F6 Revision Notes PDF

ACCA
Taxation (TX – UK)

(FA 2017)
Practice & Revision Notes
For exams in June 2018, September
2018, December 2018, March 2019
ISBN: 9781509776634
Note on exam name (F6 UK)
This text is valid for exams from June 2018 to March 2019. From the September 2018 session, a new naming
convention is being introduced for all of the exams in the ACCA Qualification, so from that session, the name of the
exam will be Taxation (TX – UK). June 2018 is the first session of a new exam year for tax, and the exam name
continues to be F6 Taxation (UK). Since this name change takes place during the validity of this text, both the old and
new names have been used.
2
Contents
Page
Introduction
4
How to use the Practice & Revision material
5
The examination and syllabus aims
7
Skills bank
13
Knowledge bank
119
Appendix
ARP313 3
INTRODUCTION
Introduction
How to use the Practice & Revision material
Step 1 Learn
Until now you have been introduced to the core skills needed to pass this exam. You must now focus on developing
these new skills to address the ultimate test – the exam itself.
Step 2 Practise
Your revision course material will help you to apply this knowledge to the context of the exam-style questions. Using
real exam questions written by the examining team you'll learn the unique exam skills required to achieve success in
each exam. Your revision material consists of:
 Skills bank (in these notes)

This illustrates the main skills needed to pass this exam. We will teach you the skills of:
– Effective reading and planning
– Tackling multiple choice questions
– Tackling objective test case questions
– Tackling constructed response questions
– Good knowledge of the whole syllabus
 Knowledge bank (in these notes)

During the learning phase of your studies you have already gained the knowledge required to pass the exam.
During this phase reinforcement of this knowledge is critical.
To help this reinforcement you will find that the same diagrams contained in your taught Course Notes are used
here with additional information added if we feel it is necessary.
If you feel that your knowledge level is weak at the Step 2 phase we recommend you purchase the i-Learn CD
from BPP Learning Media.
 Question and answer bank

The Practice & Revision Kit contains:
– Questions that will be covered in class
– Questions you will do during home study following guidance provided by your tutor
– Additional questions for further practice
Step 3 Rehearse
All your skills need to be applied on the day of the exam to deal with a complete exam.
This can be developed through use of mock exams within the Practice & Revision Kit, attending a question day at BPP
where a final mock exam is sat in full and feedback provided, or through purchasing a mock exam and online debrief.
Please see our website for further details www.bpp.com.
4
INTRODUCTION
The examination and syllabus aims
The examination
The syllabus is assessed in both computer-based (CBE) and paper-based (PBE) exam formats. PBE exams are
3 hours 15 minutes in duration to reflect the manual effort required to write up your solutions. CBE exam are 3 hours
and 20 minutes in duration to reflect the 10 extra marks for seeding questions included in CBE exams.
At each sitting, there is only one version of the PBE; however, as of March 2017, CBE questions will be extracted from
a bank of questions, meaning for CBEs you may not necessarily be sitting the same exam as your neighbour. To
ensure that the exams remain fair and equivalent, the ACCA have included 10 additional marks of seeding questions.
You will not be able to determine which question is the seeded content and all questions are quality assured and set to
the same standard as the rest of the exam. Having seeded content feeds into the rigorous processes that the ACCA
have been working on with worldwide experts to ensure all students can be confident that the new CBEs will be fair and
equivalent for all.
It is important to manage your time in the exam and when practicing questions, so to work out how long to spend when
you are attempting individual questions to time you can use:
 1.8 minutes per mark for questions attempted using the Constructed Response Workspace, the CBE specimen
or Achievement ladder CBE steps
 1.95 minutes per mark for any questions attempted on paper
The exam will be predominantly computational and all questions are compulsory.
90% Numerical 10% Discussion
40% Knowledge 60% Application
The computer-based exam (CBE)

In most countries, including the UK, the Taxation (TX – UK) exam can only be sat as a CBE. The three sections in the
exam are the same for both CBE and PBE. In the CBE, there will be a varied selection of objective test questions
(OTQs) in Section A and Section B, of which multiple choice is one. You will see examples of other OTQ types in the
lecture examples in these Course Notes. The Section C constructed response questions will be answered on computer
using software provided.
The paper-based exam (PBE)

In some countries, the Taxation (TX – UK) exam can only be sat as a PBE. The three sections in the exam are the
same for both CBE and PBE. In the PBE, all the Section A and Section B questions will be multiple choice questions
(MCQs). The Section C constructed response questions will be answered in handwriting on paper.
Format of the Exam Marks

Section A 15 objective test questions (OTQs) (CBE) or multiple choice questions (MCQs) 30%
(PBE) of 2 marks each
Section B Three 10-mark case questions which each comprise 5 objective test questions 30%
(OTQs) (CBE) or multiple choice questions (MCQs) (PBE) of 2 marks each
Section C One 10-mark and two 15-mark constructed response questions 40%
100
The two 15-mark questions will focus on income tax (syllabus area B) and corporation tax (syllabus area E).
ARP313 5
INTRODUCTION
All the other questions can cover any areas of the syllabus.
Time pressure warning
Section C questions Other questions
Aims
The syllabus aims to test the student's ability to:
A. Explain the operation and scope of the tax system and the obligations of tax payers and/or their agents and the
implications of non-compliance
B. Explain and compute the income tax liabilities of individuals and the effect of national insurance contributions on
employees, employers and the self-employed
C. Explain and compute the chargeable gains arising on individuals
D. Explain and compute the inheritance tax liabilities of individuals
E. Explain and compute the corporation tax liabilities of individual companies and groups of companies
F. Explain and compute the effects of value added tax on incorporated and unincorporated businesses
6
Skills bank
This section explains and demonstrates the key skills

required to enable you to maximise your chance of
exam success. Knowledge of the syllabus is insufficient
on its own. Through question practice you will develop a
set of skills that will enable you to pass this exam.
7
8
SKILLS BANK
Key skills required to pass

Our analysis of the examining team's comments on past exams, together with our experience of preparing students for
this type of exam, suggests that to pass Taxation (TX – UK) you will need to develop a number of key skills.
1 Exam approach
Effective reading
5 Good knowledge of
and planning at the
the whole syllabus. start of the exam.
B C
2 Tackling
4 Tackling constructed objective test
response questions questions. Specific
Excellent exam technique skills are needed in
is required in Section C. Section A.
3 Tackling objective
A ...... ……
test case questions. B ...... ……
C ...... ……
Absorbing detailed D ...... ……
information is essential in
Section B.
9
SKILLS BANK
Skill 1 – Effective reading and planning time at the start of the

e exam
We recommend that you spend time at the beginning of your exam carefully reading, specifically looking through the
case questions in Section B and the constructed response questions in Section C. Once you feel familiar with your
exam we then recommend that you attempt Section C first, ensuring that you spend adequate time reading and
planning before you begin to write up your answer. Comments from examining teams across all subjects regularly
suggest that students appear less time-pressured if they do larger Section C constructed response questions first.
Focus on the requirement first, underlining key verbs such as compute, prepare, comment, explain, discuss etc to
ensure you answer the question properly. You should underline and annotate important and relevant information,
and make notes of any relevant technical information you think you will need. Answer plans for written questions
can help consolidate your thoughts before you start writing.
However, our recommendations are not inflexible. If you would prefer to start on Section A or B questions, then do
those first, but DON'T run over time on them. Advice on tackling each of the question types is given below.
A ...... ……
B
C
...... ……
...... …… Skill 2 – Tackling objective test questions
D ...... ……
Section A of the exam has 15 2-mark objective test questions. Time allocation is important here to ensure you
tackle all of the questions in the allotted time.
There is no negative marking so where you are given a choice of answers, for example in multiple choice questions or
where you are asked to identify a statement as true or false, you should make sure that you guess the answer rather
than leaving the question out!
Having a selection of answers to choose from does not necessarily make Section A easier. The wrong options may
appear to be correct. You need to think carefully before selecting an option and ensure you practice lots of questions so
that you can spot answers which are obviously wrong and answers which are common mistakes.
Skill 3 – Tackling objective test case questions
Section B of the exam has three objective test case questions each with five 2-mark objective test questions.
Read through the whole case scenario first and and try to absorb the detailed information given. Then skim the five
questions. Identify the easier or less time consuming questions quickly as these should be attempted first. The
questions are independent of each other so they can be answered in any order.
Use the same skills as for Section A to answer the objective test questions in Section B, remembering to attempt all
the questions even if you are not sure that you have identified the correct answer. Once again, time allocation is
important to ensure you tackle all of the questions in the allotted time.
10
SKILLS BANK
B C
Skill 4 – Tackling constructed response questions
Excellent exam technique is very important in Section C. It is all too easy to spend too long on constructed response
questions. You must make sure that you answer all parts of all of the questions within the time allotted. If you start
to run over time on one part of a question – leave your answer, even if it is unfinished, and move on to the next part.
Remember that it is easier to gain the first few marks in each part of a question than the last few marks.
Professional presentation of answers is an area that students often don't do well. It is vital that you do not throw
marks away purely because the examining team cannot follow what you have done.
Numbers should be logically presented and well referenced to workings. In discussion questions use complete
sentences and make sure you avoid repeating yourself: it is important that you make and explain your point fully but
only once!
You also need to ensure that you answer the requirements of the question. This may sound obvious but many
candidates start writing all they know about a topic therefore wasting precious time giving information that doesn't score
any marks.
Candidates are usually required not just to make a technical point but to apply it to the scenario given. Whenever you
think you have finished your answer always go back and re-read that requirement before moving on to make sure you
have answered it appropriately.
Skill 5 – Knowledge of the syllabus
You need to have a good, broad knowledge of all of the Taxation (TX – UK) syllabus. The examining team can, and
will, test all areas of the syllabus.
Practising Section A and Section B questions is a really effective way of testing your knowledge of technical
numerical content. You also need to make sure that you learn information, such as the names of the PAYE forms
and the filing dates for tax returns, as these are often examined in objective test questions.
For Section C questions, you can also use a variety of memory techniques. Creating mind maps can be helpful as
the human brain is better at remembering patterns than lists. Pictures are another excellent memory tool as often a
simple picture can act as an aid in recalling information. Another effective memory technique is to create mnemonics
as often it is easier to recall sounds and rhymes than simple lists.
11
SKILLS BANK
12
Knowledge
bank
13
Contents
Page
1 Introduction to the UK tax system 15
2 Computing taxable income and the income tax liability 19
3 Employment income 25
4 Taxable and exempt benefits. The PAYE system 27
5 Pensions 31
6 Property income 35
7 Computing trading income 39
8 Capital allowances 41
9 Assessable trading income 45
10 Trading losses 49
11 Partnerships and limited liability partnerships 53
12 National insurance contributions 57
13 Computing chargeable gains 59
14 Chattels and principal private residence exemption 65
15 Business reliefs 69
16 Shares and securities 75
17 Self-assessment and payment of tax by individuals 79
18 Inheritance tax: scope and transfers of value 81
19 Computing taxable total profits and the corporation tax liability 87
20 Chargeable gains for companies 91
21 Losses 93
22 Groups 97
23 Self-assessment and payment of tax by companies 99
24 An introduction to VAT 101
25 Further aspects of VAT 105
14
Introduction to the UK tax system
How have the syllabus learning outcomes been examined?

