‘Academic’ Intelligence: A (Very) Brief Overview of Tax, Part Three

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Today’s article is the final one on taxation and will endeavour to look into some basic issues surrounding Inheritance Tax (‘IHT’).

The basic rule is that, when a person passes away his estate is taxed at 40% so long as it amounts to more than £ 325, 000. If the value of the estate is below £ 325, 000, or within what is known as the Nil Rate Band (‘NRB’), it is taxed at 0%.

‘Estate’ means (in general terms) everything that the deceased owed at the time of his death.

Let us an example:

John passed away in January 2012. He left a will saying that his Rolex watch and his doughnut business were to go to his son, Dan whilst everything else was to go to his wife, Gemma. At the time of his death, his estate consisted of:

• His VW Passat- £ 2500
• His Don King Doughnuts LTD business valued at £ 300, 000, which he had owned since 2000
• 12 Donald Road, a property he owned with his wife, Gemma, as joint tenants- £ 200, 000
• HSBS Bank account in his sole name- £ 1000
• His Rolex Watch- £ 1000

In February 2003 John made a gift of £ 1000 to his, Dan.

In March 2010, John made a gift of £ 3000 to his daughter, Jodie.

In December 2011, John paid £ 3000 into the Dog Trust.

John’s death estate is made up of his VW, his doughnut business, ½ of the jointly owned property, his HSBC account and his Rolex watch and is, therefore, calculated as follows:

£ 2500 + £ 200, 000 + £ 80, 000 (1/2 of the price of the property – 10% its value for IHT purposes) + £ 1000 + £ 1000= £ 384, 000.

The taxable estate, however, is another matter.

Under the will, Gemma, John’s wife, is to inherit everything but the Rolex and the Doughnut business, id est £ 183, 000. This sum is fully  IHT exempt as the ‘spouse exemption’ applies (s. 18 Inheritance Tax Act 1984 ‘IHTA’).

The doughnut business is covered by the business property relief (‘BPR’), ss. 103- 114 IHTA, as John had owned it for more than two years and was a limited company (unquoted shares).

The Rolex is not covered by any exemptions.

The two transfers that John made to his daughter and his son are called Potentially Exempt Transfers (individual to individual, ‘PET’) and are only taxed at 40% if the donor, i.e. John, does not survive within seven years of the gift.

The gift of £ 1000 to Dan, then, will not be taxed as John has survived the seven years.

The gift of £ 3000 to Jodie will, however, will attract IHT. Taper relief does not apply here because the donor has failed to survive at least free years (for more on taper relief and its application, please see << http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/gifts.htm#4 >>).

The final transfer of £ 3000 that John did into the dog trust is called a Life- Time Gift (individual into a trust, ‘LCT’).

IHT at 20% is payable at the onset; i.e. John should have paid £ 600 when he initially made the gift. If the donor survives for seven years, no further charge will be applied. Otherwise, IHT will need to be recalculated at 40% and the balance paid to HMRC.

In our case, however, an Annual Exemption of £ 3000 can be applied to the LCT; thus, it will not be included in the taxable estate.

 In the light of the above, then, the John’s taxable estate is made up of the HSBC account and the gift to Jodie, id est £ 4000.

As, however, this falls in the NRB, the IHT is paid at 0% and, thus, no IHT is due.

IHT calculations (much like CGT, CT, etc. ones) are, of course, much more complicated than the above examples and, should you need advice on your tax planning, I suggest you go to a specialist solicitor rather than referring to my articles as they are but a mere overview of various taxes in the UK.

‘Academic’ Intelligence: A (Very) Brief Overview of Taxation, Part Two

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Today’s article is a continuation of last week’s entry on the various types of taxes that an individual may be required to pay in the United Kingdom.

Last week, I focused on Value Added Tax, i.e. VAT, Income Tax and National Insurance Contributions through looking at some simplified tables and examples.

I shall now, in turn, look at the Capital Gains Tax and Corporation Tax.

Capital Gains Tax (‘CGT’)

CGT is applied on the profit that a person might make from disposing of a capital asset which has increased in value during the period of their ownership.

