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Where Taxpayers and Advisers Meet
TaxationWeb Christmas Tax Quiz Winners
08/01/2009, by Mark McLaughlin CTA (Fellow) ATT TEP, Tax News - TaxationWeb
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Thank you to all those who took the time and trouble to enter the TaxationWeb Christmas Quiz.

TaxationWeb is pleased to announce that the three worthy competition winners are (in alphabetical order):
 
- Martyn Bowler
- Lyn Winter
- Lee Young
 
Congratulations to all three winners.
 
Malcolm Finney's best-selling book (worth £60) which can be seen at:

(http://www.taxbookshop.com/bk-737-wealth-management-planning-the-uk-tax-principles)

will shortly be winging its way to each of you courtesy of John Wiley & Sons Ltd.
 
The questions and suggested answers are listed below. Should anyone have a different view please feel free to email Malcolm Finney (malcfinney@aol.com) who will attempt to defend his position !

QUIZ QUESTIONS

Q1 The nil rate band for inheritance tax is transferable between co-habitees who have lived together for at least two whole tax years.

Q2 The new 10% income tax band is correctly referred to as the “starting rate for savings”.

Q3 A non-UK domiciled but UK resident individual age seventeen throughout the tax year 2008/09 who has been UK resident for at least 7 out of the immediately preceding 9 tax years must pay £30,000 if the remittance basis of taxation is claimed for 2008/09.

Q4 The capital gains of a bare trust set up by a parent for his minor (ie less than age 18) child are subject to capital gains tax on the part of the minor.

Q5 Revenue & Customs Briefs have replaced Business Briefs and Tax Bulletins

Q6 Under English law an individual’s domicile of origin at birth is determined by the father’s domicile at that time if the child is illegitimate.

Q7 X  gifts a family heirloom, an antique painting, to his son.  Both X and his son are UK resident. A hold-over election can be made for capital gains tax purposes with respect to any gain arising on the gift.

Q8 X gifts his house (in which he lives) to his only son but X continues to live in it after effecting the gift; the son does not live in the house. 6 years after effecting the gift the father moves out of the house into a nursing home, never returning to the house, and dies 5 years later. The house is regarded as forming part of X’s death estate on his death for inheritance tax purposes.

Q9 For purposes of the UK and USA double taxation agreement on income and capital gains tax a marriage before 1st January 1974 between a woman who is a USA national and a man domiciled within the UK shall be deemed to have taken place on 1st January 1974 for the purpose of determining her domicile on or after 6th April 1976 for UK tax income tax and capital gains tax.

Q10 A lifetime gift by an individual into a UK resident interest in possession (other than a disabled person’s interest) trust, on or after 12th March 2006, qualifies as a chargeable lifetime transfer (assume gift is not exempt under the various exemptions).

Q11 On the 21st March 2008 X gifted a family heirloom, a very valuable piece of jewellery, to the trustees of a UK resident discretionary trust (which does not qualify as an A & M trust) whose only beneficiaries are his children, all age over eighteen. Hold-over relief cannot be claimed on the gift for capital gains tax purposes.

Q12 A and B who are not married and not registered civil partners own a property as beneficial joint tenants in equity.  A dies intestate. A’s share of the property passes automatically by survivorship to B.

Q13 The execution of a deed of variation for inheritance tax purposes does not require the persons who are to benefit under the variation to be beneficiaries under the will.

Q14 X, the uncle of Y, on the 3rd July 2006 paid for Y to have a holiday on the Algarve. X has made a potentially exempt transfer for inheritance tax purposes (ignore annual exemptions etc).

Q15 A bare trust constitutes a settlement for inheritance tax purposes.

Q16 Under his will X, an English domiciled individual, gifted his antique painting to his spouse, Y. Prior to his death X and Y divorced. No changes are made to X’s will following the divorce. On X’s death Y is no longer entitled to the antique painting.

Q17 A non-UK domiciled and non-UK ordinary resident individual dies owning foreign currency (worth £1 million sterling equivalent) in a bank account with a UK bank. Under his will the monies in the account are left to his brother who is non-UK domiciled but UK resident. No UK inheritance tax is due on the foreign currency monies.

