of 15:
OLAB is the business for UK life offices with who?
a. Policyholders who live in set states in the USA
b. Policyholders who live outside of the EEA
c. Policyholders who live outside the UK
d. Policyholders who live in the EEA states
c. Policyholders who live outside the UK
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Tina and John have two children: Ethan, who was born in March 2009, and Chloe, who was born in July 2011. Assuming that Ethan’s Child Trust Fund has not been transferred to a Junior ISA, what is the maximum investment that can be made into Junior ISAs for the children in 2021/22?
Select one:
a. £13,500.
b. £27,000.
c. £9,000.
d. £18,000.
c. £9,000.
Registered traders will typically submit VAT returns and pay any VAT due every:
Select one:
a. month.
b. six months.
c. three months.
d. year.
c. three months.
At a board meeting on 10 January a company decides to pay its managing director a bonus of £25,000. This is documented in the meeting minutes, which are distributed to the board members on 20 January. The bonus is paid on 2 February and is ratified formally at the company’s AGM on 1 March. On what date will PAYE be operated in respect of the bonus?
Select one:
a. 2 February.
b. 20 January.
c. 1 March.
d. 10 January.
d. 10 January.
Angus invested £30,000 into a non-qualifying UK life assurance investment bond on 1 June 2016. He took a partial withdrawal of £4,000 on 1 November 2018 and a further partial withdrawal of £2,000 on 1 September 2020. He surrendered the bond in November 2021 for £32,000. What chargeable gain, if any, did Angus make on his investment in 2021/22?
Select one:
a. £2,000.
b. £8,000.
c. Nil.
d. £4,000.
b. £8,000.
Dolomite Ltd made trading profits of £120,000 and a chargeable capital gain of £60,000 from the sale of a machine. What tax or taxes are paid by the company in the 2021/22 tax year?
Select one:
a. Corporation tax of £22,800 on the profit, and capital gains tax of £11,400 on the chargeable gain.
b. Income tax of £22,800 on the profit, and capital gains tax of £13,524 on the chargeable gain.
c. Income tax of £24,000 on the profit, and corporation tax of £12,000 on the chargeable gain.
d. Corporation tax of £34,200 in total on both the profit and the chargeable gain.
d. Corporation tax of £34,200 in total on both the profit and the chargeable gain
Natasha has shares in a company which she sells on 1 September 2021. If she does not want to create a gain or loss for capital gains tax purposes, she must repurchase the shares by:
Select one:
a. 14 October 2021.
b. 14 September 2021.
c. 30 September 2021.
d. 30 October 2021.
c. 30 September 2021.
Oliver, who is 45, has total earned income of £116,210 for 2021/22. How much more income tax will Oliver pay in 2021/22 compared to someone of the same age with total earned income of £100,000?
Select one:
a. £7,387.
b. £8,105.
c. £6,484.
d. £9,726.
d. £9,726.
Jake, a higher-rate taxpayer, receives earned income and dividend income. If he makes a personal pension contribution in 2021/22 that results in his dividend income being removed from the higher-rate tax bracket, the effective rate of tax relief will be:
Select one:
a. 40%.
b. 22.5%.
c. 45%.
d. 32.5%.
c. 45%. chapter reference 11D1
Grace has been resident in the UK for five years and is domiciled outside the UK. She owns substantial property and business interests in France, the income from both of which is paid into her UK bank account. How will this income and any gains from these assets be treated for tax purposes if she is taxed on the remittance basis?
Select one:
a. The income will not be subject to income tax, but any gains will be subject to capital gains tax.
b. The income will not be subject to income tax, and any gains will not be subject to capital gains tax.
c. The income will be subject to income tax, and any gains will be subject to capital gains tax.
d. The income will be subject to income tax, but any gains will not be subject to capital gains tax.
c. The income will be subject to income tax, and any gains will be subject to capital gains tax. chapter reference 5D3
Wesley, who is 14, was born in Spain shortly after the death of his father, who was Belgian. His mother was domiciled in France at that time but is now UK domiciled living in England. In which country is Wesley most likely to be domiciled?
Select one:
a. France.
b. United Kingdom.
c. Belgium.
d. Spain.
b. United Kingdom. chapter reference 5B1
A gain on the disposal of an asset is made on 1 June 2021. The capital gains tax liability for this disposal can be deferred if the gain is reinvested into an enterprise investment scheme, provided the reinvestment takes place between:
Select one:
a. 1 June 2020 and 31 May 2024.
b. 1 June 2020 and 31 May 2023.
c. 1 June 2021 and 31 May 2023.
d. 1 June 2021 and 31 May 2024.
a. 1 June 2020 and 31 May 2024. chapter reference 10K5
Penny buys a residential property in Oxford for £1,170,000 which includes £30,000 for fittings. Assuming this is Penny’s first and only property, how much stamp duty land tax is payable on the transaction?
Select one:
a. £57,750.
b. £42,000.
c. £60,750.
d. £117,500.
a. £57,750.
Blue Consulting Ltd’s CEO is Petra. She has assembled a team of eight company directors who own 100% of the shares. This is known as a[n]:
Select one:
a. close company.
b. enterprise investment scheme.
c. public company.
d. investment company.
a. close company.
ulie has earned income of £13,000 and interest from savings of £6,000. She has no other income or reliefs. How much income tax, if any, will she pay on her savings interest?
Select one:
a. £1,000.
b. £86.
c. £100.
d. £430.
b. £86. - chapter reference 9A1
When an asset is sold, the date of the disposal for capital gains tax purposes is the date that the:
Select one:
a. transaction physically occurred.
b. sale was agreed.
c. money physically changed hands.
d. contract for sale becomes binding.
d. contract for sale becomes binding.
Richard, who is a higher-rate taxpayer, sold one of his buy-to-let properties in July 2021, realising a gain of £24,000. He has carried forward losses of £10,000 and has not realised any other gains in the current tax year. How much capital gains tax would be payable in respect of his gain?
Select one:
a. £1,770.
b. £3,276.
c. £476.
d. £340.
c. £476.
Victor, a UK investor, has money in a bank account in the Channel Islands. He has not agreed for the bank to disclose details of the account to HMRC. The consequences of this are likely to be that:
Select one:
a. the interest will escape tax if the money remains offshore for 7 years.
b. he will be taxed at the higher rate regardless of his tax status.
c. withholding tax is deducted from interest payments.
d. any tax deducted cannot be offset against UK tax liability.
c. withholding tax is deducted from interest payments.
All of these are chargeable transfers for inheritance tax purposes, APART from a[n]:
Select one:
a. interest-free loan of £10,000 that is written off on death.
b. gift of £50,000 to an individual.
c. transfer of £15,000 to an absolute trust.
d. interest-free loan of £100,000 repayable on demand or death.
d. interest-free loan of £100,000 repayable on demand or death.
Sally is 32, and self-employed. In 2021/22 she has profits assessable to tax of £55,000 and she also makes a gross personal pension contribution of £3,000. What is Sally’s income tax liability?
Select one:
a. £9,432.
b. £8,232.
c. £8,832.
d. £9,472.
c. £8,832.
What expenses can be deducted from a company’s profits when calculating corporation tax?
Select one:
a. Depreciation on plant and machinery.
b. Entertaining expenses.
c. Charitable donations.
d. Depreciation on buildings.
c. Charitable donations.
Eric works in his wife’s business on a part-time basis and earns £150 per week. This means that he will:
Select one:
a. not qualify for State pension credits despite paying National Insurance contributions.
b. not qualify for State pension credits as he doesn’t pay the relevant National Insurance contributions.
c. qualify for State pension credits because he pays the relevant National Insurance contributions.
d. qualify for State pension credits even though no National Insurance contributions are due.
d. qualify for State pension credits even though no National Insurance contributions are due.
Malcolm, who is self-employed, had an income tax liability of £14,000 for 2020/21. His income tax liability for 2021/22 is £20,000 and he also has a capital gains tax liability of £4,000. Malcolm’s balancing payment on 31 January 2023 will be:
Select one:
a. £20,000.
b. £4,000.
c. £6,000.
d. £10,000.
d. £10,000.
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Amy, aged 15 and a non-taxpayer, is the beneficiary of a discretionary trust set up by her grandparents. If she receives an annual income of £1,000 from the trust, how much income tax can Amy reclaim on this income?
Select one:
a. £100.
b. £727.
c. £818.
d. £200.
c. £818.
All incomes received by beneficiaries in a discretionary trust is treated as through it has already been taxed at 45%. If you’re treated as though it has been taxed at 45%.
When would stamp duty land tax be payable following the transfer of ownership of a property?
Select one:
a. The transfer of ownership of a house from husband to wife as part of their divorce settlement.
b. The purchase of a flat for £130,000 where the carpets, curtains and domestic appliances have been valued at £6,000.
c. The purchase of a commercial property for £145,000.
d. The exchange of two properties, both valued at £550,000, between two owners without any cash changing hands.
d. The exchange of two properties, both valued at £550,000, between two owners without any cash changing hands.
Josef, 34, has been resident in the UK for 12 continuous tax years. If he chooses to claim the remittance basis he will be subject to an annual tax charge of:
Select one:
a. £50,000.
b. £30,000.
c. £60,000.
d. £90,000.
c. £60,000.
Boris has just paid his domestic gas bill which is £800 excluding VAT. How much VAT would he have paid on it?
Select one:
a. £160.
b. £80.
c. £120.
d. £40.
d. £40.
VAT on domestic energy is charged at a rate of 5%
Brian and Geoff are both self-employed. In this financial year, Brian has taxable supplies of £103,000 and profits of £70,000, whilst Geoff has taxable supplies of £90,000 with profits of £80,000. Which of them, if either, must register for VAT?
Select one:
a. Both Brian and Geoff.
b. Brian only.
c. Neither Brian nor Geoff.
d. Geoff only.
a. Both Brian and Geoff.
eorge died on 1 November 2021 and the beneficiaries of his will want to change it to reduce the inheritance tax liability that has arisen. To achieve this, they must enter into a deed of variation no later than 31 October:
Select one:
a. 2022.
b. 2023.
c. 2024.
d. 2025.
b. 2023.
A small company made a profit of £100,000 for their accounting period ending on 30 June 2021. What is the company’s corporation tax liability and when must this be paid?
