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CeMAP Unit 1 > Topic 4 Taxation 2 > Flashcards

Topic 4 Taxation 2 Flashcards

1
Q

The sale or gift of the below are examples of ?

  • Personal Property (Over a certain amount)
  • Land/property not the persons home
  • Personal property if large and used commercially
  • Business assets
A

Capital Gain

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2
Q

What is the name of an individuals CGT allowance?

A

Annual Exempt Amount

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3
Q

What do the below all have in common?

  1. Bare Trust
  2. Trustees of trust for vulnerable person
  3. Legal Personal Representatives
A

Full AEA applies

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4
Q

How much Annual Exempt Amount do trustees of other trusts receive?

A

Half

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5
Q

What was Bed & Breakfasting?

A

Holders of shares/UT’s would sell assets each year and repurchase next day to have a smaller gain for AEA.

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6
Q

How is Bed & Breakfasting stopped?

A

Any holding sold and repurchased within 30 days are treated as not to have happened

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7
Q

Main residence, ISA’s, personal belongings below £6K, Lottery/premium bond winnings

A

All exempt for CGT

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8
Q

What happens if a loss is made on asset sale?

A
  • Loss must be offset again that years AEA
  • Residual losses can be carried forward to future years
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9
Q

What are the 4 CGT reliefs?

A
  1. Personal residence
  2. Business assets disposal
  3. Roll-over relief
  4. Hold over relief
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10
Q

What is Private residence relief?

A
  • when a person sells their only property
  • If one than 1 house is owned they can choose which property to claim relief on
  • Rules tell how long a person can live away from main residence and still claim full relief
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11
Q

What is Business assets deposit relief?

A
  • Sole trader/Person who has 5% ordinary shares + 5% voting rights in company
  • 5% entitlement to distribution profits and net assets of company
  • Also for gains from investment in unlisted company
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12
Q

What is Roll-over relief?

A
  • Assets sold and replaced by other assets
  • Replacement must be bought within 1-3 years of original asset sale
  • Relief can be claimed to either the lower of the gain or reinvented amount
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13
Q

What is Hold Over Relief?

A
  • When assets gifted to a recipient CGT can be deferred until receipt disposes of assets.
  • Gift can be wholly or partly passed to recipient
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14
Q
  • Assets used by donor in their trade
  • Shares in transfer of personal company
  • Agricultural property that would attract IHT
  • Assets with immediate charge to IHT
A

Examples of Hold-over gain

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15
Q

What is inheritance tax?

A

Tax on the estates of deceased people

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16
Q

What is the estate?

A

Is not just the property but also other assets and money

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17
Q

What is the Nil Rate Band?

A

Is rate above which IHT charged on the property. The Nil rate band is £325,000

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18
Q

What happens to the NRB when a person dies?

A
  • The unused portion of the NRB can be to the surviving partner
  • Exempt from IHT
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19
Q

What is the Residential Nil Rate Band?

A

If estate is being left to children an additional band worth £175,000 is applied

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20
Q

What happens if the RNRB is larger than the estate?

A

The RNRB is reduced to the estate’s value

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21
Q

How are the NRB & RNRB similar?

A

The unused portions can both be transferred to the surviving spouse

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22
Q

What happens to the RNRB if an estate is worth more than 2 Million?

A

It is tapered away at the value of £1 for every £2 over 2 million

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23
Q

What happens if the property is less than the RNRB?

A

An unused portion can not be used again other assets in the estate

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24
Q

What is a Potentially Exempt Transfer?

A
  • When a person transfers assets from their estate during there lifetime
  • Subject to IHT when transferred
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25
Q

What happens if the donor survives for 7 years after making the gift?

A

Transaction is exempt from IHT

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26
Q

What happens is a donor dies in less than 7 years?

A

The value of the gift and estate is subject to IHT

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27
Q

How is IHT taken against gifts & and an estate?

A

Gifts are offset again the NRB first then the estate

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28
Q

What how does Taper Relief work in the 7 years after a gift is made?

A
  • First 3 years 100% IHT is due
  • Every following year IHT due is reduced by 20%
29
Q

What is a chargeable Lifetime transfer?

A

A gift to a company, other organisations and certain trusts

30
Q

When is IHT due on a Chargeable lifetime transfer?

A
  • Immediately at a reduced rate of 20%
  • Tax is only due if the value of the CLT combined with other CLT’s is larger than the NRB
31
Q

How are PET’ and CLT’s similar?

