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Paper F6
Taxation (UK)
FA 2014
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ACCA Passcards
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Fundamentals Paper F6
Taxation FA 2014
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Published by
Printed in the United Kingdom
BPP Learning Media Ltd, by Ricoh UK Ltd
BPP House, Aldine Place, Unit 2
142144 Uxbridge Road, Wells Place
Merstham, RH1 3LG
London W12 8AA
www.bpp.com/learningmedia
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Contents
Welcome to BPP Learning Media's ACCA Passcards for Fundamentals Paper F6 Taxation (UK).
They save you time. Important topics are summarised for you.
They incorporate diagrams to kick start your memory.
They follow the overall structure of the BPP Learning Media Study Texts, but BPP Learning Media's
ACCA Passcards are not just a condensed book. Each card has been separately designed for clear
presentation. Topics are self contained and can be grasped visually.
ACCA Passcards are still just the right size for pockets, briefcases and bags.
ACCA Passcards focus on the exam you will be facing.
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Run through the complete set of Passcards as often as you can during your final revision period. The day
before the exam, try to go through the Passcards again! You will then be well on your way to passing your
exams.
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Good luck!
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Page
1
Employment income
Pensions
Property income
Capital allowances
10
57
11
Trading losses
61
17
23
27
35
41
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45
51
Contents
(000)ACF6PC13_FP_UK.qxp
Page
12
65
13
69
14
73
15
16
Business reliefs
87
17
93
18
97
19
Inheritance tax
105
20
115
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21
22
23
Losses
24
Groups
Page
123
127
135
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Page
25
143
26
An introduction to VAT
147
27
157
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139
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Contents
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Notes
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Page 1
Topic List
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Economic factors
Different types
of taxes
Principal sources of
revenue law and practice
Tax avoidance
and tax evasion
Taxation represents a withdrawal from the UK economy. Tax policies can be used to encourage and
discourage certain types of activity.
Encourages
Saving
Charitable donations
Entrepreneurs
Investment in plant and machinery
Discourages
Smoking
Alcohol
Motoring
Environmental factors
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Social factors
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Tax avoidance
and tax evasion
Individuals
Partnerships
Corporation tax
Companies
Individuals
Partnerships
Companies (in the form of corporation tax)
Inheritance tax
Individuals
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Indirect
taxes
Principal sources of
revenue law and practice
Income tax
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Direct
taxes
Different types
of taxes
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Different types
of taxes
Principal sources of
revenue law and practice
Tax avoidance
and tax evasion
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Law
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Statute
Statutory instrument
Practice
Statements of practice
Extra-statutory concessions
Explanatory leaflets
Revenue and Customs Brief
Internal Guidance (HMRC manuals)
Working Together
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European Union
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Exchange of information
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Tax evasion
Different types
of taxes
Principal sources of
revenue law and practice
Tax avoidance
and tax evasion
Tax avoidance
Suppressing information, or
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Illegal
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Legal
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Tax arrangements involve obtaining a tax advantage as (one of) their main
purpose(s)
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Different types
of taxes
Principal sources of
revenue law and practice
Tax avoidance
and tax evasion
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Avoid 'tipping-off' the client
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Topic List
Scope of income tax
Deductible interest
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Chargeable/Exempt income
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Computing
taxable income
Chargeable/
Exempt income
Deductible
interest
(002)ACF6PC13_CH02.qxp
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Only home in UK
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Computing
taxable income
Chargeable/
Exempt income
Deductible
interest
Taxable income
Aggregation of income
Net income
Tax liability
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Tax payable
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Restrict if adjusted
net income > 100,000
by 1 for each 2 excess
(nil if > 120,000).
Restrict if adjusted
net income > 27,000
by 1 for each 2 excess
to minimum 10,000
(unless income > 100,000, then
restrict as for standard allowance)
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Types of income
Property income
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Chargeable/
Exempt income
Deductible
interest
Exempt income
Computing
taxable income
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Computing
taxable income
Chargeable/
Exempt income
Deductible interest
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Deductible
interest
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Notes
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Topic List
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Gift aid
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Gift aid
Child benefit
charge
Jointly held
property
Broadly interest
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Computing
income tax
Child benefit
charge
Gift aid
Gift aid donations are charitable gifts of money which qualify for tax relief.
Donor must make a gift aid declaration to the charity.