Q18 Nick Cann is currently Chief Executive of the Institute of Financial Planning

Q19 X set up a UK resident discretionary trust pre March 2006. He is one of the potential beneficiaries. In May 2008 the trust sold an asset making a significant capital gain. The capital gain is assessable on X.

Q20 Foreign source dividend income arising on or after 6th April 2008 may be subject to income tax at 40% on the part of an individual.

Q21 The ISBN of Malcolm Finney’s latest book is 978-0-470-72424-8.

Q22 A husband (age 54) and wife (age 57) died in the same accident in which it is impossible to determine which of the two died first. For inheritance tax purposes it is assumed that the elder of the two spouses died first.

Q23 X, a UK resident, purchased a property in the UK and immediately let it out for two years. X then moved into the property from which date the property qualified as X’s principle private residence for capital gains tax purposes. Five years later X sold the property. Lettings relief will not be available to reduce any capital gains tax which might arise on the sale.

Q24 Gains which may arise on a disposal of rights under a policy of life assurance can never be subject to capital gains tax.

Q25 Man (M) owns his principle private residence as to 100% and has always lived in it since acquisition. Property purchased by M on 1st July 2000.  M marries woman (W) on 30th September 2008 and on 1st October 2008 transfers 50% of the property to W. M and W continue to live in the property. M and W sell the property on 15th August 2008. W is deemed to have acquired her interest on 1st July 2000 and no capital gains tax liability arises on the part of W on the sale.


QUIZ ANSWERS

Q1 False

The nil rate band for inheritance tax is transferable between co-habitees who have lived together for at least two whole tax years.

Q2 True
 
The new 10% income tax band is correctly referred to as the “starting rate for savings”.
 
Q3 False
 
A non-UK domiciled but UK resident individual age seventeen throughout the tax year 2008/09 who has been UK resident for at least 7 out of the immediately preceding 9 tax years must pay £30,000 if the remittance basis of taxation is claimed for 2008/09.
 
Q4 True

The capital gains of a bare trust set up by a parent for his minor (ie less than age 18) child are subject to capital gains tax on the part of the minor.
 
Q5 True
 
Revenue & Customs Briefs have replaced Business Briefs and Tax Bulletins
 
Q6 False
 
Under English law an individual’s domicile of origin at birth is determined by the father’s domicile at that time if the child is illegitimate. 
 
Q7 False

X  gifts a family heirloom, an antique painting, to his son.  Both X and his son are UK resident. A hold-over election can be made for capital gains tax purposes with respect to any gain arising on the gift.
 
Q8 False
 
X gifts his house (in which he lives) to his only son but X continues to live in it after effecting the gift; the son does not live in the house. 6 years after effecting the gift the father moves out of the house into a nursing home, never returning to the house, and dies 5 years later. The house is regarded as forming part of X’s death estate on his death for inheritance tax purposes.
 
Q9 True
 
For purposes of the UK and USA double taxation agreement on income and capital gains tax a marriage before 1st January 1974 between a woman who is a USA national and a man domiciled within the UK shall be deemed to have taken place on 1st January 1974 for the purpose of determining her domicile on or after 6th April 1976 for UK tax income tax and capital gains tax.
 
Q10 False
 
A lifetime gift by an individual into a UK resident interest in possession (other than a disabled person’s interest) trust, on or after 12th March 2006, qualifies as a chargeable lifetime transfer (assume gift is not exempt under the various exemptions).
 
Q11 False

On the 21st March 2008 X gifted a family heirloom, a very valuable piece of jewellery, to the trustees of a UK resident discretionary trust (which does not qualify as an A & M trust) whose only beneficiaries are his children, all age over eighteen. Hold-over relief cannot be claimed on the gift for capital gains tax purposes.
 
Q12 True
 
A and B who are not married and not registered civil partners own a property as beneficial joint tenants in equity.  A dies intestate. A’s share of the property passes automatically by survivorship to B. 
 
Q13 True

The execution of a deed of variation for inheritance tax purposes does not require the persons who are to benefit under the variation to be beneficiaries under the will.
 
Q14 False

X, the uncle of Y, on the 3rd July 2006 paid for Y to have a holiday on the Algarve. X has made a potentially exempt transfer for inheritance tax purposes (ignore annual exemptions etc).
 
Q15 False
 
A bare trust constitutes a settlement for inheritance tax purposes.
 