Select one:
a. £20,000 corporation tax which is due no later than 1 April 2022.
b. £19,000 corporation tax which is due no later no later than 31 December 2022.
c. £19,000 corporation tax which is due no later than 1 April 2022.
d. £20,000 corporation tax which is due no later 31 December 2022.
c. £19,000 corporation tax which is due no later than 1 April 2022.
ian makes a gift aid donation to charity in 2021/22 and she has been advised to have this backdated to the previous tax year. What would the position be?
Select one:
a. She could have it treated as being paid in the previous tax year, and her previous year’s tax liability will be amended accordingly
b. She does not have the option to backdate the donation for tax purposes.
c. She could have it treated as being paid in the previous tax year, and she will receive relief in 2021/22 as a repayment.
d. She has the option to choose how the tax relief is allowed, either backdated or treated as a repayment.
c. She could have it treated as being paid in the previous tax year, and she will receive relief in 2021/22 as a repayment.
Any expenditure on equipment used in commercial property in excess of the annual investment allowance is eligible for a writing-down allowance in the year of purchase at a rate of:
Select one:
a. 18%.
b. 10%.
c. 20%.
d. 15%.
a. 18%.
Ulla has recently bought a new house and the effective date of the transaction was 7 November 2021. What is the latest date by which the stamp duty land tax must be paid?
Select one:
a. 14 November 2021.
b. 28 November 2021.
c. 21 November 2021.
d. 7 December 2021.
a. 14 November 2021.
David, a first-time buyer, purchases his new home for £350,000. The value of the property is £330,000 and the previous owner also leaves £20,000 worth of furniture and appliances. How much stamp duty land tax will David have to pay?
Select one:
a. £7,500.
b. £6,500.
c. £2,500.
d. £1,500.
d. £1,500.
Imka, who is a higher-rate taxpayer, dies at age 73 and nominates his uncrystallised defined contribution pension to go to his niece Sally. She is an additional-rate taxpayer and the pension fund is paid out to her within two years of Imka’s death. What rate of tax will Sally pay on withdrawals from the pension fund inherited from Imka?
Select one:
a. 40%.
b. 55%.
c. 0%.
d. 45%.
c. 0%.
When considering business asset disposal relief for capital gains tax purposes, the:
Select one:
a. reduced rate of capital gains tax applies to lifetime gains of £1 million or less.
b. asset must have been owned for at least one year before the disposal.
c. individual must be an employee of the company and hold at least 10% of the voting shares.
d. individual must be a director of the company and hold at least 20% of the voting shares.
a. reduced rate of capital gains tax applies to lifetime gains of £1 million or less.
n deciding whether an individual should be treated as employed or self-employed for tax purposes:
Select one:
a. the existence of a contract of service usually indicates that the individual is self-employed.
b. a self-employed individual cannot sub-contract someone else to carry out the work.
c. the existence of a contract to provide services usually indicates that the individual is self-employed.
d. a self-employed individual is never given set hours or engaged for a long period of time.
c. the existence of a contract to provide services usually indicates that the individual is self-employed.
Vasos has set-up an investment for the benefit of his grandchildren into which he makes substantial regular contributions. He funds it out of his routine outgoings and these don’t impact on his standard of living. In terms of inheritance tax, this would be regarded as a[n]:
Select one:
a. potentially exempt transfer.
b. chargeable transfer.
c. exempt expense.
d. exempt transfer.
d. exempt transfer.
Lena, who is an employed higher-rate taxpayer, wishes to file her return by paper for 2021/22. By which date must she do so?
Select one:
a. 31 October 2022.
b. 6 April 2022.
c. 30 December 2022.
d. 31 January 2023.
a. 31 October 2022.
Dirk is non-UK domiciled and has set up an offshore trust with no UK trustees. If Dirk can benefit from the trust, under UK anti-avoidance legislation:
Select one:
a. inheritance tax on the trust could be payable by him.
b. trust income could be attributed to him.
c. trust income and gains are not attributed to him.
d. trust gains only could be attributed to him.
b. trust income could be attributed to him.
An employer pays HMRC all money owed for PAYE and National Insurance contributions electronically. For the tax month of September this money must be paid across to HMRC by:
Select one:
a. 31 October.
b. 14 October.
c. 19 October.
d. 22 October.
d. 22 October.
Jake, a higher-rate taxpayer, receives earned income and dividend income. If he makes a personal pension contribution in 2021/22 that results in his dividend income being removed from the higher-rate tax bracket, the effective rate of tax relief will be:
Select one:
a. 32.5%.
b. 45%.
c. 40%.
d. 22.5%.
b. 45%.
Penny buys a residential property in Oxford for £1,170,000 which includes £30,000 for fittings. Assuming this is Penny’s first and only property, how much stamp duty land tax is payable on the transaction?
Select one:
a. £60,750.
b. £57,750.
c. £117,500.
d. £42,000.
b. £57,750.
Jenny, who is self employed, has made a gift aid donation in 2021/22 which she wishes to carry back to the previous year. What is the correct procedure in this situation?
Select one:
a. The relief is calculated as if it were given in 2020/21, but any repayment is included in the calculation for 2021/22. There will also be a reduction in the payments on account for 2021/22.
b. The relief is calculated as if it were given in 2020/21, but any repayment is included in the calculation for 2021/22. There will be no reductions in payments on account for 2021/22.
c. The relief is calculated as if it were given in 2020/21 and repaid immediately. There will also be a reduction in the payments on account for 2021/22.
d. The relief is calculated as if it were given in 2021/22 but will be repaid immediately. There will also be a reduction in the payments on account for 2021/22.
b. The relief is calculated as if it were given in 2020/21, but any repayment is included in the calculation for 2021/22. There will be no reductions in payments on account for 2021/22.
Jill invested into a non-qualifying UK investment bond when she was a higher-rate taxpayer. She transferred this to Gert, her husband, in 2017. He subsequently encashed it in November 2021 when, including the gain, he was a basic-rate taxpayer. What is the income tax position on the gain?
Select one:
a. Jill is liable for the gain and, as a higher-rate taxpayer, will pay 40% tax.
b. Jill is liable for the gain and, as a higher-rate taxpayer, will pay an additional 25% tax.
c. Gert is liable for the gain and, as a basic-rate taxpayer, he will pay 20% tax.
d. Gert is liable for the gain and, as a basic-rate taxpayer, there is no further tax to pay.
d. Gert is liable for the gain and, as a basic-rate taxpayer, there is no further tax to pay.
Sian runs her own limited business and has decided to voluntarily register for VAT. The most likely reason for this is that she can:
Select one:
a. claim output tax on her purchases.
b. use VAT to reduce her corporation tax liability.
c. use VAT to reduce her income tax liability.
d. claim input tax on her purchases.
d. claim input tax on her purchases.
Saul is self-employed and a higher-rate taxpayer. He makes a profit of £15,000 from his buy-to-let properties. When preparing his accounts for the current tax year, what dates must be used and how much tax is due on these profits?
Select one:
a. £6,000 income tax for the period which must end 6 April or 31 October.
b. £6,000 income tax for the period which must end 5 April or 31 March.
c. £2,850 corporation tax for the period which must end 31 January or 6 April.
d. £2,850 corporation tax for the period which must end 5 April or 31 March.
b. £6,000 income tax for the period which must end 5 April or 31 March.
Li Jing made a gift of £50,000 to her son in June 2021, having made no other lifetime gifts. The most appropriate life assurance policy for her to cover any potential inheritance tax liability on her estate would be a seven year:
Select one:
a. level term assurance policy with an initial sum assured of £17,600.
b. decreasing term assurance policy with a sum assured of £17,600.
c. decreasing term assurance policy with an initial sum assured of £50,000.
d. level term assurance policy with a sum assured of £50,000.
a. level term assurance policy with an initial sum assured of £17,600.
All of these are examples of zero-rated VAT supplies, APART from:
Select one:
a. books
b. public transport.
c. medicines.
d. cremation services.
d. cremation services.
Ben died in August, leaving a shareholding in a private company to his son Adam. The shareholding was valued on Ben’s death for inheritance tax purposes. If Adam subsequently sells the shares, the acquisition cost for capital gains tax purposes will be the:
Select one:
a. value placed on the shares for IHT purposes.
b. market value of the shares at the time of acquisition.
c. original purchase cost of the shares.
d. market value of the shares the day before his death.
a. value placed on the shares for IHT purposes.
If Josh transfers shares to his adult son what tax, if any, would always be payable on the shares that are transferred?
Select one:
a. Stamp duty reserve tax.
b. None.
c. Capital gains tax.
d. Income tax.
a. Stamp duty reserve tax.
- John is self-employed and his accounts run to 31 August each year, what will his taxable trading income for 2021/22 be based on?
A. Profits from 6 April 2020 to 5 April 2021
B. Profits for his accounts ending 31 August 2020
C. Profits for his accounts ending 31 August 2021
D. Profits from 31 August 2020 to the 5 April 2021
C. Profits for his accounts ending 31 August 2021
Liz has been off work sick for 6 months and is being paid through her employer’s income protection (IP) policy. Which of the following statements concerning the tax treatment of the IP is correct?
A. Liz will receive a gross amount of IP benefit from her employer as sick pay.
B. The premiums paid by the employer are not classed as an allowable expense.
C. The benefit is paid directly to the employer and treated as a trading receipt.
D. The premiums are treated as a benefit in kind for Liz.
C. The benefit is paid directly to the employer and treated as a trading receipt.
- Which of the following would be liable for National Insurance Contributions (NICs)?
A. Paul works as a part-time mechanic earning £120 per week, his second job is a florist earning £80 per week, and he also works some evenings delivering pizzas for which he earns £75 per week.
B. Stuart works for 2 separate companies, although there are some common directors between them, he is a builder for one company and works in the accounts department at the other. He earns £90 a week from each.
C. Steve is a skilled computer technician and works for 5 subsidiaries of an estate agent providing IT services for which he earns £100 a week from each.
D. Mark has two part-time jobs earning £95 and £130 per week each; they are separate companies with separate payrolls.
C. Steve is a skilled computer technician and works for 5 subsidiaries of an estate agent providing IT services for which he earns £100 a week from each.
- Jonathan has recently become self-employed and wants to know how Class 2 National Insurance contributions are normally paid. You can tell him that:
A. they are collected via self- assessment in one lump sum on 31 January after the end of the tax year to which they relate.
B. they are paid on account on 31 January in the year of assessment and 31 July following the year of assessment.
C. they are paid quarterly to the National Insurance Contributions Office.
D. they are paid monthly by direct debit.
A. they are collected via self- assessment in one lump sum on 31 January after the end of the tax year to which they relate.
