R03 Mock Questions Flashcards
(178 cards)
1
Q
Miriam has worked in the same company for 15 years and has recently been asked by them to relocate to London to take up a new role. They have offered to reimburse relocation and removal expenses of £10,000. How will Miriam be taxed on this payment?
A
Relocation and removal expenses are tax-free up to £8,000. Of Miriam’s £10,000 expenses, £8,000 will be tax-free and £2,000 will be taxable as employment income.
2
Q
Simon makes a £7,500 contribution to his employer in respect of his new company car. How will this be treated when calculating taxable benefit?
A
If an employee contributes towards the capital cost of their company car, the maximum deduction from the list price is £5,000. Therefore, £2,500 of Simon’s contribution is ignored.
3
Q
John is employed full-time in a local school but in his spare time makes children’s toys. His earnings for this are £100 per week. Which National Insurance Contributions must John pay on these self-employed earnings?
A
As John’s annual earnings for self-employment are under the small profits threshold of £6,515, he is not obligated to pay NICs on them.
4
Q
Florence has recently become self-employed. She is aware that she will have to pay National Insurance Contributions but wants to know how. You tell her that:
A
Class 2 and Class 4 are both accounted for under self-assessment.
5
Q
Suzy has recently become employed following a period of self-employment and has discovered she has paid too much National Insurance through her employer’s payroll. What can she expect to happen to rectify the situation?
A
The overpayment will be used to cover any underpayment that occurred whilst she was self-employed before any repayment is made to her.
6
Q
Pauline died on 1st October 2022. Who will be responsible for the payment of any Inheritance Tax due on her estate and when is it payable?
A
Pauline’s legal representatives must pay any tax due by 30th April 2023.
7
Q
Scarlett was born in Spain but has been employed as a teacher in a local language school which means she has become a UK resident for this tax year. In relation to how her income from the school is taxed:
A
As a UK resident and as the income arises in the UK, it is fully taxable.
8
Q
Alex is self employed and has asked you to explain what is included in the balancing payment he has to make to HMRC in January of each year. You tell him:
A
Class 2 National Insurance, the balance of income tax and Class 4 National Insurance and any capital gains tax outstanding.
9
Q
Rhiannon and Vera exchanged their houses in October 2022 with no cash payment as both houses were worth £250,000. What, if any, Stamp Duty Land Tax (SDLT) is payable?
A
Both would be liable for SDLT of £2,500 each. When houses are exchanged, each person pays SDLT on the market value of the property they have acquired. In this instance, the SDLT would be £250,000 - £125,000 = £125,000 x 2% = £2,500 each.
10
Q
Gillian has recently invested £20,000 into each of the following investments: UK Listed Shares, a Corporate Bond and a UK Domiciled Exchange Traded Fund. What amount of Stamp Duty Reserve Tax will Gillian pay in total?
A
£100.
Stamp Duty Reserve Tax is NOT payable on the purchase of corporate bonds or UK domiciled ETFs. It is payable at a rate of 0.5% on the UK listed shares. Therefore £20,000 x 0.5% = £100.
11
Q
Kat is a higher rate taxpayer. She receives net interest of £260, how much more tax must she pay assuming her personal savings allowance has been used elsewhere?
A
£65
12
Q
Jerry has been given a laptop by his new employer as part of his remuneration. The laptop was previously used by Jon, Jerry’s predecessor. The laptop originally cost £600, but its second hand value is £200. What amount is taken as the value for tax purposes?
A
£200
13
Q
What penalty may be due where an individual fails to notify HMRC of a liability to Class 2 National Insurance?
A
£100
14
Q
How old must an individual be in order to benefit from a personal allowance for income tax?
A
There is no minimum age
15
Q
Sally will pay income tax in three instalments. This is most likely because:
A
She is self-employed.
16
Q
The accounting period for Value Added Tax is usually:
A
Every three months.
17
Q
Jane receives a dividend income of £1,980 in excess of her dividend allowance. As a Basic Rate taxpayer, how much more tax is due?
A
1980 x 8.75% = £173.25
18
Q
Tilly did not pay her class 2 National Insurance contributions for 2016/17. If she pays them in 2022/2023, what will be the applicable rate?
A
The rate for 2022/2023
19
Q
Who would not receive credit towards National Insurance Contributions?
A
someone who is self employed but not earning enough to pay class 2 contributions
20
Q
What is the highest rate of income tax paid on savings income?
A
45%
21
Q
Lisa receives a dividend of £1,800 in excess of her dividend allowance. As an additional rate taxpayer, how much more tax is due?
A
1800 x 39.35% = £708.30
22
Q
Carol did not pay her class 2 NI contributions when they were due. It has now been 7 years since the missed payment:
A
Carol still needs to pay them however they will not count towards benefits such as basic state pension.
