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Tax Flashcards

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1
Q

What are the four stages of working out IHT?

A
  1. Identify the transfer
  2. Find the value of the transfer
  3. Apply exemptions and reliefs
  4. Calculate
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2
Q

What is the NRB for IHT?

A

£325k

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3
Q

What is the RNRB for IHT?

A

£175k

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4
Q

When does RNRB apply?

A

Must pass to child, grandchild etc. current spouse or widower of a child etc.

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5
Q

What is the IHT discount for commercial land?

A

10%

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6
Q

What is the IHT discount for residential land?

A

15%

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7
Q

What is the IHT rate? What is the IHT rate if the charity exemption applies?

A

40%. 36%.

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8
Q

When does 100% business property relief apply for IHT?

A

For business or shares not listed on a recognised stock exchange

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9
Q

When does the 50% discount for business property relief for IHT apply?

A

For company shares listed on a recognised stock exchange if the transferor had voting control; or they personally owned that land, machinery, plant etc. for the business

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10
Q

How long do shares have to be held for to be exempt from IHT and what is the requirement?

A

2 years at least before death. Must be personal shares not listed on a recognised stock exchange.

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11
Q

How long must property be owned for before it qualifies for agricultural property relief? IHT

A

2 years personally owned
7 years if occupied by someone else for the purpose of agriculture

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12
Q

When does the 100% exemption to IHT apply for agricultural property relief? And when does the 50% exemption?

A

100% is if the deceased had right to vacant possession.
50% in all other cases

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13
Q

When does the charity exemption apply for IHT?

A

If 10% of the person’s net estate is for charity

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14
Q

When does a reduced rate of RNRB apply and how is it calculated?

A

If the estate is valued over £2m, the RNRB is reduced by £1 every £2 over £2m.

£175k - ((value of estate - £2m) / 2)

Spouse can add their entire RNRB. Max £350k

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15
Q

What reliefs are available for IHT?

A

Business relief, agricultural relief, charity, nil rate bands

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16
Q

What are the four steps for calculating tax for a PET?

A
  1. Identify the transfer
  2. Find the value transferred
  3. Apply exemptions and reliefs

Only chargeable if die within 7 years

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17
Q

How do you calculate tax if the item was more valuable as a set (PET)?

A

Value of set - value of remaining item = loss to estate

However if the spouse holds the other item in the set, value is HALF

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18
Q

What is the annual exemption for a PET?

A

£3k.

This can be carried forward one year for a max £6k exemption.

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19
Q

What gifts are exempt from IHT?

A

Gifts of under £250.
Expenditure out of normal income.

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20
Q

By how much are marriage gifts exempt?

A

If from parent, up to £5k exempt.
If from remoter ancestor, £2.5k.
£1k for anything else

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21
Q

At what rate are LCTs immediately chargeable at?

A

20%. Rises to 40% if die within 7 years.
Does have an NRB

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22
Q

What is the taper relief on gifts before death?

A

3-4 years before death: 80% of death charge
4-5 years: 60%
5-6 years;: 40%
6-7: 20%

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23
Q

How is trading profit or loss calculated?

A

Chargeable receipts - deductibles - capital allowances

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24
Q

What is a chargeable receipt?