Syllabus learning outcomes Example past exam question
Describe the purpose (economic, social etc) of taxation in
a modern economy
Explain the difference between direct and indirect taxation September 2016 Section A Q7
Identify the different types of capital and revenue tax September 2016 Section A Q7
Describe the overall structure of the UK tax system
State the different sources of revenue law December 2016 Section A Q5
Describe the organisation HM Revenue & Customs
(HMRC) and its terms of reference
Explain the procedures for dealing with appeals and First
and Upper Tier tribunals
Explain the difference between tax avoidance and tax Specimen exam Section A Q 2
evasion, and the purposes of the General Anti-Abuse Rule
(GAAR)
Explain the need for an ethical and professional approach Specimen exam Section A Q2
Appreciate the interaction of the UK tax system with that
of other tax jurisdictions
Appreciate the need for double taxation agreements
ARP313 15
Introduction to the UK tax system
Purpose Tax avoidance and

of taxation in a modern evasion
economy
 Economic factors  Tax evasion is illegal
 Social factors  Tax avoidance is legal
 Environmental factors  Cease to act for clients evading
tax/money laundering
Structure of UK Sources of revenue law and

practice
tax system and appeals
 Revenue law sources: Acts of
Parliament, Statutory Instruments
 HM Revenue & Customs (HMRC) and case law
 Taxpayers can appeal HMRC  Finance Acts update the rules for
decisions taxes charged in the tax year and
 Tax appeals are heard by Tax financial year (FY)
Tribunal  Finance Act 2017 governs the tax
 Taxpayers can request an internal year 2017/18 and FY 2017
review before an appeal at a Tax  Tax years (for individuals): 2017/18
Tribunal runs from 6/4/17 – 5/4/18
 FYs (for companies): FY2017 runs
from 1/4/17 to 31/3/18
 HMRC sources of practice:
Statements of practice, Extra-
statutory concessions and internal
manuals
Types of taxes
Interaction with other tax

jurisdictions
 EU: Value added tax (VAT) is
an EU-wide tax
 Other countries: no direct
interaction
 Double tax agreements
 Exchange of information UK and
other countries
16
Tax Direct or Capital or Suffered by
indirect revenue
Income tax Direct Revenue Individuals and partners
National insurance Direct Revenue Employees, employers, self-employed
Corporation tax Direct Both UK companies
Capital gains tax Direct Capital Individuals and partners
Inheritance tax Direct Capital Individuals
VAT Indirect Both Businesses
ARP313 17
18
Computing taxable income and the
income tax liability

Syllabus learning outcomes Example past exam questions
Explain how the residence of an individual is determined Specimen exam Section A Q15
September 2016 Section A Q9
December 2016 Section A Q9
Prepare a basic income tax computation involving Specimen exam Section A Q3
different types of income Specimen exam Section C Q32 Simon Bass
September 2016 Section C Q32 Ashura
Calculate the amount of personal allowance available Specimen exam Section A Q3
Mar/Jun 2017 Section C Q32 Petula
Understand the impact of the transferable amount of
personal allowance for spouses and civil partners
Compute the amount of income tax payable Specimen exam Section C Q31 Sarah
Mar/Jun 2017 Section C Q31 Zhi
Explain the treatment of interest paid for a qualifying Mar/Jun 2017 Section C Q32 Petula
purpose
Understand the treatment of gift aid donations
Explain and compute the children benefit tax charge
Understand the treatment of property owned jointly by a
married couple or by a couple in a civil partnership
Compute the tax payable on savings and dividend income Specimen exam Section C Q31 Sarah
Explain the treatment of individual savings accounts Specimen exam Section A Q12
(ISAs) and other tax exempt investments December 2016 Section C Q31 Jack
Understand how the accrued income scheme applies to Mar/Jun 2017 Section C Q32 Petula
UK Government securities (gilts)
Understand how a married couple or a couple in a civil
partnership can minimise their tax liabilities
Basic income tax planning
ARP313 19
Transferable The computation of taxable income Other aspects
personal allowance and the income tax liability
 Marriage Allowance – transfer of  Jointly owned property, assumed to be held
personal allowance 50:50 unless actual proportions declared
 Spouses/CPs  Child benefit charge if ANI > £50,000, entire
 Fixed amount = 10% of standard Scope of income tax benefit clawed back if ANI reaches £60,000
personal allowance  Accrued income scheme, interest included in
 Tax reducer @ 20% ie reduction the selling price of a Government security is
 UK residents taxed on worldwide income taxed as income on accruals basis. Only if
in transferee's IT liability of 10%
 Non UK resident taxed on UK income only NV exceeds £5,000
 £11,500  20% = £230
 Can't trigger a repayment
 Statutory test of residence see next page  Married couples/civil partners to minimise tax:
 Not available if either spouse/CP using personal allowance and nil rate bands
is higher rate or additional rate
payer
Income tax computation Qualifying interest Personal

allowances
 Loan to buy plant or  £11,500 deducted from
machinery for use in Net Income
partnership  Taper if 'adjusted net
/employment income' exceeds
 Loan to invest in £100,000
Non-savings Dividend partnership  'Adjusted net income'
income income  Loan to buy interest in = Net income less trading
employee controlled losses, qualifying interest
 Trading  Received gross company gross gift aid donations
income from UK  Loan to invest in a and gross personal
 Employment companies cooperative pension contributions
income  Tax @ 0% if in
 Property the nil rate band
income (£5,000), then
 Tax @ 20%, 7.5% 32.5%,
40%, 45% 37.5%
Gift aid
Savings Tax calculation  Paid net of 20%

income  HR and AR taxpayers
extend bands by payment
 Building society/bank  Tax liability  100/80
deposit interest = income tax on
taxable income
 Received gross
 Tax payable
 Tax @ 0% if in the
= tax liability less tax
starting band or nil
already deducted at
rate band (£1,000
source
for BR taxpayers,
£500 for HR
taxpayers)
 then 20%, 40%, 45%
20
1 Statutory test of residence
Does the individual satisfy any
Yes
of the automatic overseas
tests?
No
Yes Does the individual satisfy any

of the automatic
UK tests?
No
Yes No
Does the individual satisfy the
sufficient ties test?
UK resident Non UK resident
Automatic overseas tests

Automatically not UK resident if:
(i) They are present in the UK for less than 16 days in a tax year;
(ii) They are present in the UK for less than 46 days in a tax year and were not resident during the previous 3 tax
years; or
(iii) They work overseas full time and are not present in the UK for more than 90 days in a tax year.
Automatic UK tests
Automatically UK resident if:
(i) They are present in the UK for 183 days or more in a tax year;
(ii) Their only home is in the UK; or
(iii) They carry out full time work in the UK.
Sufficient ties test
(i) Having close family in the UK (spouse/civil partner, child under 18 years);
(ii) Having accommodation available in the UK which is used for at least one night in the tax year;
(iii) Doing substantive work in the UK (at least 40 working days, at least 3 hours a day);
(iv) Being present in the UK for more than 90 days during either of the 2 previous tax years; or
(v) Spending more time in the UK than any other country in the tax year (if resident in any of the previous
3 tax years).
ARP313 21
2 Income tax computation
2.1 Proforma income tax computation for the tax year 2017/18.
Non-savings Savings Dividend
income income income
£ £ £
Trading income X
Less loss relief (X)
X
Employment income X
Property income X
UK dividends X
Building society interest/bank interest X
Other interest X
Total income X X X
Less qualifying interest (X)
Less loss relief (X)
Net income X X X
Less personal allowance (X)
Taxable income X X X
22
3 Personal allowance
Lecture Example 1
Megan (46) has net income of £120,000 in the tax year. She contributes £8,000 to her personal pension scheme and
makes a gift aid donation for £2,000.
Required
Calculate Megan's personal allowance for the tax year.
Solution
ARP313 23
4 Income tax calculation
Lecture Example 2
In the tax year Andrew has the following income.
 Salary £15,000 (PAYE deducted of £820)
 Building society interest £20,000
 Dividends £35,000
 He also makes a net gift aid donation of £800
Required
Calculate Andrew's income tax payable for the tax year.
Solution
24
Employment income

Recognise the factors that determine whether an
engagement is treated as employment or self-
employment
Recognise the basis of assessment for employment Mar/Jun 2017 Section C Q32 Petula
income
Recognise the income assessable Specimen exam Section C Q32 Simon
Recognise the allowable deductions including travelling September 2016 Section C Q32 Ashura
expenses Mar/Jun 2017 Section C Q32 Petula
Discuss the use of the statutory approved mileage September 2016 Section C Q32 Ashura
allowances Mar/Jun 2017 Section C Q32 Petula
Understand the treatment of charitable giving
ARP313 25
Employment income
Employment income
Employment vs Basis of
Self-employment assessment
Employment is a 'contract of  Received in tax year

service'  Additional rules for directors
Self employment is a 'contract
for services' Allowable
Factors to consider:
 Provision of equipment Types of deductions
 Choice over place of work, income
hours and method of work  Wholly, exclusively and
 Ability to decline work necessarily in the
 Salary performance of duties
 Integral position held  Bonus
 Bears physical or financial  Contribution to occupational
 Commission/tips pension scheme
risk
 Benefits  Fees and subscriptions to
 Rights under employment
legislation professional bodies
 Travelling expenses
incurred in performance of
duties
 Mileage allowances
If given < approved mileage
rates, deduct deficit from
employment income
If given > approved mileage
rates, add surplus to
employment income
 Capital allowances on plant
and machinery necessarily
provided by employee
 Payroll giving scheme
26
Taxable and exempt benefits. The
PAYE system