23
Q
With regard to the directors of a company and the benefits they may receive, what counts as a director having a material interest in the company?
A
Solely or with associates and relatives, owning or controlling, directly or indirectly, more than 5% of the ordinary share capital.
24
Q
Mary, a basic rate taxpayer with earnings of £15,000 PA and savings income of £5,000 PA, is about to dispose of some unit trusts, realising a capital gain, and surrender an offshore bond with a chargeable gain. As a result of these transactions, with regard to the gain on the unit trusts, she will be liable solely to higher rate tax. Assuming that these transactions do not cause her to become an additional rate taxpayer, to which rate(s) of income tax may she be personally liable with regard to the surrender?
A
20% only or to both 20% and 40%
25
Safia, a widow, received all of her spouse's estate on his death. She has recently died leaving her £600,000 estate to her children. Why was there no liability to Inheritance Tax?
Two nil-rate bands, in effect, were applied to her estate.
26
Heather, whose father and mother are UK domiciled, has lived and worked abroad full time for 10 years in Mexico where she owns a flat. One month ago, she returned to the UK because her mother is ill but will return to Mexico in one months' time and return to work. How is she most likely to be viewed by HM Revenue and Customs for UK residence and domicile purposes for the tax year 2022/2023?
She will be domiciled but not resident
27
June is an employed higher rate taxpayer. She made a donation to a charity via gift aid in the previous tax year, but failed to inform HMRC. Who, if anyone, is likely to be disadvantaged by this?
June only, because she will receive no higher rate tax reduction for the donation.
28
Harry recently disposed of some shares in a business. What is a necessary condition for the disposal to qualify for hold-over relief?
His total shareholding must account for at least 5% of the issued share capital.
29
In deciding whether an individual should be treated as employed or self-employed for tax purposes:
the existence of a contract to provide services usually indicates that the individual is self-employed.
30
Sylvia wants to set up a trust for her grandchildren where the assets and income can be distributed to them in line with their individual needs and requirements. What is the most suitable trust for Sylvia?
Discretionary Trust
31
Margaret is a higher rate taxpayer and has total dividend income of £60,000. How much tax will she pay on this income in 2022/2023?
60,000 - 2,000 (dividend allowance) = 58,000 x 33.75% = £19,575
32
Anastacia has had some of her husband's income tax personal allowance transferred to her. This means that:
he has income of less than £12,570 and she is neither a higher rate or additional rate taxpayer.
33
Jane is a higher rate taxpayer and has received net interest of £5,000 from her portfolio of directly held gilts. What should she declare on her annual tax return?
The net interest received.
34
Jodie, who is an additional rate taxpayer, makes a gift aid payment of £4,500 to her favourite charity. The payment is treated as if it were a donation of:
£5,625 (4500 x 5 / 4)
35
Fred, a higher rate taxpayer, died in June, having used none of his capital gains tax annual exempt amount for the current tax year. How much CGT, if any, would be payable by his estate on the £15,000 gains made on his shareholdings at the time of his death?
Nil - there is no CGT on the disposal of assets on the death of an individual.
36
Ben died in August, leaving a shareholding in a private company to his son Adam. The shareholding was valued on Ben's death for inheritance tax purposes. If Adam subsequently sells the shares, the acquisition cost for capital gains tax purposes will be the:
value placed on the shares for IHT purposes
37
Richard, who is a higher rate taxpayer, sold one of his buy-to-let properties in July 2022, realising a gain of £24,000. He has carried forward losses of £10,000 and has not realised any other gains in the current tax year. How much capital gains tax would be payable in respect of his gain?
£24,000 - £10,000 - £12,300 x 28% = £476
38
When an asset is sold, the date of the disposal for capital gains tax purposes is the date that the:
contract for sale becomes binding
39
Alfred purchased an asset on 30th April 1975, finally selling it in the 2022/2023 tax year after making a substantial chargeable gain. How will its base cost be calculated?
By reference to its market value on 31st March 1982
40
Sian makes a gift aid donation to charity in 2022/2023 and she has been advised to have this backdated to the previous tax year. What would the position be?
she could have it treated as being paid in the previous tax year, and she will receive relief in 2022/2023 as a repayment.
41
Lena, who is an employed higher rate taxpayer wishes to file her return by paper for 2022/2023. By which date must she do so?
31st October 2023
42
Rory, who is self-employed, has a tax liability for 2021/2022 of £18,000. If he files his 2021/2022 tax return online, by when must he have done so, and what first payment on account for 2022/2023 is made at that time?
31st January 2023 and a £9,000 first payment.
43
Trevor has noticed that he has made an error on his self assessment tax return for 2021/2022. What is the latest date that Trevor can notify HMRC of an amendment to his return?
