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Question 1

When does the tax year run?

Answer 1

6th April- 5th April

Question 2

What is income tax?

Answer 2

Tax paid on income received during a tax year

Question 3

What are the three elements of taxable income?

Answer 3

Non-savings income (e.g. salary)
Non-dividend income (e.g. interest)
Dividend income

Question 4

What non-dividend savings income is paid NET of basic (20%) rate

Answer 4

o Interest paid by companies (corporate bonds, AUTs – authorised unit trusts, OEICs/ICVCs)
o Income from annuity

Question 5

What non-dividend savings income are paid GROSS?

Answer 5

o Gilts (can elect to receive net)
o NS&I (national savings and investments) products
o Bank and building society
o Proceeds on qualifying life assurance policies
o Dividends

Question 6

What is the difference between NET and GROSS

Answer 6

Net means taxes and charges have already been accounted for whereas GROSS means that taxes and charges need to be paid.

Question 7

What’s the process for calculating income tax payable?

Answer 7

1) Add all income (gross)
2) Deduct tax free personal allowances
3) Calculate the tax due on the remaining taxable income after allowances.

Question 8

What is National Insurance?

Answer 8

employed or self employed people make payments towards benefits

Question 9

What national insurance do employees pay?

Answer 9

Class 1: on earnings

Question 10

What is national insurance does an employer pay?

Answer 10

 Class 1A: on certain employee benefits

 Class 1B: when employer in PAYE agreement with HMRC

Question 11

What is national insurance does someone who is self-employed pay?

Answer 11

Class 2 / Class 4

Question 12

What is national insurance does someone who is making voluntary contributions pay?

Answer 12

Class 3

Question 13

What is capital gains tax paid on?

Answer 13

• Paid on: gains on ‘chargeable assets’ (e.g. shares, investment property) sold during a tax year

Question 14

What is exempt from Capital Gains Tax?

Answer 14

Exempt assets:
o Main home
o Cars
o Assets held in ISAs
o National Savings & Investment Certificates
o Betting and lottery winnings
o UK government and most corporate debt (not related to equity)
o Enterprise investment scheme (EIS) and Seed enterprise investment scheme (SEIS) shares
o Foreign currency for personal use, not for gain

Question 15

When is CGT paid?

Answer 15

• Paid on 31 January following the tax year of the disposal

Question 16

what is a planning strategy for reducing CGT using ones spouse? But what are negatives to this?

Answer 16

o Spouse transfer  can transfer to spouse and share the tax
 capital losses can not be shared

Question 17

What is a planning strategy for reducing CGT that includes multiple years?

Answer 17

o Phased disposal  disposals spread over several fiscal years and each year would be able to use an annual exemption

Question 18

what is Bed and Breakfast in terms of CGT and what is now in place to stop this?

Answer 18

o Bed and breakfast (30 day rule)  realise a gain by selling an asset and using annual exemption to offset the gain and then re-purchase the asset. Tax man now wise to this so can’t buy an asset back within 30 days.

Question 19

When must hardcopy/ electronic tax returns be submitted and paid?

Answer 19

o Hardcopy
 Submitted by 31st October following the end of the tax year
o Electronic
 Submitted by 31st January following the end of the tax year
o Either way the bill must be paid by the 31st January following the end of the tax year.

Question 20

What are the three categories of residency?

Answer 20

Part A - automatically non-resident

Part B - Automatically resident Part C - Sufficient ties test

Question 21

Describe the conditions for being a part A resident?

Answer 21

o Visit UK for fewer than 16 days in the tax year; or
o Non-resident in previous three tax years and visit UK for fewer than 46 days in the tax year; or
o Work full-time overseas and visit the UK for fewer than 91 days in the tax year (with no more than 30 days working in the UK)

Question 22

Describe the conditions for being a part B resident?

Answer 22

Part A doesn’t apply…

o Present in the UK for 183 Days or more in the tax year; or
o Own a home in the UK for at least 91 days and lived there for at least 30 days in the tax year; or
o Work full-time in the UK

Question 23

How would someone get listed as a part C resident and what would then happen?