Explain and compute the amounts of benefits Specimen exam Section C Q32 Simon
assessable September 2016 Section A Q10
December 2016 Section C Q32 Array Ltd
Explain the PAYE system, how benefits can be December 2016 Section C Q32 Array Ltd
payrolled, and the purpose of form P11D Mar/Jun 2017 Section C Q31 Zhi
Recognise the circumstances in which real time
reporting late filing penalties will be imposed on an
employer and the amount of penalty which is charged
ARP313 27
Taxable and exempt benefits. The
PAYE system
Taxable benefits – general Taxable benefits – special

rules rules
 Cost to employer  See next page

 Prorate if benefit only available for
part of year
 Deduct employee contributions
except for private fuel
Exempt benefits PAYE system
 Canteen (available to all)

 PIID details benefits provided to
 Relocation (max £8,000) employees (unless benefit is
 Car parking near work payrolled).
 Workplace nurseries or up to  P45 for leavers
£55 per week in childcare if  Tax code indicates tax free pay
BR, £28 if HR and £25 if AR  Penalties apply for both late
 Employer's pension payments and late returns
contribution
 Mobile phone
 Sports and recreational
facilities
 £150 per head per year –
annual parties
 Outplacement counselling
services
 Payments within statutory
limits for use of own car on
business
 Workplace parking for bicycles
and tax free allowance of 20p
per business mile
28
1 Taxable benefits
Higher-paid employees
(1) General rule (Marginal) cost
(2) Living accommodation Job related: Exempt

Not job related: Higher of:
(1) Rent paid by employer
(2) Annual value
and Additional charge = Official rate of interest (ORI) (2.5%)  (cost – £75,000)
(3) Living expenses of living Job related: Cost to employer limited to 10% of net earnings
accommodation Not job related: Cost to employer
(4) Credit cards Cost of goods/services obtained
(5) Use of employer's assets

(Not cars) 20%  MV
(Not mobile phones)
(6) Gift of employer's assets Higher of:
(1) MV when given
(2) MV when first used less amounts already assessed.
(7) Company car Starts @ 18%  List Price

Builds up by 1% for every 5g of CO2 emitted per kilometre in excess of 95g/km
Maximum 37%  List Price
Diesel cars 3% supplement added to CO2% (maximum still 37%)
Low emission cars:
≤ 50g/km = 9%
51g–75g/km = 13%
76g–94g/km = 17%
95g–99g/km = 18%
(8) Company van £3,230 plus an additional £610 if private fuel provided
(No benefit if private use is only for home to work commute)
(9) Car fuel £22,600  CO2%
(10) Beneficial loans ORI  Average loan

or strict basis
£10,000 de minimis limit
ARP313 29
Higher-paid employees
(11) Free/subsidised canteen Tax free if available to all employees

meals
(12) Medical insurance Cost to employer
(13) Medical treatment Exempt up to £500 paid by employer to assist a return to work
(14) Reimbursed expenses Not taxable
(15) Allowances Taxable but allowable deduction is available if necessarily incurred
30
Pensions

Explain and compute the relief given for contributions to September 2016 Section A Q3
personal pension schemes and to occupational pension
schemes
December 2016 Section C Q31 Jack
ARP313 31
Pensions
Personal schemes Annual allowance (AA)
 £40,000 since 2014/15. If the AA is

 Maximum contribution is higher of
not fully used it can be carried
– £3,600
forward for up to three years
– Relevant earnings
provided the person is a member of
 Pay net of 20% tax and extend basic
a pension scheme
and higher rate limits by gross
 From 2016/17 the AA is reduced by
contribution
£1 for every £2 that adjusted
 Gross contribution is deducted to
income exceeds £150,000 to a
calculate 'adjusted net income' for minimum £10,000
personal allowance tapering
 If tax relieved contributions are paid
in excess of the AA (including any
brought forward unused
allowances) then there is an AA
charge
Occupational schemes Lifetime allowance
 Deduct employee contributions from  Maximum value of fund is £1m

salary before applying PAYE (net  Additional charge if fund more than
pay arrangements) £1m
 Employer contributions are a tax-
free benefit
32
1 Personal pension
Lecture Example 1
Joe has earnings of £60,000 in 2017/18. He pays a personal pension contribution of £7,020 (net). He has no other
taxable income.
Required
Calculate Joe's tax liability for 2017/18.
Solution
2 Annual allowance
Lecture Example 2
Clifford has made the following gross personal pension contributions:
2013/14 £50,000
2014/15 £35,000
2015/16 £20,000
2016/17 £50,000
Required
Calculate how much Clifford could contribute into his personal pension scheme in 2017/18 without suffering an annual
allowance charge.
ARP313 33
Solution
34
35
Property income

Compute property business profits Specimen exam Section C Q32 Simon
Mar/Jun 2017 Section C Qu 32 Petula
Explain the treatment of furnished holiday lettings
Understand rent-a-room relief December 2016 Section A Q11
Mar/Jun 2017 Section C Qu 32 Petula
Compute the amount assessable when a premium is
received for the grant of a short lease
Understand and apply the restriction on property income New in 2017/18
finance costs
Understand how relief for a property business loss is
given
ARP313 35
Property income
Property income Furnished holiday Lease premiums

lettings
 Available for letting for >210 days On grant of short lease
per year  Property income
 Let for >105 days assessment
 Lets >31 days add up to ≤155 Premium A
days in total Less 2% (n-1)  A (a)
Loss relief can only be set against Rental assessment X
income from the same FHL business  Trader gets trading profit
 Advantages deduction (spread over
– Finance costs are not lease term)
restricted
– Relevant earnings for pension
contributions
– Business asset for CGT  gift
relief, entrepreneurs' relief and
rollover relief
– Capital allowances on furniture
Accruals basis Deductions Loss relief
 Rent accruing in current  All expenses incurred  Offset vs current and future
tax year wholly and exclusively property income
 75% of finance costs
(other 25% is a tax
reducer) Rent-a-room relief
 Not capital
 Cost of replacement
furniture and appliances  First £7,500 pa tax free
36
1 Lease premiums
Lecture Example 1
On 1 July 2017 Sam purchased a leasehold office building for use in his business.
He paid a premium of £80,000 for the grant of a 20-year lease in addition to an annual rent of £10,000 payable in
advance on 1 July 2017.
Required
Compute the Landlord's property income for 2017/18 and Sam's trading deduction.
Solution
ARP313 37
38
Computing trading income

Syllabus learning outcomes Example past paper questions
Describe and apply the badges of trade
Recognise the expenditure that is allowable in calculating Specimen exam Section C Q32 Simon
the tax adjusted trading profit September 2016 Section C Q32 Ashura
Explain and compute the assessable profits using the
cash basis for small businesses
Recognise the relief which can be obtained for pre-trading
expenditure
ARP313 39
Computing
trading income
Badges of trade Adjustments of profits Pre-trading Cash basis for small

expenditure businesses
 Subject matter £ Expenses incurred in the  Small businesses have
 Frequency of Net profit X seven years before trading, the option to use a cash
transactions Add back treat as trading expenses of basis as opposed to an
 Length of ownership Disallowable expenditure X the first day of trading if they accruals basis
 Profit motive Deduct would ordinarily have been  Revenue must not
 Supplementary work Income assessable deductible exceed £150,000
 Manner elsewhere (X)  Loss can only be carried
acquired/reason for Non taxable income (X) forward
sale Deduct
Capital allowances (X)
Trading income X
In the exam you will be asked to begin

with net profit and to list all items including
a zero if no adjustment is needed.
40
Capital allowances

Define plant and machinery for capital allowances
purposes
Compute writing down allowances, first-year allowances September 2016 Section C Q32 Ashura
and the annual investment allowance
Compute capital allowances for motor cars Specimen exam Section C Q32 Simon
Compute balancing allowances and balancing charges
Recognise the treatment of short life assets
Recognise the treatment of assets included in the special
rate pool
ARP313 41
Capital expenditure
Function v setting
Fulfils a function with Part of setting in

which trade carried on which trade carried on
Main pool Special rate pool = Not plant and machinery (P&M)
18% WDA 8% WDA

No allowances
100% AIA
First £200,000
expenditure
(not cars)
Cars
Low emission CO2 emissions CO2 emissions

cars of between > 130 g/km
CO2 of 75 g/km 76–130 g/km
or less
SR pool
Main pool
100% FYA
8% WDA
18% WDA
42
1 Plant and machinery (P&M)
1.1 Special rate pool
 Expected working life >25 years, P&M integral to a building, and cars with CO2 emission >130g/km
 Pooled
 Small pool write off if less than £1,000 (like main pool)
 8% WDA
1.2 Proprietor's privately used assets

 Separate column for each asset
 Reduce TWDV by full WDA
 Only claim business use percentage of WDA
 Balancing adjustment on sale is business use percentage only
1.3 Short life asset

 Election on asset by asset basis
 Separate column
 Not cars
 Allows balancing allowance (BA) on sale
 Once 8  WDAs claimed reverts to main pool.
1.4 Opening years

May need to scale up or down annual allowances to fit to non-12 month accounting period
1.5 Closing years

 No WDA in final period
 Calculate balancing allowances and charges on everything
1.6 Approach
(1) Set up required proforma
(2) Insert opening balances
(3) Include additions and disposals
(4) Calculate allowances
ARP313 43
2 Proforma
2.1 Recommended format for use in the exams.
Private
Special Short used
Main rate life asset
AIA FYA pool pool assets (40%) Allowances
£ £ £ £ £ £
TWDV b/fwd X X X
Additions X X X X X
Disposals (X) (X)
(proceeds
limited to cost)
X X X X
AIA (X) X
Tfr to X X
Pool
FYA 100% (X) X
– X X
WDA 18%/8% (X) (X) (X) (X)  60% X
TWDV c/fwd X X X X X
44
Assessable trading income

Recognise the basis of assessment for self employment Specimen exam Section C Q32 Simon
income. September 2016 Section C Q32 Ashura
Compute the assessable profits on commencement and Specimen exam Section C Q32 Simon
on cessation September 2016 Section C Q32 Ashura
Recognise the factors that will influence the choice of Specimen exam Section C Q32 Simon
accounting date September 2016 Section C Q32 Ashura
ARP313 45
Assessable
trading income
Continuing trades Cessation Choice of accounting date

