P6 Practice & Revision Notes

ACCA
Advanced Taxation (FAs 2015)

Paper P6
Practice & Revision Notes
For exams in September 2016, December
2016 and March 2017
ISBN: 9781509758104
Blank
Contents
Page
Introduction
How to use the Practice & Revision material
The examination paper and syllabus aims
Analysis of past papers
Skills bank
Appendices
9
161
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 paper. 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 examiner youll learn the unique exam skills required to achieve success in each
paper. Your revision material consists of:
Skills bank (in these notes)

This illustrates the main skills needed to pass this paper. We will teach you how to:
Read the question effectively

Analyse the questions requirements
Manage your time
Produce effective and professional communication
Choose appropriate calculations
Knowledge bank (in these notes)

During the Step 1 phase of your studies (Learning phase) 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.
Question and answer bank

The Practice & Revision Kit contains:
Step 3
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
Rehearse
All your skills need to be applied on the day of the exam to deal with a complete exam paper.
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.
INTRODUCTION
The examination paper and syllabus aims

The examination paper
The examination is a three hour fifteen minute paper and will consist of two sections. Candidates are provided with tax
rates and allowances (given in Appendix B).
60% Numerical
40% Discussion
40% Knowledge
60% Application
Format of the Exam

Section A
Marks
Two compulsory questions. These will be scenario based questions involving the
consideration of a number of taxes. These questions will be broken down into a
number of requirements.
60
Question 1 will be 35 marks including 4 professional skills marks

Question 2 will be 25 marks
Section B
Three questions of 20 marks each. Two only to be answered.
40
Questions will adopt a concise, structured style but may cover more than one tax.
Computations will only be required to support the advice given and no solely
numerical questions will be set.
The whole syllabus is examinable throughout
100
Time pressure warning

Section A
Section B
Aims
The syllabus aims to test the students ability to:
Apply further knowledge and understanding of the UK tax system through the study of more advanced topics
with taxes studied previously and the study of stamp taxes
Identify and evaluate the impact of relevant taxes on various situations and courses of action, including the
interaction of taxes
Provide advice on minimising and/or deferring tax liabilities by the use of standard tax planning measures
Communicate with clients, HM Revenue and Customs and other professionals in an appropriate manner.
INTRODUCTION
Analysis of past papers

This table provides an overview of the syllabus and details of when each element has been examined. Further details
are included in the relevant chapter of the knowledge bank.
June
2012
Dec
2012
June
2013
Dec
2013
June
2014
Dec
2014
June
2015
Sept/Dec
2015
Principles of income tax
Q4
Q2
Q3
Q5
Q1,4,5
Q1
Q3,5
Q1,2,5
Pensions and other tax efficient investment

products
Q4
Q3
Q3
Taxation of individuals
Property and other investment income
Q5
Q5
Q4
Q4
Q4
Q5
Q1,4
Q1
Employment income
Q3,
Q2
Q3,5
Q2
Q3,5
Employment income: additional aspects
Q4
Q1,2
Q5
Q5
Q3
Q5
Q3,4
Q2
Q1
Q4
Q5
Q5
Q1
Q4
Q1,5
Q2
Q3
Q2
Q5
Q1
Q1
Q3
Q4
Q1
Q1
Q1,3
Q4
Q1,5
Q3
Q1,4
Q4
Q3
Q1,3,
4, 5
Trade profits
Capital allowances
Trading losses
Partnerships and limited liability partnerships
Q1
Q1
Q4
Overseas aspects of income tax

Capital taxes
Chargeable gains: an outline
Q1
Q4
Q2
Shares and securities

Chargeable gains: reliefs
Q1,3,5
Q3
Q1
Chargeable gains: additional aspects
Q2,4
Q2
Q4
Q2
Q1,3,5
Q2,4
Self assessment for individuals and

partnerships
Q1
Q4,5
Q1
An introduction to inheritance tax
Q1
Q2,5
Q2
Q1,3
Q1
Q1,3
Q4
Q1,5
Inheritance tax: valuation, reliefs and the

death estate
Q1
Q5
Q2
Q3
Q1
Q3
Q4
Q1
Inheritance tax: additional aspects
Q1
Q5
Q1,3
Q4
Q3
Q1,4
Stamp duty
Q1
Q2
Q2
Taxation of companies
Computing taxable total profits
Chargeable gains for companies
Computing corporation tax payable
Q2,5
Q1
Q2
Q1
Q2,3,5
Administration, winding up, purchase of own

shares
Losses and deficits on non-trading loan
relationships
Q3
Q4
Q2
Q1
Q2
Q2
Q2
Q2,3, 4
Q2
Q2
Q2,3
Q2
Q1
Q2
Q1
Q3
Q2,5
Q2
Q2,5
Q2
Close companies and investment companies