- If Pauline incurred a capital gain on the sale of some shares on 4 May 2021, when would the CGT liability have to be paid?
A. 31 January 2023
B. 31 January 2022
C. 30 October 2022
D. 30 October 2021
A. 31 January 2023
- Which of the following is most likely to be classed as a gift with reservation for IHT purposes by HMRC?
A. Simon gives away his holiday home to his sister but continues to stay there paying full market rent.
B. Elaine gives away her antique jewellery to her daughter but cleans it annually.
C. Edmond gives his son his share portfolio but retains the right to dividends from it.
D. Andrea gives her antique chairs to her brother but always sits on them when she visits.
C. Edmond gives his son his share portfolio but retains the right to dividends from it.
- Why might an offshore fund with reporting status be preferable for a UK investor than one without?
A. Any gains on disposal are subject to normal CGT rules and taxed at 10% or 20%.
B. Investors can roll up gross income until they are liable for income tax at a lower rate.
C. Income can be accumulated in a low tax environment.
D. Tax is only payable on distribution of income or encashment.
A. Any gains on disposal are subject to normal CGT rules and taxed at 10% or 20%.
- Why might Tom, a higher rate taxpayer with an adventurous attitude to risk, want to invest a lump sum in an Enterprise Investment Scheme?
A. To have control over the investment
B. To gain CGT exemption after a holding period of 3 years
C. To receive dividends tax free
D. To receive 50% income tax relief on an investment of £200,000
B. To gain CGT exemption after a holding period of 3 years
- The James Family Discretionary trust accumulates its income and has no expenses. The trust‘s only income is gross interest of £2,000. How is the trustees’ total tax liability calculated, assuming this is the only trust created by the settlor?
A. £2,000 taxed at 20%
B. £1,000 taxed at 20% and £1,000 taxed at 45%
C. £2,000 taxed at 45%
D. £1,000 taxed at 10% and £1,000 taxed at 35%
B. £1,000 taxed at 20% and £1,000 taxed at 45%
- James is a non-UK domicile and his wife June is UK domiciled. James is considering making an election to become UK domiciled for IHT purposes. This is most likely because:
A. he wants to be able to use the full spouse exemption.
B. he wants to avoid IHT on his worldwide property.
C. he wants to backdate the use of the wedding exemption.
D. he wants to ensure both can use their available nil rate bands.
A. he wants to be able to use the full spouse exemption.
- Julian has an estate worth £3m. He regularly uses his annual exemption for Inheritance Tax but with his son setting up his own business wishes to make an outright gift to him of £500,000. Julian should be aware that:
A. the transfer will be immediately charged to tax at 20% over the nil rate band.
B. if he survives making the gift by at least 3 years there will be a reduction in the IHT payable.
C. if the gift to his son becomes chargeable, his personal representatives will be liable for the IHT due.
D. he must report the amount of the gift to HMRC within 6 months of making it.
B. if he survives making the gift by at least 3 years there will be a reduction in the IHT payable.
- Which of the following can be an effective strategy for reducing a company director’s liability to National Insurance contributions?
A. Sacrificing salary to increase the amount the company pays to company pension schemes
B. Giving up their company car
C. Arranging for their salary to be paid in ad-hoc lump sums rather than on a monthly or weekly basis
D. Increasing their contributions into a personal pension
A. Sacrificing salary to increase the amount the company pays to company pension schemes
- Of the following individuals, who would be eligible to make a pension contribution that would receive full tax relief?
A. Alex, a 78-year-old wishing to make a single gross contribution of £3,600
B. Leo, who earns £25,000 per annum and wishes to make a single gross contribution of £20,000
C. Steve, who has never previously contributed to a pension, wishes to make a single contribution of £40,000, his earnings last year were £52,000 but have fallen this year to £38,000.
D. Alison, a full-time homemaker who wishes to make regular monthly gross contributions of £420
B. Leo, who earns £25,000 per annum and wishes to make a single gross contribution of £20,000
- With regard to taxation, trustees of an interest in possession trust where the asset is a rental property should be aware that:
A. they will only ever be charged to basic rate tax on the rental income.
B. a higher rate taxpaying beneficiary will not owe any extra tax on rental income.
C. they are entitled to tax relief for the expenses they incur in managing the trust.
D. as trustees, they will be entitled to a personal allowance.
A. they will only ever be charged to basic rate tax on the rental income.
- For this tax year, Sharon has made gross pension contributions of £20,000. She has a share of partnership profits of £100,000 and paid interest of £60,000 on a loan taken out to finance the partnership. How much of the loan interest can be deducted for tax relief purposes?
A. £20,000
B. £30,000
C. £50,000
D. £60,000
C. £50,000
- Charlie sets up a discretionary trust in this tax year for his grandchildren for £425,000. He has already used his annual exemptions. How much inheritance tax (IHT) will be payable assuming Charlie pays it when he sets up the trust?
A. £40,000
B. £25,000
C. £20,000
D. £10,000
B. £25,000
- Geraldine died in the 2004/2005 tax year using 40% of the then standard nil rate band for IHT of £263,000. If her husband dies in this tax year, how much standard nil rate band can be applied for by his personal representatives?
A. £325,000
B. £430,200
C. £482,800
D. £520,000
D. £520,000
- Maureen has an asset that is worth so little that it qualified for a ‘negligible value claim’ on 1 September 2019. She now wants to backdate a claim for the loss she’s made to that tax year. Which of the following dates is the deadline for her to backdate the claim to 2019/20?
A. 5 April 2021
B. 30 July 2021
C. 30 January 2022
D. 5 April 2022
D. 5 April 2022
- Kim is an additional rate taxpayer and has recently created a trust for her 10-year-old daughter Amelia. This produces £150 in gross interest. What is the income tax liability, if any?
A. Nil
B. £30
C. £60
D. £67.50
D. £67.50
- Kayleigh, an additional rate taxpayer, Jo a higher rate taxpayer and Edna, a non- taxpayer, have all received a £1,000 interest distribution from their unit trust investment. None of them has any other savings or dividend income. With regards to these payments, which of the following statements are true? Tick all that apply.
A. Only Kayleigh will pay tax on the full £1,000.
B. Only Edna can arrange to have her distribution paid gross.
C. Any unused dividend allowance can be offset against the payment.
D. Jo’s tax bill will be £200, whereas Kayleigh’s will be £450.
A. Only Kayleigh will pay tax on the full £1,000.
D. Jo’s tax bill will be £200, whereas Kayleigh’s will be £450.
- Maureen, a basic rate taxpayer, has just invested £50,000 into a guaranteed income bond that has been constructed by the provider using a medium-term note. She should be aware that? Tick all that apply.
A. Her personal savings allowance can be used to reduce the amount of tax payable.
B. Any chargeable gains are subject to CGT in the normal way.
C. Her tax liability will be met at source with a 20% tax credit.
D. Products constructed in this way cannot be held in an ISA wrapper.
A. Her personal savings allowance can be used to reduce the amount of tax payable.
B. Any chargeable gains are subject to CGT in the normal way.
- Yared is considering investing in a single premium investment bond. As a basic rate taxpayer, he should be aware that: Tick all that apply.
A. he can withdraw up to 5% of the original capital each year without triggering a chargeable event.
B. he can reclaim the basic rate tax suffered by the life fund.
C. any gain he makes in the future could potentially be liable to capital gains tax.
D. he can assign the policy to his spouse, although that would be a chargeable event.
E. he can use top slicing on any future chargeable gain calculation.
A. he can withdraw up to 5% of the original capital each year without triggering a chargeable event.
E. he can use top slicing on any future chargeable gain calculation.
- Lynne and her husband are considering letting a room in their house. Which of the following is true regarding letting rooms in their main residence? Tick all that apply.
A. Where gross rent in a year is not more than £7,500, they will not be charged to tax.
B. Rent a room relief will not apply if the accommodation is unfurnished.
C. Rent a room relief is automatic.
D. Lynne and her husband can both claim rent a room relief of £7,500.
E. They can let the room for business purposes and claim rent a room relief.
A. Where gross rent in a year is not more than £7,500, they will not be charged to tax.
B. Rent a room relief will not apply if the accommodation is unfurnished.
C. Rent a room relief is automatic.
- When considering investing in a Venture Capital Trust (VCT), investors should be aware that: Tick all that apply.
A. income tax relief is withdrawn if the shares are disposed of within six years.
B. the company must not be a close company.
C. it must be a listed company.
D. the disposal of VCT shares are potentially liable to CGT at 10%.
B. the company must not be a close company.
C. it must be a listed company.
- Martin is considering investing in gilt-edged securities. He should be aware that: Tick all that apply.
A. interest is usually paid twice a year.
B. interest is taxed on a current year basis as earned income.
C. he can sell them at any point on the stock exchange.
D. he can claim any losses against future capital gains.
A. interest is usually paid twice a year.
C. he can sell them at any point on the stock exchange.
- Which of the following individuals has a potential Capital Gains Tax liability? Tick all that apply.
A. Susan lived in her home for 5 years before moving out 9 months prior to its sale.
B. Jim’s house was empty for 3 years while he was travelling although he lived there before he went away and came back to it on his return.
C. Peter and Paul are civil partners and have owned two homes for the past 3 years and now wish to claim exemptions on one property each.
D. Mark has owned his house for 10 years although only lived in it for 5 years.
C. Peter and Paul are civil partners and have owned two homes for the past 3 years and now wish to claim exemptions on one property each.
D. Mark has owned his house for 10 years although only lived in it for 5 years.
- On which of the following disposals would the sale proceeds be used as the disposal figure in calculating Capital Gains Tax (CGT)?
A. On a commercial sale
B. If an asset is given away
C. On a disposal to a connected person
D. On a disposal, not at arm’s length
A. On a commercial sale
- Henry has recently made a transfer to a discretionary trust. What is a necessary condition for the disposal to qualify for holdover relief?
A. Henry and the trustees must all be UK resident.
B. The disposal must be of shares to a company.
C. Henry needs to claim it.
D. Inheritance Tax must have been paid on the transfer.
C. Henry needs to claim it.
To qualify for holdover relief regarding a trust, only the donor needs to make the claim. Only the recipient needs to be resident in the UK. It is not available for transfers of shares to a company. Transfers chargeable to IHT qualify for holdover relief, even if no IHT is actually paid (i.e., because the gift is within the available nil rate band).