 CYB – accounting period  Closing year rules  30 April delays the time
ending in tax year between profits earned
Penultimate: CYB and taxed
Final: What's left less overlap relief
 31 March avoids overlap
profits
Commencement
 Opening year rules (see
over)
46
1 Opening year rules
1st tax year: Commencement  5 April
2nd tax year
IS THERE AN ACCOUNTING PERIOD

(of whatever length) WHICH ENDS
IN THE 2ND TAX YEAR?
YES NO
HOW LONG IS IT? TAX PROFITS FROM

6 APRIL – 5 APRIL
12 months < 12 months  12 months
3RD TAX YEAR
CYB TAX PROFITS TAX PROFITS

OF 1ST 12 MONTHS OF 12 MONTHS
OF TRADE TO A/CS DATE
CYB THEREAFTER
 Overlap relief
– Profits double taxed
– Use at cessation
ARP313 47
2 Opening and closing trade
Lecture Example 1
Andrea commences trading on 1 July 2013. Her profits since then are as follows:
£
16 months to 31.10.14 48,000
Year ended 31.10.15 30,000
Year ended 31.10.16 28,000
9 months to 31.07.17 18,000
She ceases trading on 31 July 2017.
Required
Calculate the trading profit assessments for all relevant years.
Solution
48
Trading losses

Understand how trading losses can be carried forward
Understand how trading losses can be claimed against September 2016 Section C Q32 Ashura
total income and chargeable gains and the restriction that
can apply
Explain and compute the relief for trading losses in the September 2016 Section C Q32 Ashura
early years of trade
Explain and compute terminal loss relief
Recognise the factors that will influence the choice of loss
relief claim
ARP313 49
Trading losses
Loss relief against Loss relief against Early trade loss Carry forward Terminal loss
total income gains relief trade loss relief relief
Continuing trades (extension of loss Losses in first four Carry forward Loss of last
relief against total tax years against 12 months
Against total income income) TRADING
CARRYBACK PROFITS
Loss relief against against total income Against trading
Year of loss and/or
total income claim of three income in year
preceding year SAME
first preceding tax of cessation and
TRADE previous three
All or nothing years
years
Extended
to capital Automatic
Maximum higher of FIFO basis
gains LIFO
£50,000 or 25% of
total income All or nothing
(after gross PPC) Max set off = net
gains less capital
losses b/f
50
1 Trading losses
Lecture Example 1
Marion started her trade on 1 June 1996. She has always prepared her accounts to 31 January. Her recent trading
results have been:
£
Y/e 31 January 2016 25,280
Y/e 31 January 2017 19,360
Y/e 31 January 2018 (74,000)
Y/e 31 January 2019 15,000
She also received the following property income:
£
15/16 8,520
16/17 4,560
17/18 6,210
18/19 7,980
Requirement
Compute Marion's taxable income for 2015/16 to 2018/19 on the assumption that she relieves her trading loss as early
as possible.
Assume rates for 2017/18 apply throughout.
Solution
ARP313 51
52
Partnerships and limited liability
partnerships

Explain and compute how a partnership is assessed to tax Specimen exam Section C Q32 Simon
Explain and compute the assessable profits for each Specimen exam Section C Q32 Simon
partner following a change in the profit sharing ratio
Explain and compute the assessable profits for each
partner following a change in the membership of the
partnership
Describe the alternative loss relief claims that are
available to partners
ARP313 53
Partnerships and limited liability
partnerships
Assessment Change in personnel
Split profits/losses
using PSR for period of New partners Remaining Old partners
account partners
 Each partner taxed as if

sole trader
Apply opening Still CYB Apply closing
 Each partner makes own year rules to year rules to
loss claim profit share profit share
Don't forget
overlap
54
1 Allocation of partnership trading income
Lecture Example 1
Ant and Dec are in partnership sharing profits in the ratio of 1:1 after providing Ant a salary of £12,000.
On 1 January 2017 the profit sharing arrangements were changed such that no salary was paid and profits are to be
shared in the ratio of 3:1.
Profits for the year to 30 June 2017 are £40,000.
Requirements
Calculate Ant and Dec's share of profits for the year ended 30 June 2017.
Solution
ARP313 55
2 Change in personnel
Lecture Example 2
Abraham and Martin began a partnership on 1 May 2005, sharing profits and losses equally. On 1 August 2015 John
joined them, the new arrangement being 2:2:1. Results have been as follows:
£
Year end 30 April 2015 40,000
Required
Show the assessment on the partners for the tax years 2015/16 to 2017/18.
Solution
56
National insurance contributions

Explain and compute Class 1 NIC and Class 1A NIC Specimen exam Section C Q31 Sarah
payable December 2016 Section C Q32 Array Ltd
Explain and compute Class 2 and Class 4 NIC payable Specimen exam Section A Q1
Understand the annual employment allowance
ARP313 57
Employed Self employed
Class 2 Class 4
£2.85 pw Profits
Class 1 Class 1 Class 1A
Employee's Employer's (employer) Where trading profits exceed
£6,025. Due 31 January 9% (£8,164 – £45,000)
following the tax year 2% above £45,000
Cash earnings Cash Benefits
earnings
12% 13.8%
13.8%
(£8,164 – (£8,164 +)
45,000)  12%
2% above Annual
£45,000 employment
allowance
£3,000
58
Computing chargeable gains

Describe the scope of capital gains tax
Recognise those assets which are exempt Specimen exam Section A Q11
Compute and explain the treatment of capital gains Specimen exam Section B Q16
Specimen exam Section B Q18
Compute and explain the treatment of capital losses

Understand the treatment of transfers between a husband Specimen exam Section B Q19
and wife or between a couple in a civil partnership September 2016 Section A Q14
Understand the amount of allowable expenditure for a part
disposal
Recognise the treatment where an asset is damaged, lost
or destroyed and the implications of receiving insurance
proceeds and reinvesting such proceeds
Compute the amount of capital gains tax payable Specimen exam Section B Q16
September 2016 Section B Q25
Basic capital gains tax planning Specimen exam Section B Q17
December 2016 Section B Q19
ARP313 59
Computing
chargeable gains
Chargeable CGT payable Losses

disposal
 Tax at 10%/20%  Offset before annual
 Sale of asset
 18%/28% on exempt amount
 Gift of asset (@ MV)
residential property  Current year losses set
 Loss or destruction
 Tax @ 10% gains against current year
(compensation) gains automatically.
qualifying for
entrepreneurs' relief  Excess carried forward
Chargeable  Annual exempt amount  Losses b/fwd
asset reduces the taxable – Restrict to bring
gains. Set off against gains down to
highest taxed gains annual exempt
 All assets unless exempt first amount
– Cars
– Wasting chattels Calculation of
– National saving gain
certificates £
– ISAs  Gross proceeds X
– Gambling winnings Less incidental costs of disposal (X)
– Stock and other current Less cost (X)
assets Less enhancement (X)
– Qualifying corporate X/(X)
Capital gain/(capital loss)
bonds
Spouses/civil Part disposal Damaged/destroyed

partners assets
 Nil gain/nil  If asset damaged, treated as

loss transfers A part disposal using A/(A + B)
 Cost  Where
( A  B) A = compensation received
Where B = unrestored value of asset
A = disposed MV of part  If asset destroyed, full
B = MV of remainder disposal – can rollover gain if
compensation is reinvested
in replacement asset within
12 months
60
1 Computing gains
Lecture Example 1
Ron acquired a freehold office building on 1 May 2004 for £120,000. On 2 July 2010 the building was extended for a
cost of £55,800. He sold it for £335,000 on 1 September 2017. Legal fees of £24,800 were incurred in connection with
the purchase and £37,900 in connection with the disposal.
Ron also made a disposal of a residential property which he held for investment purposes and made a chargeable gain
of £40,000.
Required
Calculate Ron's capital gains tax payable for 2017/18 assuming these were the only disposals he made in the year.
Assume Ron has taxable income of £29,500.
Solution
ARP313 61
2 Part disposals
Lecture Example 2
Eric buys four Chippendale chairs for £26,000 in January 1989. He sells one chair for £31,000 in July 2017 and pays
auction costs of £2,400. The market value of the three remaining chairs is £48,000.
Required
Calculate Eric's chargeable gain.
Solution
62
3 Damaged/destroyed assets
Lecture Example 3
Cyril buys an asset for £40,000 in June 1991. It is damaged in a fire in August 2017. It's unrestored value was £50,000.
£14,000 was received in compensation from the insurance company in November 2017.
Required
Calculate Cyril's chargeable gain in 2017/18 assuming no claim is made to defer the gain.
Solution
Lecture Example 4
Ian buys an asset for £7,500 in February 1990 and it is destroyed by fire in February 2018. Insurance proceeds
received immediately amount to £17,000. A replacement asset is bought for £16,000 within 6 months.
Required
Calculate Ian's chargeable gain in 2017/18 and base cost of replacement asset.
Solution
ARP313 63
64
Chattels and principal private
residence exemption

Identify when chattels and wasting assets are exempt Specimen exam Section A Q7
Compute the chargeable gain when a chattel or wasting December 2016 Section A Q4
asset is disposed of
Calculate the chargeable gain when a principal private Specimen exam Section B Q18
residence is disposed of September 2016 Section A Q2
Basic capital gains tax planning Specimen exam Section B Q20
ARP313 65
Chattels
Non-wasting Wasting
 Life at date of disposal >50 years

 Rules for computing gains/losses
Original Gross Treatment
cost proceeds
(a) <£6,000 <£6,000 Wholly exempt Exempt
(b) <£6,000 >£6,000 Any gain restricted
to 5/3 (gross proceeds
– 6,000)
(c) >£6,000 <£6,000 Proceeds deemed
to be £6,000
(d) >£6,000 >£6,000 Normal disposal
Principal private residence (PPR)

exemption
Calculation Periods of Letting exemption

occupation
Gain X  Last 18 months  Lower of:
Less PPR relief (X)  If preceded and followed by – £40,000
Gain after relief X genuine occupation – Gain arising in
Period of occupation – Any period abroad due to letting period
PPR relief = gain  employment – PPR relief
Period of ownership
– Any period up to four years
due to working elsewhere in
UK
– Any period up to three years
for whatever reason
– Any periods (not exceeding
four years in total) during
which the owner if self
employed was working
elsewhere in the UK or
overseas
66
1 Principal private residence exemption
Lecture Example 1
On 31 December 2017 Mark sold a house for £396,000. The house had been purchased on 1 April 2011 for £206,460.
Mark occupied the house as his main residence from the date of purchase until 30 June 2014. The house was then
unoccupied until it was sold on 31 December 2017.
Required
Compute Mark's chargeable gain.
Solution
ARP313 67
68
Business reliefs