31st January 2024
44
Matt, who is self employed, fails to make his balancing payment on 31st January 2023. How long before he is charged a 5% penalty on any tax that still remains unpaid?
Once 30 days have passed.
45
What is the latest date by which an employer must give their employees a P60 for 2022/2023?
31st May 2023
46
An employer failed to pay HMRC money owed for PAYE and National Insurance Contributions on 2 occasions during 2022/2023. Both times the payment was 2 months late. What penalty will be incurred for the second late payment which was for an amount due of £68,500?
£685 (1%)
47
David made a net profit of £30,000 in the tax year 2022/2023. Under self assessment, when will he need to pay his balancing payment for this tax year?
January 2024
48
Rose is self employed and has calculated that her income tax liability is £25,000 for 2021/2022 and £35,000 for 2022/2023. How much income tax will she pay on 31 Jan 2024?
£27,500
49
For the tax year 2022/2023, the income tax payments for a self employed individual are payment on account on:
31st Jan 2023, a second payment on account on 31 July 2023 and a balancing payment on 31 Jan 2024
50
Martha, who is self employed, has made a gift aid donation in 2022/2023 which she wishes to carry back to the previous year. What is the correct procedure in this situation?
The relief is calculated as if it were given in 2021/2022, but any repayment is included in the calculation for 2022/2023. There will be no reductions in payments on account for 2022/2023.
51
An employer pays HMRC all monies owed for PAYE and National Insurance Contributions electronically. For the tax month of September, this must be paid across to HMRC by :
22nd October
52
Chris has been asked by HMRC to make an accelerated payment of a disputed tax liability. What is the most likely reason for this?
He has been found by HMRC to be using a failed tax avoidance arrangement.
53
Within how many months of their receipt of a self assessment tax return does HMRC usually have the right to carry out a compliance check into its accuracy?
12 months
54
Class 2 and Class 4 NICs account for what percentage of the National Insurance Fund?
3%
55
Stefan has a company car valued at £15,100 and has private fuel paid by his employer. Assuming the carbon emissions of the car lead to a percentage charge of 25%, What is the taxable benefit of the fuel?
£6,325 - The charge for private fuel use is based on a set figure each year, for 2022/2023 its £25,300. 25% of £25,300 is £6,325.
56
Who determines the rates and bands for income tax in England?
Parliament
57
Amy is a company director and is paid a flat fee of £20,000. How are her National Insurance Contributions calculated?
By considering her total earnings from the start of the tax year and using the annual limits
58
Rory made a £14,000 loss on a disposal in this tax year whereas his wife Amy made a substantial gain. What is he permitted to do?
Carry the loss forward to use against future gains using only enough to reduce future gains to the annual exempt amount.
59
Mr Sloane has created 6 trusts, one of which has made a gain of £10,000 on the sale of an investment. What is the annual exempt amount for Capital Gains Tax that can be used against this gain?
£1,230
60
Damon owed a balancing tax payment of £10,000 on 31st January 2023. In late March 2023, he still had not paid it. What penalty will HMRC usually charge Damon?
£500
61
Caroline, a first time buyer buys a flat in England for £127,950. What stamp duty land tax (SDLT) will be payable?
£0
62
What do promoters of tax avoidance schemes receive from HMRC in the event of their scheme being registered?
a reference number
63
Klaus and Caroline, both age 38, are married with 2 children age 15 and 17. What is the total amount they can pay into ISAs in the current tax year?
£78,000
64
Elijah has been asked to be a trustee of a trust where there is no interest in possession. He has asked you what the implications of this are. You can tell him that:
- there is no requirement for him to pay income to any particular beneficiary.
- if a beneficiary dies, there is no charge to IHT on their estate.
65
When considering business asset disposal relief for capital gains tax purposes, the:
reduced rate of capital gains tax applies to lifetime gains of £1m or less
66
Hazel received a gift of £100,000 in May 2022. She has fully utilised her ISA allowance for 2022/23 and would like to invest the £100,000 in a tax-efficient manner. If she has a total income of £7,500 PA, the most tax efficient investment would be:
a deposit account
67
What tax benefit could someone making a new investment into an Enterprise Investment Scheme enjoy?
Deferral of an existing capital gains tax
68
Armando is interested in investing in a guaranteed equity product linked to the performance of the FTSE 100. The components used within the product are most likely to be a combination of a: -
Fixed-interest investment and a derivative of the FTSE 100.
69
Vanessa is considering investing her money in a local authority bond and wants to know more about them. Vanessa should be advised that:
interest is paid gross and is taxable as savings income.
