Stuff I need to learn Flashcards

Question

Tell me one of the main benefits of owning agricultural property in relation to tax

Answer 1

You get an agricultural relief for inheritance tax 100% inheritance tax relief for owner-occupied land 50% where the owner has let out the land

Answer 2

Treasury bills are short‑term redeemable securities issued by the Debt Management Office (DMO) of the Treasury Like GILTs, they are a way the government can raise funds but they differ to GILTs two main ways which are: Treasury bills are short-term (normally issued for 91 days). GILTs generally are much longer terms Treasury bills are zero‑coupon securities (they do not pay interest). Instead, they are issued at a discount of their par value which is where the investor makes their gain.l

Answer 3

Short‑term redeemable securities issued at a discount to their par value. Also known as T‑bills They are literally GILTS except they are short term and they do not offer a coupon The way the investor makes the money from the T-Bill since they do not offer interest is that the coupon is offered at a discount to its par value ( the amount paid back by the gov on redemption ) E.G For example, a Treasury bill may be issued for £9,850 with a 'par value’ of £10,000. The investor makes a guaranteed £150 on their £9,850 investment over 91 days

Answer 4

For a business who needs to borrow for working capital purposes ( in short term ) Commercial paper offers cheaper borrowing opportunities for companies that have good credit ratings companies with lower credit ratings can issue commercial paper if it is backed by a letter of credit from a bank that guarantees (for a fee) to make repayment if the issuer default Most commercial paper is issued for periods of between 5 and 45 days, with an average of around 30 to 35 days

Answer 5

Money‑market instruments’ is a generic term used to describe a number of forms of short‑term debt 3 types are treasury bills, commercial paper and certificates of deposits

Answer 6

A product offered by banks and building societies where u are required to make a substantial deposit (normally over 50k ) for a fixed period at a fixed rate of interest. They offer a higher interest rate in return Terms are typically three months or six months Significant penalties for withdrawals before the end of the term Basically like bonds but because CD’s are ‘bearer securities’ they can be sold to a third party if the depositor needs the funds before the end of the term

Answer 7

A relief that applies to CGT Available when someone sells the property they have lived in as their main or only residence It is a full relief so those who are eligible do not pay any CGT

Answer 8

A relief that applies to CGT for businesses It is for business owners who are required to pay CGT when they dispose of assets used in their business (ie machinery) It is a partial relief so those who are eligible pay a lower rate of CGT rather than not pay all of it like with private residence relief For owners of limited companies, eligibility depends on holding at least 5% of the ordinary share capital of the business. In addition, they must also be entitled to at least 5% of the distributable profits and net assets of the company

Answer 9

A relief that applies to CGT for businesses Roll‑over relief may be claimed if the business assets disposed of are replaced by other business assets This means that, instead of CGT falling due on the original disposal, it is deferred until a final disposal is made ( hence rolled over ) The replacement asset must be bought within a period of one year before and three years after the sale of the original asset

Answer 10

A relief that applies to CGT for gifts Allows any CGT on any gain arising on the gift of certain assets to be deferred until the recipient disposes of it

Answer 11

Corporation tax is paid by limited companies on their profits. It is also payable by clubs, societies and associations, by trade associations and housing associations, and by co‑operatives. It is not paid by conventional business partnerships or limited liability partnerships, or by sole traders: these are all subject to income tax

Answer 12

Venture Capital Trusts were introduced by the government to incentivise private investors to invest in newly established companies. It incentivises investors becomes of its tax benefits A Venture Capital Trust (VCT) is a company whose shares are listed on the stock exchange. it is run by an investment manager. The VCT normally spreads the monies raised from investors over a range of different companies Tax reliefs are as follows: Income tax relief up to 30% is given on an investment of up to £200,000 per tax year Any dividends paid by the VCT from the £200,000 permitted maximum investment are tax free Any capital gains are exempt from CGT Venture capital trusts must be first approved by HMRC ( because of tax shit )

