Topic 4: UK Taxation 2 Flashcards
Melanie bought a painting in a charity shop for £40. It turned out to be by a well known artist, and she sold it three years later for £2,000. She had to pay CGT on the gain she made. True or false?
False. Gains made on ‘chattels’ (movable objects such as jewellery, antiques and paintings) are exempt from CGT if their value is £6,000 or less.
For how many years can the annual exempt amount for CGT be carried forward?
The CGT annual exempt amount cannot be carried forward at all.
To qualify for roll over relief, a business must replace an asset not more than five years from the date of disposal. True or false?
False. Assets must be replaced within three years after the date of disposal.
Inheritance tax would be charged on which of the following?
a) The total value of the deceased’s estate.
b) The total value of the estate above the available nil rate band.
c) The value of the estate less any gifts that have been made in the previous seven years.
b) Inheritance tax would be payable on the total value of the estate above the available nil rate band.
Tax on a chargeable lifetime transfer in excess of the available nil rate band is payable:
a) immediately, at the full rate.
b) only if the transferor dies within seven years of the transfer.
c) immediately, at a reduced rate.
c) Immediately, at a reduced rate of 20 per cent.
What kind of tax is payable when shares are purchased electronically?
Stamp duty reserve tax.
Sanjay, a basic rate taxpayer with taxable income of £12,000, purchased UK listed company shares for £11,300 in May 2014.
He sold them for £25,400 in August 2020. He has no other gains or losses (current or carried forward) in the tax year 2020/21.
Ignoring any costs, calculate his capital gains tax liability.
Gain: £25,400 – £11,300 = £14,100
Taxable gain: £14,100 – £12,000 = £2,100
Capital gains tax payable: £2,100 × 10% = £210
Sarah, a basic rate taxpayer with earned income of £17,000 in 2020/21, bought some shares in May 2016 for £15,000 and sold them in October 2016 for £10,100, making her a loss of £4,900 in the tax year 2016/17. She made no gains in the same tax year. In June 2020 she sold her holiday flat in Devon, which made her a profit of £47,600. She had spent £14,000 on renovations, and it cost her £3,500 in estate agent’s commission to sell it.
Calculate the capital gains tax due for the tax year 2020/21.
Gain on flat £47,600 Less cost of renovations (£14,000) Less cost of disposal (commission) (£3,500) Less annual exempt amount (2019/20) (£12,000) Less carried forward loss from 2016/17 (£4,900) Taxable gain = £13,200 × 18% = £2,376 capital gains tax Note that a rate of 18 per cent applies as the gain arises from the disposal of property.
Luis sold his studio flat and bought an apartment (his only property) for £325,000. How much stamp duty, if any, will he pay?
a) £6,250.
b) £2,500.
c) £3,750.
d) £0.
a) £6,250. No tax is payable on the first £125,000. Tax is payable at 2% on
the portion between £125,001 and £250,000 (£125,000 × 2% = £2,500).
Tax is payable at 5% on the portion between £250,001 and the purchase
price of £325,000 (£75,000 × 5% = £3,750). Total SDLT due = £6,250.
A company makes an annual profit of £1.2m. When would the company’s corporation tax normally be payable?
Nine months after the end of the relevant accounting period.