The above is best illustrated by an example.

Let us say that John, a banker, bought a painting in 1999 for £ 5, 000. Note that buying the painting is in no way connected to the nature of his employment. The painting had since increased in value to £ 12, 000. If he chose to sell the painting, he would be liable to pay CGT on the £ 7, 000 profit that he had made.

Further to the above, the CGT personal allowance for individuals in 2013/ 2014 is £ 10, 900. This means that CGT will only be payable on profits above the £ 10, 900 threshold. It must be noted the personal allowance is halved for trustees.

The rates at which CGT is applied are as follows:

Basic rate individuals- 18% (i.e. individuals earning less than £ 32, 010)

Higher rate individuals- 28% (i.e. individuals earning £ 32, 010 or more)

Where Entrepreneurs’ Relief applies: 10%

( ‘Entrepreneurs' Relief allows individuals and some trustees to claim relief on qualifying gains made on the disposal of any of the following:

• all or part of a business
• the assets of a business after it has stopped trading
• shares in a company
•  

The relief applies for the years 2008-09 onwards. There is a maximum lifetime limit of Entrepreneurs' Relief you can claim.’

See <<  http://www.hmrc.gov.uk/cgt/businesses/reliefs.htm#1 >> )

Corporation Tax (‘CT’)

As you might have probably guessed, corporation tax is paid by private and public companies and not individuals.

Nevertheless, you might have to deal with it if you are a company director or even a shareholder (if, for instance, you want to know a bit more about the tax obligations of the company that you want to invest in).

CT is payable on a company’s profits.

The current rates are:

Rate			2013	2014
Small profits rate*			20%*
Small profits rate can be claimed by qualifying companies with profits at a rate not exceeding			£300,000
Marginal Relief Lower Limit			£300,000
Marginal Relief Upper Limit			£1,500,000
Standard fraction			3/400
Main rate of Corporation Tax*			23%*	21%*
Special rate for unit trusts and open-ended investment companies			20%*

( See << http://www.hmrc.gov.uk/rates/corp.htm >)

For more on how Marginal Relief is applied and calculated, see <<  http://www.hmrc.gov.uk/ct/forms-rates/claims/marginal-rate.htm >>)

As CT is a lot more complex that the other types of taxation, I shall not go into any further detail at this point.

Next week, I will endeavour to provide the reader with a brief overview of how and when Inheritance tax is applied and becomes due.

‘Academic’ Intelligence: A (Very) Brief Overview of Taxation, Part One

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Several weeks ago, a couple of international friends of mine asked what taxes we paid in the UK.

They, indeed, quite intrigued to find out more about the various types of taxes and how those are

applied to various individuals and business.

I have, thus, decided to briefly outline the main taxes that an individual pays in the UK.

Prior to going on any further, I should like to note that I am by no means trying to insult the intelligence of my UK audience; rather, I am merely trying to provide my international readers that they might find quite useful.

Value Added Tax (‘VAT’)

At present, most of the items that you buy in the UK are, in reality, supposed to be 20% cheaper than they are sold at. What inflates the price is the VAT added on top. VAT avoids the cascade effect of sales tax by taxing only the value added at each stage of production.

Income Tax (‘IT’)

Any income that you generate through being employed on an employment contract will be taxed with IT. 

Since your paycheque goes through a system called PAYE, you cannot choose what rate of IT you will be paying; it is automatically applied, based on how much you are earning.

The various bands are as follows:

Your earning [per year after taking away your Personal Allowance amount from your earning]	Tax rate 2013 - 2014	that is
Under your personal allowance amount	No tax is taken	£0
£0 - £32,010▼	20%	called basic rate
£32,011▼ - £150,000	40%	called higher rate
over £150,000	45%▼	called additional rate

( See << http://iknowtax.com/2013/ >>

The ‘personal allowance amount’ (‘PAA’) is currently £ 9, 440 if you were born on or before 6^th April 1948 and you are earning less than £ 100, 000 per year. If you are earning more than £ 100, 000, the PAA is decreased 50% of every pound you earn above £ 100, 000 until it reaches £ 0 (i.e. at £ 118, 000).