Groups and consortia
Q2
Q1
Q2
Q5
Q2
Q2
Q2
Q3
Q2
Q2
Q2,3
INTRODUCTION
June
2012
Overseas aspects of corporate tax
Dec
2012
June
2013
Q3
Dec
2013
June
2014
Q4
Dec
2014
June
2015
Sept/Dec
2015
Q1
Q1
Q2
Q5
Value added tax

Value added tax (1)
Value added tax (2)
Q4
Q4
Q2
Q1
Q1
Q2,4
Q1,5
Q2
Q3
Q4
Q1,3
Q1
Q1,3
Q1,5
Q1,2
Q1
Q2
Q1
Q1,2
Impact of taxes and tax planning

INTRODUCTION
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 paper.
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Key skills required to pass

Our analysis of the examiners comments on past exams, together with our experience of preparing students for this
type of exam, suggests that to pass Paper P6 you will need to develop a number of key skills.
5 Choosing the
appropriate calculations
to be prepared.
1 Effective reading and

planning to understand
the contents of the
scenario.
2 Accurate analysis
of a questions
requirements.
4 Effective and
professional
communication.
3 Disciplined time
management to
ensure that all parts of
the question and all
questions are
answered in the time.
Each of these key skills is analysed on the following pages, with example(s) from past exam questions of the
importance of these skills and how these skills should be applied.
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Skill 1 Effective reading and planning to understand the

contents of the scenario.
We recommend that you spend time at the beginning of your exam carefully reading through all the questions in the
paper, and each of their requirements. Here are our dos and donts of how to use those vital initial moments:
DOS
It is important to stay positive and not to panic.
One approach you could try is to spend the first 5-10 minutes focussing on the requirements of the three shorter
optional questions in Section B and choosing which two questions you will attempt. These questions are concise in
their format and you should be able to select the two you are strongest at.
ACCA December 2007 examiners comments
Some candidates started with the shorter, optional questions in Section B. This is an approach that all
candidates should at least consider as these questions provide a gentler introduction to the exam than those in
Section A.
At the end of this exercise you will have made some important positive decisions about question choice and should be
feeling more confident and in control.
DONTS
At the start of the exam you will be at your most tense and stressed so it is probably not sensible to plunge straight into
the more difficult questions in the exam. Section A will contain two compulsory questions which will cover 60% of the
marks. These are scenario based questions which are often very involved. Focusing on these two questions in the first
5-10 minutes will often result in a feeling of extreme panic which prevents clear thinking and as a result this time is often
wasted.
You will then also need to think about planning each individual question as you progress through the paper. We
recommend you follow the approach outlined below:
STEP
1
Read the requirements
STEP
2
Read the question slowly highlighting the data
STEP
3
Plan how you are going to tackle this question
See key skill 2 for detailed guidance.
This will ensure you are actively attacking the question i.e. that you are trying to achieve something.
You dont necessarily need to start with part (a) first. Identify if there are any easier parts you should
do first. Also you need to decide which calculations you will need to satisfy the requirement [see skill
5 for detailed guidance].
Further guidance is given on later pages about question analysis, time management, communication and choosing the
appropriate calculations.
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Skill 2 Analysis of a question's requirements

The examiner has stressed again and again the importance of answering the questions requirements.
The examiners comments from the June 2010 exam stated:
ACCA June 2010 examiners comments
Read the requirement carefully then read it again; its important. In the Section A questions you will need to
identify the various tasks from the documents provided; instructions may be provided by both the client and the
manager. It may be helpful to list them out and tick them off as you address them.
The requirement of each question is carefully worded in order to provide you with guidance as regards the style
and content of your answers. You should note the command words (calculate, explain etc), any matters which
are not covered and the precise issues you have been asked to address.
Pay particular attention to the number of marks available this provides you with a clear indication of the
amount of time you should spend on each question part.
1 Be aware of the verbs used in exam questions

