To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions
From a tax standpoint, what is the major advantage for an investor of a unit trust over an investment bond?
A) The rate of tax imposed on the underlying income of a unit trust is only 10% whereas for a life fund it is 20%
B) The CGT annual exemption is not available to set off against bond gains
C) When investing in accumulation units, all income can roll up tax free and be converted into capital gains
D) The personal allowance is not available to set off against chargeable- event gains
Under an offshore reporting fund:
A) At least 85% of the income accruing each year must be distributed
B) The income is taxed whether distributed or not
C) Income is received with no tax credit
D) Investor is taxed only on the distributed income
Enid has £20,000 worth of unit trusts that are all invested in bond funds. Which of the following statements is correct in terms of her tax position?
A) If she is a non-taxpayer she can reclaim the tax deducted on the interest distributions
B) She will not be liable to tax on any gains on the units as the underlying assets are usually exempt from CGT
C) The interest received is liable to higher rate tax only
D) Any capital gains are chargeable to income tax rather than capital gains tax
What is the rate of tax that unit trust managers pay on capital gains that they realise within their funds?
C) 20% after indexation allowance
D) They don’t pay tax on capital gains
What is a “fund of funds”?
A) A name given to the funds in the top 10% performance bracket
B) A fund which invests in other funds
C) A fund that is a sub-fund of another fund
D) A fund that has several sub-funds
Questions supplied by Technical Connection
Answers: B, B, A, D, B