Every mock section 6

Approved securities

Investments that are permitted for certain tax advantages

• shares

• OEICs

• Unit trusts

• Investment trusts

CGT charges

Allowance = £3,000

BRT - 18%

HRT - 24%

ART - 24%

ETC & ETN

Exchange traded commodity (ETC):

• an etc is usually backed by a commodity or tracked the price of it

Exchange traded Note (ETN):

• A debt security issued by a bank or financial institution

• This creates counterparty risk

No stamp duty on these they only apply to shares

Undiluted NAV per share and diluted NAV

Assets - liabilities / No. Of Shares

Diluted NAV includes the extra assets and shares when warrants are exercised

• You add it to the assets

• Use same formula

Assets + exercised proceed - liabilities / current shares + New Shares

What is the tax due for a BRT who got £600 dividends and £800 distribution

£600 - £500 (Div All) = £100 × 8.75% = £8.75

£800 - £1000 (Pers Sav All) = £0.00

Distribution is the fixed security version of dividends

EIS and VCT

EIS:

• Max investment = £1million

• 30% Tax relief

• More risky and less liquid

• CGT

VCT:

• Max investment £200k

• 30% Tax relief (must hold for 5 years to keep this)

• Tax-free dividends

Depositary

Acts as an independent custodian

Responsibilities:

• Safeguard assets

• Protects investors

• Oversees fund manager actions

Every OEIC has one

Equalisation

Happens when:

• You buy units shortly before a distribution

• Part of the distribution is actually your own capital being returned

Therefore it isn’t all taxable income

• A return of capital

Non reporting funds

Usually offshore funds

HMRC don’t recognise them as reporting funds

• When sold gains arent subject to CGT

• Instead taxed as income

OEICs (Open Ended Investment Companies)

Shares created and cancelled as investors join and leave

• Open ended means the number of shares aren’t fixed

A big pool of money that investors buy into

Single pricing

Reporting funds

Opposite of non reporting funds

HMRC approved offshore funds

When sold there is CGT

Single pricing

Used by OEICS

One price for buying and selling

Charges are separate

• The usual spread usually helps cover charges

Unit Trusts

Open ended collective investment schemes

• Dual priced (Bid & Offer price)

• Units rather than shares

Investment Trusts

Close ended (fixed number of shares)

• Can trade at a discount if shares remain unsold

Buy shares in this not units

• Gearing allowed

• Listed on stock exchange

Call option

Gives you the right to buy at the strike price

A call is in the money if: Current Price>Strike price

Put option

The right to sell at the strike price

A put is in the money if: Current price>strike price