- Madeline died on 12 December 2019 leaving her entire estate to her husband John. John died on 23 November 2021. Their children are acting as personal representatives and they want to know how long they have to make a claim for the transfer of Madeline’s unused nil rate band. You tell them they have/had until:
A. 12 December 2021
B. 23 November 2023
C. 5 April 2023
D. 30 November 2023
D. 30 November 2023
The claim should be made within two years of the end of the month in which the second death occurs, so that’s 30 November 2023.
- Andrew is a self-employed plumber and for the first time is going to complete his tax return online. He wants to know when the deadline is for submitting this to HMRC for
the 2021/22 tax year. You tell him that the filing date is the:
A. 31 October 2022
B. 30 December 2022
C. 31 January 2023
D. 31 January 2024
C. 31 January 2023
For the 2021/22 tax year, the final filing date for submitting a tax return online is 31 January following the end of the tax year, i.e., 31 January 2023.
- Jack is employed in one of the largest high street banks. He has noticed on his pay slip that he has a PAYE code of 543L. Which of the following is the correct explanation of what this means?
A. £453.25 will not be taxed each month.
B. £543.00 will be taxed each month.
C. £543.00 will not be taxed each month.
D. £453.25 will be taxed each month.
A. £453.25 will not be taxed each month.
A PAYE code of 543L means that £5,439 / 12 = £453.25 will not be subject to tax each month. (The final digit is always deemed to be a 9 so 543L becomes £5,439).
- Which of the following individuals would be unable to claim a personal allowance against income taxable in the UK?
A. John, a non-resident former teacher from the UK who, following a period of illness, has moved to Spain to recuperate and aid his recovery
B. Oliver who lives in the Isle of Man
C. Toby, who has annual overseas income of £6,000 and pays tax on a remittance basis
D. Sophie, whose late husband worked at the Crown Prosecution Service and now lives in Germany
C. Toby, who has annual overseas income of £6,000 and pays tax on a remittance basis
Toby will have forfeited his entitlement to the personal allowance because he has annual overseas income in excess of £2,000 and claims the remittance basis.
- Tom is a trustee of the Davies family Interest in Possession trust. What rate of income tax will he be liable for, as trustee, on savings income?
A. 20%
B. 37.5%
C. 40%
D. 45%
A. 20%
Trustees of interest in possession trusts pay income tax at the basic rate. Savings income is therefore subject to tax at 20%.
- Simon makes payments to his occupational pension scheme by deduction from his pay. What is this method known as?
A. Net pay arrangement
B. Relief at source
C. Gross pay arrangement
D. Relief by claim
A. Net pay arrangement
Employee contributions to occupational schemes are deducted before calculating tax under the net pay arrangement.
- A company pays a basic rate taxpaying director a dividend. What is the tax liability for both the company and the director?
A. There is no tax implication for the company, and the director receives the income with a 10% tax credit which satisfies his liability.
B. The company is liable to corporation tax on the dividend payment, and the director is liable to income tax at 7.5% if it is in excess of their dividend allowance.
C. There is no tax implication for the company, the director receives the income gross and is liable to tax at 7.5% if it is in excess of their dividend allowance.
D. The company claims the dividend payment as an expense and the dividend is taxed at 7.5%.
C. There is no tax implication for the company, the director receives the income gross and is liable to tax at 7.5% if it is in excess of their dividend allowance.
While there are no tax implications for the company, the director will need to pay tax at the basic rate of 7.5% once the dividends exceed the dividend allowance of £2,000.
- Sarah is a basic rate taxpayer and in August 2014 took out a 10-year qualifying life policy as a savings plan. Regarding this policy, which of the following is true?
A. If she is a UK resident, she will receive full tax relief on the premiums.
B. For the policy to keep its qualifying status, she cannot pay more than £36,000 in premiums over the term.
C. The premiums will be taken into account on maturity when a chargeable event is triggered.
D. The premiums must be paid monthly, annually or as a single premium.
B. For the policy to keep its qualifying status, she cannot pay more than £36,000 in premiums over the term.
For qualifying policies issued since 6 April 2013, premiums are restricted to £3,600 per year. To keep her policy’s qualifying status, Sarah therefore needs to ensure she does not pay more than £36,000 in premiums over the 10-year term.
- Joanne sold an investment property to her sister at market value of £120,000 making a gain of £40,000. She has allowed her sister two years to pay for the house. When would Joanne be liable to pay any Capital Gains Tax (CGT)?
A. Joanne must pay any CGT based on the contract date.
B. Joanne must pay any CGT when she receives the money from her sister.
C. There would be no CGT liability as Joanne has sold to a close relative.
D. Joanne must pay any CGT based on the contract date but can pay in instalments.
D. Joanne must pay any CGT based on the contract date but can pay in instalments.
In this case, as the deferred consideration is payable more than 18 months after the disposal, HMRC will usually agree to the tax being paid in instalments. Joanne must, however, still pay any CGT based on the contract date.
- What happens to ‘excluded property’ trusts in the event of the settlor subsequently becoming UK domiciled?
A. The trust assets remain protected from Inheritance Tax (IHT).
B. The trust becomes part of the settlor’s worldwide assets and is liable to IHT.
C. The trust is subject to IHT, but relief given for the period the settlor was a non-UK domicile.
D. If at least one of the trustees is UK resident, then the domicile status of the settlor has no effect.
A. The trust assets remain protected from Inheritance Tax (IHT).
Assets within an excluded property trust remain protected from Inheritance Tax in the event of a settlor subsequently becoming UK domiciled.
- Maureen, a higher rate taxpayer, bought a limited-edition print in May 2008 for £2,500. She sold it in June 2021 for £6,250. In September 2021, she subsequently sold a second print for £14,000. This had been purchased in July 2009 for £5,000. What is Maureen’s capital gains tax liability in 2021/22?
A. £0
B. £90.00
C. £290.00
D. £653.33
A. £0
May 2008 disposal proceeds £6,250 less acquisition costs of £2,500 gives a gain of £3,750. Chattels relief available, restricting gain to (£6,250 - £6,000) x 5/3 = £416.67 (rounded).
July 2009 disposal proceeds £14,000 less acquisition costs of £5,000 gives gain of £9,000. Chattels relief not used as it gives a higher figure (£14,000 - £6,000) x 5/3 = £13,333.33. Total gain £416.67 + £9,000 = £9,416.67 which is less than the CGT annual exempt amount, so no CGT is payable.
- On Aaron’s death he left an estate valued at £900,000. This included a main residence worth £550,000. In his will, Aaron left £60,000 to the Dogs Trust. The remainder of his estate was divided equally between his two sons. Aaron was divorced at the time of his death and had made no lifetime gifts. What is the amount of IHT payable on Aaron’s estate?
A. £120,240
B. £122,400
C. £136,000
D. £144,000
B. £122,400
Aaron’s chargeable estate is £900,000 less the exempt gift to charity of £60,000 = £840,000. The first £325,000 is exempt under the nil rate band. £175,000 is exempt under the residence nil rate band. The net estate for establishing whether the 36% rate applies is £900,000 - £325,000 = £575,000. The 10% threshold is therefore £57,500. As the charitable bequest is £60,000, the 36% rate applies to the remaining estate of £900,000 - £60,000 - £325,000 - £175,000 = £340,000 @ 36% = £122,400.
- Phil is buying a residential property for £275,000 and has agreed with the seller that this includes £5,000 for carpets and curtains. How much Stamp Duty Land Tax is payable by Phil, who is a first-time buyer?
A. £0
B. £3,500
C. £3,750
D. £8,100
A. £0
As a first-time buyer, Phil won’t pay SDLT on this property as he paid less than £300,000 for it.
- Gail has set up a discretionary trust for her grandchildren for £400,000. Assuming she has a full nil rate band available and has NOT made any previous transfers, how much IHT will be payable assuming the trustees pay the tax?
A. £30,000
B. £15,000
C. £14,400
D. £13,800
D. £13,800
Where the trustees pay the immediate tax due, the charge is 20% of the excess over the nil rate band. From the £400,000 we can deduct 2 x annual exemptions – one for the current tax year and one for the previous tax year. £400,000 - £3,000 - £3,000 = £394,000. £394,000 - £325,000 = £69,000. £69,000 @ 20% = £13,800
- Susan died on 1 February 2005, when the nil rate band was £263,000. She left £78,900 in trust for her niece and the remainder of her estate to her husband Ron. She had made no lifetime gifts. On Ron’s death, his estate was valued at £1.5m, including the family home valued at £750,000 with no mortgage outstanding. His estate was left to the couple’s two children. Ron had made no lifetime gifts. What is the IHT liability on Ron’s estate?
A. £239,000
B. £263,920
C. £291,000
D. £301,680
A. £239,000
On Susan’s death 30% (£78,900/£263,000) of her NRB was used, leaving 70% of the NRB in place at the date of Ron’s death available to Ron’s estate (£325,000 @ 70% = £227,500). 2 x RNRB are also available, 2 x £175,000 = £350,000. IHT is therefore due on £1,500,000 - £227,500 - £325,000 - £175,000 - £175,000 = £597,500 @ 40% = £239,000.
- Tom is considering investing in an onshore single premium life assurance bond. He should be aware that: Tick all that apply.
A. the fund suffers tax on income and capital gains at a rate of 10%.
B. maturity of the bond will be treated as a chargeable event.
C. surrender of the bond may give rise to a 25% Income Tax liability.
D. if he later assigns the policy to his wife this will be a chargeable event.
B. maturity of the bond will be treated as a chargeable event.
C. surrender of the bond may give rise to a 25% Income Tax liability.
The life assurance fund suffers tax on most income and capital gains at 20%. The maturity of the bond will be treated as a chargeable event. If, on surrender, the gain falls within the additional rate tax band, Tom could be liable to tax of up to 25%. Assigning policies between spouses or civil partners does not give rise to a chargeable event.
- Samantha has an offshore bond and her friend Julia has an onshore bond. They have asked you to explain some of the features of both products. You can tell them that: Tick all that apply.
A. only onshore bonds benefit from ‘time apportionment relief’.
B. only offshore bonds benefit from gross roll up.
C. both products benefit from top slicing relief.
D. offshore bonds are better protected in the event of the company failing.
B. only offshore bonds benefit from gross roll up.
C. both products benefit from top slicing relief.
Only offshore bonds benefit from gross roll up (onshore bonds are deemed to have tax deducted at the basic rate within the fund). Both products benefit from time apportionment relief and top slicing relief. Offshore bonds are not better protected than onshore bonds in the event of the company failing.
