Tax: Maximum penalty for errors in tax
30% of the lost tax revenue (can be reduced for genuine mistakes)
Tax: Who can take advantage of the residence nil rate band?
Lineal descendants
Tax: What is the basic tax point?
- usually the delivery date of goods/services or the ship date
- but if VAT invoice issued within 14 days after that date, then the date of the invoice.
Tax: When does personal allowance get tapered? (1 per every 2 of income over this amount)
$100,000
Tax: Marriage allowance criteria
- both basic rate taxpayers
- married or partners
- transferring partner’s income is less than personal allowance
Once that’s established, they get basically the marriage allowance as a tax reduction
Tax: Allowance for savings income
Basic rate TP - $1000
Higher rate TP - $500
Additional rate TP - none
Tax: Allowance for dividend income
$2000 for ALL TP
Tax: 4 options for taking trading losses as a sole trader or partnership (not company tax)
- use in current year and/or prior year and use leftover losses to offset CGT
- carry it forward to offset trading income (not any other sort of income)
- carry forward to offset profit income when business is incorporated
- when person stops operating company, then can offset profit income from the last 3 years
Tax: Standard to see if someone is tax dodging
if HMRC can prove that the arrangement cannot reasonably be regarded as a reasonable course of action
Tax: Generally there’s no gift tax in the UK, but if you die within 7 years, then that gift is treated as if you were trying to avoid inheritance tax. But what gifts made during lifetime are always tax-free?
- gifts to spouse (except if the gift is to a non-UK domiciled spouse)
- gifts to charities
- the entire gift is under $250 each
- gifts on marriage (parent 5000, grandparent 2500, bride/groom 2500, everyone else 1000)
- regular or habitual gifts
- the first $3000 of any gift (can be carried forward one year too)
Tax: Tax rate for property transferred to a trust if paid by:
- the trust
- the settlor
- 20%
- 25%
Tax: Procedure for calculating lifetime tax
- identify the value transferred using the loss to donor rule
- deduct annual exemptions (up to $6000)
- identify the nil rate band and subtract any transfers that we made within the last 7 years from the nil rate band
- multiply the amount over the nil rate band by 20% or 25%
Tax: Business tax relief for inheritance tax
- Have you held the property for over 2 years?
- Is the business trading and not just an investment company?
- Is it a sole trader/partnership interest or private company? Then 100% relief.
- Is it shares in a quoted trading company that you have voting control of or land/buildings/plant and machinery of a company you control? Then 50% relief.
Tax: I am transferring land and buildings that I used to rent out to a farmer, is that eligible for relief from inheritance tax?
100% relief if held for 7 years (or 2 years if I were the actual farmer gifting land instead)
Tax: Inheritance tax rate
40%, unless at least 10% of the estate was left to charity, then it’s 36%
Tax: Unused percentage of nil rate band can be transferred to spouses, but what if I have 3 ex-husbands?
You can only transfer nil rate band from 2 spouses and only up to 100% total (so total nil rate band can only ever be 2x current nil rate band).
Tax: What is the residence relief with respect to inheritance tax?
If family home is willed to lineal descendants or spouses of such descendants, then can add up to $175,000 to the nil rate band for the house. Tapers for estates exceeding $2M. Can be transferred to spouses (same rules for other transfer of nil rate band apply)
Tax: A died 5 years before B and he left B a nice house. B paid 40% inheritance tax on it and then sells the house for $1M. B dies and leaves an estate worth $1M to C. Does C have to pay inheritance tax on this $1M?
Maybe not because B died within 5 years of the gift from A. There’s no requirement that the gift remain within the estate.
Tax: Typically tax is calculated on the value of the gift at death, but what if the executors sell the gift for a much lower value?
1. stocks
2. land and buildings
3. woodland
- you can get tax refund if stocks go down in aggregate over 12-month period after death
- yes if land or building reduce in value within 3 years of death
- yes if within 5 years of death
Tax: When inheritance tax is due:
1. for chargeable life transfer
2. at death
- the later of (i) 6 months from the end of the month in which the transfer was made and (ii) April 30 after the tax year in which it was made
- 6 months from end of the month of death.
Note that for potentially exempt transfers, the tax is paid by the recipient and not the giftor.
Tax: Would CGT be paid for the following:
1. gilts (government bonds)
2. shares held in an ISA
3. cars
4. Rolex watch
5. home pizza machine
6. business pizza making machine
7. an antique worth $6000
- no
- no
- no
- no
- no
- yes
- yes ($6000 is the threshold)
Tax: When is CGT due?
By 1/31 the year following the year it was made (ex. Sold shares in May 2021. CGT due on 1/31/2023)
Unless it’s UK property, then it’s within 30 days of completion.
Tax: If I sell my home that I’ve lived in, can I get a discount for the time that I’ve lived there and not used the home as an investment?
Yes, you can reduce the tax due by the percentage of how long you’ve been there (ex: lived in the home for last 3 years, bought it 10 years ago, you can multiply the gain by 3/10)
Tax: For purposes of the private residence relief for capital gains tax, what is the period of deemed occupation?
- the last 9 months, always
- up to 3 years for any reason
- any time that owner was abroad working
- up to 4 years that owner was working elsewhere in the UK