Basic rate
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Jointly held
property
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Gift aid
Child benefit
charge
Child benefit is paid to individual who cares for at least one child
Usually paid to mother and exempt from tax
Charge reclaims child benefit received by taxpayer or partner
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Jointly held
property
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Gift aid
Child benefit
charge
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Jointly held
property
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Notes
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4: Employment income
Topic List
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Allowable deductions
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Basis of assessment
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Employed or self-employed
Basis
of assessment
Factors
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Allowable
deductions
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Employment income
Basis
of assessment
Allowable
deductions
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Basis
of assessment
Allowable
deductions
(004)ACF6PC13_CH04.qxp
Exam focus
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Topic List
Taxable benefits
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Exempt benefits
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Non-cash benefits
Exempt
benefits
Vouchers
Cash vouchers
Credit token
Non-cash vouchers
Taxable on all employees (cost of providing benefit)
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The PAYE
system
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Accommodation
Living expenses
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Including
excluded
employees
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Vans
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Loans
Exempt
benefits
The PAYE
system
Cars
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Only taxed on
P11D employees
Annual taxable benefit for the private use of a car is (price of car
capital contributions) %.
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Other benefits
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Exempt benefits
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Loans of up to 10,000
Entertainment and gifts provided by a third party for an employee
by reason of his employment
Long service awards of up to 50 per year of service
Job related accommodation
Workplace nurseries
Other childcare provided by employer
Recreational/sporting facilities available to employees generally
Works buses and mini-buses
Bicycles provided for cycling to work
Parking places at or near work
Exempt
benefits
The PAYE
system
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Exempt
benefits
The PAYE
system
(005)ACF6PC13_CH05.qxp
The PAYE system collects tax from employees each payday, with the intention that over a tax year, the correct total of tax due
will be collected.
Payment
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The employer must pay over the tax and NIC deducted
up to the 5th of each month by the 22nd of that month if
electronic payment (19th if by cheque).
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Forms
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6: Pensions
Topic List
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Contributions to
pension schemes
Pension Schemes
Employees only
All individuals
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Defined Benefits
Pension based on
earnings and
length of service
Money Purchase
No guarantee of amount
of pension. Investments
are used to 'build up' fund
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Annual limit
Lifetime allowance
Relevant earnings
3,600 pa
Annual allowance
Employer contributions
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Contributions to
pension schemes
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Occupational
pension
Contributions to
pension schemes
Personal
pension
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25% if excess
taken as pension
55% if excess
taken as lump sum
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Taxable annual
pension (usually)
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Pension fund
at retirement
Contributions to
pension schemes
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6: Pensions
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Notes
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7: Property income
Topic List
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Computation
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Property income
Computation
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Exception
For furnished residential lettings, a 10% wear
and tear allowance can be claimed.
Capital allowances are not available.
Exception
Keep a separate pool of profits/losses from
letting furnished holiday lettings.
Losses
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On a commercial basis
Available for letting for 210 days in the tax year
Actually let for 105 days in the tax year
Not in longer term occupation for more than 155 days during the tax year
Rent-a-room scheme
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7: Property income
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Notes
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Topic List
Badges of trade
Cash basis of accounting
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Badges of trade
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The adjustment
of profits
Cash basis of
accounting
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The adjustment
of profits
Cash basis of
accounting
Certain items of expenditure are not deductible for trading income purposes and so must be added back to the
net accounts profit when computing trading profits. Conversely other items are deductible.
Deductible expenditure
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Non-deductible expenditure
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The adjustment
of profits
Cash basis of
accounting
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Cash basis of
accounting
The adjustment
of profits
Cash received
Expenses paid
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Election required
less
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Includes
capital
expenditure
on P&M
(except cars)
Profit
Loss
Taxable
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The adjustment
of profits
Cash basis of
accounting
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9: Capital allowances
Topic List
What is plant?
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Special assets
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Allowances on
plant and machinery
Special
assets
There are two sources of the rules on what qualifies as plant and is therefore eligible for capital allowances.
Statute
Case law
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Statutory exclusions
The following items are excluded as plant by statute.
Buildings and parts of buildings
However, utility systems provided to meet the
particular requirements of the trade, lifts, alarm
systems and several other items can be plant
Structures, with some exceptions: dry docks and
pipelines
Land
Statutory inclusions
Computer software qualifies as plant by statute.