- Amanda is considering a future transfer of her son’s Child Trust Fund to a Junior ISA. She should be aware that: Tick all that apply.
A. the tax position of the fund is the same for both products.
B. her son can withdraw the proceeds when he reaches 18.
C. payments are cumulative so can be made up in later years.
D. income generated of more than £100 will be taxed on her.
A. the tax position of the fund is the same for both products.
B. her son can withdraw the proceeds when he reaches 18.
The tax position of both Child Trust Funds and Junior ISAs is the same. Proceeds can be taken from both products at 18. The annual subscription limit is not cumulative – if the full allowance is not used in one year, it cannot be made up in a later year. CTFs and Junior ISAs are exempt from the rule that income of more than £100 is taxed on the parent.
- Henry is planning to move to Switzerland. Which of the following tax planning strategies relating to his investments should he consider? Tick all that apply.
A. Move bank accounts offshore to avoid any potential liability to UK income tax
B. Dispose of any gilt-edged securities as the income is taxable
C. Withdraw any ISA investments as they will lose their tax-free status
D. Dispose of any assets that will produce a loss and postpone the disposal of any assets that will produce a gain
A. Move bank accounts offshore to avoid any potential liability to UK income tax
D. Dispose of any assets that will produce a loss and postpone the disposal of any assets that will produce a gain
By moving bank accounts offshore they will not come within the remit of HMRC for income tax purposes. Income on certain gilts is exempt when paid to those not resident in the UK, so there is no need to dispose of these. ISAs maintain their tax-free status, but no further contributions can be made. Disposing of any assets that will produce a loss may be useful as no CGT will be due. It may be worth postponing disposals that will produce a gain until he is certain he will complete 5 years’ non-residence.
- As a financial adviser, which of the following individuals would you advise if possible, to pay Class 3 National Insurance Contributions? Tick all that apply.
A. Jane, who took early retirement at 50 having established 32 years of NICs
B. Peter, aged 67, with an inadequate NIC record to qualify for a full State pension
C. Hayley, who is moving to Portugal for a year, after selling the UK based business she owned for 10 years
D. Mary, who has an incomplete NIC record after taking the last 2 years off to study
A. Jane, who took early retirement at 50 having established 32 years of NICs
C. Hayley, who is moving to Portugal for a year, after selling the UK based business she owned for 10 years
D. Mary, who has an incomplete NIC record after taking the last 2 years off to study
Jane needs a further 3 years of NICs to qualify for a full State pension. Peter cannot contribute further because he is over State pension age. Both Hayley and Mary should pay Class 3 NICs to avoid gaps in their contribution records.
- Erica is considering Inheritance Tax (IHT) mitigation and wonders whether trusts may help with her planning. She should be aware that: Tick all that apply.
A. a transfer into an interest in possession trust is a potentially exempt transfer.
B. a transfer into a disabled trust is a chargeable lifetime transfer.
C. a transfer into a bare trust is a potentially exempt transfer.
D. a transfer into a discretionary trust could trigger a 20% tax charge.
C. a transfer into a bare trust is a potentially exempt transfer.
D. a transfer into a discretionary trust could trigger a 20% tax charge.
A transfer into both a bare trust and a trust for disabled beneficiaries is a potentially exempt transfer (PET). A transfer into an interest in possession trust and a discretionary trust is a chargeable lifetime transfer (CLT). A transfer into a discretionary trust could therefore trigger an immediate charge to IHT of 20% in excess of the available nil rate band.
- Aniket is considering using a discretionary trust to make provision for his children and future grandchildren as well as to mitigate his own Inheritance Tax (IHT) position. He should be aware that: Tick all that apply.
A. the transfer in is a potentially exempt transfer.
B. capital distributions to a beneficiary may trigger an exit charge.
C. the beneficiaries are entitled to an equal amount of income and capital.
D. if a beneficiary dies, there is no charge to IHT on the beneficiary’s estate.
B. capital distributions to a beneficiary may trigger an exit charge.
D. if a beneficiary dies, there is no charge to IHT on the beneficiary’s estate.
The transfer into a discretionary trust is a chargeable lifetime transfer (CLT), not a potentially exempt transfer (PET). Capital distributions to a beneficiary trigger an exit charge. If a beneficiary dies, there is no charge to IHT on the beneficiary’s estate. None of the beneficiaries have a specific entitlement to any of the income or capital of the trust until the trustees use their discretion to make a payment.
- A financial adviser has been asked to explain the potential capital gains tax (CGT) liabilities of the trustees regarding the assets of an interest in possession trust. She will explain that: Tick all that apply.
A. for those created after 22 March 2006, there is generally a CGT uplift on the death
of the life tenant.
B. the trust will benefit from a standard rate band of £1,000 to offset against gains.
C. for those created before 22 March 2006, the trust assets are valued at the date of death of the life tenant.
D. most gains realised by trustees are charged at the rate of 20%.
C. for those created before 22 March 2006, the trust assets are valued at the date of death of the life tenant.
D. most gains realised by trustees are charged at the rate of 20%.
For IIP trusts created after 22 March 2006 there is generally no CGT uplift on the death of the life tenant, meaning that there is a potential charge to CGT for any increase in value between the acquisition of the asset and the death of the life tenant. The standard rate band applies to income tax (not CGT) and only to discretionary trusts, not interest in possession trusts. For trusts created before 22 March 2006, the trust assets are valued at the date of death of the life tenant and there is no CGT charge on the trustees (unless there were held over gains). Most gains realised by trustees are charged at the rate of 20% (28% for non-exempt residential property).
- John and Sue are both aged 90 and have been married for 70 years. John is concerned that he will lose some of their married couple’s allowance as his pension income will exceed £30,400 this tax year. What measures could John take to ensure this doesn’t happen? Tick all that apply.
A. Use the gift out of normal expenditure rule
B. Transfer income producing assets to Sue
C. Make a gross pension contribution
D. Switch investments from income to growth funds
B. Transfer income producing assets to Sue
D. Switch investments from income to growth funds
John needs to reduce his income. Transferring income-producing assets to Sue and switching investments from income to growth funds will achieve this. The gift out of normal expenditure rule relates to IHT and John is too old to receive tax relief on his pension contributions.
- Assuming all of the following individuals are UK-resident but non-UK domiciled, which of them could claim the remittance basis without having to pay the annual tax charge? Tick all that apply.
A. Sarah who is aged 20
B. Claire who has been resident in the UK for 5 out of the last 9 years
C. Alex who is aged 16
D. Leo who has unremitted overseas income for the year of £3,000
E. Duncan who has unremitted overseas income for the year of £1,800
B. Claire who has been resident in the UK for 5 out of the last 9 years
C. Alex who is aged 16
E. Duncan who has unremitted overseas income for the year of £1,800
Mary, currently a basic-rate taxpayer with earnings of £15,000 per annum and savings income of £5,000 per annum, is about to dispose of some unit trusts, realising a capital gain, and surrender an offshore assurance bond with a chargeable gain. As a result of these transactions, with regard to the gain on the unit trusts, she will be liable solely to higher-rate tax. Assuming that these transactions do NOT cause her to become an additional-rate taxpayer, to which rate(s) of Income Tax may she be personally liable with regard to the surrender?
A. 10%only.
B. 10% only or to both 10% and 20%.
C. 20% only or to both 20% and 40%.
D. 40%only
C. 20% only or to both 20% and 40%
- A company pays premiums for both medical insurance and group income protection insurance which benefit a 46-year-old full-time employee with taxable remuneration of £155,000 per annum. What is the employee’s taxation position with regard to the premiums attributable to him for those benefits?
A. Both premiums are taxed as a benefit.
B. Neither premium is taxed as a benefit.
C. The income protection premium only is taxed as a benefit.
D. The medical insurance premium only is taxed as a benefit.
D. The medical insurance premium only is taxed as a benefit.
Hassan has just invested £10,000 into each of the following, namely, a FTSE 100 company by way of its ordinary shares; an open-ended investment company; a Real Estate Investment Trust; and an Exchange Traded Fund incorporated within the UK. What total amount of stamp taxes will Hassan have paid?
A. £50
B. £100
C. £150
D. £200
B. £100
- Heather, whose father and mother are UK-domiciled, has lived and worked abroad full time for ten years in Mexico where she owns a flat. One month ago she returned to the UK because her mother is ill but will return to Mexico in one month’s time and return to work. How is she most likely to be viewed by HM Revenue & Customs for UK residence and domicile purposes for the tax year 2022/2023?
A. She will be domiciled and resident.
B. She will be domiciled, but not resident.
C. She will be neither domiciled nor resident.
D. She will not be domiciled, but will be resident.
B. She will be domiciled, but not resident.
- Harry has recently disposed of some shares in a business. What is a necessary condition for the disposal to qualify for hold-over relief?
A. He must have sold the shares within 3 years of retirement.
B. His total shareholding must account for at least 5% of the issued share capital.
C. He must have owned the shares for at least 7 years.
D. He must make the election for relief within 12 months of the date of disposal.
B. His total shareholding must account for at least 5% of the issued share capital.
- The assets of a discretionary trust consist solely of equities and qualifying corporate bonds. With regard to potential Capital Gains Tax (CGT) liabilities for the tax year 2022/2023, the trustees should be aware that typically
A. a disposal of the equities and a disposal of the corporate bonds may each create a CGT liability for the trustees.
B. if assets are transferred from the trust to the beneficiaries, then hold over of any capital gain to the beneficiaries is not permitted.
C. if assets have been gifted by the settlor to the trust, then the settlor may have elected to hold over any capital gain to the trustees.
D. the CGT exemption for the trust depends on the settlor’s CGT exemption and use.
C. if assets have been gifted by the settlor to the trust, then the settlor may have elected to hold over any capital gain to the trustees.
- Abe, an additional-rate taxpayer because of his earnings, receives income from his portfolio’s assets which consist solely of gilt unit trusts and investment trusts investing in European equities. Once full use has been made of his dividend allowance, what total rate(s) of tax apply to the income?
