R03 UK and offshore collectives: free practice questions

1. Question 1 of 5

   How is a distribution from a UK bond fund (an OEIC investing in fixed-interest securities) taxed?

   Option A: As savings income, paid grossOption B: As dividend income, with the dividend allowanceOption C: It's tax-freeOption D: As savings income paid net of 20%

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   The answer is A: As savings income, paid gross

   Dividends from equity unit trusts and OEICs are taxed as dividends. Distributions from funds invested in fixed-interest securities are interest distributions, paid gross and taxed as savings income. Gains on disposal are subject to CGT.

   Why the other options are wrong

   B

   Bond fund distributions are interest distributions.

   C

   It's taxable savings income.

   D

   Interest distributions are paid gross.

2. Question 2 of 5

   A higher-rate taxpayer sells a non-reporting offshore fund at a gain of £20,000, all falling in the higher rate band. What tax is due?

   Option A: £4,800Option B: £8,000Option C: £7,800Option D: £4,080

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   The answer is B: £8,000

   An offshore income gain is calculated on CGT principles but taxed as income, with no annual exempt amount, savings allowance, dividend allowance or starting rate: £20,000 × 40% = £8,000.

   Why the other options are wrong

   A

   The gain is taxed at income tax rates, not 24%.

   C

   No personal savings allowance is available against an offshore income gain.

   D

   That's CGT after the annual exemption; offshore income gains are taxed as income.

3. Question 3 of 5

   How are gains and losses on selling units in a UK unit trust treated?

   Option A: Gains are exempt, like giltsOption B: Gains are taxed as savings income when soldOption C: Losses can't be usedOption D: Gains are chargeable to CGT and losses are allowable

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   The answer is D: Gains are chargeable to CGT and losses are allowable

   Gains on disposing of unit trust units and OEIC shares are chargeable to CGT, and losses are allowable, as for direct shareholdings.

   Why the other options are wrong

   A

   Unit trust gains are chargeable.

   B

   Gains on UK collectives are subject to CGT.

   C

   Losses are allowable.

4. Question 4 of 5

   Why might offshore funds suit someone who isn't long-term UK resident?

   Option A: Their gains are always exempt from UK taxOption B: They qualify for business reliefOption C: They are excluded property, so outside UK IHTOption D: They pay a guaranteed income

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   The answer is C: They are excluded property, so outside UK IHT

   Offshore investments are excluded property for those not long-term resident, so outside UK IHT. Non-residents also pay no UK tax on offshore income and gains, and qualifying new residents can use the FIG regime.

   Why the other options are wrong

   A

   UK residents are taxed on offshore funds.

   B

   Funds don't qualify for business relief.

   D

   They don't guarantee income.

5. Question 5 of 5

   What will the rates on interest distributions from offshore reporting funds be from 6 April 2027?

   Option A: 20%, 40% and 45%, as in 2026/27Option B: 18% and 24%Option C: 22%, 42% and 47%Option D: 10.75%, 35.75% and 39.35%

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   The answer is C: 22%, 42% and 47%

   Interest distributions are savings income. From 6 April 2027 the savings rates rise to 22%, 42% and 47%.

   Why the other options are wrong

   A

   The rates rise by two points from April 2027.

   B

   Those are CGT rates.

   D

   Those are dividend rates.

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