Machinery
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Allowances on
plant and machinery
Special
assets
Deduct lower of
(i) Disposal proceeds
(ii) Original cost
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9: Capital allowances
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Allowances on
plant and machinery
Special
assets
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9: Capital allowances
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Special
assets
Allowances on
plant and machinery
(009)ACF6PC13_CH09.qxp
Not cars
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Topic List
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Commencement
Cessation
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Opening years
1
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Basis period
Overlap profits
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Cessation
Tax year
Commencement
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Commencement
Cessation
Final year
The basis period for the final year starts at the end of the basis period for the previous year and ends at cessation.
Any overlap profits are deducted from the final year's profits.
Example
Brenda has been carrying on a sole trade for many years preparing accounts to 30 April each year. She closes down
her business on 30 September 2014. The results of her final two periods of trading are:
24,000
5,000
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The final year is 2014/15 and the basis period for this year runs from 1 May 2013 to 30 September 2014. She can
deduct the overlap profits. Her taxable trading income for 2014/15 is therefore (24,000 + 5,000 10,000) = 19,000.
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Notes
(010)ACF6PC13_CH10.qxp
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Topic List
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(011)ACF6PC13_CH11.qxp
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Set against
general income
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Set against
general income
Example
Partial claims are not allowed: the whole loss must be set
off, if there is income (or, if chosen, gains) to absorb it in
the chosen tax year.
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Exam focus
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Opening years
Set against
general income
Closing years
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Computation of loss
(011)ACF6PC13_CH11.qxp
Relief is given in
the latest year first
(LIFO)
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Losses
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(012)ACF6PC13_CH12.qxp
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Losses
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Losses
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Losses
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Notes
(012)ACF6PC13_CH12.qxp
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Topic List
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CLASS 1
Primary
CLASS 1A
Secondary
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Employment allowance
reduction up to 2,000
per employer for tax year
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(013)ACF6PC13_CH13.qxp
Exam focus
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Class 2
Class 4
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Exam focus
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Notes
(013)ACF6PC13_CH13.qxp
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You may find that the basic topics in this chapter are
tested in Section A and you should also be prepared to
answer a Section B question containing a number of
disposals of chargeable assets.
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Basic
computation
Losses
The charge to
CGT for individuals
Spouses and
civil partners
Part
disposals
Damage, loss
or destruction
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Cars
Some chattels (eg racehorses)
Gilts
QCBs
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Basic
computation
Losses
X
(X)
__
X
__
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Gain
Spouses and
civil partners
Part
disposals
Damage, loss
or destruction
Computation
Proceeds
Less: Cost
The charge to
CGT for individuals
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Include:
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Basic
computation
Losses
The charge to
CGT for individuals
Spouses and
civil partners
Part
disposals
Damage, loss
or destruction
Deduct allowable capital losses from gains in the tax year in which they arise (before deducting the annual
exempt amount).
Any loss which cannot be set off
is carried forward to set against
future gains.
Example
ca
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(014)ACF6PC13_CH14.qxp
10/24/2014
2:50 AM
Page 77
Basic
computation
Losses
Spouses and
civil partners
Part
disposals
Damage, loss
or destruction
Deduct the annual CGT exempt amount of 11,000 (2014/15) to compute an individual's taxable gains.
from gains not qualifying for
entrepreneurs' relief first
Rates
taxable income and
gains qualifying for
entrepreneurs' relief
deducted first
remember to increase
limit by gross gift aid
donations/personal
pension contributions
Page 77
ca
stu
dy
ma
ter
ial
.
(014)ACF6PC13_CH14.qxp
2:50 AM
Page 78
dy
ma
ter
ial
.
10/24/2014
Basic
computation
Losses
The charge to
CGT for individuals
Spouses and
civil partners
Part
disposals
Damage, loss
or destruction
Disposals between spouses and civil partners do not give rise to gains or losses.
ca
stu
When the second spouse/civil partner sells the asset, assume that he/she bought the asset for its original cost.
(014)ACF6PC13_CH14.qxp
10/24/2014
2:50 AM
Page 79
Basic
computation
Losses
Part disposals
The charge to
CGT for individuals
Page 79
ca
stu
Spouses and
civil partners
Part
disposals
Example
Damage, loss
or destruction
dy
ma
ter
ial
.
