R03 - Personal Taxation

Transcription

1 R03 - Personal Taxation Practice Paper These questions relate to tax year 2017/2018 V viva plc

2 ttempt to answer all questions: 1 ortina, 33, manages a cake emporium and pays herself a salary of 54,000 per annum and dividends of 12,000 per annum. ssuming she has no other income, what is the income tax liability on her dividends in the tax year 2017/18? 525 2,275 3,000 3,900 2 ave is about to make a donation of 2,000 to charity. In the tax year 2016/17 his income is 60,000. What is the gross value of the gift to the charity if he makes a gift aid declaration in respect of the donation? 2,000 2,500 2,564 2,800 3 Which of the following events would be a chargeable event under a life assurance policy? Multiple Response Question Payment of the death benefit under a single premium policy. The assignment of the policy as a gift. The part withdrawal of 7,600 in the 4 th year of a single premium investment bond, where the premium paid was 40,000 and no other withdrawals have been taken. The full surrender of a single premium investment bond after 12 years. The maturity of a qualifying policy, where the premiums have been paid throughout the 10 year term. 4 Ralph is employed and aged 50. How much adjusted net income can Ralph earn in 2017/18 before his personal allowance is completely lost? 100, , , ,000 V viva plc

3 5 Ryan is a widower aged 84. In 2017/18 he has the following gross income: State Pensions 6,000 ompany Pension 20,000 Interest from his building society account of 1,750 What is Ryan s tax liability? 3,250 3,423 3,000 3,050 6 fter deducting his personal allowance Gordon has non-savings income of 1,000 and savings income of 4,500 in the 2017/2018 tax year. How much income tax is due on his savings income only? 100 zero Joe is single aged 69 and has retirement income of 110,000. What is his income tax liability? 34,700 19,700 32,700 37,600 8 Pat is single aged 35 and has income from her employer of 30,000. What is her tax liability for 2017/2018? 3,700 3,740 4,000 6,000 9 John is 55 and is paid a salary of 50,000. If his salary is increased by 5,000 what will be the total increase in overall National Insurance contributions paid by John and his employer? V viva plc

4 10 What did the Upper ccrual Point establish when related to National Insurance ontributions? The point at which State Second Pension benefits ceased to accrue The point at which employee contributions ceased The minimum contribution that secured a full basic state pension The point at which additional contributions of 1% began 11 Harold has weekly earnings of 1,200. What is his employer s weekly national insurance contribution? In addition to regular wages and salary, on what types of earnings do employees have to pay NIs? Multiple Response Question. Redundancy payments Holiday pay Incentive payments enefits in kind Work related expenses onuses 13 Karen is a higher rate taxpayer who has used her capital gains tax exemption for the current year. ob her husband is a basic rate taxpayer who has no capital gains in the current year. Karen owns shares showing a capital gain of 15,000, what is the most efficient way for her to realise this gain? ob should transfer his exemption to Karen Sell the shares to ob under exempt disposal rules Sell the shares and transfer the gain to ob Transfer the shares to ob for him to sell 14 Joe a higher rate taxpayer, made a gain of 30,000 after deduction of the annual exemption on the sale of a orporate ond unit trust in May If he sold his principal private residence for a loss of 15,000 in the previous tax year, how much GT will be payable on the sale of the orporate bond unit trust? 1,500 6,000 8,400 3,000 V viva plc

5 15 Joan owns a house that has been her principal private residence in the past, but ceased to be so 3 years ago. How is any capital gains tax on the sale of the property calculated? proportion of the gain is taxable based on the period of occupation and period of ownership The gain is assessed depending on where Joan lives at the time of sale HMR will take into account other property sales since acquisition Married couple relief may be available if a couple own two properties 16 n investment portfolio with a book value of 200,000 was subsequently disposed of for 250,000 without incurring a apital Gains Tax liability. This was because The portfolio was originally purchased prior to pril 1998 Taper relief reduced the value below the original costs arried forward losses erased any gain The assets were originally acquired through an exempt transfer 17 Which of the following are correct regarding the carry forward of losses for GT purposes? Multiple Response Question. Losses must first be used against gains in the same tax year Losses can only be carried forward for 4 years Losses can be transferred between spouses or civil partners Losses must be set against all gains before application of the annual exemption Losses must be claimed within 4 years of the end of the tax year they were made Unrealised losses must be used before realised losses 18 Tyrone gifted 2,000 to his neighbour during the last tax year. He has made no other gifts. He wants to gift a further 4,000 in the current tax year. You should tell him that this will be lassed as a PT hargeable at the lifetime rate llowable under the small gifts exemption n exempt transfer 19 onnie died in June The only gift onnie made before her death was a cash gift of 600,000 after deduction of allowable annual exemptions to her son in July alculate the IHT due on the gift. 66,000 88, , ,000 V viva plc

