topic 4 - uk taxation 2

Question 1

Capital gains tax

Answer 1

• Is payable on net gains made in the tax year, after allowing capital losses that were made in the same year or carried forward from previous years

Question 2

CGT not payable on

Answer 2

• personal property worth less than £6000
• main residence
• gilts
• ISAs
• Premium bonds
• Corporate bonds

Question 3

When is CGT paid?

Answer 3

• Normal paid on 31st January following the end of the tax year in which the gain is made

Question 4

Private residential relief

Answer 4

• When someone sells a property, they have lived in as their main/only residence
• If someone has more than one property, they can nominate the property they want to claim relief on

Question 5

Business asset relief

Answer 5

• Available to ore sole traders and limited companies
• For limited companies, eligibility depends on holding at least 5% of the ordinary share capital

Question 6

inheritance tax

Answer 6

• Is levied mainly on the estates of deceased persons and is charged following and individual’s death. The tax is charged on the amount by which the value of the estate exceeds the available nil-rate band at the date of death.

Question 7

potential exempt transfer

Answer 7

• If the donor survives for 7 years after making the gift, these transactions become fully exempt.
• The amount of IHT is tapered down over the final 4 years over 7.

Question 8

Gifts/transfers exempt from IHT

Answer 8

• Between spouse/civil partners during their lifetime or on death, provided the spouse is UK domiciled.
• Small gifts up to £250per recipient in each tax year
• Wedding gifts up to £1000 (or £5k from parents and £2.5k from grandparents).
• Gifts made on a regular basis out of income, and which do not affect donor’s standard of living.
• Up to £3000 per tax year for gifts not covered by other exemptions. Can be carried forward if not used.

Question 9

Value added tax (VAT)

Answer 9

• An indirect tax levied on the sale of most goods and the supply of most services in the UK.
• Some goods and services are exempt. Eg loans and insurance
• The supply of financial advice is not exempt.
• Supply of health and education services s exempt, as are books
• Zero-rated items include food, books, children’s clothes, domestic water supply and medicines.
• Domestic heating is charged at a reduced rate.

Question 10

Stamp duty

Answer 10

Certain transactions, such as purchases of securities and of land are liable. It is tax imposed on the documents that give effect to the transaction. Eg conveyances of property or stock transfer forms.

Question 11

Stamp duty reserve tax

Answer 11

is charged on transfers that are completed electronically.

Question 12

Stamp duty land tax

Answer 12

• Is paid by the purchaser of property and there are different rates applied to different portions of the purchase price.
• SDLT does not apply to purchase of properties in Scotland or Wales, which are subject to a different tax.
• First-time buyers can claim a relief on stamp duty land tax.

Question 13

Corporation tax

Answer 13

• Paid by limited companies on their profits.
• Also payable by clubs, societies and associations, trading associations, housing associations and co-operatives.
• Taxed on all their profits arising in a given accounting period.
• Companies’ resident in the UK pay on their worldwide profits.

Question 14

Gains made on chattels..

Answer 14

are exempt from CGT if their value is £6k or less

Question 15

To qualify for business rollover relief, a business must replace an asset not more than five years from the date of disposal. True or false?

Answer 15

False – assets must be replaced within 3 years after the date of disposal

Question 16

Tax on a chargeable lifetime transfer in excess of the available nil rate band is payable:

Answer 16

immediately, at a reduced rate – of 20%

Question 17

A company makes an annual profit of £1.2m. When would the company’s corporation tax normally be payable?

Answer 17

9 months after the end of the relevant accounting period