Level 6 Tax and Trust

Question 1

What is a Junior ISA?

Answer 1

ISA funded by parent for children less than 16 years old. Money is locked away until child is 18 years old and then it’s theirs.

Question 2

What happens to a ISA funded by a parent for child 16 yrs +?

Answer 2

Tax applies on interest over £100 to the parents

Question 3

How to reduce capital gains tax?

Answer 3

1. Annual exemption amount
2. losses from the sale of assets in the current and previous years
3. business asset disposal relief
   4.business asset rollover relief
4. incorporation relief
5. gift hold-over relief

Question 4

What are wasting chattels?

Answer 4

Tangible assets with a predictable useful life of 50 years or less, and their value ‘wastes away’ as they age like cars, livestock, machinery, copy wrights
- Are exempt from CGT

Question 5

What are non-wasting Chattels?

Answer 5

Tangible & moveable assets, such as jewelry, art and antiques, with a predictable lifespan of more than 50 years. They are exempt from CGT if the disposal proceeds do not exceed £6,000. Limit is per item

Question 6

What is the CGT on Non-Wasting Chattels?

Answer 6

1. The gain as five-thirds of the amount by which the disposal price exceeds £6,000.
2. The gain is calculated using the standard CGT method: the disposal price minus acquisition price and additional cost

Question 7

Calculate CGT on Current value - £55k, disposed £25k, acquisition is £30k

Answer 7

Percentage of market value by disposal: £25/£55k = 45.45% . . . 45.45% of original (£30k) = £13,636.36 . . . . Total gain: £25 - £13,636.36 = £11,364

Question 8

What is business asset disposal relief?

Answer 8

• qualifying will allow 10% up to lifetime limit of £1M per individual(spouses can share)
• Qualify: own 5% ownership/profits
  -owned 2 years
  -Diposed at least 3 years before business ceases
  -Trust - only beneficiary can claim to their lifetime limit, trust can’t(discretionary are disqualified altogether)

Question 9

What is a resident ? Non Resident?

Answer 9

• How much time you have spent in the UK in a tax year - 183days = resident
• Only home is in UK
• Were you a resident in the previous 2 years?
  Automatic Overseas Test
  Automatic UK Tests
  Sufficient Ties Test

Question 10

What is domicile?

Answer 10

Only one domicile - Home country
Domicile of origin, choice, deemed domicile(resident 15 of past 20 years)

Question 11

What would automatically make a person a non resident?

Answer 11

1. An individual who is in the UK for fewer than 16 days in the tax year.
2. An individual who is in the UK for fewer than 46 days in the current tax year and was not resident in the previous 3 tax years.
3. An individual who has left the UK to take up full-time work abroad and is in the UK for fewer than 91 days in the current tax year, of which a maximum of 30 days are spent working in the UK.

Question 12

What would make an automatic resident?

Answer 12

1. An individual who is in the UK for 183 days or more in the tax year.
2. An individual whose only home is in the UK.
3. An individual who works full-time in the UK.

The residence status of someone who does not meet the criteria of the automatic tests is determined by the time spent in the UK and a number of UK ties.