(014)ACF6PC13_CH14.qxp
Proceeds
18,000
Less: Incidental costs of disposal
(1,000)
_____
17,000
Less:
18,000
18,000 + 36,000
30,000
(10,000)
______
7,000
_____
_____
2:50 AM
Page 80
dy
ma
ter
ial
.
10/24/2014
Basic
computation
Losses
Damage
The charge to
CGT for individuals
Spouses and
civil partners
Part
disposals
Damage, loss
or destruction
Loss or destruction
If all the proceeds are applied for the replacement of the asset
within 12 months, any gain can be deducted from the cost of
the replacement asset.
stu
ca
(014)ACF6PC13_CH14.qxp
10/24/2014
2:50 AM
Page 81
dy
ma
ter
ial
.
(015)ACF6PC13_CH15.qxp
Chattels
ca
Private residences
stu
Wasting assets
2:50 AM
Page 82
dy
ma
ter
ial
.
10/24/2014
Chattels
ca
Private
residences
Wasting chattels
stu
Wasting
assets
(015)ACF6PC13_CH15.qxp
10/24/2014
2:50 AM
Page 83
Chattels
Wasting asset
Private
residences
Example
Page 83
ca
stu
Proceeds
30,000
Less: Cost (10,000 25/40)
(6,250)
______
Gain
23,750
______
______
Exception
dy
ma
ter
ial
.
(015)ACF6PC13_CH15.qxp
2:50 AM
Page 84
dy
ma
ter
ial
.
10/24/2014
Wasting
assets
Private
residences
stu
Period of occupation
Gain
Total period of ownership
Absences of up to three
years for any reason
Absences while employed
abroad
Absences of up to four
years while working
elsewhere
Exam focus
Draw up a table of periods present or absent, exempt months and chargeable months. Check
that the total of exempt and chargeable months is correct, to avoid making mistakes.
ca
These periods
must normally
be preceded
and followed
by a period of
actual
occupation
(015)ACF6PC13_CH15.qxp
10/24/2014
2:50 AM
Page 85
Business use
When part of residence is used exclusively for business purposes, that part of gain is
taxable. Last 18 months exemption does not apply.
Permitted area
Letting exemption
1 40,000
stu
Page 85
ca
dy
ma
ter
ial
.
(015)ACF6PC13_CH15.qxp
2:50 AM
Page 86
dy
ma
ter
ial
.
10/24/2014
ca
stu
Notes
(015)ACF6PC13_CH15.qxp
10/24/2014
2:49 AM
Page 87
Topic List
Entrepreneurs' relief
ca
Gift relief
stu
Rollover relief
dy
ma
ter
ial
.
(016)ACF6PC13_CH16.qxp
2:49 AM
Page 88
dy
ma
ter
ial
.
10/24/2014
Entrepreneurs' relief
Rollover
relief
Gift
relief
ca
stu
Business assets
(016)ACF6PC13_CH16.qxp
10/24/2014
2:49 AM
Page 89
Exam focus
ca
Page 89
Gift
relief
Eligible assets
stu
Rollover
relief
dy
ma
ter
ial
.
(016)ACF6PC13_CH16.qxp
2:49 AM
Page 90
dy
ma
ter
ial
.
10/24/2014
ca
stu
Rollover
relief
Gift
relief
(016)ACF6PC13_CH16.qxp
10/24/2014
2:49 AM
Page 91
Gift relief
Qualifying assets
ca
stu
Page 91
Gift
relief
Rollover
relief
dy
ma
ter
ial
.
(016)ACF6PC13_CH16.qxp
2:49 AM
Page 92
dy
ma
ter
ial
.
10/24/2014
ca
stu
Notes
(016)ACF6PC13_CH16.qxp
10/24/2014
2:48 AM
Page 93
Topic List
Matching
ca
stu
The computation
dy
ma
ter
ial
.
(017)ACF6PC13_CH17.qxp
2:48 AM
Page 94
dy
ma
ter
ial
.
10/24/2014
The
computation
Alterations of
share capital
The matching rules for shares held by an individual are different to the matching rules for shares held by a
company. Take care not to confuse the two.
ca
stu
Exam focus
(017)ACF6PC13_CH17.qxp
10/24/2014
2:48 AM
Page 95
Matching
The computation
Alterations of
share capital
The cost
Page 95
ca
stu
dy
ma
ter
ial
.