6 20 Which of the following would normally qualify for 100% business property relief from IHT? armland used purely for commercial purposes quity sold under a share purchase agreement Significant excess cash held by a small business n unincorporated sole traders business valued at 1.5 million 21 On her death, Helen left all her assets to her husband. She owned a 50% share in a property on a tenancy in common with her daughter. The total value of the property was 1.5 million. What inheritance tax, if any, is due? Nil 80, , , Ken has made potentially exempt transfers of 100,000, 75,000 and 50,000 (all after deduction of allowable annual exemptions) in the last 7 years prior to his death in September His residual estate is valued at 400,000 and will be inherited by his niece. What is the IHT liability on death? 110, , , , What effect will the application of IHT taper relief have on the taxation of a chargeable transfer? The full charge at death rates will be reduced ny overpaid lifetime rate tax can be reclaimed The value of the transfer will be reduced when calculating the remaining nil rate band The tax due on transfers within the nil rate band is revoked 24 When does IHT become due in respect of a PT which is chargeable as a result of the death of the transferor? 6 months after the end of the month in which death occurs 12 months after the end of the month in which death occurs 30 th September in the tax year following death 31 st January in the tax year following death V viva plc

7 25 What are the conditions that must be fulfilled in order to qualify for the normal expenditure exemption for Inheritance Tax purposes? Multiple Response Question. Ideally the income should be taken from an annuity Gifts should be made out of income Payments should be a fixed amount Gifts must not exceed the annual exemption xpenditure should be habitual and normal onors standard of living should not be reduced 26 Which of the following individuals would normally be treated as a UK resident by HMR? Linda who enters the UK to take up a permanent position for 18 months but leaves after 4 months Harold who visits the UK to take up a 3 year contract of employment June who has lived in the UK for an average of 5 months over the last 3 years lbert who is a crown employee working in Luxembourg for 2 years 27 Pete is US domiciled and married to nna who is UK domiciled. Pete moved to ngland 8 years ago when he married nna. They have 2 children aged 2 and 4. What is the domicile of the children? They have joint domicile They must choose a domicile before reaching 16 They are US domiciled They are UK domiciled 28 Ned was born in the UK and has lived there all his life. He holds a full UK passport and has now accepted a 3 year contract to work in Italy, what are the main tests used to determine Ned s residency? Multiple Response Question. His period of employment abroad Where his parents were born Whether any incidental duties are performed in the UK The length of time spent in the UK while working abroad Whether any short visits to the UK take place V viva plc

8 29 Lucy is resident in the UK, but she is domiciled in the US. Which of the following can be remitted to the UK without being assessed to UK income tax? Multiple Response Question. ssets re-invested in a UK registered pension scheme Intangible assets such as derivative contracts ssets held in an U authorised collective investment scheme ssets costing less than 1,000 sset in the UK for less than 275 days Personal effects 30 When will a Self mployed higher rate taxpayer begin making payments on account for the 2017/2018 tax year? 31 st July st January st July st January What penalties can HMR impose if a tax return is not filed on time? Multiple Response Question. Interest on late payments from the due date Interest on later payments from the end of the tax year aily charge of 10 utomatic fixed penalty Removal of personal or age allowances Removal of payment on account facility 32 Which of the following transactions would be exempt from Stamp uty? Multiple Response Question. rthur who buys his first home for 110,000 onnor who invests 25,000 in UK blue chip shares Gareth who buys investment trust shares valued at 3,500 rederick who invests 5,000 in an xchange Traded und rnest who sells investment trust shares for 20, t what level of annual turnover do companies have to register for VT from 1 st pril 2017? 83,000 85,000 81, ,000 V viva plc

9 34 Mrs Moore died on 1 st July 2017, leaving total assets worth 900,000, which includes her main residence valued at 200,000..She leaves everything to her son and daughter equally. In 2008 she made a gift of 150,000 to her daughter. Mrs Moore s husband died on 1 st September 2007 (when the nil rate band was 300,000) and left all of his estate to her, except for an investment worth 150,000 that passed to his son. How much inheritance tax is payable on Mrs Moore s death. 125, ,000 85, , limited company with gross profits of 310,000 in 2016/17 may benefit from which of the following approaches to tax planning? Multiple Response Question. ringing forward unused VT allowances from previous years ppointing an auditor to reduce book value reduction in gross profits through payment of director bonuses totalling 12,000 laiming marginal relief against previous years profits pplying for holdover relief on unrealised profits Making an additional pension contribution totalling 15, Which one of the following is correct in respect of the basic rate income tax treatment of income from Government Stocks in the hands of the investor? Interest is non-taxable 0% paid, 20% further liability 10% paid; no further liability 20% paid, no further liability 37 Terence receives dividend income of 14,500 in the 2017/18 tax year. How will this be treated for income tax? Multiple Response Question. 14,500 will be added to his income for the year and taxed at the appropriate rate He will be subject to an additional 7.5%, 32.5% or 38.1% tax on the amount received. 9,500 will be taxable at the appropriate rate If he remains a basic rate tax payer no additional tax is due His personal allowance may be affected 10% tax credit will be deducted from his existing income tax liability V viva plc