You need to be aware of the meaning of the key verbs used by the examiner.
At the professional level you are likely to be tested with the higher level learning verbs such as advise, evaluate,
recommend as opposed to the comprehension and application skills you were tested on at fundamental level.
These verbs require you to use numbers to build a logical argument in response.
For example, in the September 2015 exam Q4(a) gave details of a gift of loan stock by an individual who had acquired it
on a takeover in exchange for some shares. The examiner made the following comments.
ACCA September 2015 examiners comments Q4(a)
It was pleasing to see that a majority of candidates realised that they needed to calculate the cost of the loan
stock by reference to the value of loan stock and shares received in the exchange. However, having done this
few realised that this needed to be used to calculate a gain at that date, and that this would then be frozen until
the later date of disposal of the loan stock. Admittedly this is a difficult area, but many candidates would have
scored higher marks if they had paid more attention to the requirement to Explain the capital gains tax
implications, as well as performing the calculations.
When asked to explain do make sure you develop your point clearly. There is no need to state your point and then
apply it to the scenario. The examiner has commented that better answers are often concise so apply your point straight
to the scenario and if you can make a conclusion or recommendation make sure you do so. If an election is needed
make sure you explain this to your client.
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2 Identify ALL the questions requirements in your answer plan

The requirements of a question often contain a number of sub-requirements. In your answer plan, or on the question
paper, you need to make sure that these sub-requirements are clearly identified. Failure to answer the whole question
is often due to candidates forgetting to address these sub-requirements and is a key reason why people fail this paper.
The examiners comments from June 2010 were:
ACCA June 2010 examiners comments Q1
The most significant issue for weaker candidates was a failure to identify all of the tasks within each question
such that they failed to address all of the available marks. Many candidates would benefit from thinking more
and writing less.
3 Answer the question youve been asked not the question you hoped would
be asked!
There are many times where the examiner cites that students simply seemed to regurgitate knowledge into their answer
without applying it to the scenario or where it simply was not relevant in answering the question. As stated above you
should always re-read the requirement to ensure youre actually answering whats been asked.
For example, the examiners made the following comments about September 2015 paper Q2:
ACCA September 2015 examiners comments Q2
Part (c) concerned the often-tested area of registration for VAT, an area which the vast majority of candidates
are very technically comfortable with. However, all but a handful failed to read the question in sufficient detail,
and provided a very detailed account of the tests applied to determine whether compulsory registration is
required, but this did not address the question and wasted a good deal of time. Where the subject coverage is
very familiar it is particularly important to understand the context in which it is being tested. In this case, the key
issue was recognition that monitoring the level of cash receipts is not relevant, it is the level of taxable supplies,
ie the invoiced value of taxable sales which is relevant.
Skills practice
In each question you attempt you should spend a minute identifying the verb and planning what structure
your answer should have to ensure you really do 'evaluate', 'discuss', 'recommend' etc.
Make sure you list out all the requirements and tick them off as you address them.
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Skill 3 Time management

In this paper your ability to manage your time is very important. Failure to attempt all the required questions or
complete the questions will often result in a fail simply because not enough marks were attempted to achieve the
required pass mark.
There were many very good scripts and it is pleasing to note that the vast majority of candidates attempted all of
the parts of four questions.
1 Planning your time

