R03_flashcards_section_one

Question 1

When is a member of an LLP taxed under self assessment rather than PAYE?

Answer 1

When they meet at least one of the salaried-member tests

An LLP member is treated as self-employed if they show characteristics of a true partner.

Question 2

What is the profit-link requirement for LLP self-employment status?

Answer 2

More than 20% of pay must depend on LLP profits

This indicates entrepreneurial risk rather than employment.

Question 3

What level of influence must an LLP member have to be classed as self-employed?

Answer 3

Significant influence over the running of the LLP

HMRC expects genuine managerial involvement.

Question 4

What is the capital-contribution test for LLP members?

Answer 4

Capital contribution of at least 25% of expected profit share

Capital at risk indicates partnership status.

Question 5

What is the general rule for taxing employee benefits?

Answer 5

Employee taxed on the cash equivalent

Usually cost to employer.

Question 6

How do employee contributions affect the taxable benefit?

Answer 6

They reduce it pound-for-pound

Only net benefit is taxed.

Question 7

What is the Pepper v Hart rule?

Answer 7

In-house benefits taxed on marginal cost

Applies when employer provides benefit internally.

Question 8

How is annual asset-use benefit calculated?

Answer 8

20% of market value when first provided

Applies for non-cash asset use.

Question 9

How are rented assets taxed as benefits?

Answer 9

Higher of annual value or rent paid

Ensures full value taxed.

Question 10

How is the benefit of an asset gifted to an employee calculated?

Answer 10

Market value at date of gift

Value transferred is taxable.

Question 11

How is basic living accommodation benefit calculated?

Answer 11

Annual rental value or actual rent paid

Highest figure used.

Question 12

When does the additional accommodation charge apply?

Answer 12

When property cost > £75,000

Expensive housing triggers extra tax.

Question 13

What rate is used for additional accommodation charge?

Answer 13

(Cost – £75,000) × HMRC ORI

ORI expected 2.5% for 25/26.

Question 14

What valuation applies if property bought >6 years earlier?

Answer 14

Market value when first provided

Prevents low historical cost use.

Question 15

Is furnished accommodation taxed differently?

Answer 15

Yes, add 20% of furniture value

Furniture is a separate benefit.

Question 16

When is employer-provided accommodation exempt?

Answer 16

Necessary, customary, or security reasons

No taxable benefit.

Question 17

What is a beneficial loan?

Answer 17

Loan below market interest

Difference creates taxable benefit.

Question 18

How is beneficial loan benefit calculated?

Answer 18

(ORI − actual interest) × loan balance

Based on HMRC ORI.

Question 19

What is the small-loan exemption?

Answer 19

Loans below £10,000 not taxable

Applies if under this all year.

Question 20

What is the Net Pay Arrangement?

Answer 20

Pension deducted before tax calculation

Gives automatic full tax relief.

Question 21

Which schemes use Net Pay?

Answer 21

• Occupational pensions
• AVCs

Contribution lowers taxable pay.

Question 22

How does Relief at Source work?

Answer 22

Member pays net; provider claims 20%

Higher-rate relief via self-assessment.

Question 23

Which pensions use Relief at Source?

Answer 23

• Personal pensions
• GPPs
• SIPPs

Standard DC retail approach.

Question 24

When is Relief by Claim required?

Answer 24

Gross-paid legacy contributions

Old RACs mainly.

Question 25

How is **Relief by Claim** applied?

Answer 25

Deduct contribution from total income ## Footnote Relief given at marginal rate.

Question 26

What contributions extend **tax bands**?

Answer 26

* RAS pensions * Gift Aid ## Footnote Increases basic/higher-rate thresholds.

Question 27

How much do **tax bands extend** by?

Answer 27

By gross contribution amount ## Footnote Net × 1.25 for RAS.

Question 28

Why extend **tax bands**?

Answer 28

To reduce tax by moving income into lower bands ## Footnote Key planning strategy.

Question 29

What is a **tax reducer**?

Answer 29

Amount deducted from final tax liability ## Footnote Applied after tax calculated.

Question 30

How does **Marriage Allowance** work?

Answer 30

10% PA transfer reduces tax by £251.40 ## Footnote Only for basic-rate couples.

Question 31

What is **Married Couple’s Allowance**?

Answer 31

10% reducer on MCA allowance ## Footnote For couples with one born before 6/4/35.

Question 32

How does **EIS tax relief** work?

Answer 32

30% reducer on investment ## Footnote Cannot reduce tax below zero.

Question 33

How does **SEIS tax relief** work?

Answer 33

50% reducer ## Footnote Higher relief due to higher risk.

Question 34

How does **VCT tax relief** work?

Answer 34

30% reducer on up to £200k ## Footnote Also tax-free dividends.

Question 35

What are **pre-eminent object reliefs**?

Answer 35

30% reducer for gifts to the nation ## Footnote Can spread over 5 years.

Question 36

How are **property finance costs** treated?

Answer 36

20% basic-rate reducer ## Footnote Replaced mortgage interest relief.

Question 37

What is the **Plan 5 student loan threshold**?

Answer 37

£25,000 income ## Footnote Repayments begin above this.

Question 38

What is the **student loan repayment rate**?

Answer 38

9% of income above threshold ## Footnote Applies to Plan 5.

Question 39

How long are **Plan 5 loans repaid**?

Answer 39

40 years ## Footnote Written off afterwards.

Question 40

How is **student loan interest** calculated?

Answer 40

Based on RPI only ## Footnote No extra interest margin.

Question 41

How are **repayments collected for employees**?

Answer 41

Through PAYE ## Footnote Deducted automatically.

Question 42

How are **repayments collected for self-employed**?

Answer 42

Through self-assessment ## Footnote Based on annual profits.