70
An employer pays HMRC all money owed for PAYE and National Insurance Contributions electronically. For the month of September this money must be paid to HMRC by:
22nd October
71
National Insurance contributions above the upper earnings limit are payable by:
an employee at 3.25% with no upper limit
72
Tom has been asked by HMRC to make an accelerated payment of disputed tax liability. What is the most likely reason for this?
He has been found by HMRC to be using a failed tax avoidance arrangement.
73
Can charitable donations be deducted from a company's profits when calculating corporation tax?
YES
74
Marisa died on 30th July 2022 leaving an estate of £900,000 which did not include any residential property. She left £60,000 to a UK Charity and the remainder to be split equally between her husband and her daughter. If she has not made any lifetime gifts, how much inheritance tax must her executors pay?
£900,000 - £60,000 (Charity donation exempt) = £840,000
- £325,000 (Marisa's NRB) = £515,000
- £325,000 (Husband's NRB) = £190,000
Net Estate = £190,000 x 10% = £19,000 - this means Marisa's donation of £60,000 is over 10% which means estate qualifies for IHT at 36% instead of 40%.
£190,000 x 36% = £68,400
Husband is exempt from IHT so only due on daughter's.
£68,400 divided by 2 = £34,200
IHT due = £34,200
75
Joe dies leaving an estate of £350,000 to Amanda. IHT was paid of £10,000. Amanda dies 3.5 years later - work out the quick succession relief.
- on Joe's death, Amanda's estate is increased by £340,000
Tax relief calculated as follows:
-Gross estate (350,000) minus IHT paid (10,000) = 340,000
- divided by gross estate of 350,000
- multiplied by tax paid (10,000)
340,000/350,000 x10,000 = £9,714
As Amanda died 3.5 years later, the % used is 40%
£9,714 x 40% = £3,885
IHT on Amanda's estate is reduced by £3,885
76
With regard to the directors of a company and the benefits they may receive, what counts as a director having material interest in the company?
Solely or with associates and relatives, owning or controlling, directly or indirectly, more than 5% of the ordinary share capital.
77
Sally will pay income tax in 3 instalments. This is most likely to be because
she is self-employed
78
When completing her value added tax (VAT) return for the quarter, a self-employed shopkeeper has outputs of £8,000 and inputs of £14,000. How much VAT will be either submitted to or refunded by HMRC this quarter?
£1,200 refunded by HMRC
79
Bert died several years ago, leaving £165,000 in total to his two children and the balance of his estate to his wife Hilda. Bert had not made any lifetime gifts and the inheritance tax nil rate band at the time of his death was £275,000. Hilda died in August 2022. Assuming that Bert and Hilda never owned their own property, what nil rate band can be applied to Hilda's estate when calculating her IHT liability?
£455,000
80
Sharon spends 190 days in the UK in the current tax year. For tax purposes, this means that she will be treated as UK resident:
automatically
81
Sid, an additional-rate taxpayer, received £100 interest on his NS&I account. How much tax would be payable on the amount received by him?
£45
82
Jed, who is self-employed, fails to make his balancing payment on 31 January 2023. How long will it be before he is charged a 5% penalty on any tax that still remains unpaid?
Once 30 days have passed
83
Arthur has made lifetime gifts over the last seven years that exceed the nil rate band and has also fully used his annual exemption in 2022/23 and the previous two years. If he makes a further gift of £80,000 to his grandson in the current tax year, the most appropriate life assurance policy to cover any potential inheritance tax liability on this would be a seven year:
decreasing term assurance with an initial sum assured of £32,000.
84
Donna provides management consultancy services and is registered for VAT. If her fees are £6,750, how much would she invoice including VAT?
6,750 x 20% + = £8,100
85
Sue is aged 15 and Gabby is aged 16. They both wish to open an NS&I investment account. You advise their parents that:
Sue will require someone eligible to open the account on her behalf for her whilst Gabby can open it herself.
86
Carly, who had never been married, died in July 2022 leaving an estate of £560,000 which did not include any property. She had made a gift to a discretionary trust of £200,000 [after using the annual exemptions] for her grandchildren in April 2017. Assuming no other gifts or reliefs, how much inheritance tax, if any, would be due on her estate?
£174,000
87
An individual would automatically be non-resident if they were not resident in the UK for any of the previous three tax years, and spent fewer than:
46 days in the UK in a tax year
88
Ulla has recently bought a new house and the effective date of the transaction was 7 November 2022. What is the latest date by which the stamp duty land tax must be paid?
21 November 2022.
89
Rita died in June 2022 leaving an estate valued at £800,000 to her son. She was never married and made a gift of £100,000 to her son in May 2018. Assuming the value of her main residence on death was £220,000, what is the inheritance tax liability on Rita's death?
£157,600.
90
Oliver, who is 45, has total earned income of £116,210 for 2022/23. How much more income tax will Oliver pay in 2022/23 compared to someone of the same age with total earned income of £100,000?