At the planning stage you should write on to your exam paper the amount of time that you will spend. This will be
determined by the mark allocation; 195 minutes equates to 1.95 minutes per mark.
For example, in the June 2015 exam Q1 had the following requirement for 35 marks:
Please prepare paragraphs for inclusion in a letter from me to Jodie addressing the following issues.
(a)
UK tax residence status and liability to UK income tax Assuming Jodie leaves the UK in accordance
with her plans, explain how her residence status for the tax year 2016/17 will be determined and
conclude on her likely residence status for that year. To help, I have already concluded that Jodie will not
be regarded as non-UK resident using the automatic overseas tests so there is no need to consider
these tests. State how becoming non-UK resident will affect Jodies liability to UK income tax.
(b)
Relief available in respect of the trading loss Calculate the income tax relief which Jodie would obtain if
she were to claim terminal loss relief in respect of her trading loss. You should not consider any other
ways in which the loss could be relieved. There is no need to calculate Jodies tax liabilities for each of
the years concerned; just calculate the tax which will be saved due to the offset of the loss and explain
how you have determined this figure.
(c)
Capital gains tax Assuming that Jodie becomes non-UK resident from 6 April 2016 and does not return
to the UK for at least four tax years: explain how this will affect her liability to UK capital gains tax in the
tax year 2016/17 and future years, and in 2015/16 (the tax year prior to departure); and calculate her
capital gains tax liability for the tax year 2015/16. You should include explanations of the chargeable
gains which have arisen or may arise in that year and the tax rate(s) which will be charged.
(d)
Other matters Explain how leaving the UK will affect the UK inheritance tax liability on any gifts Jodie
may make in the future. Explain the matters which Jodie should be aware of in relation to VAT in
respect of the cessation of her business. I have already checked that Jodie charged the correct amount
of VAT when she sold the business premises and the computer equipment.
Required:
Prepare the paragraphs for inclusion in a letter from your manager to Jodie as requested in the email from your
manager. The following marks are available:
(a)
(b)
(c)
(d)
UK tax residence status and liability to UK income tax.

Relief available in respect of the trading loss.
Capital gains tax.
Other matters.
(7 marks)
(8 marks)
(11 marks)
(5 marks)
Professional marks will be awarded for following the managers instructions, the clarity of the explanations and
calculations, the effectiveness with which the information is communicated, and the overall presentation.
(4 marks)
(35 marks)
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For 35 marks you will allocate 1.95 x 35 = 68 minutes. This will not be easy as this is a third of the exam and you still
have three other questions to answer.
In addition to maximise your chances of getting most of the 35 marks you need to ensure you answer all parts of the
requirements. To achieve this you should further break down your 68 minutes into how long you should spend on each
part. For example part (c) should take 21 minutes.
You can permit yourself a small overrun in time but no more than 5 minutes; you must remember that there will always
be other requirements within a question that also need to be attempted and often other questions still to complete.
2 Handling time pressure in numerical aspects of questions

To avoid time overruns in the numerical parts of a question you need to practice:
(a)
(b)
Concentrating on all the easy marks

Making a reasonable approach at the harder calculations
For example, in the December 2007 exam Q1(a)(i) in ACCAs marking guide the easy marks were available for:
Marks
Computing taxable income
Annual exempt amount
4.5
0.5
5.0
Competent treatment of these easier areas would have secured a clear pass for this section.
One of the harder areas in this question was calculating the gain on the shares following a takeover. This however
was only worth 3 marks but as it appeared to be the first item that needed tackling it would have caused many
candidates to waste valuable time struggling to calculate the answer.
So, concentrate on what you can do in the time available and dont be too concerned if you cant do everything
no-one else will be able to either!
3 Using your time effectively in the discussion aspects of questions

This is a practical exam so you will often be asked to advise a taxpayer what the tax implications are. You need to
make sure your advice is to the point and relevant. Therefore think about what the taxpayer needs to know. This is
often simply how much tax they need to pay and when. They rarely need to be told everything you happen to know
about a particular rule.
For example in Q3(a) of December 2010:
Explain whether or not Victoria and/or Melba satisfy the conditions
relating to period of ownership and reduction in level of shareholding such
that the amount received from Trifles Ltd on the purchase of own shares may
be treated as capital.
(6 marks)
To successfully answer this question you needed to focus on the words satisfy the conditions relating to the period of
ownership and reduction in level of shareholding and restrict your answer to these areas and not list all the conditions
necessary for the capital method.
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Note the following examiners comments from the December 2010 exam:
ACCA December 2010 examiners comments Q3(a)
Many candidates answered this part well but others with similar knowledge levels did not perform well because
they failed to answer the question. Rather than addressing the two particular conditions set out in the question,
this latter group attempted to address all of the conditions despite the majority of them being irrelevant.
The examiner has advised that candidates answers should be concise and to the point LESS IS BEST
A briefly made point should score 1 mark; if that same point is explained in a whole page it may only score 2 marks, and
will take a lot of your time. So we recommend you use short punchy paragraphs as you develop your answer.
Skills practice
Every time you make a point think
Think whether my point is relevant
Write my point
Apply it to the scenario so that my point clearly and concisely relates to the taxpayer in the question
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Skill 4 Effective and professional communication