Answer 23

sufficient test ties (neither part A nor part B apply, and…)

o Further tests based on family, work and accommodation

Question 24

What is domicile?

Answer 24

• Domicile is where a person has their permanent home

Question 25

How many domiciles can an individual have?

Answer 25

A person can only be domiciled in one country at a time

Question 26

What are the types of domicile and when can these be acquired?

Answer 26

o Domicile of origin – acquired at birth

o Domicile of choice – can be acquired from the age of 16

Question 27

Talk about implications of tax (income/ CGT / Inheritance) for a UK resident who is also of UK domicile

Answer 27

Income/CGT
- Payable on worldwide income and gains

Inheritance tax
- Payable on UK assets

Question 28

Talk about implications of tax (income/ CGT / Inheritance) for a non-UK resident?

Answer 28

Income/ gains / assets arising in the UK

Question 29

Talk about implications of tax (income/ CGT / Inheritance) for a UK resident who is non-UK domicile?

Answer 29

income/ gains in UK.

For income / gains outside the uk don’t have to pay but will pay remittance tax – if proceeds/ items are brought into the UK - even if through ‘relevant’ persons

Question 30

For a CIS talk about taxation of the fund?

Answer 30

o Exempt tax on gains within the fund

o Income subject to corporation tax at 19%

Question 31

For a CIS talk about taxation for the investors?

Answer 31

o Dividend/ interest distribution treated as direct holdings
o Where funds hold more than 60% in interest-bearing securities distributions treated as interest
o CGT charged on disposals

The tax treatment of income from collective investment schemes is the same for unit trusts and OEICs. … This means that you will be taxed on any dividend income exceeding £2,000. Capital gains tax (CGT) is also chargeable on any gain on the disposal of shares in an OEIC and units in a unit trust.

Question 32

For a life insurance fund what will the fund pay in tax?

Answer 32

• Fund – gains and income subject to corporation tax at 20%

Question 33

what is disposal of shares?

Answer 33

sell the shareholdings to an unconnected party;
sell the shares back to the company;
gift the shares to a family member or an unconnected party.

Question 34

for investors of a qualifying (multiple premium 10 years) life assurance policy what is the taxation?

Answer 34

Usually free of income tax and CGT

Question 35

For investors using a single premium UK life assurance bond what is the taxation?

Answer 35

• One-off or regular payments for a basic rate taxpayer will normally incur no further income tax because 20% will have been paid on their behalf.
• Additional rate/ Higher rate tax-payers will have to make further payment
• Investors are allowed to take the following payment from a life assurance bond without an immediate liability for income tax (deferring the payment until later):
  • 5% of the original premium each policy year, until 100% is reached (20 years)
  • Gains on encashments/ maturity are taxed as income
  • Designed for higher rate/ additional rate tax payers as they can wait until they are in a lower band of tax liability

Question 36

For a Real Estate Investment Trust talk about taxation of the fund

Answer 36

• Fund exempt tax on rental income and capital gains

Question 37

For a Real Estate Investment Trust talk about taxation of the investor

Answer 37

• Investor subject to income tax and capital gains tax

Question 38

How must a Real Estate Investment Trust make a payment?

Answer 38

REITs must distribute the majority (90% - paid as a dividend but not with dividend tax rate tax charged on this as marginal rate) of their tax-exempt income to shareholders

Question 39

Talk about taxation for an investor in a Venture Capital Trust (VCTs)

Answer 39

• Income tax relief of 30% of the amount invested (withdrawn if shares not held for five years or more)
• Maximum investment for tax relief purposes £200,000 (for investor)
• Dividends tax free. No GCT on disposal

Question 40

Talk about taxation for an investor in a Enterprise investment scheme (EISs)

Answer 40

• Income tax relief of 30% of the amount invested (if shares held for three years or more)
• Maximum investment for tax relief purposes £1m per year
• No CGT on disposal