National Insurance Contribution (‘NIC’)

If you are employed through a contract, the NIC is automatically deducted from your paycheque via the PAYE system.

This is how NIC is applied:

Your earning [per year]	National Insurance rate	that is
Earnings up to  £7748▲	0%	No National Insurance contribution is payable
Earnings between £7748▲ and£41,444▼	12%	Salary minus £7748 = X, 12% of X
Earnings £41,444▼ or more	2%	£41,444 minus £7748 =  £33,696, 12% of £33,696 plus salary minus £41,444 = X, 2% of X

(See << http://iknowtax.com/2013/ >>)

If you are self- employed, different rules apply. Self- employed individuals have to either pay Class 2 NIC ( << http://www.hmrc.gov.uk/working/intro/class2.htm >>) or Class 4 NIC (<<http://www.hmrc.gov.uk/working/intro/class4.htm >>)

As an example, if you are earning £ 20, 000 per year, you will be paying £ 2, 112. 00 in IT and £ 1, 470. 24 in NIC, leaving you with a net salary of £ 16, 417.76.

(Should you want to calculate how much tax you would pay in the UK, please visit << http://iknowtax.com/2013/ >> and use the tax calculator at the top.)

Next week, I shall opt to provide a brief overview of Capital Gains Tax, Inheritance Tax as well as Corporation tax.

‘Academic’ Intelligence: Are Genes Patentable? Part Two

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A continuation of last week’s article, today’s entry will look at whether human genes (or the process for extracting those from the genome) can be registered as a patent under UK law by establishing whether the statutory criteria can be met in such cases.

( For a more detailed definition of the requirements, see << http://myveryownhell.blogspot.co.uk/2013/04/academic-intelligence-are-genes.html >> )

Novelty

The product/ process must be ‘new’ and must NOT form a part of the state of the art available to the public  at the priority date (date of filing application as per s. 5 Patent Act 1977 ‘PA’).

Unfortunately, the answer to the above is not as simple as it looks and is derived from a field of study that I tend to avoid at all cost- philosophy.

The question that needs to be answered is whether it is all possible to ‘discover’ genes that have always been there.

If so, would that forces such as gravity, etc. patentable as well?

As for actual process of separating a gene from the genome, it can be argued that the end result is something that does, indeed, form a part of the state of the art available to the public.

Inventive Step

Because of technological advancement, scientist have been able to distinguish between various genes and have, eventually, come up with techniques and process of separating those genes and cloning those.

It is arguable whether the said technological advancement can amount to an ‘inventive’ step which is not obvious to skilled but unimaginative professional.

Capable of Industrial Application

Human genes can be cloned; however, it still remains a question of morality. The processes for separating genes from the genome and cloning those to be used in various sorts of medication are currently used by some US companies who hold valid US patents to the genes used.

Not Excluded by PA

Under s. 1 (2) PA, a discovery, scientific theory or mathematical method CANNOT be patented.

Thus, even if genes WERE to be viewed as scientific discoveries, they would have still been excluded under the current statutory provisions.

The process of separating those from the genome, however, are not covered by the ay of the exceptions outlined in s. 1 (2) PA.

In the light of the above, then, it would seem that companies would struggle to register a human gene (or the process for separating and cloning one) as a valid patent under the current UK legislation.

It remains to be seen, however, whether the US Supreme Court will also decide, in June, that genes should not have been patentable under US law in the first place.

(See << http://myveryownhell.blogspot.co.uk/2013/04/good-idea-chap-are-genes-patentable.html >> )

Finally, would preventing companies from patenting genes stifle investment and was  Justice Kennedy not right in saying:

 “I think scientists look for things for a whole variety of reasons, sometimes because they’re curious about the world. I just don’t think we can decide the case on the ground, oh, don’t worry about investment, it’ll come.”

‘Academic’ Intelligence: Are Genes Patentable Under UK Law? Part One, Overview of Patent

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As promised last week, in today’s article, I shall endeavour to provide the readers with a critical discussion of whether human genes can be patented under UK law.