1 Professional skills
In Section A of this paper, Question 1 will contain 4 marks for professional skills. The examiners comments on the June
2010 exam, provided the following insight into how to gain these marks:
In order to earn these marks candidates first had to satisfy the requirement in relation to the format of the
document requested. Further marks were then available for providing clear explanations, coherent calculations
and the ease with which the meeting notes could have been used in a meeting. On the whole the performance
of candidates in this area was good with the majority producing well structured documents in a style that was
easy to follow.
2 Effective presentation of answer

Question 1 in Section A will require your answer to be presented in a particular format. You therefore need to organise
your answer accordingly.
Here is the layout you should use if asked for a report.
Report format
Report
To:
Management of Hutt plc
From
Tax advisers
Date:
1 June 2016
Subject: Acquisition of Lucia Ltd

Introduction
The purchase price
VAT issues
The Office building
Conclusion
If asked for a memorandum adopt the same format. The main difference between memos and reports is one of
formality.
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For example in Q2 December 2007 paper:
Prepare
Prepare schedules required by Kara

(a)
Tax adjusted trading profit/loss of the new business (Aral)

for its first three trading periods
(b)
The tax relief available in respect of the anticipated

trading losses, together with supporting calculations and a
recommended structure for the business
(c)
Explanatory notes, together with relevant supporting

calculations, in connection with the loan.
Your answer needed to be split into three distinct headings

1.
Tax adjusted profits/(losses)
2.
Tax relief for the trading losses; further split into relief available if a sole trader and then relief available if a
company
3.
Tax implications in respect of loan
The examiners comments were:

ACCA December 2007 examiners comments Q2
Candidates were asked to produce three distinct schedules which should have had appropriate headings taken
from the requirement, sadly many failed to do so.
In September 2015 Q2 students were required to make a comparison of the tax implications of a company being
acquired by an individual as opposed to by another company. The examiners comments once again underline the
importance of presentation of your answers:
ACCA September 2015 examiners comments Q2
Candidates who did well had a good knowledge of the subject, adopted a sensible, logical approach and
addressed all of the issues briefly, as instructed in the question. Weaker candidates fell down in at least one of
these areas.
The adoption of a logical approach in this sort of question requiring a comparison of two alternatives can save
considerable confusion and avoid wasting time due to needless repetition. Candidates should pause and think
before they start writing. Dealing fully with the implications of one of the alternatives first, and then the other,
tended to provide a much clearer answer than those who adopted a less logical approach, apparently writing
points as they occurred to them, without making it clear which alternative they were dealing with, constantly
swapping between the two, and leading to a confusing answer.
Candidates should avoid repetition, including making the same point from different angles. An example in this
case would be where a candidate has stated that if the company is acquired by another company, they would
form a group for group relief purposes. Stating separately at a later point that if acquired by an individual there
will not be a group for group relief purposes, scored no additional marks.
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SKILLS BANK
Here is a step by step approach on how to structure such an answer.
STEP
1
Do appendix first
STEP
2
Set up required format
STEP
3
Include an introduction and conclusion
STEP
4
Use headings in your answer
This will enable you to carry out any calculations you will need.
Make sure the tone is formal and business like. Use the names of the characters from the scenario
but never use you own name. A.N. Accountant is a good name to use for yourself if necessary.
However, make sure both are short and concise. Your introduction should simply reiterate the
questions requirements. Your conclusion should simply sum up your advice and should never include
new material.
For the body of your answer utilise headings to give your answer structure but also to ensure you are
covering all aspects of the requirement. This will also make marking your answer easier for the
markers.
Skills practice
A useful exercise is to practice any Section A question. Compare your attempted answer with the
solution in the Practice and Revision Kit and ensure that you have followed the above step by step
approach.
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Skill 5 Choosing appropriate calculations