Explain and apply entrepreneurs' relief Specimen exam Section B Q17
Explain and apply rollover relief Mar/Jun Section C Q31 Zhi
Explain and apply holdover relief for the gift of business Specimen exam Section B Q16
assets December 2016 Section A Q15
Basic capital gains tax planning
ARP313 69
Business reliefs
Entrepreneurs' relief Gift relief Rollover relief
 Assets qualifying  Assets qualifying  Assets qualifying

– Disposal of whole or – Business assets – Land and buildings
part of business. (No – Unquoted shares in a – Goodwill (individuals)
relief on gains from trading company – Fixed plant and machinery
investments) – Quoted shares in a  Impact of relief
– Disposal of shares in a personal trading company – Defers gain by reducing base
trading company, where (>5%) cost of replacement asset
individual has 5%  Impact of relief  Conditions
shareholding and is an – Defers gain – Replace 12m before  36m
employee of the – Reduces base cost of after sale
company donee  Special rules
 £10m lifetime limit  Conditions – Proceeds not reinvested
 Gains taxed @ 10% – Donee must be UK taxable
 These gains use up any resident – Gain is held over if
unused basic rate band  Special rules investment is in a
 Conditions – Actual proceeds less cost depreciating asset until
– Assets must be owned is chargeable earliest of
for one year prior to CBA – Disposal of new asset
disposal – for shares – New asset ceases to be
CA used in trade
Where – Ten years after
CBA = Chargeable business acquisition
assets (chargeable assets – Depreciating asset
Investors' relief except investments) – <60 years
CA = Chargeable assets – Fixed plant and machinery
(all assets except exempt
ones)
 10% tax on disposals of
shares in unquoted
trading companies
 No need to have 5% or
be an employee
 Separate £10m lifetime
limit
 Newly issued shares only
 Minimum holding period
of three years from
17/3/16
70
1 Entrepreneurs' relief
Lecture Example 1
Ben made the following disposals in 2017/18.
On 1 June 2017 Ben sold his sole trader business which he set up on 1 September 1983. The sale resulted in the
following capital gains.
£
Goodwill 390,000
Freehold office building 455,000
Freehold warehouse 136,300
981,300
The warehouse had been rented out to a neighbouring business.

All assets had been owned for at least one year prior to disposal.
On 1 January 2018 Ben sold a 40% shareholding in Miraz Ltd resulting in a gain of £360,000. Ben had owned the
shares and been an employee of this company for the past five years.
Required
Calculate Ben's capital gains tax payable for 2017/18. Assume Ben's taxable income for 2017/18 is £38,000.
Solution
ARP313 71
2 Gift relief
Lecture Example 2
Freddie bought a workshop for use in his trade several years ago for £10,000. He sold it to his daughter in the current
tax year for £110,000 (when its market value was £250,000).
Required
What is Freddie's gain? What is the base cost of the asset in the hands of Freddie's daughter?
Solution
72
3 Rollover relief
Lecture Example 3
James acquired a plot of land several years ago for £20,000 for use in his trade. He sold it in the current tax year for
£290,000. Six months before that sale he had purchased freehold offices for £280,000, also for use in his trade.
Required
What is James' chargeable gain? What is the base cost of the new asset?
Solution
ARP313 73
74
Shares and securities

Recognise the value of quoted shares where they are December 2016 Section B Q18
disposed of by way of a gift
Explain and apply the identification rules as they apply to

individuals including the same day and 30 day matching
rules
Explain and apply the pooling provisions September 2016 Section B Q24
Explain the treatment of bonus issues, rights issues, September 2016 Section B Q24
takeovers and re-organisations December 2016 Section B Q17
Identify the exemption available for gilt-edged securities Specimen exam Section A Q11
and qualifying corporate bonds
ARP313 75
Shares and securities
Valuing quoted shares on gift Bonus/rights issues Gilts/QCBs
 Mid price of day's quoted price  Bonus issue increases number of  Exempt for individuals
shares
 Rights issue increases number of
shares and cost by amount paid
for rights shares
Matching rules for individuals Takeovers
 No gain on 'paper for paper'

 Same day exchange
 Next 30 days (FIFO basis)  Cost of original holding is passed
 Share pool on to new holding
76
1 Matching rules
Lecture Example 1
Julia bought shares in XYZ plc as follows:
1 June 1997 3,000 shares for £9,000
1 June 2004 1,000 shares for £5,000
30 March 2018 500 shares for £2,000
On 1 August 2001 there was a 1:4 rights issue at £4 per share which Julia took up in full.
Julia sold 2,000 shares on 15 March 2018 for £12,000.
Required
What is Julia's chargeable gain?
Solution
ARP313 77
2 Takeovers
Lecture Example 2
Benny acquired 10,000 £1 shares in Frida plc in April 1990 for £5,000. Frida plc was taken over by Agnetha plc in July
1995 and for each share in Frida plc, Benny received:
Two £1 ordinary shares in Agnetha plc – valued at £1.10 each
50,000 £6% loan stock 2010 – valued at £65,000
The shares in Agnetha plc were sold in January 2018 for £27,000.
Required
Calculate the gains arising.
Solution
78
Self-assessment and payment of tax by
individuals

Explain and apply the features of the self-assessment September 2016 Section A Q8
system as it applies to individuals
Recognise the time limits that apply to the filing of returns
and the making of claims
Recognise the due dates for the payment of tax under the September 2016 Section A Q15
self-assessment system and compute payments on Mar/Jun 2017 Section C Q31 Zhi
account and balancing payments/repayments for
individuals
List the information and records that taxpayers need to Specimen Exam Section A Q13
retain for tax purposes December 2016 Section A Q6
Explain the circumstances in which HM Revenue &
Customs (HMRC) can make a compliance check into a
self assessment tax return
Calculate late payment interest and state the penalties September 2016 Section A Q12
that can be charged
ARP313 79
Self-assessment and payment
of tax by individuals
Paper Electronically
Returns: returns delivered
31.10.18 31.1.19
2017/18
Payments:
31.1.18 31.7.18 31.1.19

1st POA 2nd POA Balance
50%  16/17
 Capital gains tax (CGT) – due on 31 January following end of tax year
liability
 Penalties for late returns
 3 months = £100
3  6 months = £100 + £10 per day (for a maximum of 90 days)
6 12 months = 5% of tax due (minimum of £300)
 Interest on late payment of tax
 Penalty on late final payment
< 5 months after penalty date 5%
> 5 months – 11 months after penalty date 10% of unpaid tax
> 11 months after penalty date 15%
Penalty date is 30 days after due date for tax
 Common penalty regime – errors in the return
– Applies to income tax returns, corporation tax returns and value added tax (VAT) returns
– 0% if taxpayer simply made a mistake
– 30% if taxpayer careless
– 70% if error is deliberate
– 100% if error is deliberate and concealed
 Late notification of new source of income penalty
– 0% if reasonable excuse
– 30% if non deliberate (careless) failure
– 70% if deliberate
– 100% if deliberate and concealed
 Amendments
– By HMRC within 9 months of actual filing date
– By taxpayer within 12 months of normal filing date
 Compliance checks
– Up to 12 months from actual submission if on time but 1st anniversary of next quarter day (31.1, 30.4, 31.7,
31.10) if late
 Keeping records
– Five years from 31 January after the tax year if in business, otherwise one year from 31 Jan
80
18
Inheritance tax: scope and transfers of

value

Identify the persons chargeable
Understand and apply the meaning of transfer of value, Specimen exam Section A Q8
chargeable transfer and potentially exempt transfer Specimen exam Section B Q24
Demonstrate the diminution in value principle December 2016 Section B Q23
Demonstrate the seven year accumulation principle taking Specimen exam Section B Q24
into account changes in the level of the nil rate band
Understand the tax implications of lifetime transfers and Specimen exam Section A Q8
compute the relevant liabilities Specimen exam Section B Q24
Understand and compute the tax liability on a death estate Specimen exam Section B Q21
Understand and apply the transfer of any unused nil rate September 2016 Section B Q16
band between spouses December 2016 Section A Q3
Understand and apply the residence nil rate band New in 2017/18
available when a residential property is inherited by direct
descendants
Understand and apply the following exemptions:
(i) Small gifts exemption Specimen exam Section A Q9
(ii) Annual exemption September 2016 Section A Q1
(iii) Normal expenditure out of income Specimen exam Section B Q25
(iv) Gifts in consideration of marriage
(v) Gifts between spouses December 2016 Section B Q25
ARP313 81
Basic inheritance tax planning September 2016 Section B Q19
December 2016 Section C Q31 Jack
Identify who is responsible for the payment of inheritance September 2016 Section B Q18
tax and the due date for payment of inheritance tax December 2016 Section B Q22
82
Inheritance
Tax (IHT)
Scope of IHT Transfers of Exemptions Types of lifetime

value transfers
 Tax on gifts or Loss to donor principle  Exempt gifts  Potentially exempt
transfers of value in Value before gift X – Gifts between spouses/civil transfers (PETs)
lifetime and on Less value after gift (X) partners – Gifts by individual to
death Transfer of value X individual
– Gifts to UK charities
 Individuals and  Lifetime exemptions  Chargeable lifetime
trustees – Annual exemption transfers (CLTs)
– £3,000 per tax year – Gifts to trusts
– Set against transfers
chronologically
– c/fwd for one year only
– Small gifts
– Up to £250 per donee per tax
year
– Normal expenditure out of
income
– Habitual, cash gifts
– Gifts in consideration of marriage
– By parent £5,000
– By lineal ancestor/other party
to marriage £2,500
– By any other person £1,000 Calculating lifetime
tax on
lifetime transfers
 PETs
– No lifetax but still use AEs
CLTs
£
Gift X
Less AE (X)
Less AE b/f (X)
X
Less nil band remaining
Nil band @ date of gift X
Less CLTs in last 7 years (X)
before gift (X)
Tax @ 20%/or 20/80 X
Gross chargeable transfer (GCT) is:
£
Gift after exemptions X
Tax paid by donor @ 20/80 (X)
GCT
ARP313 83
Inheritance
Tax (IHT)
Death Estate Tax on estate Spouses/civil