£9,726
100k - full PA. 37000 x 20% = £7540 + 49,730 x 40% = 19,892 = £27,432 - total tax liability.
116,210 - PA reduced to £4,465. 37000 x 20% = £7540 + £74,045 x 40% = £29,618. = £37,158 - total tax liability.
£37,158 - £27,432 = £9,726
91
Hideki, a higher-rate taxpayer, bought a holiday cottage for £85,000 twenty years ago. He added a conservatory ten years ago at a cost of £7,000 and sold the cottage in September 2022 for £152,000. The costs associated with the purchase were £500 and £3,000 with the sale. What is Hideki's capital gains tax liability on the sale, assuming he made no other losses or capital gains in 2022/23?
£12,376
92
Wang Jin is 40 years old and an employee who is paid monthly. She earns £4,500 during August 2022. What amount of employee's Class 1 National Insurance contributions are payable for August 2022?
£426.29.
93
Sally is 32 and self-employed. In 2022/23 she has profits assessable to tax of £55,000 and she also makes a gross personal pension contribution of £3,000. What is Sally's income tax liability?
£8,832.
94
Pamela is emigrating to New Zealand and plans to leave on 5 April 2023. She has a share portfolio that would generate a large capital gains tax liability if encashed. Assuming that Pamela remains non-UK resident and she wants to minimise her tax liability, she would be best advised to postpone disposal of the shares until at least 6 April:
2028
95
Juan, a higher-rate taxpayer, has sold shares making a capital gain of £36,000 for 2022/23. Assuming he has made no losses or other gains in this tax year, what is his liability and what is the latest date that it must be paid to HMRC?
£4,740 no later than 31 January 2024
96
Jeremy, who is age 49 and self-employed, has profits of £72,000. What is his Class 4 National Insurance contributions liability for 2022/23?
72,000-50,270 = 21,730
50,270 - 11,908 = 38,362 x 10.25% = £3,932.11
21,730 x 3.25% = £706.23
£3,932.11 + £706.23 = £4,638.34
97
Nathan, who is a higher-rate taxpayer, sold his company in August 2022 for £1.6m. He purchased the business 20 years ago for £650,000 and was the controlling director holding all the shares. Assuming he made no other chargeable gains or losses in 2022/23, how much capital gains tax will be payable as a result of the sale?
£93,770.
98
Sally has a child trust fund for her son George and wants some advice about making contributions into it whilst he is still under 18. Sally:
can continue to fund it or it can now be transferred into a Junior ISA
99
Derek is a widower aged 77. If he receives gross pension income of £27,330 plus building society interest of £750 in 2022/23, what is Derek's income tax liability?
£2,952
100
Jackie, a higher rate taxpayer, is considering investing in Permanent Interest Bearing Shares (PIBS). She should be aware that:
- Income received from the investment will be paid without the deduction of tax at source.
- In the event that the PIBS are later converted to PSBs, the tax treatment will remain the same.
101
Class 1 National Insurance Contributions:
Are collected via PAYE
102
Crosby holds £50,000 of Gilts which mature with a gain of £5,000. At what rate will he pay CGT if he is a higher rate taxpayer?
20%
103
James and Sean are married. They own a large property as joint tenants. This is their main residence. The property has a basement that they let to a student couple. They estimate that the basement accounts for 25% of the total space within the property. They are about to sell the property and estimate that the overall gain will amount to £400,000. They have asked whether they will be liable to capital gains tax and if so, how would this work. They are both basic rate taxpayers. They should be aware that:
- As they own the property as joint tenants, any gain will be split equally between them for tax purposes.
- The rates of tax due on residential property are 8% higher than the rates due on non-residential property.
- The rate of tax applicable to the gain will be determined by their other income in the tax year.
104
Dermot has a loan of £10,000 from his employer, for which he is paying interest of 2%. What is the taxable benefit of this loan assuming an official rate of interest of 3%?
£100
105
Margaret settled £200,000 into a discretionary trust. She acts as trustee along with her son, Bob. It is her intention that Bob's children should ultimately benefit from the trust property but she is not yet sure when she wishes for this to happen. The trust is predominantly invested in OEICs, though it holds some cash for short-term needs:
- the full rate of tax on income will be 45%
- the trust will benefit from a £1000 per annum "basic rate band" for income.
106
Who is responsible for determining an individual's residence and domicile status?
The individual
107
IHT Reliefs
- Woodland Relief
- Business Relief
- Agricultural Relief
108
Gains realised by trustees in respect of non-property investments are liable for CGT at the rate of:
20%
109
Rick and Tia have just had twins. They are talking to their financial advisers about tax-free savings for them. They should be aware that:
- they can invest up to £9,000 PA in Junior ISAs for each of them.