(017)ACF6PC13_CH17.qxp
2:48 AM
Page 96
dy
ma
ter
ial
.
10/24/2014
Alterations of
share capital
Bonus issues
Rights issues
stu
ca
The
computation
(017)ACF6PC13_CH17.qxp
10/24/2014
2:48 AM
Page 97
Returns
Penalties
ca
Payment of tax
stu
dy
ma
ter
ial
.
(018)ACF6PC13_CH18.qxp
2:48 AM
Page 98
dy
ma
ter
ial
.
10/24/2014
Filing date
Records and
appeals
The latest filing date for filing a 2014/15 tax return is:
(1) 31 October 2015 (paper)
(2) 31 January 2016 (electronic)
Payment of tax
Penalties
Compliance checks
ca
stu
(018)ACF6PC13_CH18.qxp
10/24/2014
2:48 AM
Page 99
Records
Records and
appeals
Payment of tax
Penalties
Appeals
Powers
stu
Page 99
ca
dy
ma
ter
ial
.
(018)ACF6PC13_CH18.qxp
2:48 AM
Page 100
dy
ma
ter
ial
.
10/24/2014
Payment of tax
Records and
appeals
Interest
(1) POAs from the normal due dates (31 Jan and 31 July).
(2) Any final payment and CGT from the later of:
(i) 31 January following tax year
(ii) Three months after the notice to file a tax return was issued
ca
Penalties
stu
Payment of tax
(018)ACF6PC13_CH18.qxp
10/24/2014
2:48 AM
Page 101
Records and
appeals
Payment of tax
Penalties
Page 101
ca
stu
dy
ma
ter
ial
.
(018)ACF6PC13_CH18.qxp
2:48 AM
Page 102
dy
ma
ter
ial
.
10/24/2014
Records and
appeals
Payment of tax
Common penalty regime for IT, NICs, PAYE, CGT, CT and VAT
stu
ca
Penalties
(018)ACF6PC13_CH18.qxp
10/24/2014
2:48 AM
Page 103
Page 103
stu
ca
dy
ma
ter
ial
.
(018)ACF6PC13_CH18.qxp
2:48 AM
Page 104
dy
ma
ter
ial
.
10/24/2014
ca
stu
Notes
(018)ACF6PC13_CH18.qxp
10/24/2014
2:48 AM
Page 105
Topic List
Scope/basic principles
Death estate
Exemptions
Payment of IHT
ca
stu
dy
ma
ter
ial
.
(019)ACF6PC13_CH19.qxp
2:48 AM
Page 106
dy
ma
ter
ial
.
10/24/2014
Death
estate
CLTs and
PETs
Transfer of
nil rate band
Exemptions
Payment
of IHT
By individuals
Transfer of value
Lifetime or death
Diminution in value
stu
ca
(019)ACF6PC13_CH19.qxp
10/24/2014
2:48 AM
Page 107
Chargeable transfer
2014/15 325,000
Page 107
stu
ca
Chargeable lifetime
transfer (CLT)
immediate charge to
tax. Gift to trust.
dy
ma
ter
ial
.
(019)ACF6PC13_CH19.qxp
Chargeable
transfer on
death.
2:48 AM
Page 108
dy
ma
ter
ial
.
10/24/2014
Death
estate
CLTs and
PETs
Transfer of
nil rate band
Exemptions
Payment
of IHT
(1) Take into account all chargeable transfers in seven yrs before this
transfer (including PETs which have become chargeable)
stu
(2) Calculate the tax at 40% on excess of the gross CLT over nil rate
band at death
(3) Deduct taper relief if death between threeseven yrs after transfer
Exam focus
(4) Deduct lifetime tax but no repayment if exceeds tapered death tax
ca
(019)ACF6PC13_CH19.qxp
10/24/2014
2:48 AM
Page 109
Tax on death
stu
(1) Take into account all chargeable transfers in seven yrs before this
transfer (including other PETs which have become chargeable)
(2) Calculate tax @ 40% on excess over nil rate band at death
Page 109
ca
(3) Deduct taper relief if death between threeseven yrs after transfer
dy
ma
ter
ial
.
(019)ACF6PC13_CH19.qxp
2:48 AM
Page 110
dy
ma
ter
ial
.
