Home Forums Thread for Mock Exam 1 queries

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  • David Hedges
    Participant
    Post count: 65

    Question 2

    Could you clarify if the £300,000 inheritance was the gross or net amount? I know the QSR calculation but I struggle to understand whether she received £250,000 or £300,000 after the tax paid.

    Thank you 🙂

    Tessa Roberts
    Participant
    Post count: 2046

    Hi David,

    My intent when I wrote it was for you to interpret that as the net amount – am thinking if I tweak ‘inherited’ to ‘received’ that would make it clearer that the £300k is net. (i.e. the gross amount is the £300k plus the £50 tax paid).

    Kind regards,

    Tessa.

    Tutor for Expert Pensions.

    David Hedges
    Participant
    Post count: 65

    That would definitely make it clearer 🙂 thanks Tessa.

    Sasha W
    Participant
    Post count: 69

    Question 2 – calculate Elizabeth’s IHT liability. I got one step wrong on the calc as I didnt include the £125k NRB available.

    Hopefully ive answered my own question by having a read around the study notes but:

    – we calculate CLT 1 and 2 against her NRB used on both due to the 14 year rule
    – but when we calculate the IHT on estate, we only include the NRB utilised by any CLT 2 as its the only one within the last 7 years and that’s why there’s £125k NRB available to deducted from her estate?

    Many thanks!

    Julie Stewart
    Participant
    Post count: 155

    I tripped up on that one too Sasha, came to the same conclusion as you re first CLT being outside the estate on death.

    Sasha W
    Participant
    Post count: 69

    Thanks Julie! Least I will remember that from now on 🙂

    Tessa Roberts
    Participant
    Post count: 2046

    Correct – CLT outside 7 years may impact on later CLTs in that they use up the NRB available to them – but they don’t use it up as far as the estate is concerned (because they’re outside 7 years).

    It’s the 14 year rule 🙂

    Tessa.

    Tutor for Expert Pensions.

    Sasha W
    Participant
    Post count: 69

    Thanks Tessa! Another quirk solved alongside cracking the new top slicing calcs today!

    Gary Youssef
    Participant
    Post count: 31

    Question 1)e) ii) RENT A ROOF RELIEF
    Hi Tessa
    I thought was use used rent a room relief you were not able to deduct any expenses from the income, however, in your calculation you deduct £1200 against this rent a room relief method. Can you please explain why?

    Thanks
    G

    Tessa Roberts
    Participant
    Post count: 2046

    Hi Gary.

    It’s not being deducted to work out the tax due (see first line).

    It’s only being deducted to show how much the couple end up with once both expenses and tax have been deducted, i.e. their net income.

    Tessa.

    Tutor for Expert Pensions.

    Gary Youssef
    Participant
    Post count: 31

    Understood – thank you

    Gary Youssef
    Participant
    Post count: 31

    Hi Tessa

    RE Question 1 a)i) Income tax calc – I thought the £6000 dividend partly fell into the ART band as total gross income £150,475 therefore:

    £2000 x 0% (dividend allowance)
    £3525 x 32.5% (HRT band)
    £475 x 38.1% (ART band)

    The model answer states entire £4000 x 32.5% – why is this?

    Thanks
    G

    Tessa Roberts
    Participant
    Post count: 2046

    The personal pension contribution expands her HRT to £151,500 so she’s not quite an additional rate tax payer.

    Tessa.

    Tutor for Expert Pensions.

    Gary Youssef
    Participant
    Post count: 31

    Stupidly i didn’t think the personal pension contribution also expanded the ART band as well as HRT band. Luckily this came up in the mock exam!! Now i know 😉

    Cara
    Participant
    Post count: 277

    ERS nic liability for Janie….

    Why do we not deduct the 6% occupational pension contribution from the ERs NICS? I thought they saved NICS and Corp Tax as a deductible?

    Ta muchly x

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