- Any money invested in a Junior ISA will become a normal adult ISA when the children reach their 18th birthday.
110
What income tax relief is given for an investment into an Enterprise Investment Scheme where the company is not knowledge intensive?
30% on investments up to £1m
111
What deductions are allowable against savings and investment income?
No deductions are permitted.
112
Up to what percentage of the value of a Venture Capital Trust (VCT) can be invested in FTSE 100 Shares?
30%
113
Bob sells his house to Kim for £450,000. How much Stamp Duty Land Tax is due and who pays it? (assume Kim is not a first time buyer)
£12,500 paid by Kim
114
Fred has recently died, leaving £200,000 in his income drawdown pension fund. The fund is due to pass to his wife, Betty. In terms of tax, Betty should be aware that:
- As long as Fred was under the age of 75, the fund can potentially be paid out to Betty Tax-Free.
- The fund must be paid out within 2 years to avoid punitive tax being levied.
115
Bob is UK domiciled but not UK resident. He dies is 2022/23 leaving £1,000,000 in gilts and £325,000 of other assets. How much IHT is due?
Nil
- No IHT will be due as government securities are not subject to IHT if the owner is not UK resident, even he is domiciled. The rest of the estate does not exceed the Nil Rate Band.
116
In order for the Starblast Property company to qualify for Real Estate Investment Trust status, it must ensure that:
- at least 90% of profits are paid out to investors within 12 months of the accounting year end.
- Any property it develops is held for at least 36 months.
117
Alan comes to the UK from the USA to take a 7 year full time teaching post. He will be UK resident:
- From arrival
118
How much can Win and Fred give their grandson on marriage as an exempt transfer for IHT?
£5,000 (£2,500 each)
119
Patrick's parents invest £1000 for him and he receives £50 in interest
Patrick will be liable for tax on this but can use a personal allowance to offset against it
120
At what rate is tax deducted at source from interest paid by UK building societies?
Nil
121
The system by which HMRC requires employers to submit PAYE information is known as:
RTI
122
As a general rule, someone may be deemed domiciled for UK IHT if they have been in the UK in:
15 of 20 tax years
123
In simple terms, "domicile" in the context of tax means:
The place an individual regards as home
124
Noel has a bank account in Jersey. What rate of withholding tax will he paid on interest?
35%
125
Kevin surrenders an onshore bond, making a chargeable gain of £100,000. He held the bond for 5 years and had made no withdrawals during this period. His earnings for the current year amount to £60,000. He should be aware that:
- He can "top-slice" the gain to avoid losing his personal allowance.
- He will be able to "top-slice" the gain to prevent him from paying any additional rate income tax.
126
Personal chattels are exempt from CGT to the value of:
£6,000
127
In respect of CGT, losses:
can be carried forward but must be used before losses from earlier years.
128
Junior ISAs:
- max contribution £9,000 per tax year
- Both equity and cash may be held within the wrapper
129
Jack is UK domiciled but his wife Sunita is not. When Jack dies leaving an estate of £1m, how much of the estate (aside from the nil rate band) is exempt from IHT?
£325,000
130
In relation to "top-slicing" relief for non-qualifying policies:
- Both onshore and offshore policies may benefit from top-slicing
- Top slicing can be used at both the higher rate threshold and the additional rate threshold.
131
Holdover relief for CGT is given where:
both parties to the transaction claim it
132
Keifer is considering gifting money to his nephews, one of whom is disabled. He wishes to use trusts in order to allow him to control the timing of distribution. When considering the IHT consequences of such gifts, he should be aware that:
- A gift to a discretionary trust will be treated as a chargeable lifetime transfer (CLT)
- a gift to a disabled persons trust will be treated as a potentially exempt transfer (PET)
133
Chris sold his brother a property for £150,000. It is valued at £240,000 on the open market. Stamp duty of £500 was paid. The disposal proceeds for CGT are:
£240,000
as the transfer was between connected persons, the market value is used instead of the transfer value.
134
Ginny has bought $7000 in an attempt to make money from the fluctuating currency market. For CGT purposes
This is chargeable
135
Kate makes annual gifts of £3000 and then a single gift of £150,000 in 2017/18. She dies in 2021/22, what IHT will be due on the gift?
None - under the NRB
136
Mick has a tax code of K540, his personal allowance is:
A negative amount of £5,400
137
Peta, 57, has a personal pension fund valued at £600,000. This is her only pension fund and she now wishes to draw benefits using flexi-access drawdown. She should be aware that:
- she will usually be able to take up to £150,000 from the fund as a tax-free lump sum (25%)
- Her fund will be tested against the lifetime allowance at the point she brings it into payment.