partners
 List of all assets at death  From estate deduct any  The unused percentage
 No exempt assets remaining nil rate band of nil band/ residence nil
 Deduct outstanding and the residence nil rate rate band can be
debts, funeral expenses band (where available) transferred to remaining
and exempt transfers  Tax @ 40% on remaining spouse/civil partner
amount
 Treat as top slice of
lifetime transfers in
previous seven years
Calculating death tax on
lifetime transfers
Payment of IHT
 All PETs and CLTs in seven years of death
 Taper relief – if gift within three to seven years of
death  Lifetime transfers
£ – Due six months from end of
Gross CLT/PET X month of transfer or
Nil band @ death X following 30 April if made
Less GCTs <7 years before gift (X) (X) between 6 April – 30
X September
 On death
Tax @ 40% X – Lifetime gifts – six months
Less taper relief (X) from end of month of death
Less life tax (on CLTs) (X) – Death estate – six months
Death tax due X from end of month of death
or delivery of accounts if
Paid by donee
earlier
84
1 Calculation of IHT liabilities
Lecture Example 1
Merlin died on 18 March 2018. He had made the following lifetime gifts.
20 January 2010 A gift of 100,800 to a trust
14 December 2012 A gift of £72,000 to his wife
2 June 2014 A gift of £150 to his cousin
10 August 2014 A gift of £288,000 to his son
1 November 2014 A gift of £360,000 to a trust
Merlin paid any IHT from the gifts to the trusts.
Required
Calculate the IHT that will be payable as a result of Merlin's death.
Nil rate bands are as follows:
2009/10 £325,000
2012/13 £325,000
2014/15 £325,000
Solution
ARP313 85
86
Computing taxable total profits and the
corporation tax liability

Define the terms 'period of account', 'accounting period'
and 'financial year'
Recognise when an accounting period starts and when an September 2016 Section C Q33 Mable
accounting period finishes
Explain how the residence of a company is determined December 2016 Section C Q33 Wretched Ltd
Recognise the expenditure that is allowable in calculating Specimen exam Section C Q33 Naive Ltd
the tax adjusted trading profit September 2016 Section C Q33 Mable
December 2016 Section C Q33 Wretched Ltd
Mar/Jun 2017 Section C Q33 Online Ltd
Recognise the relief which can be obtained for pre-trading September 2016 Section A Q15
expenditure
Compute capital allowances (as for income tax) Specimen exam Section C Q33 Naive Ltd
September 2016 Section C Q33 Mable
Compute property business profits and understand how Specimen exam Section C Q33 Naive Ltd
relief for a property business loss is given September 2016 Section C Q33 Mable
Recognise and apply the treatment of interest paid and Specimen exam Section C Q33 Naive Ltd
received under the loan relationship rules September 2016 Section C Q33 Mable
Recognise and apply the treatment of qualifying charitable Mar/Jun 2017 Q33 Online Ltd
donations
Compute taxable total profits Specimen exam Section C Q33 Naive Ltd
September 2016 Section C Q33 Mable
Mar/Jun 2017 Q33 Online Ltd
Compute the corporation tax liability Specimen exam Section C Q31 Sarah
Specimen exam Section C Q33 Naive Ltd
September 2016 Section C Q31 Joe
ARP313 87
Computing taxable
total profits and the corporation tax
liability
Charge to Trading Interest Long period of Corporation

corporation income income account tax liability
tax
Adjusted profits X Loan for trade? 2 computations: FY17: TTP  19%
Chargeable companies Less capital  1st 12 months FY16: TTP  20%
 UK incorporated allowances (X)  2nd for the
 Not UK incorporated X remaining
but UK central months
management and No
control Yes Forms part
Basis of assessment Forms part of interest
 CT based on of trading income
financial years (FYs) income
 FY17 = 1 April 2017
Property
– 31 March 2018
income
As for individuals except

 Interest on loan is part of
interest income (no
finance costs restriction)
 Losses are relieved
against total profits of
current period and any
excess carried forward
against total profits of
future periods
88
1 Proforma corporation tax computation
A LTD CORPORATION TAX COMPUTATION FOR THE X MONTHS TO...
£ £
Trading income
Adjusted profits X
Less capital allowances (X)
Trading income (accruals) X
Other income
Interest income (accruals) X
Property income (accruals) X
Miscellaneous income (accruals) X
Net chargeable gains (date of disposal) X
Total profits X
Less qualifying charitable donations (QCDs) (X)

Taxable Total Profits (TTP) X
Corporation tax liability

TTP  19% X
ARP313 89
90
Chargeable gains for companies

Compute and explain the treatment of chargeable gains September 2016 Section C Q33 Mable
Explain and compute the indexation allowance available September 2016 Section B Q21
Explain and compute the treatment of capital losses December 2016 Section C Q33 Wretched Ltd
Understand the treatment of disposals of shares by Mar/Jun 2017 Section C Q33 Online Ltd
companies and the identification rules including the same
day and nine day matching rules
Explain and apply the pooling provisions Mar/Jun 2017 Section C Q33 Online Ltd
Explain the treatment of bonus issues, rights issues,
takeovers and reorganisations
Explain and apply rollover relief September 2016 Section B Q22
ARP313 91
Chargeable gains
for companies
Computing chargeable gains Shares and securities Capital losses Rollover relief
Matching rules  Offset vs current  Operates for

 Same day and future capital companies in the
 Previous nine gains same way as for
days individuals
 1985 pool
Indexation allowance
 RPI in month of – RPI in month of

sale purchase
RPI in month of purchase
 Round to 3 dp
 Indexation allowance cannot increase
or create a loss
92
Losses

Understand how relief for a property business loss is December 2016 Section C Q33 Wretched Ltd
given Mar/Jun 2017 Section C Q33 Online Ltd
Understand how trading losses can be carried forward December 2016 Section C Q33 Wretched Ltd
Understand how trading losses can be claimed against Specimen exam Section A Q14
income of the current or previous accounting periods September 2016 Section A Q13
Recognise the factors that will influence the choice of loss
relief claim
Explain and compute the treatment of capital losses December 2016 Section C Q33 Wretched Ltd
ARP313 93
Losses
Current period relief Carry back relief Carry forward relief
Against total Against total Carried forward

profits in current profits of against trading
accounting preceding 12 profits of same trade
period months * but
only after current
year claim
* extended to 36 months in final year of trading (LIFO)
94
1 Loss relief proforma
2015 2016 2017
£ £ £
Trading income X Nil X
Carry forward relief (X)
Other income and gains X X X

X X X
Current period relief 1(X)
Carry back relief (X)
Less QCDs (X) (X) (X)
TTP X X X
ARP313 95
96
Groups

Define a 75% group and recognise the reliefs that are Specimen exam Section A Q4
available to members of such a group
Define a 75% capital gains group and recognise the reliefs December 2016 Section A Q2
that are available to members of such a group
ARP313 97
Groups
75% group Chargeable gains group
 Definition  Definition
– 75% ownership and – 75% ownership and >50%
effective interest effective interest
– UK resident companies only  Implications
(foreign companies can – NG/NL transfers
provide the link) – One unit for ROR
 Can transfer any amount of – Elect for external disposals
current period to be treated as made by
– Trading loss any group member to match
– Excess qualifying charitable capital gains and capital
donations losses
– Excess property losses
 Offset vs claimant's taxable
total profits (TTP)
 If accounting periods are not

coterminous, profits and losses
must be apportioned so only
results of overlap period are
offset.
98
Self-assessment and payment of tax by
companies

Syllabus learning outcomes Example past exam question
Explain and apply the features of the self-assessment Specimen exam Section C Q33 Naive Ltd
system as it applies to companies including the use of
iXBRL
Recognise the time limits that apply to the filing of returns
and the making of claims
Recognise the due dates for the payment of tax under the
self-assessment system
Explain how large companies are required to account for Specimen exam Section A Q5
corporation tax on a quarterly basis and compute quarterly December 2016 Section A Q12
instalment payments
List the information and records that taxpayers need to
retain for tax purposes
Explain the circumstances in which HM Revenue & December 2016 Section A Q10
Customs (HMRC) can make a compliance check into a
self-assessment tax return
Calculate late payment interest and state the penalties Specimen exam Section A Q6
that can be charged
ARP313 99
Self-assessment and payment
of tax by companies
Non-large company
1.10.18 31.12.18
Y/e 31.12.17 Tax due Return

date
Large company
14.07.17 14.10.17 14.01.18 14.04.18 31.12.18
Instal 1 Instal 2 Y/e 31.12.17 Instal 3 Instal 4 Return

date
 Large company is a company with Augmented Profits above the upper limit
– Limit is £1,500,000 multiplied by n/12 and divided by the number of related 51% group companies
– Augmented profits = TTP + dividends received from unrelated companies
 Transitional relief. No quarterly instalments if:
– Augmented Profits 10m and
– Not large in previous year
 Short accounting period (AP)
CT
– Each instalment = 3  (n = no. of months of AP)
n
– Final instalment always due by 14th of 4th month following end of AP
 Penalties
– Failure to notify chargeability – same as for individuals
– Late filing of tax return
(i) Up to 3 months late £100
(ii) Up to 6 months late £200
(iii) Up to 12 months late £200 + 10% unpaid tax
(iv) Over to 12 months late £200 + 20% unpaid tax
– Failure to keep records – up to £3,000 per AP
– Errors in returns – same as for individuals
100
An introduction to VAT

