Unit 1 Topic 4 Flashcards
Melanie bought a painting ina charity shop for £40. It turned out to be a well known artist and she sold it 3 years late 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.
How many years can the annual exempt amount for CGT be carried forward?
Exempt amount cannot be carried forward at all.
To qualify for business rollover relief, a business must replace an asset not more than 5 years from the date of disposal. True or false?
False. Assets must be replaced within 3 years after the date of disposal.
Inheritance tax would be charged on
which of the following?
- The total of the deceaseds estate
- The total value of the estate above the available nil rate band
- The value of the estate less any gifts than have been made in the previous seven years
- The total value of the estate above the available nil rate band
Tax chargeable lifetime transfer in excess of the available nil rate band is payable?
- Immediately at the full rate
- Only if the transferor dies within the 7 years of transfer
- Immediately at reduced rate
- Immediately at reduced rate of 20%
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 eight years ago. He sold them in the current tax year for £25,400. He has no other gains or losses (current or carried forward) in the current tax year. Ignoring any costs, calculate his capital gains tax liability assuming an annual exempt amount of £3,000 and a basic rate of 10%.
a) £830
b) £1,110
c) £1,410
d) £2,540
b) £1,110
8) Six years ago, Sarah, a basic-rate taxpayer with taxable income of £17,000, bought some shares for £15,000. She sold them later that same tax year for £10,100, making her a loss of £4,900 in that tax year. She made no gains in the same tax year. In the current tax year, she sold her holiday flat in the UK, 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 1 current tax year assuming an annual exempt amount of 2 £3,000 and a basic rate of 18%.
a) £3,996
b) £3,618
c) £4,518
d) £5,418
a) £3,996
Luis sold his house, which has been his main residence since he bought the house in 2020, and downsized to a one-bedroom flat, making a gain of £325,000. Is the capital gain made from this sale eligible for private residence relief?
a) Yes, because the house was Luis’s main residence; the gain from the property’s sale will be eligible for private residence relief.
b) No, because Luis has not lived in the house long enough to qualify for private residence relief.
c) We do not have enough information to decide if the gain is eligible for private residence relief or not.
a) Yes, because the house was Luis’s main residence; the gain from the property’s sale will be eligible for private residence relief.
A company makes an annual profit of £1.2m. When would the company’s corporation tax normally be payable?
a) Throughout the accounting period in monthly installments.
b) Within 3 months of the end of the accounting period.
c) 9 months after the end of the accounting period.
d) 12 months after the start of the accounting period.
c) 9 months after the end of the accounting period.
What is Capital Gains Tax (CGT) primarily levied on?
(A) An individual’s annual income.
(B) The increase in value of certain assets.
(C) Goods and services purchased by consumers.
(D) The total value of an individual’s estate upon death.
(B) The increase in value of certain assets.
What happens to allowable capital losses that were made in the same tax year or carried forward from previous years?
(A) They are added to the taxable gain.
(B) They are ignored for CGT calculations.
(C) They are deducted from the capital gains in the tax year.
(D) They can be used to offset income tax liability.
(C) They are deducted from the capital gains in the tax year.
What constitutes a “disposal” for Capital Gains Tax purposes?
(A) Simply owning an asset.
(B) An increase in the market value of an asset.
(C) The sale of an asset, transferring ownership, giving it away, or receiving compensation for its loss or destruction.
(D) Inheriting an asset from a deceased person.
(C) The sale of an asset, transferring ownership, giving it away, or receiving compensation for its loss or destruction.
what is the tax treatment of any shares and unit trusts that are sold and repurchased within 30 days for CGT purposes?
(A) They are subject to a higher rate of CGT.
(B) The capital gains are doubled.
(C) They are treated as if those related transactions had not taken place.
(D) The capital losses cannot be claimed.
(C) They are treated as if those related transactions had not taken place.
According to the mind map in the notes, which of the following assets is listed as being exempt from CGT?
(A) Real estate or land that is not an individual’s main home.
(B) The sale of shares held outside an ISA.
(C) An individual’s main private residence.
(D) Business assets such as land and buildings.
(C) An individual’s main private residence.
What are deductible costs when calculating CGT?
(A) Income tax paid on the asset.
(B) The purchase price and selling costs.
(C) The market value of the asset at the time of disposal.
(D) Any interest paid on loans used to acquire the asset.
(B) The purchase price and selling costs
What is a key condition for Private Residence Relief to apply when selling a property?
(A) You owned the property for more than ten years.
(B) The property was your main home.
(C) The property was located overseas.
(D) You made a significant profit on the sale.
(B) The property was your main home
What is the first step in calculating CGT liability?
(A) Apply the relevant tax rates.
(B) Deduct any allowable losses.
(C) Calculate the gain.
(D) Subtract the annual exempt amount.
(C) Calculate the gain
What is a key requirement for limited company owners to be eligible for Business Asset Disposal Relief?
(A) They must have owned the company for at least five years.
(B) They must own at least 25% of the company’s shares.
(C) They must own at least 5% of the shares and be entitled to 5% of profits and assets.
(D) They must be actively involved in the day-to-day management of the business.
(C) They must own at least 5% of the shares and be entitled to 5% of profits and assets
Which of the following is listed as an eligible asset for Gift Hold-Over Relief?
(A) Cash.
(B) Shares in a quoted trading company.
(C) Business assets used in a trade.
(D) Personal belongings.
(C) Business assets used in a trade
What is Inheritance Tax (IHT) primarily a tax on?
(A) Income received after someone dies.
(B) The sale of inherited property.
(C) The estate (property, money, and possessions) of a deceased person.
(D) Gifts given during a person’s lifetime.
(C) The estate (property, money, and possessions) of a deceased person
What is the Nil Rate Band (NRB)?
(A) The total value of an estate that is always subject to IHT.
(B) The portion of the estate that is subject to a 0% tax rate.
(C) The maximum amount of tax that can be paid on an estate.
(D) The rate at which Inheritance Tax is always charged.
(B) The portion of the estate that is subject to a 0% tax rate
According to the notes, what happens to any unused Nil Rate Band (NRB) if a person does not use their full allowance?
(A) It is lost and cannot be used.
(B) It can be transferred to their children.
(C) The unused portion can be transferred to their surviving spouse or civil partner.
(D) It can be carried forward for their own future use.
(C) The unused portion can be transferred to their surviving spouse or civil partner
Who can transfer unused Nil Rate Band (NRB)?
(A) Any family member.
(B) Only the deceased’s children.
(C) Only the spouse or civil partner.
(D) Any beneficiary named in the will.
(C) Only the spouse or civil partner