10/24/2014
Death
estate
CLTs and
PETs
Death estate
Transfer of
nil rate band
Exemptions
Payment
of IHT
stu
ca
(019)ACF6PC13_CH19.qxp
10/24/2014
2:48 AM
Page 111
(1) Take into account all transfers in seven years before death
(including PETs which have become chargeable).
Page 111
ca
stu
(2) Calculate the tax at 40% on excess over nil rate band at
death.
dy
ma
ter
ial
.
(019)ACF6PC13_CH19.qxp
2:48 AM
Page 112
dy
ma
ter
ial
.
10/24/2014
Death
estate
CLTs and
PETs
Transfer of
nil rate band
Exemptions
Payment
of IHT
Effect
Claim
stu
ca
(019)ACF6PC13_CH19.qxp
10/24/2014
2:48 AM
Page 113
Death
estate
CLTs and
PETs
Page 113
ca
Spouse/civil partner
Exemptions
Payment
of IHT
stu
Transfer of
nil rate band
dy
ma
ter
ial
.
(019)ACF6PC13_CH19.qxp
2:48 AM
Page 114
dy
ma
ter
ial
.
10/24/2014
Death
estate
CLTs and
PETs
Payment of IHT
Transfer of
nil rate band
Exemptions
Payment
of IHT
Event
Due date
Later of
(1) 30 April just after end of tax year
(2) Six months after end of month of transfer
Trustees
PET
Donee
Death estate
PRs
ca
stu
(019)ACF6PC13_CH19.qxp
10/24/2014
2:51 AM
Page 115
Accounting periods
Residence
Taxable total profits
Loan relationships
ca
stu
dy
ma
ter
ial
.
(020)ACF6PC13_CH20.qxp
2:51 AM
Page 116
dy
ma
ter
ial
.
10/24/2014
Residence
Taxable total
profits
Period of account
Loan
relationships
Long period
of account
Accounting period
An accounting period is the period for which
corporation tax is charged.
stu
ca
(020)ACF6PC13_CH20.qxp
10/24/2014
2:51 AM
Page 117
Residence
Taxable total
profits
Residence
Loan
relationships
Page 117
ca
stu
Long period
of account
dy
ma
ter
ial
.
(020)ACF6PC13_CH20.qxp
2:51 AM
Page 118
dy
ma
ter
ial
.
10/24/2014
Residence
Taxable total
profits
stu
Loan
relationships
Long period
of account
Trading profits
X
Interest income
X
Miscellaneous income
X
Property business income
X
Chargeable gains
X
__
Total profits
X
Less: losses deductible from total profits (X)
Less: qualifying charitable donations
(X)
__
Taxable total profits
X
__
ca
Dividends from other companies (UK and overseas) are not included in taxable total profits.
(020)ACF6PC13_CH20.qxp
10/24/2014
2:51 AM
Page 119
Residence
Trading profits
The computation of trading profits follows
income tax principles.
Loan
relationships
Long period
of account
Proforma
ca
X
__
X
stu
Deduct
Income not taxable as trading income
Expenditure not charged in the
accounts but allowable for tax
Capital allowances
Page 119
Taxable total
profits
X
X
__
dy
ma
ter
ial
.
(020)ACF6PC13_CH20.qxp
(X)
__
X
__
2:51 AM
Page 120
dy
ma
ter
ial
.
10/24/2014
Residence
Taxable total
profits
Loan
relationships
Long period
of account
Loan relationships
ca
stu
(020)ACF6PC13_CH20.qxp
10/24/2014
2:51 AM
Page 121
Residence
Taxable total
profits
Loan
relationships
Long period
of account
Division of profits
ca
stu
Example
dy
ma
ter
ial
.
(020)ACF6PC13_CH20.qxp
2:51 AM
Page 122
dy
ma
ter
ial
.
10/24/2014
ca
stu
Notes
(020)ACF6PC13_CH20.qxp
10/24/2014
2:47 AM
Page 123
Topic List
ca
stu
Associated companies
dy
ma
ter
ial
.
(021)ACF6PC13_CH21.qxp
2:47 AM
Page 124
dy
ma
ter
ial
.
10/24/2014
Rates
Rates of corporation tax (CT) are:
Augmented profits
Associated
companies
ca
stu
Augmented profits are taxable total profits plus the grossed up amount of dividends (FII) received from nonassociated companies.
