Topic 4 - UK Taxation 2

Question 1

Disposal

Answer 1

Sale of an asset etc..

Question 2

How is CGT calculated

Answer 2

1- calculate the amount of gain
2- deduct annual exempt amount
3- deduct any losses from the gain
4- taxable gain is left over
5- add to taxable income to establish what rate of CGT should be paid for both

Question 3

Private residence relief

Answer 3

Available when selling your main residence

Question 4

Business asset disposal relief

Answer 4

Pay lower rate of tax

Available to business owners who own at least 5% and entitled to 5% of profits

Question 5

Roll over relief

Answer 5

Rolling over existing asset to future asset. Must’ve been bought 1 year before or 3 years after of sale of original asset

Question 6

Hold over relief

Answer 6

Gifting asset to another recipient. CGT paid when they sell - not you

Question 7

What is inheritance tax?

Answer 7

Tax charged on estate of deceased person

Charged on the amount the value exceeds the available nil-rate band at the date of death.

Question 8

Nil-Rate Band

Answer 8

Amount of your asset that can be passed down to beneficiaries free from IHT

Question 9

Residence Nil Rate Band

Answer 9

If the estate includes a residence (house) that’s being left to direct descendent, an additional (RNRB) can be applied

Question 10

Potentially exempt transfer

Answer 10

Usually a gift of an asset from a persons estate, can be subject to IHT if the donor dies within 7 years of gifting and exceeds NRB

Question 11

IHT on potentially exempt transfers

Answer 11

Death within / Tax due
1 year / 100%
2 year / 100%
3 year / 100%
3-4 year / 80%
4-5 year / 60%
5-6 year / 40%
6-7 year / 20%
7+ year / NO TAX

Question 12

Chargeable lifetime transfer

Answer 12

Gifts to companies/organisations which tax is due at reduced rate.

‘Lifetime’ tax is due when added to other chargeable lifetime transfers (past 7 years) and exceeds the NRB

Question 13

Value added tax (VAT)

Answer 13

Tax on most good and services

Businesses with high turnover may wish to register for VAT

Zero rated goods may be subject to VAT

Question 14

Stamp duty and stamp duty reserve tax (SDRT)

Answer 14

Stamp duty is payable for securities and land

Paid on paper documents that transfer ownership of financial assets and stamped by HMRC

SDRT is charged on electronic transfers

Question 15

Stamp duty land tax

Answer 15

Tax when buying a property, different thresholds apply

Question 16

Corporation tax

Answer 16

Paid by limited companies on their profits

Up to threshold - due 9 months after
Over threshold - quarterly instalments

Question 17

Withholding tax

Answer 17

Tax on income before received - mainly if non resident (sportsperson)

Aim is to make sure money is taxed before leaving country