Recognise the circumstances in which a person must September 2016 Section B Q26
register or deregister for value added tax (VAT) December 2016 Section B Q26
(compulsory) and when a person may register or
deregister for VAT (voluntary)
Recognise the circumstances in which pre-registration September 2016 Section B Q27
input VAT can be recovered December 2016 Section B Q27
Explain the conditions that must be met for two or more
companies to be treated as a group for VAT purposes and
the consequences of being so treated
Calculate the amount of VAT payable/recoverable Specimen exam Section B Q26
Understand how VAT is accounted for and administered September 2016 Section B Q29
Recognise the tax point when goods or services are Mar/Jun 2017 Section C Q31 Zhi
supplied
Explain and apply the principles regarding the valuation of
supplies
Recognise the principal zero rated and exempt supplies
Recognise the circumstances in which input VAT is non- September 2016 Section B Q28
deductible December 2016 Section A Q1
Recognise the relief that is available for impairment
losses on trade debts
ARP313 101
Value added tax (VAT)
Charge to VAT Registration Transfer of Tax point Recovery of

going concern input VAT
 Earliest of:
 If assets sold  Not recoverable on:
Standard (i) Despatch date
– Cars if used
20% Compulsory each has VAT at (ii) Invoice date
the appropriate privately
(iii) Cash received
rate – UK customer
Alternative?
 If a transfer of a entertaining
 If taxable Cash accounting
Zero 0% – Non business
turnover exceeds going concern
purchases
£85,000 in past (TOGC) then no
VAT chargeable  Pre-registration
12 months or will expenses
be in next 30  Conditions to be
Exempt met:
– Stock if still held
days
– Purchaser VAT Administration – Fixed assets if still
of VAT held
registered
– Services if supplied
Voluntary – Same kind of
 Quarterly – normal in last six months
business
carried on  Monthly – repayment
– No significant traders
De-registration break in trade  Annual – turnover below
£1,350,000
 Payments on account –
 If cease to make liability exceeds £2.3m Impairment
taxable supplies losses
 Voluntary if taxable
supplies next year  Refund of
will be below previously paid
£83,000 output tax if
invoice unpaid six
Group months after
payment due date
 Holding company must and written off in
control subsidiary (ie the accounts
votes) and all companies
must have a fixed place of
business in UK
 Group nominates
'representative member'
who prepares one VAT
return for entire group
 Intragroup sales are
ignored
 All members of group are
jointly and severally liable
102
1 Other matters
1.1 Discounts
– VAT charged on actual amount received by the trader
1.2 Private use

– Business use only recoverable
1.3 VAT on private fuel

– Reclaim all input tax
– Charge output tax based on scale charges
ARP313 103
104
Further aspects of VAT

List the information that must be given on a value added September 2016 Section B Q30
tax (VAT) invoice
Understand when the default surcharge, a penalty for an Specimen exam Section B Q28
incorrect VAT return and default interest will be applied Specimen exam Section B Q29
Understand the treatment of imports, exports and trade
within the European Union (EU)
Understand the operation of and when it will be Specimen exam Section A Q10
advantageous to use the VAT special schemes: September 2016 Section A Q4
 Cash accounting scheme
 Annual accounting scheme
 Flat rate scheme
ARP313 105
Further aspects
of VAT
VAT invoice Penalties Imports/Exports Special schemes
 Outside EU
– Sales zero rated
– Purchases – account for VAT @
point of entry, reclaim on next VAT
return
 Inside EU
– Sales – zero rated if to VAT
registered customer, otherwise
standard rated
– Purchases – VAT neutral
– Treat as sale and
purchase to yourself
Default Default Errors

interest surcharge
 Interest on unpaid VAT  Late return/payment  See Chapter 17
 Notice issued for 12
months
 2%, 5%, 10%, 15%
Annual accounting Cash accounting Flat rate
 Annual turnover in next  Annual turnover  Taxable supplies

12m £1,350,000 £1,350,000 <£150,000
 One return due two  Tax point =  Optional
months after year end receipt/payment of cash  VAT liability = % (industry
 Pay 90% of previous  Automatic impairment specific)  VAT inclusive
year's liability over 9 loss relief sales
months starting in month 4  Cease when turnover  Still charge 20% to
 Balance due within two >£1,600,000 customer
months after year end  Admin simplified
106
Answers to
lecture examples
107
108
Chapter 1
No Lecture Examples
Chapter 2
Answer to Lecture Example 1

£
Personal allowance 11,500
Less ½ (107,500 – 100,000) (3,750)
7,750
Working: Adjusted net income
£
Net income 120,000
Less gross pension contribution 8,000  100
80
(10,000)
Less gross gift aid donations 2,000  100
80
(2,500)
107,500

NSI SI DI
£ £ £
Salary 15,000
Building Society Interest 20,000
Dividends 35,000
Net income 15,000 20,000 35,000
PA (11,500)
Taxable income 3,500 20,000 35,000
Extend BR band 33,500 + (800  100
80 ) = 34,500
Extend AR band 150,000 + (800  100

80 ) = 151,000
Income tax
£
NSI 3,500  20% 700
SI 1,500  0% (starting band ie £5,000 – 3,500) 0
500  0% (nil rate band for HR payer) 0
18,000  20% (20,000 – 1,500 – 500) 3,600
DI 5,000  0% (dividend nil rate band) 0

6,000  7.5% 450
34,500
24,000  32.5% (ie £35,000 – 5,000 – 6,000) 7,800
Income tax liability 12,550
Less PAYE (820)
Income tax payable 11,730
ARP313 109
Chapters 3 and 4
No Lecture Examples
Chapter 5

£
Earnings 60,000
PA (11,500)
Taxable income 48,500
Extend BR band = £33,500 + (7,020  100/80)
= £42,275
£42,275  20% 8,455
6,225  40% 2,490
48,500
10,945

2017/18 40,000
+ unused allowance from 2014/15 onwards

2014/15 (40,000 – 35,000 – 5,000) (Note) –
2015/16 (40,000 – 20,000 – 5,000) (Note) 15,000
2016/17 –
55,000
Note. In 2016/17 the pension contribution paid uses all of Clifford's annual allowance for 2016/17 and the £5,000
(40,000 – 35,000) unused in 2014/15 and £5,000 of the £20,000 unused (40,000-20,000) for 2015/16.
Chapter 6
£
Premium 80,000
Less 2% (20 – 1)  80,000 (30,400)
49,600
Rent 10,000  9/12 7,500
57,100
Sam's trading deduction is £49,600/20 = £2,480 pa in addition to the actual rental.
Chapters 7 and 8
No Lecture Examples
110
Chapter 9
£
13/14 1 July 13 – 5 April 14
9  48,000 27,000
/16
14/15 Long AP ending in 14/15
1.11.13 – 31.10.14
12  48,000 36,000
/16
15/16 y/e 31.10.15 30,000
16/17 y/e 31.10.16 28,000
17/18 9 months to 31.7.17 18,000
Less overlap profits (15,000)
3,000
Overlap profits
1.11.13 – 5.4.14 5/16  48,000 15,000
Chapter 10

2015/16 2016/17 2017/18 2018/19
£ £ £ £
Trading income 25,280 19,360 – 15,000
Carry forward (2)(15,000)
Property income 8,520 4,560 6,210 7,980
Total income 33,800 23,920 6,210 7,980
Loss relief vs total income (1) (23,920)
PA (11,500) (11,500) (11,500) (11,500)
22,300 – – –
Working:
Loss Memo
Y/e 31.1.18 74,000
Loss relief vs total inc – 17/18 – *
– 16/17 (1) (23,920)
C/fwd vs 18/19 50,080
(2) (15,000)
35,080
* A loss relief claim vs net income in 17/18 would waste Marion's personal allowance for that year and would not
save any tax as all income is covered by personal allowance. Carry back to 16/17 wastes personal allowance
but results in all tax paid being refunded.
(1) This claim is within the maximum of the higher of £50,000 and 25% of total income.
ARP313 111
Chapter 11

Total Ant Dec
Y/e 30.6.17 £ £
1.7.16 – 31.12.16
Salary 6/12  12,000 6,000 6,000 –
Balance 1:1 14,000 7,000 7,000
6/12  40,000 20,000
1.1.17 – 30.6.17
6/12  40,000 (3:1) 20,000 15,000 5,000
Total 40,000 28,000 12,000

Step 1 – Allocate profit
Total Abraham Martin John
£ £ £ £
Y/e 30.4.15
1:1 40,000 20,000 20,000 –
Y/e 30.4.16
1.5.15 – 31.7.15
/12  50,000 1:1 12,500 6,250 6,250 –
3
1.8.15 – 30.4.16
9
/12 50,000 2:2:1 37,500 15,000 15,000 7,500
50,000 21,250 21,250 7,500
Y/e 30.4.17
2:2:1 35,000 14,000 14,000 7,000
Step 2 – Basis periods
Existing partners – CYB Abraham Martin
£ £
15/16 y/e 30.4.15 20,000 20,000
16/17 y/e 30.4.16 21,250 21,250
17/18 y/e 30.4.17 14,000 14,000
112
New partner – John
Started trade on 1.8.15
£
15/16 1.8.15 – 5.4.16
8  7, 500 6,667
9
16/17 1st 12 months

7,500 + 3 12  7,000 9,250
17/18 y/e 30.4.17 7,000
Overlap profits for John

1.8.15 – 5.4.16 6,667
1.5.16 – 31.7.16 1,750
8,417
Chapter 12
No Lecture Examples
Chapter 13
£
Proceeds from office building 335,000
Less costs of disposal (37,900)
Less cost (120,000 + 24,800) (144,800)
Less enhancement (55,800)
Chargeable gain 96,500
Gain on residential property 40,000

Less annual exempt amount (11,300)
28,700
(33,500 – 29,500) = 4,000  10% 400

(96,500 – 4,000)  20% 18,500
28,700  28% 8,036
26,936

£
Proceeds 31,000
Less selling expenses (2,400)
28,600
Cost 26,000  31,000
31,000  48,000 (10,203)
18,397
ARP313 113
£
Proceeds 14,000
14,000
Cost 40,000  (8,750)
14,000  50,000
Gain 5,250

£
Proceeds 17,000
Cost (7,500)
9,500
Proceeds not reinvested (gain taxed now) (1,000)
Gain deferred 8,500
Base cost of replacement asset

Actual cost 16,000
Less deferred gain (8,500
7,500
Chapter 14

£
Proceeds 396,000
Cost (206,460)
189,540
Less PPR (W) 57/81  189,540 (133,380)
Gain 56,160
Working: Total ownership period 1.4.11 – 31.12.17 = 81 months

PPR period
Actual occupation 1.4.11 – 30.6.14 = 39 months
Last 18 months 18 months
57 months
114
Chapter 15