A. 39.35% on all.
B. 45% on all.
C. 45% regarding the investment trusts and 39.35% regarding the unit trusts.
D. 45% regarding the unit trusts and 39.35% regarding the investment trusts.
D. 45% regarding the unit trusts and 39.35% regarding the investment trusts.
- Stanley, an additional-rate taxpayer, invested £100,000 into an onshore assurance bond in his own name on his daughter Elise’s eighth birthday. On the tenth anniversary of the bond, when its total value was £212,000, he assigned 50% of the segments to Elise. On her 21st birthday, Elise, then with taxable income of £50,000 per annum before use of allowances, surrendered her total holding, receiving £136,000. As a result of the surrender, who would be liable to any tax due and, if any, at which rate?
A. Elise, with no tax to pay.
B. Elise, with a 20% Income Tax liability.
C. Elise, with a 20% Capital Gains Tax liability.
D. Stanley,witha25%IncomeTaxliability.
B. Elise, with a 20% Income Tax liability.
- Chiyo has just received a £50,000 inheritance which she intends to invest with exposure to property. Having sought advice, she has been provided with information on direct property purchase, Real Estate Investment Trusts (REITs) and life assurance property funds. Of what should she be aware regarding taxation?
A. All three types of property investment are subject to the same tax treatment with regard to Capital Gains Tax and Income Tax.
B. Direct property investment may deliver rental income that could be set against her Capital Gains Tax exemption and any losses carried forward from previous years.
C. Life assurance property funds, held through qualifying policies, have no tax liability on gains realised within the funds.
D. REITs may provide some income that can be used against her dividend allowance.
D. REITs may provide some income that can be used against her dividend allowance.
- Natalia, a higher-rate taxpayer, is wondering how Permanent Interest Bearing Shares (PIBs) and open-ended investment companies (OEICs) invested solely in gilts, compare with regard to taxation. She should be aware that
A. only income from the OEICs may be applied against her dividend allowance.
B. no Capital Gains Tax liability arises on realised gains from either.
C. interest from both investments can be set against her personal savings allowance.
D. only the OEICs are eligible to be held within ISAs, securing the taxation advantage.
C. interest from both investments can be set against her personal savings allowance.
- William has an estate in excess of £2,000,000. He has decided to gift £600,000 worth of gilts to his daughter, having made no previous gifts except through use of annual exemptions. How may this impact on any eventual Inheritance Tax (IHT) liability?
A. If the gift becomes chargeable, the daughter is liable for payment of the IHT due.
B. If the gift becomes chargeable, the IHT due is based on the asset’s value at the time of death.
C. So long as William survives the gift by at least two years, there will be some IHT mitigation.
D. The gift is totally IHT exempt after seven years, but only if it was reported to HM Revenue &
Customs within six months of the gift being made.
A. If the gift becomes chargeable, the daughter is liable for payment of the IHT due.
- Lucia has earnings of £25,000 per annum. Within her ISA, she receives the following annual income: £500 from AIM shares; £1,000 from qualifying corporate bonds. Outside her ISA, she receives the following annual income: £500 bank interest; £1,000 income from equity unit trusts. What Income Tax saving is she currently making, if any, by holding her AIM shares and qualifying corporate bonds within the ISA rather than outside?
A. None.
B. 7.5% on the AIM income only.
C. 20% on £500 of corporate bond income only.
D. 20% on all the corporate bond in come and all the AIM income.
C. 20% on £500 of corporate bond income only.
- Leda wants to leave some of her estate to two registered charities as well as some to her children and just £75,000 to her husband. Her total estate is valued at £800,000. On the basis of those figures, she should be aware that in order to secure a reduced rate of tax on the remainder of her estate, on death, she must leave to the charities at least a minimum of
A. £40,000
B. £40,000 to each charity.
C. £72,500
D. £80,000 divided between the two charities in any way she wants.
A. £40,000
- Martyn, an additional-rate taxpayer, has created a bare trust for his five-year-old son, Ben, who is a non-taxpayer. The bare trust property produces £120 in gross interest. What is the Income Tax liability, if any?
A. Nil.
B. £9
C. £48
D. £54
D. £54
- Bradley earns £120,000 per annum by way of salary and receives interest from his deposit accounts of £2,000. What is his total income tax liability in the tax year 2022/2023?
A. £35,432
B. £39,432
C. £40,432
D. £40,632
C. £40,432
- Victor, a higher-rate taxpayer, is wondering whether, on Inheritance Tax (IHT) and Capital Gains Tax (CGT) grounds, it is better to gift his £500,000 of FTSE 250 shares now to his son and hope to live for seven years or simply bequeath the shares to his son. The shares currently show a gain of the order of £200,000. His other assets total £100,000. He has already made full use of his annual CGT exemption. What key factors should be brought to his attention?
A. Hold-over relief could be used so that no CGT liability would arise at the time of the gift and no IHT liability would arise if the gift were to a bare absolute trust for the son.
B. Retaining the shares until death would avoid CGT liability, but would lead to a 40% IHT liability on the total value of the shares at death.
C. The gift could generate a 20% CGT liability on £200,000 and an IHT liability of 20% on £175,000 at the time of the gift.
D. The gift could generate a 20% CGT liability on £200,000, but no IHT liability at the time of the gift
D. The gift could generate a 20% CGT liability on £200,000, but no IHT liability at the time of the gift
- A settlor transfers £106,000 into a discretionary trust. Two years later he transfers a further £106,000 into a bare trust. He has made no other transfers. He dies three years after the second transfer, leaving an estate of £700,000 to his children. His estate includes no residential property. What is the Inheritance Tax liability?
A. £150,000
B. £154,800
C. £230,000
D. £234,800
C. £230,000
- Benedict, with current earnings of £148,000 per annum, has recently bought some Real Estate Investment Trust shares (REITs). He is concerned about the tax position concerning the property income distributions (PIDs) and the non-property income distributions (non-PIDs) as well as the tax position on any disposals. He should be aware that (Multiple Response)
A. on disposal, any realised gains would be free of tax, if the REITs have been held for a minimum of three years.
B. the non-PIDs would all be liable to 33.75% tax because they cannot be set off against any unused dividend allowance.
C. the non-PIDs cannot be set off against any unused personal savings allowance.
D. the PIDs cannot be set off against any unused dividend allowance.
E. the PIDs could be liable to some tax at 40% and some at 45%.
C. the non-PIDs cannot be set off against any unused personal savings allowance.
D. the PIDs cannot be set off against any unused dividend allowance.
E. the PIDs could be liable to some tax at 40% and some at 45%.
- An investor is considering using some realised capital gains to subscribe for shares in an Enterprise Investment Scheme (EIS) new issue. The total investment being made would be £250,000. He should be aware that (Multiple Response)
A. the Capital Gains Tax due on the gain from the original investment may be deferred until the disposal of the EIS shares.
B. 30% Income Tax relief may be available on the full amount of the investment.
C. to qualify for deferral relief, the investment must be made within six months of the disposal of
the shares.
D. the rate of Capital Gains Tax due on the original gain is the rate applying at disposal of the EIS
shares.
A. the Capital Gains Tax due on the gain from the original investment may be deferred until the disposal of the EIS shares.
B. 30% Income Tax relief may be available on the full amount of the investment.
D. the rate of Capital Gains Tax due on the original gain is the rate applying at disposal of the EIS
shares.
- Steve, a higher-rate taxpayer, is considering making his first investment into a pension plan in the tax year 2022/2023. He should be aware that (Multiple Response)
A. any personal contribution is made gross, if exceeding £3,600 gross per annum.
B. he may be able to invest up to £40,000 per annum into the pension plan, by paying the sum net of basic rate tax and claiming further tax relief.
C. interest and dividend income received, as well as realised capital gains, within a pension fund generate no tax liability for the fund.
D. the maximum tax-relieved fund he can accumulate over his lifetime is £1,250,000.
B. he may be able to invest up to £40,000 per annum into the pension plan, by paying the sum net of basic rate tax and claiming further tax relief.
C. interest and dividend income received, as well as realised capital gains, within a pension fund generate no tax liability for the fund.
- A few years ago, Lavinia created a discretionary trust into which she settled an offshore assurance bond. Her two daughters are the trustees. She has been involved with no other trusts. She has recently died. Regarding the surrender of the bond, the trustees should be aware that if the surrender occurs (Multiple Response)
A. in a tax year after the death, then there may be a 45% Income Tax liability.
B. in a tax year after the death, then no chargeable event can occur.
C. in the tax year of the death, then any Income Tax liability is determined by the settlor’s tax position.
D. in the tax year of the death, then any Capital Gains Tax liability is determined by the settlor’s tax position.
A. in a tax year after the death, then there may be a 45% Income Tax liability.
C. in the tax year of the death, then any Income Tax liability is determined by the settlor’s tax position.
- Martina, in a civil partnership, invested £100,000 in some Venture Capital Trust (VCT) shares at issue, just over three years ago. She should be aware that were she in this tax year (Multiple Response)
A. to purchase, in the market, up to £100,000 of additional shares of the same VCT, now trading, she would secure further Income Tax relief on the purchase.
B. to purchase another new issue of VCT shares, Income Tax relief may be available.
C. to sell her shares, she would be liable to Income Tax on the dividends already received.
D. to transfer her shares to her civil partner, she would retain the Income Tax relief.
B. to purchase another new issue of VCT shares, Income Tax relief may be available.
D. to transfer her shares to her civil partner, she would retain the Income Tax relief.
- Silvana, single and an additional-rate taxpayer, is considering the taxation implications for her, were she to subscribe £500,000 to a forthcoming Enterprise Investment Scheme in the tax year 2022/2023. She should be aware that, with regard to Income Tax relief, (Multiple Response)
A. she could carry back the subscription to the tax year 2021/2022, securing tax relief in that year.
B. she could increase her subscription up to £1,000,000 in this tax year, with 45% tax relief being available on the total subscribed.
C. she would be able to claim up to £150,000 in tax relief, which could be spread over up to five years, if insufficient tax liability for this tax year.
D. the relief would usually be withdrawn, were she to dispose of the shares within three years from commencement of the enterprise trading.
A. she could carry back the subscription to the tax year 2021/2022, securing tax relief in that year.
D. the relief would usually be withdrawn, were she to dispose of the shares within three years from commencement of the enterprise trading.
- Matravers is wondering about the tax implications, having just invested £500,000 into an equity unit trust and £500,000 into a qualifying corporate bond unit trust. He earns £147,000 per annum and holds no other investments or savings. He should be aware that (Multiple Response)
A. all the income from the unit trusts may be set off against his dividend allowance.
B. his personal savings allowance may be used against both income sources.
C. income from the equity unit trust could be liable to Income Tax at the 33.75% and 39.35% rates, after use of his dividend allowance.