You are expected to do more in this exam then just calculate standard tax liabilities. You will need to determine which
calculations are needed to answer the question set. The examiner wants you to apply your tax rules to the particular
scenario given in the question. This will mean thinking carefully about what is relevant to the scenario given and
deciding which calculations are necessary to achieve the required solution.
For example in December 2007 Q1 (a) (i)
"Calculations to support the amount of external finance required. You
should state any assumptions you have made in preparing the calculations.
(9 marks)"
To achieve this end the solution required a series of calculations to be performed:

1.
Chargeable gains on the disposal of shares and loan stock
2.
Calculation of capital gains tax payable
3.
Determination of amount of external finance

Candidates performed well, but many did not know how to use the information and went on to calculate the
income tax due or tried to use the income to fund the establishment of the business.
For example in Q2 of December 2007 candidates were asked to calculate the tax relief available for the anticipated
trading losses if the business was run as a sole trader or as a company.
In order to calculate the potential tax relief it was necessary to determine the taxpayers income tax liability for
the years in which loss relief was available. Candidates had no problems calculating the income but were
unsure how to proceed from there. In particular there was a lack of thought with many candidates performing
calculations for all years rather than recognising that the income was the same in each year such that only one
calculation was necessary.
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In Question 4 (a) of December 2007

With the objective of minimising the total after tax cost, advise Coral as
to whether the gross pension contributions of 9,000 should be made:
Wholly by Reef Ltd; or
By Coral to the extent that they are tax allowable with the balance
made by Reef Ltd
Your answer should include supporting calculations where necessary.

(9 marks)"
To answer this question effectively required careful thought.

If paid by Reef the contribution would have simply saved corporation tax as there were no NIC liabilities and it is an
exempt benefit for the employee.
If paid partly by both the contribution paid by Coral would save 20% but would be limited to her UK earnings as dividend
and rental income do not count as relevant earnings.
Neither of these calculations was difficult but candidates needed to think clearly and carefully what was needed.
ACCA December 2007 examiner's comments Q4 (a)
Many candidates demonstrated poor knowledge of the tax treatment of pension contributions and consequently
did not score well. Others took the opportunity to explain the tax aspect of pension contributions in a general
manner rather than attempting to satisfy the particular requirements of the question.
In September 2015 Q1 students were asked to calculate the after tax value of an inheritance received by an individual.
While this had not previously been examined students should have been well versed in questions asking for after tax
proceeds from a sale of an asset and so should have been able to use this skill to work out an after tax value of the
inheritance. Students need to make sure that they think clearly before they dive into calculations to work out the starting
point to produce the information requested:
ACCA September 2015 examiner's comments Q1
Questions at P6 frequently ask for a calculation of after-tax proceeds here, the amount receivable by the sole
beneficiary of the estate. Candidates need to think more carefully about the starting point for this type of
calculation. Here, it wasnt the value of the chargeable estate, as this includes a deduction for the nil rate band.
Candidates needed to identify the actual value which would be received prior to making this deduction. Failure
to identify the correct starting point is a common error.
Skills practice
Practice questions from previous papers to familiarise yourselves with the examiners style. Before
undertaking any calculations think about what is needed and whether that particular calculation will get
you to the end solution. Review your attempted answer with the suggested solutions to assess if this was
correct.
22
How have the syllabus learning outcomes been examined?

Syllabus Guide detailed outcomes
Exam question reference in P&R kit
Remember the material already studied in F6 Taxation

under the heading 'computation of taxable income and
income tax liability' and use of exemptions and reliefs in
deferring and minimising income tax liabilities.
Calisia (6/11)
Faure (6/11)
Tetra (6/12)
Dana (12/12)
Shuttelle (6/13)
Monisha And Horner (12/13)
Ziti (6/14)
Kesme And Soba (6/14)
Bamburg Ltd (6/14)
Kantar (12/14)
Nocturne (6/15)
Cate (6/15)
Jonny (2H/15)
Christina (2H/15)
Stella and Maris (2H/15)
Advise on the income tax position of the income of minor

