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Flashcards in Taxation of direct investments Deck (17)
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1

Is the rule regarding £100 per annum for a child which is then taxed on a parent just for the one parent or is this for two?

This is £100 per parent therefore if the gift is joint then the limit will be £200

2

What is the interest paid for this tax year by UK banks?

Gross

3

With a building society demutualisation what happens if the member is paid a cash bonus? (From a tax perspective)

This will be a chargeable gain if the saver is a member of the building society ( ie has a share account). It will not be a chargeable gain if they have a deposit account

4

With a building society demutualisation what happens if free shares are given to an individual from a tax perspective

There will be no tax liability created but any gain on disposal would be a chargeable gain and the acquisition value would be nil.

5

Which investments are tax free under NS & I? (4)

*Direct ISA
*Premium Bonds
*Savings certificates ( both fixed and interest linked)
*Children's bonds

6

Explain gilts?(5)

*Gilts pay a fixed interest - coupon
*Set amount (usually £100)
*Usually have a fixed term
*Coupon is paid gross unless the investor has elected to be paid net
*No CGT payable

7

What is a local authority bond? (5 features)

*Represent local borrowing
* Pay fixed interest
*Usually at end of a fixed term
*Paid net of tax
*Qualifying corporate bond and therefore no CGT payable on any gains

8

What is a corporate bond?

*Form of borrowing by a company
*Pay fixed interest
*Have a redemption value
*No CGT on a qualifying corporate bond but CGT on a non-qualifying bond

9

What is the difference and features between a permanent interest bearing share (PIBS) and a perpetual subordinated bond? (8)

*PIBS are issues by building societies to raise capital
*If the build society demutalises then they become PSBs
*PSBs have identical features to PIBS
*fixed interest investments
*Interest normally paid half yearly
*interest is paid gross
*Must be declared by UK tax payer
*Qualifying corporate bond so no liability to CGT - therefore losses can not be offset either

10

Name some features of a share? (4)

*Part ownership of the company
*voting rights
*Gains/Losses subject to CGT rules
*Can use dividend allowance

11

What would happen if a UK resident where to receive a dividend from an overseas country? (3)

*It will have withholding tax deducted at source
*This is if a double taxation agreement is in place
*UK resident could then either pay the foreign tax or pay the amount of UK tax due

12

What is the requirement for the annual income to be below in order for property profits to be allowed to be collected through PAYE?

Under £2500 and if the individual already pays PAYE

13

Is rental income classed as relevant UK income for pensions contributions?

No, even though it falls under the heading of non savings income it is not classed as relevant UK income for pension contributions
(exception is furnished holiday lettings or were the HMRC allows the business to be taxed as a trade)

14

What are the allowable deductions for property income? (6)

*Repairs and maintenance - this must be routine expenditure and will not be required to pay CGT
*Interest - any interest on a property loan can be offset against rent received from any of the properties in the property pool - this is being restricted in 2017/18
*Other expenses eg insurance premiums, ground rents
*Capital allowances - plant and machinery in no residential properties
*Wear and tear allowances - with a furnished buy to let the landlord can claim the expense of replacing or repairing the item under wear and tear
*premiums on short leases- where lump sums are received at the outset for the grant of a lease of less than 50 years

15

What are the 4 advantages if HMRC accepts that a property business can be taxed as a trade?

*Rent received can be used for relevant UK income for pension contributions
*CGT rollover relief, holdover and entrepreneurs relief
*IHT business relief
*More scope for setting off losses

16

Discuss what the tax advantages for furnished holiday lettings

*Must be in the UK or EEA
*Commercially let
3 tax tests must be met:-
* Available for commercial letting as holiday accommodation to the public for at least 210 days
* Commercial let for at least 105 days in any tax year
*not be let for periods of longer term occupation (continuous periods for more than 31 days) for more than 155 days during the year

As a qualified let it can be treated as trading income and expenses are allowable trading expenses.
Does not need to be in a holiday area or let out for holidays

17

What is rent a room relief?

*Where an individual receives income from letting out a room in their main home
**Relief is £7500 per annum
*Exemption is per residence
*If total gross rental income is below £7500 then there is nothing payable
*If above £7500 then the individual can pay tax on the amount over £7500 or pay tax on the net rent (gross rent less expenses) with no adjustment to rent a room relief