Q16 True
 
Under his will X, an English domiciled individual, gifted his antique painting to his spouse, Y. Prior to his death X and Y divorced. No changes are made to X’s will following the divorce. On X’s death Y is no longer entitled to the antique painting.
 
Q17 True
 
A non-UK domiciled and non-UK ordinary resident individual dies owning foreign currency (worth £1 million sterling equivalent) in a bank account with a UK bank. Under his will the monies in the account are left to his brother who is non-UK domiciled but UK resident. No UK inheritance tax is due on the foreign currency monies.
 
Q18 True

Nick Cann is currently Chief Executive of the Institute of Financial Planning
 
Q19 False
 
X set up a UK resident discretionary trust pre March 2006. He is one of the potential beneficiaries. In May 2008 the trust sold an asset making a significant capital gain. The capital gain is assessable on X.
 
Q20 True
 
Foreign source dividend income arising on or after 6th April 2008 may be subject to income tax at 40% on the part of an individual.
 
Q21 True
 
The ISBN of Malcolm Finney’s latest book is 978-0-470-72424-8.
 
Q22 False
 
A husband (age 54) and wife (age 57) died in the same accident in which it is impossible to determine which of the two died first. For inheritance tax purposes it is assumed that the elder of the two spouses died first.
 
Q23 False
 
X, a UK resident, purchased a property in the UK and immediately let it out for two years. X then moved into the property from which date the property qualified as X’s principle private residence for capital gains tax purposes. Five years later X sold the property. Lettings relief will not be available to reduce any capital gains tax which might arise on the sale.
 
Q24 False
 
Gains which may arise on a disposal of rights under a policy of life assurance can never be subject to capital gains tax.
 
Q25 True
 
Man (M) owns his principle private residence as to 100% and has always lived in it since acquisition. Property purchased by M on 1st July 2000.  M marries woman (W) on 30th September 2008 and on 1st October 2008 transfers 50% of the property to W. M and W continue to live in the property. M and W sell the property on 15th August 2008. W is deemed to have acquired her interest on 1st July 2000 and no capital gains tax liability arises on the part of W on the sale.

About The Author

Mark McLaughlin is a Fellow of the Chartered Institute of Taxation, a Fellow of the Association of Taxation Technicians, and a member of the Society of Trust and Estate Practitioners. From January 1998 until December 2018, Mark was a consultant in his own tax practice, Mark McLaughlin Associates, which provided tax consultancy and support services to professional firms throughout the UK.

Mark is now a consultant with The TACS Partnership,  an independent tax advisory firm that provides high quality, independent advice on all UK taxation matters.

He is a member of the Chartered Institute of Taxation’s Capital Gains Tax & Investment Income and Succession Taxes Sub-Committees.

Mark is Chief Contributor to McLaughlin’s Tax Case Review, a monthly journal published by Tax Insider.

Mark is the Editor of the Core Tax Annuals (Bloomsbury Professional), and is a co-author of the ‘Inheritance Tax’ Annuals (Bloomsbury Professional).

Mark is Editor and a co-author of ‘Tax Planning’ (Bloomsbury Professional).

He is a co-author of ‘Ray & McLaughlin’s Practical IHT Planning’ (Bloomsbury Professional).

Mark is also co-author of ‘Incorporating and Disincorporating a Business‘ (Bloomsbury Professional).

He is Editor and co-author of ‘HMRC Investigations Handbook‘ (Bloomsbury Professional).

Mark has also written numerous articles for professional publications, including ‘Taxation’, ‘Tax Adviser’, ‘Tolley’s Practical Tax Newsletter’ and ‘Tax Journal’, which provides free information and resources on UK taxes to taxpayers and professionals, and TaxationWeb’s sister site TaxBookShop.

Mark is a Director of Tax Insider, and Editor of Tax Insider, Property Tax Insider and Business Tax Insider, which are monthly publications aimed at providing tax tips and tax saving ideas for taxpayers and professional advisers. He is also Editor of Tax Insider Professional, a monthly publication for professional practitioners.

Mark is also a tax lecturer, and has featured in online tax lectures for Tolley Seminars Online.

Mark co-founded TaxationWeb (www.taxationweb.co.uk) in 2002.

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