(021)ACF6PC13_CH21.qxp
10/24/2014
2:47 AM
Page 125
stu
Exam focus
Page 125
ca
dy
ma
ter
ial
.
(021)ACF6PC13_CH21.qxp
2:47 AM
Page 126
dy
ma
ter
ial
.
10/24/2014
ca
stu
Associated
companies
Example
1,500,000
2
= 562,500
(021)ACF6PC13_CH21.qxp
10/24/2014
2:47 AM
Page 127
Topic List
ca
Rollover relief
stu
Disposal of shares
dy
ma
ter
ial
.
(022)ACF6PC13_CH22.qxp
2:47 AM
Page 128
dy
ma
ter
ial
.
10/24/2014
Computation
Compute a gain as follows:
Proceeds
Less: allowable cost
Less: indexation allowance
Chargeable gain
Rollover relief
X
(X)
(X)
__
X
__
Disposal of
shares
(022)ACF6PC13_CH22.qxp
stu
ca
10/24/2014
2:47 AM
Page 129
Disposal of
shares
Page 129
ca
stu
Rollover relief
dy
ma
ter
ial
.
(022)ACF6PC13_CH22.qxp
2:47 AM
Page 130
dy
ma
ter
ial
.
10/24/2014
The cost
Disposal of
shares
Rollover relief
Operative event
stu
ca
(022)ACF6PC13_CH22.qxp
10/24/2014
2:47 AM
Page 131
Page 131
ca
stu
dy
ma
ter
ial
.
(022)ACF6PC13_CH22.qxp
2:47 AM
Page 132
dy
ma
ter
ial
.
10/24/2014
ca
Rollover relief
Eligible assets
stu
Disposal of
shares
(022)ACF6PC13_CH22.qxp
10/24/2014
2:47 AM
Page 133
ca
Page 133
stu
dy
ma
ter
ial
.
(022)ACF6PC13_CH22.qxp
2:47 AM
Page 134
dy
ma
ter
ial
.
10/24/2014
ca
stu
Notes
(022)ACF6PC13_CH22.qxp
10/24/2014
2:47 AM
Page 135
23: Losses
Topic List
Trading losses
ca
stu
Non-trading losses
dy
ma
ter
ial
.
(023)ACF6PC13_CH23.qxp
2:47 AM
Page 136
dy
ma
ter
ial
.
10/24/2014
Trading losses
A company's trading loss may be:
stu
Reliefs (1) and (2) need to be claimed. A company can choose to claim
relief (1) only (ie relief (1) but not relief (2)). However, if relief (2) is to be
claimed, relief (1) must be claimed first. Relief (3) is given automatically to
any loss not relieved under (1) or (2).
ca
Non-trading
losses
(023)ACF6PC13_CH23.qxp
10/24/2014
2:47 AM
Page 137
Cessation of trade
Page 137
ca
stu
dy
ma
ter
ial
.
(023)ACF6PC13_CH23.qxp
23: Losses
2:47 AM
Page 138
dy
ma
ter
ial
.
10/24/2014
Non-trading
losses
Non-trading losses
Capital losses
ca
stu
(023)ACF6PC13_CH23.qxp
10/24/2014
2:47 AM
Page 139
24: Groups
Topic List
Group relief
ca
stu
dy
ma
ter
ial
.
(024)ACF6PC13_CH24.qxp
2:47 AM
Page 140
dy
ma
ter
ial
.
10/24/2014
Capital
gains group
stu
ca
Trading losses
Excess property business losses
Excess qualifying charitable donations
Exam focus
(024)ACF6PC13_CH24.qxp
10/24/2014
2:47 AM
Page 141
dy
ma
ter
ial
.
(024)ACF6PC13_CH24.qxp
Available profits
Page 141
ca
stu
24: Groups
2:47 AM
Page 142
dy
ma
ter
ial
.
10/24/2014
Rollover relief
stu
ca
Capital
gains group
(024)ACF6PC13_CH24.qxp
10/24/2014
2:47 AM
Page 143
Returns
ca
stu
Payment of tax
dy
ma
ter
ial
.
(025)ACF6PC13_CH25.qxp
2:47 AM
Page 144
dy
ma
ter
ial
.