A

Income for sale of goods and services provided by business

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25
What is deductible expenditure?
Expenditure incurred for the trade. Salaries, heating etc
26
What is the capital allowance value for machinery and plant?
18%
27
What is the AIA?
£1m. Per tax year
28
What is trading loss relief?
Sole traders or partners can use, Set off business loss against previous employment income
29
What is start up loss relief?
Can carry back loss against income for any of the first 4 tax years for any prior three years. Start 3 years back and work forward. From 31 Jan preceding loss. Capped
30
What is carry across and carry back relief?
1. Set against income against same tax year 2. Set against income from preceding tax year 3. Set against income from same tax year until this hits 0 then carry back 4. Set against income of last tax year until hits 0 and carry forward. By 31 January of end of current tax year. Capped
31
What can you do if you carry across losses but not all losses are absorbed?
Set them off against capital gain 31 January of end of current tax year
32
What income reliefs are capped and how much by?
Start up and carry across, 50k or 25% of income (whichever is greater)
33
When is the level for compulsory vat registration?
Value of taxable supplies has to be £85k.
34
What is carry forward relief?
Set off against subsequent years of profit indefinitely. Must notify HMRC within 4 years after end of tax year of loss
35
What is carry back of terminal trading loss relief?
In final 12 months of trading set off profits against the final tax year. Can go back a further previous 3 years. Claim must be within 4 years.
36
What is carry forward on incorporation relief?
Wholly or mainly incorporated for return of shares. (80%) Indefinite relief. Notify HMRC within 4 years
37
What reliefs are available to partners and sole traders for income tax?
Carry forward relief, carry back relief (terminal), carry forward on incorporation, trading loss relief, start up loss relief, carry across and back relief
38
How do you calculate corporation tax?
1. Calculate income profits 2. Calculate chargeable gains Disposal, gain or loss, reliefs, aggregate 3. Calculate profits and apply relief 4. Calculate tax
39
How do you calculate chargeable gains for corporation tax?
Proceeds - costs = net proceeds of disposal Less allowable expenditure = gain or loss Less Indexation allowance
40
What is rollover on replacement relief for corporation tax?
Postpone tax until the asset is disposed of entirely. Cannot be for investment, must be for use. Can apply for 1 year before replacement or 3 years after.
41
What is a large company and when must they pay tax?
Profit is 1.5m. 4 instalments. First is due 6 month and 13 days after accounting period. Then every three months.
42
When is corporation tax due?
9 months and 1 day from end of accounting period.
43
What is a very large company and when does it have to pay corporation tax?
£20m profit. 4 instalments First is 2 months and 13 days after accounting period. Then every three months
44
When aren’t loans to group companies taxed
If the loan is under 15k, the person is a full time employee and has no more than 5% shares
45
What are the 3 steps to calculate income tax?
1. Chargeable receipts 2. Subtract deductibles and capital allowances = trading profit 3. Calculate
46
What is the calculation for income tax?
Total income - reliefs = net income Deduct allowances = taxable income Separate nsdi, dividends and savings Calculate
47
What is exempt from income tax?
Interest on damages for PI or death; ISA interest; savings certificates interests; state benefits
48
What loans are exempt from income tax?
Loan for partnership, loan for IHT, loan to invest in close trading company
49
What is the personal allowance and when is it reduced?
12, 570. Reduced by £1 every 2 over 100k. No allowance over 125,140
50
How do you calculate the reduction in income tax personal allowance over 100k?
12570 -( (net income -100k) / 2 )
51
What is the marriage allowance for income tax?
1250 transfer to spouse Not available above base rate
52
What is the allowance for the blind for income tax?
2.5k
53
What is the property and trading allowance for income tax?
£1k
54
How much is corporation tax?
19%
55
When is the tax year?
6 April to 5 April
56
When is the corporation tax year?
01 April to 31 march.
57
What is the personal savings allowance?
Basic rate = £1k Higher rate = £500 Additional = none
58
What is the dividends allowance?
£2k flat rate
59
What are the current tax brackets?
20% up to 50,270 40% up to 150k 45% for more
60
What are the dividends tax rates?
Basic = 8.75% Higher = 33.75 Additional = 39.35
61
When is the deadline for income tax?
31 Jan following tax year
62
What are the 5 steps for calculating CGT?
1. Identify disposal 2. Calculate gain (subtracting initial and subsequent disposal expenditure) 3. Apply reliefs 4. Deduct exemptions 5. Apply tax at 20%
63
What is the current allowance for CGT?
12 300
64
What are the current brackets for CGT?
10% for basic rate 20% for all other bands
65
When do PRs pay CGT?
Only on disposal at a flat rate of 20%
66
What is the rate of CGT on residential property (not main home)?
18 % basic rate 28% all other rates
67
When must an estate (deceased) have a tax return?
Complex estate of £2.5m or the tax due exceed £10k or the value of assets sold in any one year exceeds £500k
68
What is the % for BADR and what is the time limit for disposal?
10% (capped at £1m) Time limit is 1 year before disposal or 3 years after.
69
When can you pay CGT in 10 instalments?
1. Gift 2. Asset is land or controlling shareholding 3. Hold over relief is not available First instalment will be due 31 Jan following end of tax year
70
What reliefs are available for CGT?
Roll over, roll over on incorporation, wasting assets, residential relief, buy back of shares, hold over relief
71
What is roll over relief for CGT?
No CGT charged if sale proceeds are invested in other business assets. Does not include shares. If disposed of by a shareholder, they must hold 5% voting shares Must claim within 4 years of the asset obtained No annual exemption applies
72
What is wasting assets disposal relief? CGT
If lifespan under 50 years, exempt if disposal is under £6k
73
What is rollover on incorporation relief (CGT)?
Charge of CGT postponed. Must receive shares in return and then will pay CGT when dispose of these shares
74
What is hold over relief for CGT?
Applies to gifts of business assets Charged on disposal of gift Must be entitled to 5% profits and assets on winding up OR 5% of proceeds to the sale of the whole capital. Must be an employee or officer gifting it Can be shares not listed on stock exchange or a personal company (5% voting) Does not apply if the donee is a company Both parties to apply for relief within 4 years
75
When is CGT payable on buy back of shares?
If shareholders profit
76
What does buyback of share relief do to CGT?
Charges to income tax, not CGT.
77
When can buyback of share relief be claimed?
1. Trading company not listed on recognised stock exchange 2. Buyback must be to raise cash for IHT or to benefit the trade 3. Seller must have owned the shares for 5+ years 4. Selling all it substantially reducing shareholding by 25 - 30%
78
What tax applies to buyback of shares?
Dividends tax brackets
79
When must buyback of shares tax be filed?
On or before 31 Jan following end of tax year. Calculation must be submitted to hmrc within 30 days of the sale.
80
How do you calculate net current assets? And net assets?
Current assets - current liabilities. Fixed assets + current assets - current liabilities - long term liabilities
81
Who can make a security of costs application?
Defendant against claimant..

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