D. realised gains resulting from sale of either unit trust could be liable to Capital Gains Tax at 20%.
C. income from the equity unit trust could be liable to Income Tax at the 33.75% and 39.35% rates, after use of his dividend allowance.
D. realised gains resulting from sale of either unit trust could be liable to Capital Gains Tax at 20%.
ABC Ltd has provided John, an employee, with rent-free accommodation. How will this benefit be taxed?
Select one:
a. There is generally a tax charge which John will have to pay.
b. There is no tax liability for either John or ABC Ltd.
c. There is generally a tax charge which ABC Ltd will have to pay.
d. There is a tax charge which both John and ABC Ltd will have to pay.
a. There is generally a tax charge which John will have to pay.
Rachel is an Irish citizen and is attending a 12 month university course in England. She intends to return home when she completes her course. For income tax purposes, Rachel is currently regarded as:
Select one:
a. domiciled in the UK.
b. non resident in the UK.
c. temporarily domiciled in the UK.
d. resident in the UK.
d. resident in the UK.
Neil is self-employed and is very late in paying the £10,000 balancing charge which was due on 31 January 2021. What would be the penalty on this amount if it was still outstanding in mid February 2022?
Select one:
a. £500.
b. £1,500.
c. £2,000.
d. £1,000.
b. £1,500.
Before any VAT, Samantha spends £60 on shoes and clothes for her grandchild, £600 on domestic fuel for her home heating system, and £400 to the crematorium for her mother’s funeral. How much VAT will she pay on these items?
Select one:
a. £30.
b. £120.
c. £200.
d. £212.
a. £30.
Under what circumstances might income received by a landlord from a letting be treated as trade income?
Select one:
a. Where the landlord provides substantial services in connection with the letting.
b. Where the tenant has signed a formal tenancy agreement.
c. Where the tenant is not connected in any way with the landlord.
d. Where the landlord also lives within the same premises
a. Where the landlord provides substantial services in connection with the letting.
A tax charge may be triggered when a pension fund invests in which type of asset?
Select one:
a. Cash.
b. Commercial property.
c. Gilts.
d. Residential property.
d. Residential property.
William has an endowment policy and he has been advised that the proceeds could be subject to income tax on maturity as the policy does not meet the qualifying rules. What would NOT be a contributing factor to this potential tax liability?
Select one:
a. The policy was taken out in May 2013.
b. The premiums are £400 per month.
c. The policy is on a single life basis.
d. The term of the policy is 8 years.
c. The policy is on a single life basis.
Jenny invested £100,000 into a non-qualifying UK life assurance investment bond on 1 August 2013. She took a partial withdrawal of £10,000 on 1 September 2015 and a further partial withdrawal of £16,000 on 1 March 2019. She surrendered the bond in June 2021 for £90,000. What chargeable gain, if any, did Jenny make on her investment?
Select one:
a. £10,000.
b. £6,000.
c. £16,000.
d. Nil.
c. £16,000.
Bob, an additional-rate taxpayer, has received £50 from the non tax-exempt element from his UK real estate investment trust. How will this payment be treated for tax purposes?
Select one:
a. As UK dividend income.
b. As property income.
c. The payment will be ignored for tax purposes as it was below £100.
d. As savings income.
a. As UK dividend income.
ormack is interested in having an exposure to international commercial property in his portfolio to provide potential gains and ongoing income, but has neither the time or the knowledge to buy directly. The most appropriate solution for him would be a[n]:
Select one:
a. special purpose vehicle.
b. property security fund.
c. insurance company property fund.
d. UK real estate investment trust.
b. property security fund.
Promoters of tax avoidance schemes must disclose their scheme to HMRC, primarily so that HMRC can:
Select one:
a. assess the risk to investors.
b. block unacceptable schemes through legislation.
c. inform the EU.
d. include the details on their information leaflets.
b. block unacceptable schemes through legislation.
If a family qualifies for the family element of the child tax credit they could receive up to how much per annum?
Select one:
a. £2,830.
b. £6,530.
c. £750.
d. £545.
d. £545.
David is a non-earner and pays £1,200 gross into his registered pension scheme. How much more can he pay net of tax into the pension scheme?
Select one:
a. £2,400.
b. £1,680.
c. £2,640.
d. £1,920.
d. £1,920.
Haris is 45 and has a salary of £52,000. He has a company car giving him a taxable benefit of £5,000. He pays interest of £1,500 on a loan to pay inheritance tax and £4,000 into a retirement annuity plan that doesn’t operate tax relief at source. What is his income tax liability for 2021/22?
Select one:
a. £8,832.
b. £10,300.
c. £8,032.
d. £13,060.
c. £8,032.
Jo, who has taxable income after deduction of the personal allowance of £34,200 for 2021/22, purchased a diamond ring for £6,500 in 2005. She sold the ring for £28,000 in August 2021, with no other gains or losses in 2021/22. Jo’s capital gains tax liability will be:
Select one:
a. £1,550.
b. £1,490.
c. £920.
d. £1,900.
b. £1,490.
Peter, a bachelor, gifted a lump sum of £1,000,000 to his son Adam in February 2017. What would be the inheritance tax liability on this gift if Peter died in August 2021 leaving no residential property, assuming this was the only gift Peter had ever made?
Select one:
a. £267,600.
b. £162,000.
c. £270,000.
d. £160,560.
d. £160,560.
Doug disposes of some shares in May 2021, incurring a capital gains tax liability. He could defer some or all of this tax liability by investing the gains in an enterprise investment scheme, provided he does so between:
Select one:
a. May 2021 and May 2024.
b. May 2020 and May 2024.
c. May 2021 and May 2023.
d. May 2020 and May 2023.
b. May 2020 and May 2024.
On the encashment of a life assurance policy, what factor will have NO impact on whether tax is payable or, if it is, by what amount?
Select one:
a. How much top slicing relief is available.
b. The taxation regime of the underlying assets held within the life funds.
c. The tax position of the investor at the time they encash the policy.
d. How much capital gains tax annual exempt amount is available in the year of encashment.
d. How much capital gains tax annual exempt amount is available in the year of encashment.
If Tim owns a furnished holiday let and he wants to make pension contributions based on the income from this, the property must:
You must select ALL the correct options to gain the mark:
a. be let on a commercial basis.
b. be situated in the UK only.
c. be situated in an acknowledged holiday resort.
d. not be subject to ‘long term lets’ for more than 155 days in a tax year.
e. be let for at least 105 days in a tax year. This can be averaged with other properties.
f. be let to individuals who are on holiday only.
a. be let on a commercial basis.
d. not be subject to ‘long term lets’ for more than 155 days in a tax year.
e. be let for at least 105 days in a tax year. This can be averaged with other properties.
The anti-avoidance rules are designed to prevent people exploiting pension flexibility by:
You must select ALL the correct options to gain the mark:
a. not allowing further contributions once a pension is in payment.
b. imposing a reduced annual allowance once a pension is accessed.
c. introducing a tapered reduction to the amount of the annual allowance for higher earners.
d. taxing the death benefit if a pension member dies before age 75.
e. capping the contributions of higher earners at £240,000 gross a year.
b. imposing a reduced annual allowance once a pension is accessed.
c. introducing a tapered reduction to the amount of the annual allowance for higher earners.
Julie is 17 and Sue is 23. They have each invested £2,000 into their ISAs, and both wish to invest more in the 2021/22 tax year. What are their options?
You must select ALL the correct options to gain the mark:
a. Sue can invest a further £18,000.
b. Julie can invest a further £18,000 but it must be in cash ISAs only.
c. Julie can invest a further £27,000.
d. Julie can only invest a further £7,000.
e. Sue can invest a further £18,000 but at least £9,000 of it must be in stocks and shares.
a. Sue can invest a further £18,000.
c. Julie can invest a further £27,000.
chargeable event for a non-qualifying life assurance policy occurs in the event of the:
You must select ALL the correct options to gain the mark:
a. surrender of the policy.
b. maturity of the policy.
c. payment of a critical illness benefit.
d. death of the life assured.
e. policy being assigned to the policyholder’s spouse.
f. policy being assigned by way of mortgage to a bank.
a. surrender of the policy.
b. maturity of the policy.
d. death of the life assured.
Gemma, whose taxable income is £40,000 after deducting the personal allowance, has realised a chargeable gain of £20,000 on an onshore life policy. When calculating the taxation due on this gain, she:
You must select ALL the correct options to gain the mark:
a. may assume that 20% tax has already been paid in the fund and this amount can be deducted from any tax that is due.
b. can offset some of the gain by taking into account her capital gains tax annual exempt amount.
c. must pay income tax on the full gain at 40%.
d. must top-slice the gain by the number of years held to determine the rate of tax she will pay on the gain.
e. can take into account the personal savings allowance if it has not already been used up.
a. may assume that 20% tax has already been paid in the fund and this amount can be deducted from any tax that is due.
e. can take into account the personal savings allowance if it has not already been used up.
When considering the taxation of annuities:
You must select ALL the correct options to gain the mark:
a. pension annuities are taxed in full as earned income.
b. purchased life annuities are taxed in full as earned income.
c. a deferred annuity is taxed as a purchased life annuity when the annuity is taken.
d. an annuity for a beneficiary under a will is taxed in full as savings income.
e. a cash sum payable under a guaranteed annuity is fully taxable as investment income.
a. pension annuities are taxed in full as earned income.
c. a deferred annuity is taxed as a purchased life annuity when the annuity is taken.
d. an annuity for a beneficiary under a will is taxed in full as savings income.
Meena has sold some shares making a gain of £50,000 and has an income tax liability of £30,000. She wishes to invest in an enterprise investment scheme [EIS]. What do you advise her to consider?
You must select ALL the correct options to gain the mark:
a. Meena will be able to invest £50,000 and receive income tax relief of £10,000.
b. To eliminate her income tax liability completely, Meena would need to invest £100,000 in qualifying investments.
c. Meena does need not to be resident in the UK, but must be liable to UK income tax.
d. Meena can defer the capital gains tax due on up to 100% of the gain, and disposals of qualifying EIS shares are normally exempt from capital gains tax if held for three years.
e. There may be pre-arranged exit provisions in order to minimise risk.
f. Enterprise investment schemes are ideally suited for medium risk investors.
b. To eliminate her income tax liability completely, Meena would need to invest £100,000 in qualifying investments.
c. Meena does need not to be resident in the UK, but must be liable to UK income tax.
d. Meena can defer the capital gains tax due on up to 100% of the gain, and disposals of qualifying EIS shares are normally exempt from capital gains tax if held for three years.