10/24/2014
Returns
Payment
of tax
ca
stu
Compliance checks
(025)ACF6PC13_CH25.qxp
10/24/2014
2:47 AM
Page 145
Due dates
stu
Quarterly instalments
ca
Interest on overdue tax runs from the due date. Overpaid tax earns interest. Interest received and
interest paid are dealt with as credits and debits on a non-trading loan relationship.
Page 145
Payment
of tax
dy
ma
ter
ial
.
(025)ACF6PC13_CH25.qxp
2:47 AM
Page 146
dy
ma
ter
ial
.
10/24/2014
ca
stu
Notes
(025)ACF6PC13_CH25.qxp
10/24/2014
4:08 PM
Page 147
Scope of VAT
Taxable and exempt supplies
Valuation of supplies
Deduction of input tax
ca
stu
Registration
dy
ma
ter
ial
.
(026)ACF6PC13_CH26.qxp
4:08 PM
Page 148
dy
ma
ter
ial
.
10/24/2014
Taxable and
exempt supplies
Registration
Accounting and
administration
Valuation of
supplies
Deduction of
input tax
Gift of goods
Supplies
(026)ACF6PC13_CH26.qxp
ca
stu
10/24/2014
4:08 PM
Page 149
Taxable and
exempt supplies
Zero-rated supplies
Accounting and
administration
Taxable at 0%
Can recover input VAT
Eg food, books and newspapers
Registration
Reduced-rated supplies
ca
Page 149
Deduction of
input tax
Exempt supplies
Not taxable
Cannot recover input VAT
Eg insurance, education and health services
Standard-rated supplies
Taxable at 20%
Can recover input VAT
All supplies which are not zero-rated,
reduced-rated or exempt
stu
Taxable at 5%
Can recover input VAT
Eg fuel for domestic use
Valuation of
supplies
dy
ma
ter
ial
.
(026)ACF6PC13_CH26.qxp
4:08 PM
Page 150
dy
ma
ter
ial
.
10/24/2014
Taxable and
exempt supplies
Compulsory registration
Registration
Accounting and
administration
Valuation of
supplies
Deduction of
input tax
Voluntary registration
Advantages
Increased administration
Penalties if VAT/return is late
Increased cost for non-registered customers
Notification required by
the end of the 30 day
period. Registration takes
effect from the beginning of
that period.
ca
Notification required
within 30 days of the end
of the 12 month period.
Registration takes effect
from the end of the month
following the 12 month
period.
stu
Exam focus
The examiner may favour VAT questions requiring
advice to new traders (should they register, etc).
(026)ACF6PC13_CH26.qxp
10/24/2014
4:08 PM
Page 151
Voluntary deregistration
stu
ca
Page 151
dy
ma
ter
ial
.
(026)ACF6PC13_CH26.qxp
4:08 PM
Page 152
dy
ma
ter
ial
.
10/24/2014
Registration
Group registration
Accounting and
administration
Valuation of
supplies
Improves
cash flow
stu
Reduces VAT
accounting
ca
Scope
of VAT
Deduction of
input tax
(026)ACF6PC13_CH26.qxp
10/24/2014
4:08 PM
Page 153
Taxable and
exempt supplies
VAT period
Registration
Accounting and
administration
Valuation of
supplies
Substantial traders
ca
stu
Page 153
Deduction of
input tax
dy
ma
ter
ial
.
(026)ACF6PC13_CH26.qxp
4:08 PM
Page 154
dy
ma
ter
ial
.
10/24/2014
Taxable and
exempt supplies
Registration
Accounting and
administration
Valuation of
supplies
Administration
Tax point
ca
stu
Deduction of
input tax
(026)ACF6PC13_CH26.qxp
10/24/2014
4:08 PM
Page 155
Registration
Taxable and
exempt supplies
Value of supply
Accounting and
administration
Valuation of
supplies
1
6
Example
Discounts
stu
Page 155
ca
40 (240
Deduction of
input tax
dy
ma
ter
ial
.
(026)ACF6PC13_CH26.qxp
4:08 PM
Page 156
dy
ma
ter
ial
.
10/24/2014
Taxable and
exempt supplies
Registration
Accounting and
administration
Valuation of
supplies
Deduction of
input tax
Non-deductible VAT
Fuel
VAT on:
stu
ca
(026)ACF6PC13_CH26.qxp
10/24/2014
2:47 AM
Page 157
Topic List
VAT invoices and records
Penalties
ca
Special schemes
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Errors
Default surcharge
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Advantages
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