10 38 Kevin has purchased a second house for 240,000 that he intends to use as his main residence. He does not intend to sell his other house at this time. Which statement is correct in respect of Stamp uty Land Tax (SLT) for his recent house purchase? No SLT is payable as the house is his main residence. SLT of 2,300 is payable and no reclaim can be made if he sells his 1 st house within 3 years. SLT of 9,500 is payable and no reclaim can be made if he sells his 1 st house within 3 years. SLT of 9,500 is payable, although he can reclaim 7,200 if he sells his first house within 3 years. 39 n investment in a Personal Pension is free of all tax except when benefits are drawn as a pension or income the maximum tax free cash sum is not available contributions exceed the annual allowance contributions are made by a third party 40 red invested 15,000 in an onshore life assurance bond. It was fully surrendered 5 years later for 25,000. red s other income less allowances is 38,400. What amount of income tax will red have to pay on surrender? 2,000 3,000 4,000 5, erek is a 45% taxpayer who owns an offshore bond valued at 400,000 including a 100,000 gain. He is keen to gift this to his nephew, but is unsure of the tax liability. How much income tax will he pay if he makes an outright gift of the policy? Nil 20,000 50,000 80, udrey invests 100,000 into VT in the 2017/2018 tax year. How much could she reduce her tax bill by? Nil 25,000 30, ,000 V viva plc

11 43 Karen has a large portfolio of shares which she is considering selling. When must any gain be reinvested by if she is to benefit from IS GT deferral relief? No later than 1 year after the disposal No later than 3 years after the disposal No later than 5 years after the disposal No later than 7 years after the disposal 44 What are the tax implications of investing in a real estate investment trust? Multiple Response Question. Investors pay no GT in respect of capital gains from the exempt element The RIT must be UK resident to benefit from tax concessions dividend payment is made from the tax exempt element Sales of developed property may be subject to 30% tax within the fund Where conditions are met they are free of corporation tax 45 Which of the following are features of an IS? Multiple Response Question. GT can be carried back to a previous tax year Tax relief is given as a reduction in tax due Tax relief is given at 30% Shares are free from GT on disposal at any time Providers must agree to buy back shares after 3years Maximum investment is 200, Richard is interested in long term lump sum investment and is considering investment bonds and collective investments. Which of the following statements are true? Multiple Response Question. Investment bonds offer useful tax concessions where income is required ollectives cannot be held under an IS wrapper Investment bonds are taxed differently depending on whether they are UK or Offshore based apital gains made within a UK collective investment are subject to corporation tax Investment bonds are normally non-qualifying life assurance policies V viva plc

12 47 Mr and Mrs Jacobs have asked their financial adviser to recommend tax efficient products for their child born in September In respect of Stakeholder pensions and ISs the adviser should confirm which of the following are true. Multiple Response Question. Only stakeholder products are available to the under 16s Only ash ISs are available to Under 16s Personal contributions to pension schemes from non taxpayers do not qualify for tax relief Stakeholder pension contributions are limited to 3,600 (Gross) for nonearners oth products offer tax efficient growth Mr & Mrs Jacobs can claim higher rate tax relief on contributions to their child s pension 48 What are the benefits of drawing income from a Purchased Life nnuity rather than a Pension nnuity? Multiple Response Question. Purchased Life nnuities are ignored for means tested state benefits Purchased Life nnuities can be purchased for the beneficiaries of a trust Pension annuities must include dependants benefits Pension annuities cannot increase in payment Part of the Purchase Life nnuity income is treated as a return of capital Only the interest element of a Purchased Life nnuity is subject to tax 49 married couple with assets of well over 1 million are considering gifting some assets to their children. If their assets are split equally what should be taken into account when deciding which spouse makes the gifts for tax planning purposes? Multiple Response Question. Number of years they have been married Record of previous transfers ge, health and life expectancy mount of nil rate band available Government ctuary s department annuity rates Whether they are both UK domiciled 50 ndy, who is aged 62, has a pension of 12,500 and receives 500 gross in interest from his building society account. What is his income tax liability in 2017/18? V viva plc