Answer 13

Like venture capital trusts, enterprise investment schemes were introduced by the government to incentivise private investors to invest in newly established companies. It incentivises investors becomes of its tax benefits An EIS involves a direct investment into a company that is eligible for the scheme The tax reliefs offered are as follows: Income tax relief up to 30% is given on an investment of up to £1,000,000 (£2,000,000 if the amount invested in excess of £1,000,000 is made in 'knowledge‑intensive companies') per tax year The CGT on any capital gains that are reinvested is deferred Capital gains from investment in the EIS are exempt from CGT, provided that the EIS shares have been held for at least three years Seed Enterprise Investment Scheme (SEIS), offers even higher tax reliefs than EIS, as it is targeted at raising funds for small start‑up companies ( hence seed )

Answer 14

A VCT is a listed company that invests into companies on behalf of the investor An EIS involves a direct investment in a company that is eligible for the scheme A SEIS involves direct investment in a company that is eligible for the scheme, but the companies start-ups so are more risky but in return the tax benefit is greater than an EIS Similarity: They all offer respective tax benefits to investors and were introduced by the government to encourage investors to invest in smaller or establishing companies

Answer 15

Class 2 = Flat rate contribution paid by self employed. Collected through self assessment in a single lump sum Class 4 = Additional Contributions paid by self employed in half yearly installments by self assessment search a youtube vid for context

Answer 16

Certificate of deposits are an example of a bearer security. It is why they can be sold to a third party

Answer 17

Realty = (also know as real estate) . Property that is immovable. Personalty = all other property besides realty Joint tenants = each joint owner owns 100% of the property . On death of one the surviving joint owner will automatically take legal ownership and cannot be overridden ( such as by a request in the will ) Tenants in common = Each owner has a set amount of equity in the property. If one owner dies their portion or share in ownership passes to whoever is entitled to inherit it

Answer 18

EPA automatically ceases if a person becomes mentally incapacitated. It can be revoked at any time by the court of protection LPA has now replaced EPA. All new arrangements must be LPA. There are two types if LPA: health and welfare (only uses if no mental capacity) property and financial affairs (can be used with/without mental capacity) Any POA registration must be registered with the Office of the Public Guardian Donor = person who makes POA Donee = (also known as attorney) person who is given POA If a person loses mental capacity and does not have a valid LPA or EPA in place, the Court of protection can appoint a ‘deputy’. Deputy’s are much more restricted.

Answer 19

Testator = person who makes the will Beneficiary = the person who receives the benefits under the terms of the will Codicil = document that amends a will ( must be by the testator and before they have died ) Executor = person named by the testator as being responsible for carrying out the wishes if the will Grant Of Probate = legal authority for the executors to distribute the will Deed of Variation = legal agreement by all beneficiaries to alter the terms of the will, after the death of the testator (commonly used for tax purposes) . Must be done with 2 years upon death of testator and HMRC must be informed within 6 months of it being used Intestate - death without leaving a valid will Administrator - person who is given the role of distributing the estate according to rules of intestacy Letters of administration = legal authority given to the administrator to distribute the estate of a person who has died without a valid will

Answer 20

A trust is also known as a settlement The settlor is the person who creates the trust and originally owned the assets held within it Trust deed = document that sets out how the trust should be managed, by whom and for whose benefit Trustee = person named in the trust deed as the legal owner of the trust property. They have the responsibility you look after the estate in accordance with the trust deed Trust property is the assets in the trust that are under the legal ownership of the trustees. The settlor originally owner the trust property.

Answer 21

Official receiver = appointed by courts to possess and dispose of the bankrupt persons assets in order to pay off the creditors- clothing, household items and work related items CANNOT BE SEIZED

Answer 22

IVA’s are alternative to bankruptcy for individuals The debtor arranged with the creditors to reschedule the repayments of the debt. IVA firms can often arrange with the creditor that part of the debt is written off in return for repayment of the remaining debt (this is better for a creditor than writing the debt off in full or selling the debt to a debt recovery firm) Set up by creditors who represent 75% of the debt in the arrangement Individuals with an IVA will find it difficult to arrange credit This arrangement must be supervised by an insolvency practitioner

Answer 23

A company voluntary arrangement For companies in temporary financial difficulty Set up by the directors of a company or by a liquidator. NOT SET UP BY CREDITORS Like IVA creditors representing 75% of the company debt must agree to it