Manuel is self-employed and he is keen to minimise the income tax that he pays. He should be aware that:
You must select ALL the correct options to gain the mark:
a. tax planning is normally carried out on an ongoing basis.
b. the choice of accounting date can make a difference to the timing of tax payments on his business profits.
c. the date on which he retires makes no difference to the tax liability of the business in the final year.
d. typically, there is no advantage of undertaking tax planning at the end of the tax year.
a. tax planning is normally carried out on an ongoing basis.
b. the choice of accounting date can make a difference to the timing of tax payments on his business profits.
A client is considering making lifetime gifts of both business and non-business assets. What factors should they take into account?
You must select ALL the correct options to gain the mark:
a. The tax status of the recipients.
b. The availability of holdover relief for gifts of business interests.
c. Any gifts the recipients plan to make themselves.
d. The availability of business relief on gifted assets.
e. The tax status of the client.
b. The availability of holdover relief for gifts of business interests.
d. The availability of business relief on gifted assets.
e. The tax status of the client.
Marina has two grandchildren, Charles aged 10 and Ellie aged 19. She wishes to minimise the potential inheritance tax payable on two large gifts to them. What would be suitable types of trusts for her to use for lifetime inheritance tax planning?
You must select ALL the correct options to gain the mark:
a. Bare trust for Ellie and a discretionary trust for Charles.
b. Interest in possession trust for Ellie.
c. Discretionary trust for both Charles and Ellie.
d. Bare trust for Charles and a discretionary trust for Ellie.
e. Individual bare trusts for both Charles and Ellie.
b. Interest in possession trust for Ellie.
c. Discretionary trust for both Charles and Ellie.
d. Bare trust for Charles and a discretionary trust for Ellie.
Charlotte is considering making a transfer into a discretionary trust for the benefit of her nieces. What are the inheritance tax implications of such a transfer?
You must select ALL the correct options to gain the mark:
a. Taper relief may be available on any inheritance tax due on the transfer in the event of Charlotte’s death.
b. Any inheritance tax payable will be the responsibility of her nieces.
c. If the value of the trust exceeds the nil rate band, the trust will be subject to periodic charges.
d. Any transfers into the trust will affect the availability of the nil rate band for any future chargeable lifetime transfers she may wish to make.
e. A transfer into the trust in excess of Charlotte’s available nil rate band will be subject to the lifetime rate of 30%.
a. Taper relief may be available on any inheritance tax due on the transfer in the event of Charlotte’s death.
c. If the value of the trust exceeds the nil rate band, the trust will be subject to periodic charges.
d. Any transfers into the trust will affect the availability of the nil rate band for any future chargeable lifetime transfers she may wish to make.
omaz is taxed by his employer on £3,000 as a benefit in kind in relation to a van which he also uses outside work. What National Insurance contributions would be payable on this?
Select one:
a. Tim will pay £414 of class 1 contributions.
b. His employer will pay £270 of class 1A contributions.
c. Tim will pay £270 of class 1 contributions.
d. His employer will pay £414 of class 1A contributions.
d. His employer will pay £414 of class 1A contributions.
The valuations of an asset for capital gains tax purposes and for inheritance tax purposes are:
Select one:
a. never the same.
b. very rarely the same.
c. not always the same.
d. always the same.
c. not always the same.
Eva has made the following lifetime transfers: £210,000 into a discretionary trust in 2017, £500,000 into a bare trust in 2020, and £150,000 into a discretionary trust in 2021. The transfer[s] which resulted in an immediate lifetime IHT liability was[were]:
Select one:
a. the transfers made in 2020 and 2021.
b. only the transfer made in 2021.
c. all of the transfers.
d. the transfers made in 2017 and 2021.
b. only the transfer made in 2021.
Mark is neither resident nor domiciled in the UK. He owns an office building in the UK, which he rents out. As far as UK tax is concerned, he may be liable for:
Select one:
a. inheritance tax only on death.
b. income tax only on the rent from the office.
c. income tax on the rent from the office, inheritance tax on death, but no capital gains tax on the sale of the property
d. income tax on the rent from the office, capital gains tax on the sale of the property, and inheritance tax on the property on death.
d. income tax on the rent from the office, capital gains tax on the sale of the property, and inheritance tax on the property on death.
Steve was two weeks late filing his tax return. What penalty, if any, will HMRC charge him?
Select one:
a. £100, plus £5 penalty for each full week overdue.
b. £100.
c. 5% of his final liability.
d. £100, plus 5% for each full week overdue.
b. £100.
Quick-In Limited import goods from outside the EU on a regular basis. When must they pay the tax due on these goods?
Select one:
a. At the end of each quarter.
b. Once the goods have been sold.
c. At the time of importing them, unless special arrangements exist.
d. At the end of every month.
c. At the time of importing them, unless special arrangements exist.
Sanjay is in good health and about to retire. He is looking for an annuity into which he can invest part of his tax free cash sum in order to generate additional income. Which type of annuity is he most likely to use to achieve this?
Select one:
a. Lifetime annuity.
b. Enhanced annuity.
c. Scheme pension.
d. Purchased life annuity.
d. Purchased life annuity.
XYZ have assets of £13m and qualify for the enterprise investment scheme [EIS]. What is the maximum amount they could raise under the EIS?
Select one:
a. £10m.
b. £2m.
c. £5m.
d. £3m.
d. £3m.
Alex is a company director who has a salary of £45,000. What action would he take if he wants to minimise the income tax that he pays?
Select one:
a. Take dividends from his company instead of a salary.
b. Transfer the ownership of his private car to the company so that it is taxed as a benefit in kind.
c. Increase his pension contributions that are made by his employer.
d. Increase his salary to above the upper earnings limit.
a. Take dividends from his company instead of a salary.
George, a millionaire, is UK domiciled but he is married to Olga who is non-UK domiciled. They have made wills leaving all of their estate to each other. All of these statements are correct, APART from:
Select one:
a. if George dies first, there will only be a £55,000 spouse exemption since Olga is non-UK domiciled.
b. if George dies first, there will only be a £325,000 spouse exemption since Olga is non-UK domiciled.
c. if Olga elects to be UK domiciled for IHT purposes there will be no tax on George’s death assuming he dies first.
d. Olga’s personal representatives can elect within two years of her death for her to be treated as UK domiciled.
a. if George dies first, there will only be a £55,000 spouse exemption since Olga is non-UK domiciled.
Emily is 35 and single. She has a salary of £37,570 and a company car, the value of which for tax purposes is £3,500 in 2021/22. How much of her income will be taxed at the basic rate?
Select one:
a. £25,000.
b. £28,500.
c. £34,500.
d. £29,150.
b. £28,500.
Lucy is 77 and has never married. In 2021/22 she has pension income of £10,500 and receives interest of £6,000 from her savings account. What is the highest rate of tax that she is liable for on her current level of savings income?
Select one:
a. 10%.
b. 20%.
c. 0%.
d. 40%.
c. 0%.
Imran sold two share holdings in the current tax year. The first realised £100,000 having been purchased for £35,000. The second realised £40,000 having been inherited at a value of £60,000. The disposal costs for each were £500. Assuming he had no further losses and made no other capital gains during the tax year, what would be his taxable gain?
Select one:
a. £33,000.
b. £31,700.
c. £31,200.
d. £32,700.
c. £31,200.
Peter is a widower who has made no lifetime transfers and he has lived in a care home since the passing of his wife. He died in 2021/22 with an estate of £600,000. He left a picture worth £40,000 to the National Gallery and split the rest of his estate equally amongst his four nephews. Peter’s deceased wife’s IHT nil rate band was fully used at the time of her death. What is the IHT due on Peter’s estate?
Select one:
a. £99,000.
b. £94,000.
c. £110,000.
d. £84,600.
d. £84,600.
In order to avoid paying any personal tax on encashment of a qualifying policy with a premium paying term of 12 years, for what minimum period of years must the policy be held?
Select one:
a. 7.5.
b. 12.
c. 10.
d. 9.
d. 9.
If Sanjeev wants to invest into an ISA for the first time, what eligibility criteria must he meet?
You must select ALL the correct options to gain the mark:
a. He must be domiciled in the UK. Incorrect
b. The cash invested in an ISA must belong to him.
c. An individual aged 16 can invest in a stocks and shares ISA.
d. A non-resident Crown employee working overseas can open an ISA.
e. He must be resident in the UK.
f. A joint ISA can be arranged, but only between spouses or civil partners.
b. The cash invested in an ISA must belong to him.
d. A non-resident Crown employee working overseas can open an ISA.
e. He must be resident in the UK.
The life fund of Giorgio’s existing with-profits bond is taxed:
You must select ALL the correct options to gain the mark:
a. at 20% on any gains arising from the sale of assets from the fund.
b. at 20% on property rental income.
c. on dividend income from UK shares at 10%.
d. at 40% on offshore based assets, such as shares.
e. but this tax cannot be reclaimed by Giorgio as a policyholder.
a. at 20% on any gains arising from the sale of assets from the fund.
b. at 20% on property rental income.
e. but this tax cannot be reclaimed by Giorgio as a policyholder.
Jeremy’s investment portfolio has grown significantly and he has now set up a limited partnership special purpose vehicle. This would suggest that:
You must select ALL the correct options to gain the mark:
a. he wishes to invest for at least 10 years.
b. he aims to create additional income.
c. he is an experienced investor.
d. his objective is capital growth.
e. he is interested in the commercial property market.
c. he is an experienced investor.
d. his objective is capital growth.
e. he is interested in the commercial property market.
Henna earns £60,000 and is increasing her pension contributions, which can have the effect of reducing:
You must select ALL the correct options to gain the mark:
a. the amount of income that falls into the higher-rate tax bracket.
b. her income tax personal allowance.
c. the rate of capital gains tax payable on a gain realised in the same tax year.
d. her pension annual allowance.
e. the rate of income tax payable on her dividend income.
a. the amount of income that falls into the higher-rate tax bracket.
c. the rate of capital gains tax payable on a gain realised in the same tax year.
e. the rate of income tax payable on her dividend income.