- Taking large withdrawals could potentially result in her paying higher rates of income tax.
138
Jon, Joe and Ben each receive dividends from their shareholding in ACME industries. Jon is a basic rate taxpayer, Joe is a higher rate taxpayer and Ben is an additional rate taxpayer. Assuming that the dividends are not sufficient enough to push any of them into a higher tax band:
- Joe could lose his personal allowance depending upon where his income falls within the higher rate band.
- Jon will be able to benefit from a dividend allowance and will then pay income tax of 8.75% on any dividends above this level
139
Harold, 57, has earned income after deduction of personal allowances of £2000. He also has savings income of £3,600 (Net). How much tax will be due on the savings income?
£100
His earned income is taxed first (20% / £400)
Savings income grossed up = £4500, of this £3000 falls within 0% band, remaining £1500 is partially covered by his PSA of £1000. Tax due on remaining £500 x 20% = £100.
140
David makes a gain on the sale of his business. He reinvests into EIS shares and eventually realises a gain from his EIS. The original gain would have qualified for Business Asset Disposal Relief, what is the position in respect of Business Asset Disposal Relief when he realises the eventual gain?
Business Asset Disposal Relief will be available
141
Harj is considering investment into private quity. HE is aware that there are potentially significant tax benefits to be derived from this type of investment but he is not sure of the details. You advise him:
- Dividends from EIS are taxable
- Up to £1m per annum may be invested in EIS with income tax relief of 30%
142
Damon intends to settle some money into trust. He is considering using either a discretionary or bare trust. The money is currently held in his ISA portfolio and he would ideally like to transfer the ISAs straight into the trust. If this is not possible, he will disinvest and settle cash into the trust. You advise him:
- Neither a bare nor a discretionary trust may hold ISAs.
- A transfer to a discretionary trust may result in an immediate liability to inheritance tax.
143
Harold, 57, has earned income after deduction of personal allowances of £2000. He also has savings income of £3,600 (Net). How much tax will be due on the EARNED income?
£400
2000 x 20% = £400
144
Bob gives £400,000 in 2021/22 into a discretionary trust. Apart from using his annual £3000 allowance, this is his only transfer. What tax may be due?
£15,000
400,000 - 325,000 = 75000 x 40% = 15,000
145
What rate of quick succession relief applies on death two and half years after the initial transfer?
60%
146
In England, an individual keeps their domicile of origin until at least age,
16
147
Gains realised by trustees in respect of non-property investments are liable for CGT at the rate of:
20%
148
Crosby holds £50,000 of gilts which mature with a gain of £5,000. At what rate will he pay CGT if he is a higher rate taxpayer?
0%
Gilts are usually free of CGT in the hands of private individuals.
149
Mark and Matilda separated in 2018/19 but are note divorced. Where they transfer an asset between them in the current tax year:
the transfer is taxable as a non-commercial transaction
150
Betty fraudulently completes her self-assessment form. How long do HMRC have to raise an enquiry?
There is no limit
151
Mary dies in July 2022 leaving a property worth £1m and other assets worth £200,000. She leaves everything to her housekeeper, Maud. How much IHT will be due, assuming no transferable Nil Rate Band?
£350,000
As Mary doesn't leave her assets to a direct descendant, there is no residence nil rate band to claim. The tax is therefore based on £1.2m less £325,000 (NRB) at 40%. This is £350,000.
152
Marty sells 1000 shares in ACME to his brother on 1st June 2020. The accountant's valuation on the shares was £110,000 and the sale proceeds £90,000. The deemed acquisition costs of the shares when Marty first bought them is £10,000. If Marty is a higher rate taxpayer and has used his CGT allowance for the year elsewhere, what will be the value to him in terms of tax reduction if he qualifies for business asset disposal relief?
£10,000
The transaction is between connected persons, because of this, it will be deemed to be a commercial transaction not at arms length and the accountants value will be used rather than the sale price. This means the sale proceeds are £110,000, the cost of acquisition is £10,000 leaving taxable proceeds of £100,000. If he qualifies for business asset disposal relief, this is taxed at 10%, if he doesn't it will be 20%, the difference being £10,000.
153
what rates of business relief are available for IHT purposes?
100% and 50%
154
Expenses of a discretionary trust may be offset against income in a very specific order:
Dividend, savings, other
155
Sandeep is a higher-rate taxpayer. He receives dividend income of £1359 in the current year, how much tax will be due assuming he remains a higher rate taxpayer?
nil
156
Ian buys a house for £427,000, calculate the stamp duty land tax due assuming this is not Ian's first property purchase but it is his only residence:
£11,350
£125,000 @ 0% = £0
£125,000 @ 2% = £2,500
£177,000 @5% = £8,850
157
By what date must an employer issues P60s to employees?
