Indirect Investments Flashcards
What is the tax position on pensions?
Tax reduce on pension input up to lower of annual allowance 60k or annual earnings.
Can carry forward up to 3 years, tax relief at members highest rate
Non tax payers can get relief at 20% up to 3.6k
Funds grow tax free
25% can be taken tax free, rest is taxed under paye
No benefits can be taken before 55.
What is the tax position on ISAs?
No relief on the way in, 20k allowance
Only available to those resident in the UK or UK criwn servants working overseas.
JISA available - 9k up until 18.
Can open a cash ISA at 16
Help to buy ISA - open with up to 1k lump sum and 200 per month after, every 200 govern contributes 50 up max bonus of 3000 per year
450k london 250k outside London
No longer running must be used for bonus claimed no later 1 Dec 2030.
Lifetime ISA - 4000 max contribution which forms part of 20k ISA allowance.
25% bonus in investment so 1000 max bonus per annum - must be used after 60 for bonus or towards first home
What is the tax position on UK collectives?
No relief on entry and no limits
Dividends paid just like normal for dividends tax can use allowance
Subject to cgt at 10, 20 or both, can use allowance
What is the tax position on offshore reporting funds?
No tax relief on contributions no limit on investment .
Reporting status given by HMRC and reports details of income
Income earned declared on tax return and taxed as for onshore collectives - div allowance and on rate applicable.
Tax due on arising basis whether paid out or not
Subject to cgt at 10,20 or both
What is the tax position on offshore non reporting funds?
no tax relief on investment and no limit on contributions
Non reporting fund which don’t report income to HMRC
Income can be rolled up gross with bi income tax deduction
Tax on gain using normal cgt principal but tax is due at rate of 20/40 or 45% rather than 10/20%
What is the tax position on UK qualifying policies
No tax relief
Qualifying premiums limited to 3600 per annum
Fund manager pays tax on income and gains equivalent to basic rate. No tax to be paid unless make a withdrawal
Providing qual rules met, maturity of proceeds are paid tax free
What is the tax position on UK non qualifying policies?
No tax relief on entry and no limits
Fund manager pays tax on income and gains at the basic rate
Withdrawals of up to 5% of initial investment per annum tax deferred
Top slicing allowed
PSA may be used
Gains subject to income tax with equivalent of the basic rate paid, non tax payers cannot reclaim
What is the tax position on offshore bonds
No tax relief on entry and no limits on investment
Gross roll up and no UK tax paid
Bonds deemed personal portfolio bonds so 15% per annum tax on investor regardless of actually gain
Cgt at investors rate no allowances
What is the tax position on EIS?
Income tax relief at 30% on up to 1 mil or 2 mil (knowledge intensive) paid as a tax reducer at the last stage
No cgt due if Held for 3 years to get relief
Initial income tax relief withdrawn if not held for 3 years
Can roll over profits into an EIS
Tax on dividends
What is the tax position on VCTs?
Income tax relief at 30% up to 200k per annum, paid as a tax reducer at the last stage on IT, cannot carry back
No roll over no cgt deferred possible
Dividends tax free
Exempt from cgt regardless of holding period
For initial income tax relief must be held for 5 years
What is the tax position on SEIS?
50% IT relief on 200k held for 3 years
50% Roll over relief on cgt
No cgt if held for 3 years
Dividends taxed
What is the tax position on purchased life annuities?
No tax relief on investment and part of each income payment regarded as a return of capital and not taxed the remainder is taxed as savings income paid net of 20%
Non taxpayers can have income paid gross
What is the tax position on real estate investment trust?
Special investment companies investing in properties are closed Ended companies listed on recognised stick exchange
Gain will usually be taxed at 30% unless the property is completed and held for a further 36 months
Reits can be held in (wrappers) such as ISAs and ctf
To qualify for tax relief:
75% of gross profits come from letting property
Interest borrowing covered by 125% rental income
90% if profit paid to investors as dividends within 12 months of end of accounting period
Where above happens distribution split into 2 pots:
A payment from tax free pot - treated as property income to be declared by recepient - the fund pays out net of BRT - if non tax payer can reclaim
A payment from non tax free pot treated as dividends
Where qualify do not have to pay income tax so can distribute more to you as to give 90% of rental income to investors
Invester fully liable to cgt
When considering income distributed from property income distribution PID - it is paid net of BRT - so when recive it may have further tax to pay, you need yi gross it up then apply either 20/25% !!!!!
To remember if a indirect investment is equity paying or interest
Ask this question.
Does the fund hold 60% of interest bearing assets? If no then it is equity
If 50/50 then equity….
When by unit trusts you buy in units