Gains qualifying for entrepreneurs' relief
£
Goodwill 390,000
Freehold office building 455,000
Shareholding 360,000
1,205,000
@ 10% 120,500
Gains not qualifying for entrepreneurs' relief
£
Freehold warehouse 136,300
Annual exempt amount (11,300)
125,000
@ 20% 25,000
Total CGT payable (120,500 + 25,000) 145,500

£
Proceeds (MV) 250,000
Cost (10,000)
240,000
Taxed now (actual proceeds over cost) = 110,000 – 10,000 (100,000)
Gain held over 140,000
Gain taxed now 100,000
Base cost to Freddie's daughter

MV on acquisition 250,000
Less gain held over (140,000)
110,000

£
Proceeds 290,000
Cost (20,000)
270,000
Proceeds not reinvested (290,000 – 280,000) (10,000)
Gain rolled over 260,000
Gain taxed now 10,000
Acquired 280,000
Less gain rolled over (260,000)
20,000
ARP313 115
Chapter 16

(1) Match with acquisition in next 30 days 30 March 2018
£
Proceeds 500/2000  12,000 3,000
Cost (2,000)
1,000
(2) Match with share pool
£
Proceeds 1500/2,000  12,000 9,000
Cost (W) (5,368)
3,632
Total gains (1,000 + 3,632) 4,632
Working: Share pool
Shares Cost
£
1.6.97 3,000 9,000
1.8.01 (RI) 750 3,000
3,750 12,000
1.6.04 1,000 5,000
4,750 17,000
Disposal (1,500) (5,368)
3,250 11,632

Consideration received
£
Ordinary shares 20,000  £1.10 = 22,000
Loan stock 50,000 6% = 65,000
87,000
Base cost
Shares = 22,000  5,000 = 1,264

87,000
Loan stock = 65,000  5,000 = 3,736
87,000
5,000
Disposal of shares in Agnetha plc January 2018
£
Proceeds 27,000
Cost (1,264)
25,736
116
Chapter 17
No Lecture Examples
Chapter 18
Life tax
£
20 January 2010
CLT 100,800
Annual exemption 2009/10 (3,000)
2008/09 (3,000)
Chargeable transfer 94,800
Covered by nil band, GCT = £94,800
14 December 2012 exempt transfer
2 June 2014 small gifts exemption
£
10 August 2014
PET 288,000
AE 2014/15 (3,000)
2013/14 (3,000)
No life tax on PETs 282,000
£
1 November 2014 CLT 360,000
Es used up by PET
Nil band @ Nov 14 325,000
Less GCT in previous 7 years (94,800)
(230,200)
129,800
 20/80 = 32,450
Gross chargeable transfer is £392,450 (360,000 + 32,450)
ARP313 117
Death tax
Only gifts from 18 March 2011
£
10 August 2014 PET 282,000
Nil band @ death 325,000
Less GCT in previous 7 years before 10/8/14 (94,800)
(230,200)
51,800
 40% = 20,720
Less taper relief 20% (3–4 years) (4,144)
16,576
£
1 November 2014 GCT 392,450
Nil band @ death 325,000
Less GCT in previous 7 years before1/11/14 (94,800 + (376,800) –
282,000)
392,450
 40% = 156,980
Less taper relief 20% (3–4 years) (31,396)
Less life tax (32,450)
93,134
Chapters 19 to 25
No Lecture Examples
118
Appendix
119
120
Appendix: Tax tables and formulae
SUPPLEMENTARY INFORMATION
1. Calculations and workings need only be made to the nearest £.
2. All apportionments may be made to the nearest month.
3. All workings should be shown in Section C.
TAX RATES AND ALLOWANCES
The following tax rates and allowances are to be used in answering the questions.
Income tax
Normal rates Dividend rates
Basic rate £1–£33,500 20% 7.5%
Higher rate £33,501–£150,000 40% 32.5%
Additional rate £150,001 and over 45% 38.1%
Savings income nil rate band – Basic rate taxpayers £1,000

– Higher rate taxpayers £500
Dividend nil rate band £5,000
A starting rate of 0% applies to savings income where it falls within the first £5,000 of taxable income.
Personal allowance
£
Personal allowance 11,500
Transferable amount 1,150
Income limit 100,000
Residence status
Days in UK Previously resident Not previously resident
Less than 16 Automatically not resident Automatically not resident
16 to 45 Resident if 4 UK ties (or more) Automatically not resident
46 to 90 Resident if 3 UK ties (or more) Resident if 4 UK ties
91 to 120 Resident if 2 UK ties (or more) Resident if 3 UK ties (or more)
121 to 182 Resident if 1 UK tie (or more) Resident if 2 UK ties (or more)
183 or more Automatically resident Automatically resident
Child benefit income tax charge
Where income is between £50,000 and £60,000, the charge is 1% of the amount of child benefit received for every
£100 of income over £50,000.
Car benefit percentage
The base level of CO2 emissions is 95 grams per kilometre.
The percentage rates applying to petrol cars with CO2 emissions up to this level are:
50 grams per kilometre or less 9%
51 grams to 75 grams per kilometre 13%
76 grams to 94 grams per kilometre 17%
95 grams per kilometre 18%
Car fuel benefit
The base figure for calculating the car fuel benefit is £22,600.
Individual savings accounts (ISAs)
The overall investment limit is £20,000.
ARP313 121
Property income
Basic rate restriction applies to 25% of finance costs.
Pension scheme limits

Annual allowance £40,000
Minimum allowance £10,000
Income limit £150,000
The maximum contribution that can qualify for tax relief without any earnings is £3,600.
Authorised mileage allowances: cars
Up to 10,000 miles 45p
Over 10,000 miles 25p
Capital allowances: rates of allowance
Plant and machinery
Main pool 18%
Special rate pool 8%
Motor cars
New cars with CO2 emissions up to 75 grams per kilometre 100%
CO2 emissions between 76 and 130 grams per kilometre 18%
CO2 emissions over 130 grams per kilometre 8%
Annual investment allowance

Rate of allowance 100%
Expenditure limit £200,000
Cash basis
Revenue limit £150,000
Cap on income tax reliefs
Unless otherwise restricted, reliefs are capped at the higher of £50,000 or 25% of income.
Corporation tax
Rate of tax – Financial year 2017 19%
– Financial year 2016 20%
– Financial year 2015 20%
Profit threshold £1,500,000
Value added tax (VAT)
Standard rate 20%
Registration limit £85,000
Deregistration limit £83,000
Inheritance tax: tax rates
Nil rate band £325,000

Residence nil rate band £100,000
Excess – Lifetime rate 20%
– Death rate 40%
Inheritance tax: taper relief
Percentage
Years before death reduction
Over 3 but less than 4 years 20%
122
Capital gains tax
Normal Residential
rates property
Rates of tax – Lower rate 10% 18%
– Higher rate 20% 28%
Annual exempt amount £11,300
Entrepreneurs' relief – Lifetime limit £10,000,000
– Rate of tax 10%
Class 1 Employee £1–£8,164 per year Nil
£8,165–£45,000 per year 12%
£45,001 and above per year 2%
Class 1 Employer £1–£8,164 per year Nil
£8,165 and above per year 13.8%
Employment allowance £3,000
Class 1A 13.8%
Class 2 £2.85 per week
Small profits threshold £6,025
Class 4 £1–£8,164 per year Nil
£8,165–£45,000 per year 9%
£45,001 and above per year 2%
Rates of interest (assumed)
Official rate of interest 2.50%
Rate of interest on underpaid tax 2.75%
Rate of interest on overpaid tax 0.50%
END OF APPENDIX
ARP313 123
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any
form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written
permission of BPP Learning Media Ltd.
The contents of this book are intended as a guide and not professional advice. Although every effort has been made to
ensure that the contents of this book are correct at the time of going to press, BPP Learning Media makes no warranty
that the information in this book is accurate or complete and accept no liability for any loss or damage suffered by any
person acting or refraining from acting as a result of the material in this book.
BPP House, Aldine Place, London W12 8AA

Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
www.bpp.com/learningmedia
124

F6 Revision Notes PDF

Uploaded by

Copyright:

Available Formats

F6 Revision Notes PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

F6 Revision Notes PDF

Uploaded by

Copyright:

Available Formats

ACCA

Taxation (TX – UK)

 Skills bank (in these notes)

 Knowledge bank (in these notes)

 Question and answer bank

The examination and syllabus aims

90% Numerical 10% Discussion

40% Knowledge 60% Application

The computer-based exam (CBE)

The paper-based exam (PBE)

Format of the Exam Marks

Time pressure warning

Section C questions Other questions

This section explains and demonstrates the key skills

Key skills required to pass

Skill 1 – Effective reading and planning time at the start of the

Skill 3 – Tackling objective test case questions

Skill 5 – Knowledge of the syllabus

How have the syllabus learning outcomes been examined?

Purpose Tax avoidance and

Structure of UK Sources of revenue law and

Interaction with other tax

How have the syllabus learning outcomes been examined?

Income tax computation Qualifying interest Personal

Savings Tax calculation  Paid net of 20%

Yes Does the individual satisfy any

UK resident Non UK resident

Automatic overseas tests

How have the syllabus learning outcomes been examined?

Employment is a 'contract of  Received in tax year

How have the syllabus learning outcomes been examined?

Taxable benefits – general Taxable benefits – special

 Cost to employer  See next page

Exempt benefits PAYE system

 Canteen (available to all)

(1) General rule (Marginal) cost

(2) Living accommodation Job related: Exempt

(4) Credit cards Cost of goods/services obtained

(5) Use of employer's assets

(7) Company car Starts @ 18%  List Price

(No benefit if private use is only for home to work commute)

(9) Car fuel £22,600  CO2%

(10) Beneficial loans ORI  Average loan

(11) Free/subsidised canteen Tax free if available to all employees

(12) Medical insurance Cost to employer

(14) Reimbursed expenses Not taxable

(15) Allowances Taxable but allowable deduction is available if necessarily incurred

How have the syllabus learning outcomes been examined?

Personal schemes Annual allowance (AA)

 £40,000 since 2014/15. If the AA is

Occupational schemes Lifetime allowance

 Deduct employee contributions from  Maximum value of fund is £1m

How have the syllabus learning outcomes been examined?

Property income Furnished holiday Lease premiums

Accruals basis Deductions Loss relief

How have the syllabus learning outcomes been examined?

Badges of trade Adjustments of profits Pre-trading Cash basis for small

In the exam you will be asked to begin

How have the syllabus learning outcomes been examined?