w3

Question 1

Ethics

Answer 1

Integrity
Objectivity
Professional Competence and Due Care
Confidentiality
Professional Behaviour

Question 2

Integrity

Answer 2

Straightforward, honest & truthful
No association with false or misleading information
[includes misleading by omission]

Question 3

Objectivity

Answer 3

Professional judgement not to be overridden by:
bias
conflict of interest
influence of others

Question 4

Professional competence and due care

Answer 4

Continual development (knowledge and skills)
Current developments in practice, legislation and techniques
Reports to have appropriate training and supervision

Question 5

Confidentiality

Answer 5

Do not disclose information unless:
specific permission
legal duty
professional duty

Question 6

Professional Behaviour

Answer 6

Comply with relevant laws and regulations
Avoid action that could negatively affect the reputation of the profession

Question 7

Personal Capital Gains

Answer 7

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.”

Exempt Items:
Your car
Your home
Shares held in an ISA
UK gov gilts
Premium Bonds
Gambling winnings (inc lottery)

Question 8

Individual Savings Accounts

Answer 8

Maximum you can save in ISAs per year £20,000. ALL gains and income within the ISA wrapper are TAX FREE.
No limits beyond the £20,000.

There are 4 types of ISA:
cash ISAs
stocks and shares ISAs
innovative finance ISAs
Lifetime ISAs
You can put money into one of each kind of ISA each tax year.

Question 9

Capital Gain Calc

Answer 9

Add up all gains
Deduct allowable losses
Deduct allowance

Balance taxable at 10% for basic rate, 20% for higher & additional
Residential property at 18% and 28%
Capital Gains Tax worked out after all other income (week one and two)

Question 10

Allowable exp examples

Answer 10

Gain = what you sold the asset for less what you paid, less any costs incurred when buying/selling.
Stamp duty is paid when buying certain assets (0.5% on shares). These are allowable costs of buying.
Legal fees, administration charges, agency fees and so on all allowable.

Question 11

How do you calc shares gain?

Answer 11

Using AVCO:
You buy 100 shares for 80p each. The total cost is £80.
You later buy 300 shares for £1.20 each. The total cost is £360.
In total, you have 400 shares costing £440 - the AVERAGE COST of each share is £1.10.

If you sell 150 shares, the cost of the shares for your tax calculations is £165 (£1.10 multiplied by
150). Deduct this from what you sold the shares for to work out your gain.

Question 12

Section 104 holding

Answer 12

Shares of the same class in the same company are identical – not possible to determine which are
sold, so “AVCO” applies.
All shares held together in a ‘Section 104 holding’.

Question 13

UK Property BTL

Answer 13

Buy to Let – Income from Residential Property (i.e. another persons home)
Individual with spare cash (~25% of property value) and good credit secures mortgage on a home.
Home is rented out.
Rental income covers all costs including mortgage repayments.
VERY appealing investment. Highly leveraged (mortgage 75%), and good returns (rental income AND capital gain)
Controversial though…
Recent changes to tax structure are making it significantly less appealing

Question 14

BTL

Answer 14

Profits = rent less allowance costs
MORTGAGE INTEREST IS NOT AN ALLOWABLE COST
Mortgage interest instead attracts a tax credit worth 20% of the interest charge.
Means that basic rate landlords DO get the full benefit.
Higher/Additional Rate DO NOT get the full benefit.

Capital Gains on UK Property (note, own home is exempt) taxed at 28%.

Question 15

Not all UK Property income is BTL

Answer 15

Rent-a-room - Rent from letting a room in your own home.
Furnished Holiday Lets
Commercial (Non-residential)

Question 16

Rent-a-room

Answer 16

£7,500 - tax-free
>£7,500:
Method A: Receipts less expenses and capital allowances = profit. Profit taxed as income.
NO £7.5k allowance
Method B: Gross receipts less Rent-a-Room limit of £7,500 = taxable profit. NO OTHER EXPENSES CLAIMABLE
NOTE: letting out a room IN YOUR HOME.

Question 17

Furnished Holiday Lets (FHL)

Answer 17

A business in its own right. Intention to profit (NOTE: badge of trade)
Must be furnished sufficient for occupation.
Must be in UK or EEA
Occupancy conditions:
available for lettings >210 days per year
actual lets >105 days per year
individual lets >31 days do NOT count (unless illness or accident or flight delays)
If lettings >31days amount to >155 days, the property no longer counts as FHL

Question 18

Benefits of FHLs

Answer 18

Capital Gains Tax Reliefs (Note, a business, not “residential”)
Furniture etc allowable
Mortgage interest an allowable cost*
*up to the value when purchased. Re-mortgaging above this means the interest needs to be
apportioned.

Question 19

UK Property – Commercial

Answer 19

A business in its own right. Intention to profit (NOTE: badge of trade)
Capital Gains Tax Reliefs (Note, a business, not “residential”)
All wholly and exclusively costs allowable
Mortgage interest an allowable cost*
*If part commercial and part residential, then requires apportionment on a “just and reasonable” basis.