In order for me to be able to so, however, it is essential to first of all look at the intellectual property (‘IP’) right of ‘patent’ in a bit more detail.

Thus, part one of the article will look at the criteria required to register a patent and part two of the article will assess whether a gene (or the process of extracting it fits those criteria).

The current UK law dealing with patents is the Patents Act 1977 (‘PA’) as amended.

Under the act, one can patent both a product AND a process.

It must be noted that, as with registered design and trademark, a patent gives the owner a monopoly right; id est, so long as the patent is registered in his name, the owner can enforce it against the world without having to prove subsistence in it.

Further, as with any other IP right, patents can be assigned or licensed (fully or partly) to other parties (s. 30 (2) PA, s. 33 PA + s. 30 (6) PA requirement for the grant of an assignment or license to be in writing).

The requirements that need to be satisfied before registered a patent are outlined in s. 1 PA.

Namely:

• Novelty
• Inventive Step
• Capable of Industrial Application
• Not excluded by the PA

For the purposes of today’s article, a brief explanation of each is essential.

Novelty- s. 2 PA

The product/ process must be ‘new’ and must NOT form a part of the state of the art available to the public  at the priority date (date of filing application as per s. 5 PA)

The ‘state of the art’ is defined in s. 2 ( 2) as:

“All matter (whether a product, a process, information about either, or anything else) which has, at any time before the priority date of that invention, been made available to the public (whether in the United Kingdom or elsewhere) by written or oral description, by use or in any other way.”

It must also be noted that exposing a product/ process to the public might result in enabling disclosure which will prevent the owner from registering a patent for the said process/ product. (so long as the disclosure has disclosed enough for a skilled person to be able to work the product/ process, Windsurfing International v Tabur Limited [1985] RPC 59)

Inventive Step- s.3 PA

 The new product/ process must involve an ‘inventive step’ which is not obvious to the person skilled in the art. Id est, it must have not been apparent to the skilled but unimaginative professional.

Capable of Industrial Application- s. 4 PA

The invention is capable of industrial application if it can be ‘made or used in any kind of industry, including agriculture’

Not Excluded by PA

S. 1 (2) provides an non- exhaustive list of a number of things that cannot be registered as patents:

•  A discovery, scientific theory or mathematical method.
• A literary, dramatic, musical or artistic work.
•  A scheme, rule or method for performing a mental act, playing a game or
• doing business, or a program for a computer.
•  The presentation of information.

In next week’s article, by applying the above criteria, I shall try to establish whether a human gene (or the process for extracting or cloning one) can be patented under PA and whether the position closely resembles or greatly differs the one in the USA.

‘Academic’ Intelligence: Acute Bronchitis, a Brief Overview

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Today’s entry shall opt to provide the reader with a brief overview of the acute bronchitis by looking at its symptoms, duration as well as various ways of treating the condition in a timely and effective manner.

What is ‘acute bronchitis’?

Acute bronchitis is an inflammation of the large bronchi (medium-size airways) in the lungs that is usually caused by viruses or bacteria and may last several days or weeks.

(See << http://en.wikipedia.org/wiki/Acute_bronchitis >>)

To put simply, then, it is a form of chest infection which is normally contracted through an earlier condition such as the common cold or influenza (the flu).

What are the symptoms?

The main symptom is a somewhat dry chesty cough which may bring up mucus. Other symptoms include chest pain, wheezing, shortness of breath, runny or blocked nose, fever and malaise.

How is bronchitis diagnosed?

Do NOT try to self- diagnose by referring to various websites; acute bronchitis is a very serious condition which, if not treated on time, can lead to chronic bronchitis (for which there isn’t a cure yet...).

If you notice that you have recently developed a cough which has progressively become worse, contact your GP immediately.

Who develops bronchitis?

Smoking and being exposed to secondary smoke greatly increases the risk of contracting bronchitis. Furthermore, it takes a lot longer for smokers or those often exposed to smoke to recover from the condition.

Others who are more vulnerable to bronchitis include those who have recently suffered, or are suffering from, the common cold and flu.

