Indirect Investments Flashcards

1
Q

What is the tax position on pensions?

A

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.

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2
Q

What is the tax position on ISAs?

A

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

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3
Q

What is the tax position on UK collectives?

A

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

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4
Q

What is the tax position on offshore reporting funds?

A

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

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5
Q

What is the tax position on offshore non reporting funds?

A

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%

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6
Q

What is the tax position on UK qualifying policies

A

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

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7
Q

What is the tax position on UK non qualifying policies?

A

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

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8
Q

What is the tax position on offshore bonds

A

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

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9
Q

What is the tax position on EIS?

A

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

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10
Q

What is the tax position on VCTs?

A

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

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11
Q

What is the tax position on SEIS?

A

50% IT relief on 200k held for 3 years

50% Roll over relief on cgt

No cgt if held for 3 years

Dividends taxed

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12
Q

What is the tax position on purchased life annuities?

A

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

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13
Q

What is the tax position on real estate investment trust?

A

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% !!!!!

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14
Q

To remember if a indirect investment is equity paying or interest

A

Ask this question.

Does the fund hold 60% of interest bearing assets? If no then it is equity

If 50/50 then equity….

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15
Q

When by unit trusts you buy in units

A
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16
Q

Top slicing for onshore investment bonds

A

Top slicing is worked out on full years only

So if says is in 13 year the total full years is 12

17
Q

For life assurance bond 5% rule

A

It is rounded up in terms of how much can withdraw. I.e 12 yrs 3 months you are in 13 years so can draw 13 x 5%