31st May
158
Gillian settled £200,000 into a discretionary trust in 2015. This was the first gift she had made, other than making use of her annual exemption. Under current tax rules:
- the gift will escape tax provided she survives for at least 7 years.
- on the tenth anniversary, a charge of up to 6% of the value of the fund may be applied.
- should she gift any further sums into discretionary trust within 7 years of this first gift, the nil rate band available to those gifts will be reduced by £200,000
159
To qualify as a furnished holiday let, for how many days each year must a property be available to let?
210 days
160
How many potential UK ties form part of the test for UK residence?
5
161
How long must an investor hold EIS shares before they are exempt from CGT?
3 years
162
Mani is interested in understanding the CGT implications of private equity investment. He should be told that:
- in order to benefit from CGT exemption on gains under SEIS, the investment must be held for at least 3 years.
- any capital gain rolled over into EIS can benefit from holdover relief but will ultimately still be liable for tax.
163
Bob, 45, has income after deduction of personal allowance of £34,700. He makes a chargeable gain on an onshore bond of £20,000 over a 10 year period. He also sells some shares in the year realising a gain of £30,000 after allowing for his CGT allowance. What additional tax is due on his bond gain?
Nil
164
A REIT must be:
UK resident and listed on a recognised stock exchange
165
a company car has a list price of £16,160 and additional accessories costing £2,500. The cost to the employer after discount is £15,800. What amount is the taxable benefit based on?
£18,660
The taxable benefit is based on the list price plus accessories regardless of any discounts gained. The other important issue is the carbon dioxide emissions the car has, which creates a percentage charge.
166
Where a 40 year old lease is granted on a property for a premium of £50,000, what is the income element?
£11,000
For leases under 50 years, part of the premium is treated as rent and is taxable in the property income accounts. To work out the proportion to be treated this way, the amount of the premium is reduced by 1/50th for each year of the lease with the exception of the first year. In this case: Premium £50,000 / 50 = £1000 x 39 = £39,000
(less 39 (number of lease years minus 1st lease year (40-1=39)
50,000 - 39000= 11,000
167
what penalty may be due where an individual fails to notify HMRC of liability to class 2 National Insurance?
£100
168
Karen has a pair of candlesticks worth £100,000. One on its own is worth £20,000. She gives a single candlestick to her mother. What is the value of the gift for IHT purposes?
£80,000
- the loss to the estate is £80,000 as the pair is worth £100,000 but after the transfer the remaining one is only worth £20,000, thus the estate is now worth £80,000 less than before.
169
In order to benefit from the transfer of the Nil Rate Band for IHT purposes, the second spouse must have died after:
8th Oct 2007
170
Derek bought a vase in 2002 for £2,000. It has sat on his mantlepiece for a number of years until this year he decides to sell it at auction where it achieves a sale price of £8,000 after deduction of all fees. What is the relevant gain for CGT purposes?
The vase is chattel. The gain is £6,000 but it will be restricted to 5/3 of the gain above £6,000 so (8000-6000) x 5/3 = £3333.33
171
LPL ltd has just floated on the stock market. It has issued a total of 1.1m shares which traded at £2.20 per share at launch. Tim was involved in the launch of the business 20 years ago, and is interested in buying some shares "for old times sake" but has no experience of equities. He should be aware that:
- shares represent part ownership of a company's capital, not the company itself.
- the £2000 allowance for dividends is available to additional rate tax-payers.
172
Marco invests £120,000 into a VCT. He makes the investment in July and it is the first time he has invested in a VCT. What amount can he backdate to the previous tax year?
£0.
It is EIS where investors can backdate not VCTs
173
James is considering investing in Real Estate Investment Trust Shares. He has asked his adviser to explain some of the taxation rules concerning such investments. His adviser tells him:
- any gains are potentially liable for CGT
- income distributed from the "non-property income" element will be taxed as a dividend.
174
James has a corporate bond OEIC. He receives £800 of interest. He is a non-taxpayer
the interest is paid gross and he pays no tax
175
which body administers LBTT?
Revenue Scotland
176
Harry uses his main residence for business purposes. For CGT:
He can benefit from principle residence relief, but not on the part used for business purposes.
177
Stan invests in 2 different OEIC funds. Fund A has a 70% fixed interest content and 30% equity content, Fund B has a 70% equity content and 30% property content:
- Fund B will pay distributions entirely as dividend
- Both funds will be potentially subject to capital gains tax on any gains made.
- Only fund B will benefit from the dividend allowance for income tax.
Where a fund has less than 60% fixed interest, payments will be treated as dividends. For fund A the payment will be an interest payment.
178
Jack will automatically be regarded as non-resident in the UK if he spends fewer than how many days in the country during the current tax year?
16