How long does bronchitis last for?

Acute bronchitis can last from several days to two or three weeks, depending on the strength of your immune system and on the medication that you take.

Although most symptoms are likely to disappear in a few days (if treated properly), the cough is likely to remain for a further couple of weeks.

Should the disease last for more than three weeks, consult your GP immediately as there is a real danger for you to have contracted chronic bronchitis.

How is bronchitis treated?

Unfortunately, antibiotics are only effective when the bronchitis has been caused by a bacterial rather than a viral (common cold or flu) infection. As with other viral infections, the most important thing to do is to drink lots of fluids and rest up.

In addition, try calming down the symptoms by taking anti- inflammatory medicines and paracetamol.

If the chesty cough persists, get some cough syrup to mild it up. Do remember, however, that you must not completely suppress the cough as it is an important way to bring up mucus and remove irritants from the lungs.

Acute bronchitis is a very serious condition which needs to be treated in its early stages as it can easily turn into a chronic disease which will have an incredibly negative impact on your general well- being.

To conclude, although most of us claim to be invincible, I should like to implore you to take such conditions seriously and consult your GP as soon as you notice any of the above symptoms.

After all, there are but a few things that you can effectively do whilst lying in bed; why take the risk?

‘Academic’ Intelligence: On the Various of Types of Intelligence

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‘We are looking for an ambitious, hard- working and intelligent person to join our team.’

The above sentence is, without a doubt, painfully familiar to each and every one of us.

Nevertheless, few of us had ever thought about what the underlined bit above actually meant.

In fact, most people automatically assume that being ‘intelligent’ means having a first class degree from a good university, being fluent in four languages, being well- informed on topics such as politics, business, art, etc.

I should like to note that I respectfully disagree with the above premise in that I personally believe that there are, in fact, three types of intelligence.

I shall opt to explore those in turn and discuss them in some detail.

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‘Academic’ Intelligence (‘AI’)

AI refers to the one’s ability to assimilate and comprehend vast amounts of information or information of complex and intricate nature in a limited time frame and under considerable pressure.

AI individuals tend to do well in sectors such as academics, teaching, research, analytics, law and sciences.

Such individuals tend to concentrate more on their work rather than social interaction and cannot, consequently, develop their ‘Social’ Intelligence (‘SI’) as well as others.

Having said that, though, if among other AI individuals, such people can develop their SI, albeit to a limited extent.

‘Social’ Intelligence (‘SI’)

SI refers to one’s ability to efficiently interact with others, regardless of their professional or personal background, whilst properly assessing various social situations by reacting to those in the most proper and timely manner without adversely affecting any of the parties involved.

SI individuals tend to do well in sectors such as journalism, management, human resources, PR, marketing and advertising and consultancy.

Used to being among people, such individuals tend to be more relaxed and have a sense of humour and a somewhat soothing presence which makes them look more trustworthy and friendly in the eyes of others.

SI can be effectively combined with AI and ‘Everyday’ Intelligence (‘EI’) but rarely both.

‘Everyday’ Intelligence (or ‘Common Sense’) (‘EI’)

EI refers to one’s ability to approach situations and tasks from the most practical angle by coming up with a pragmatic, cost- effective and time- efficient solution which applies the least effort required and produces the best result possible.

EI individuals tend to do well in sectors such as architecture, accounting, planning, actuarial sciences and investment.

Such individuals often tend to see everything and everyone around them as numbers and equations that they can easily read which can sometimes be erroneously translated as arrogance.

Being quite opportunistic, EI individuals can easily develop a high level of SI which they can make good use of in their chosen fields.

On the other hand, it is incredibly difficult for EI and AI to co- exist  as they clash in that the former sees the latter as being unnecessarily wordy and colourful whilst the latter sees the former as incredibly dull and dry.

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Although the above is but an overview of my theory, I hope that it has introduced some degree of clarity in the columns that I have chosen to write under.

As homo sapiens, it is high time we realised that every single one of us possesses at least one, if not a combination, of the above.

The sooner we realise that, the better our standard of life will become.