A

They both are subject to taper relief

32
Q
  • Transfers to spouse during lifetime and on death (UK Dom only)
  • Gifts of up to £250 cash per tax year
  • Charitable donations
  • Wedding gifts up to £1,000
  • Gifts on regular basis out of income
  • Gifts of up to £3,000 per tax year
A

All exempt for IHT

33
Q

Can parts of the gift amount of £3,000 be carried forward into the next tax year?

A

Yes but only for one tax year

34
Q

What is VAT?

A

Tax on goods and services in the UK

35
Q

What do the below items have in common?

  • Loans, Insurance
  • Health and Education Services
  • Books (hard copy & electronic)
A

They are all exempt form VAT

36
Q

What are Zero Rated Goods?

A

Items that could be subject to VAT but are not currently

37
Q

What is the advantage of a business not subject to VAT to register for it?

A

They can claim back VAT on business expencpes

38
Q

What is Stamp Duty?

A

Is a tax on the documents relating to land and securities purchase?

39
Q

What is Stamp Duty Reserve Tax?

A

Tax charged on documents completed electronically

40
Q

All these are what?

  • Stock Exchange Transfers
  • High Growth Segment
  • Property Authorised Investment Fund (PAIF)
A

Are all exempt for either Stamp duty or SDRT

41
Q

What is Stamp Duty Land Tax?

A

Is a tax charged to the purchaser of property

42
Q

How is SDLT charged?

A
  • Only parts above a certain threshold will be subject to SDLT.
  • This does increase with the value of the purchase price
43
Q

What happens to SDLT if the purchaser owns more than 1 residential property?

A

Supplementary rates are applied

44
Q

What are the equivalents to SDLT in Scotland & Wales?

A

Scotland: (LBTT)
Land & Buildings Transaction Tax

Wales: (LTT)
Land Transaction Tax

45
Q

How is SDLT different for first time buyers?

A
  • They are entitled to a tapered relief depending on the purchase price
  • Properties below a certain price no SDLT is chargeable
  • Above a certain amount no relief is available
46
Q

What is Corporation Tax?

A

A tax charged to LTD companies on their net profits

47
Q

LTD companies, Clubs, Societies + associates, trade & Housing associations, Co-operatives

Are all what?

A

Liable to Corporation Tax

48
Q

Do the below have to pay corporation tax?

Business partnerships, LLP & Sole traders

A

No they are subject to income tax

49
Q

Companies resident in the UK have to do what?

A

Pay corporation tax on worldwide profit

50
Q

Do companies resident outside of the UK need to pay corporation tax on worldwide profits?

A

No only on their UK- based businesses

51
Q

How do companies pay tax if their profits are up to and below a set threshold?

A

9 months after the end of their accounting period

52
Q

When is corporation tax due if profits are over the threshold?

A

In quarterly amounts halfway through the accounting year

53
Q

What is Withholding Tax?

A

Tax charged in a particular country to a non-resident for income received in that country. So income does not leave that country without being taxed

54
Q

When is CGT charged?

A

On the 31st January the following tax year

55
Q

How much wedding gifts can a parent gift to their child?

A

£5,000

56
Q

How much wedding gift can a grandparent gift to their grandchild?

A

£2,500

57
Q

How can the RNRB be used?

A

In the same way as the NRB any unused percentage can be used by the children on the survival spouse’s death

58
Q

Can the AEA be used for future years?

A

No it must be used in that tax year

59
Q

What is CGT?

A

Tax that is payable on the net gain of an asset/property the following tax year

60
Q

Is someone able to claim property maintenance & property improvements as a CGT deduction?

A

Property improvements is allowed but property maintenance is not

61
Q

For a basic rate tax payer what is the percentage gain they pay on the disposal of assets?

A

10%

62
Q

For a basic rate tax payer what is the percentage gain they pay on the disposal of property?

A

18%

63
Q

For a higher rate & additional tax payer what is the percentage gain they pay on the disposal of assets?

A

20%

64
Q

For a higher rate & additional tax payer what is the percentage gain they pay on the disposal of property?

A

28%

65
Q

When must CGT be paid on non-exempt gains on a residential property?

A

Within 60 days of completion

66
Q

How is CGT calculated?

A
  1. Amount of gain
  2. Deduction of AEA
  3. Deduct any losses
  4. Left is taxable gain
  5. Add to income
  6. Tax at appropriate rate
67
Q

Are these are what?

  • Food
  • Children’s clothes
  • Domestic Water Supplies
  • Medicines
A

Zero rated VAT items

68
Q

What percentage is IHT charged at?

A

40%

69
Q

Capital losses cannot be carried forward

True or False

A

False they can

CeMAP Unit 1 (18 decks)

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