1
Q
Quick Succession Relief (QSR)
A
- Available where property in a deceased estate had passed to them by chargeable transfer in the 5 years before death.
NE / GE x IHT paid x QSR %
2
Q
Calculating Income Tax Charge
A
- Calculate all pre-tax income for the year (ESDL)
- Deduct reliefs (business / property loss, annuity payments, interest on loans)
- Deduct PA / Blind PA
- Calculate any higher / additional relief through tax band extension (Gross up RAS pension contribution / gift aid)
- Calculate tax on remaining income
- Deduct any reducers (EIS / VCT)
3
Q
Adjusted Net Income
A
- Income after deducting GROSS pension payments & gift aid donations.
- Pension payments must be subject to RAS
4
Q
How is ITR received on contributions to a UK charity?
A
- Receive TR through SA.
- Basic / higher rate bands increased by GROSS donation
- By increasing bands tax relief is received at the highest marginal rate.
- Must make a declaration that the gift is being made under gift aid.
5
Q
Income tax benefit for contributing to a SIPP
A
- Net Contribution grossed up
- Reduces ANI
- Does this reinstate PA if reducing below £125,140?
- Increases BRB & HRB by gross contribution
- meaning more of income taxed at lower rate
- Does this re-instate the PSA?
- Does this change tax applied to Savings Income and Dividend Income?
- Does it restrict taxation at highest level?
6
Q
Basis of tax assessment for self employed?
A
- Assessment is based on tax year
- regardless of accounting date
- Profits are apportioned for the split
7
Q
Class 2 & 4 NIC’s for Self Employed
A
- Class 4 NIC’s paid at the main rate of 6% on PROFITS
- Between lower (£12,570) and upper (£50,270) earning limit.
- Taxed at 2% for all profit above UEL
- Dont’t need to pay class 2 if profits are over the small profit threshold (SPT)
- As they are considered paid
- Still entitled to contributory benefits
8
Q
Action needed regarding VAT if profits reach £90k Threshold
A
- Must register for VAT
- If make taxable supplies above £90k
- Have to notify HMRC within 30 days of the end of the month when limit was exceeded
- will be registered on 1st of the following month
- at which point must charge customers VAT at 20%
9
Q
Explain how the flat scheme for VAT operates?
A
- Can account for VAT as a percentage of profits rather than the difference between input / output VAT
- To qualify annual taxable turnover must be no more than £150k (ex VAT)
- There is a 1% reduction in the flat rate percentage in the 1st year
- Upon joining the flat rate scheme, can stay on it until income in over £230k
- no VAT reclaims on VAT purchases
- VAT on capital purchases of more than £2k may be eligible for reclaim
10
Q
Describe implications of death without amending a will if divorced
A
- Will still valid / not revoked on divorce
- Former spouses treated as if they died on divorce
- If will doesn’t state what happens on death of a sole beneficiary
- rules of intestate could apply / descendants benefit
- Any current partner not entitled to benefit if not married
- Former spouse can no longer be an executor
- Former spouse could make a claim if can prove they were being financially maintained
11
Q
Purpose of an 18 to 25 Trust and how it operates?
A
- An 18 to 25 trust can be created for minors / children
- extends the protection of assets beyond age 18
- however an absolute interest must be given to the child no later than age 25
- beneficiary treated as owning the assets for IHT until age 18
- An exit charge is made
- based on number of quarters between age 18. 25
- There are no periodic charges
12
Q
Calculate IHT payable if a child receives an absolute interest to an 18 to 25 trust on their 25th Birthday
A
- value of trust - NRB
- X 6 % (periodic charge)
- X 28/40 (apportioned 10 year anniversary charge)
13
Q
CGT treatment on tax year arrival in the UK…
A
- If spent more than 183 days (half year) in the UK within the tax year
- Treated as a UK resident
- Therefore liable to CGT on all UK gains
14
Q
Implications of electing to use remittance basis for CGT purpose on assets held overseas
A
- Only liable to CGT on foreign gains remitted to the UK
- not liable to the remittance basis charge if not been resident in the UK for at least 7 out of the previous 9 tax years
- The gains that are not remitted escape UK tax.
- Person will loose their annual CGT exempt amount if claiming the remittance basis for that tax year.
- If remittance basis not used, they will be liable to CGT on worldwide gains.
15
Q
Factors to be aware of for Private Residence relief (PRR) if moving to another owned property
A
- Must determine which property is the main residence that benefits from PRR.
- Must make the election within 2 years of change of residence.
- The election can be changed but not backdated more than 2 years
- If no election is made, HMRC can decide, based on the facts, which property should be treated as the main residence
- letting relief could be available if a person shares occupancy with a tenant.
16
Q
Chattels relief
A
- exempt form CGT if value at disposable does not exceed £6k (applies per person in marriage if asset owned jointly)
- If proceeds exceed £6k, the chargeable gain can’t exceed five-thirds of the excess above £6k
17
Q
Negligible value claims
A
- For assets that have become worth nothing whilst owning them.
- Can make a negligible value claim to HMRC which allows the asset to be written off as a capital loss.
18
Q
Tax treatment of income form Inetrest In Posession (IIP) Trust
A
- Interest is treated as savings and dividends are treated as dividend income (not classed as trust income)
- If trust income exceeds de minimis (£5k), the total income is taxed
- Trustees pay basic rate tax on all income received within the trust
- Dividend income is paid with a tax credit of 8.75%
- If higher / additional rate tax-payer, an additional 25% / 30.6% will be owed
- beneficiary can use dividend allowance if not already used
- Interest is paid with a 20% tax credit
- higher / additional tax payers would owe a further 20% / 25%
- Can also use PSA if not already used
- additional income tax must be paid by self assessment
- by 31st January in the following tax year
19
Q
Outline conditions that must be satisfied for a Deed of Variation to be effective for IHT purposes.
A
- Must execute deed within 2 years of death
- It must refer to the will being varied.
- All affected beneficiaries must sign
- It must contain a statement that the variation is to have an effect for IHT
- The personal representatives must sign if the variation increased the IHT on estate
- There must be no consideration for money
20
Q
Disclaimer
A
- Similar to a DOV
- Where a person inherits property under a will, intestate or trust the property can be disclaimed (legally renounce their entitlement).
- provided it has not already been accepted.
- must be disclaimed in writing within 2 years of death and there must be no consideration in money
- Disclaimer must contain a statement that it is to have effect for IHT.
- Property passes back into the residue of the estate and thus whomever is entitled under the will. The person disclaiming their inheritance has no choice of who, alternatively, will inherit their legacy.
21
Q
Drawbacks of enduring power of attorneys (EPAs)
A
- EPAs do not allow health and care decisions to be made by the attorney
- The EPA of the survivor will be revoked on the first of the couple to die
- An EPA can’t be registered prior to becoming mentally incapable
- Any powers of attorney are suspended during the registration period
- Can’t make own decisions after EPA has been registered.
22
Q
Benefits of replacing a EPA with an LPA
A
- A health and welfare LPA can be executed
- which is less costly / time consuming than applying to the court of protection for a deputyship
- An LPA can be registered immediately
- Donor can continue to make decisions post-registration if mentally capable (flexible)
- Additional attorneys can be appointed to act joint and severally
- Replacement attorneys can be appointed in the event the donor are unable to act
23
Q
What is a Deputy / deputyship?
A
- Relevant if a person loses mental capacity and there is no LPA or EPA in place.
- Must apply to COP to be appointed
- Can make decisions on behalf of incapacitated person.
- must be over 18
- can’t be bankrupt
AF1
flashcards
Decks in class (11)
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