children.
John and Maureen Robinson (6/08)
Advise on the tax implications of jointly held assets.
Monisha and Horner (12/13)
23
Types of income
Personal Allowances
Exempt income
Income from national
savings certificates
Statutory redundancy
pay
Winnings
Income from
investments through
ISAs
24
PA is 10,600
Restricted if ANI more than 100,000, restriction = (ANI 100,000)
No PA if ANI is 121,200 or more
Can transfer 1,060 between spouses/civil partners (basic rate taxpayers only)
giving tax reducer at 20%
Non savings
Savings
Dividends
Tax @
20%/40%/45%
Tax @
0%/20%/40%/45%
Tax @
10%/32.5%/37.5%
Income tax computation
1.1
Savings
income
Dividend
Income
Income from o/seas securities
Bank interest received ( 100/80)

Dividends received ( 100/90)
UK property income
Total income
Less qualifying interest
Net income (NI)
Less PA
Taxable income
Trading income
Employment income
1.2
Non-savings
income
X
X
X
X
X
(X)
(X)
(X)
X
X
(X)
X
bal (X)
X
X
(X)
X
bal (X)
X
Adjusted net income (ANI) is net income less gross personal pension contributions (and gross gift aid
donations but these not in P6 syllabus).
25
26
Pensions and other tax efficient

investment products

Remember the material covered at F6 Taxation:
Dokham (6/10)
explain and compute the relief given for contributions to

personal pension schemes and to occupational pension
schemes.
Tetra (6/12)
Understand and apply the rules relating to investments in

the enterprise investment scheme and seed enterprise
investment scheme.
Capstan (6/11)
Understand and apply the rules relating to investments in

venture capital trusts.
Tetra (6/12)
Shutelle (6/13)
Pescara (12/13)
27
Pensions
Types
Tax relief
Maximum contribution
attracting tax relief is higher of
3,600
Relevant earnings
Personal schemes
Pay net of 20% income
tax and if HR/AR taxpayer
increase basic rate and
additional rate limits by
gross contribution
Occupational schemes
Deduct from salary before
applying PAYE (net pay
arrangement)
Personal
Any individual
28
Occupational
Company schemes
Final salary
Money purchase
Limit on contributions
40,000 for 2015/16

and 2014/15.
Previously 50,000
If annual allowance is
not fully used it can
be carried forward for
3 years.
If gross contributions
exceed limit, there is
an annual allowance
charge.
Lifetime allowance
Maximum value of
fund is 1,250,000
Tax excess on
retirement at 25%
(if used to provide
pension income)
and 55% (if taken as
lump sum)
Tax efficient investment products
Conditions
Maximum subscription
1,000,000
Keep three years
Can't be connected employee/director or
own > 30% of shares.
Cannot own other
shares in company
other than EIS/SEIS.
Gross asset 15m
before, 16m after
Unquoted trading cos
<250 employees
Not raised >5m via
EIS/SEIS/VCTin last
12m nor >12m in co
lifetime
Be no more than 7 yrs
old or, if >7 yrs old,
must have raised qual
funds in first 7 yrs
Excluded trades
VCT
SEIS
EIS
Tax reliefs
IT relief @ 30%
(claw back if sell
shares < 3 yrs)
CGT exempt
(losses
allowable)
provided keep
shares > 3 yrs
Deferral relief
any asset
12m before
36m after
Tax reliefs
For very small unquoted

trading companies
Assets not exceeding
200,000 before issue
with fewer than 25 full
time equivalent
employees carrying on
a new trade.
Lifetime cap of 12m
investment in
EIS/SEIS/VCT schemes
IT reducer 50%,
maximum investment
100,000 (claw back if
sell shares < 3 yrs)
SEIS reinvestment relief
exempts up to 50% of a
gain on any asset if
SEIS shares bought
Conditions
Maximum subscription
200,000
Quoted investment
trusts
Tax reliefs
IT relief @ 30%
(claw back if sell
shares < 5 yrs)
CGT exempt (no
min holding
period)
Dividend income
tax free
29
Pensions
Lecture Example 1
Diana has earnings of 85,500 in 2015/16. She made a contribution of 48,000 (net) into her personal pension. She
has no other income.
She has 5,000 unused annual allowance bought forward.
Required
Compute Diana's income tax liability for 2015/16.
Solution
30
Property and other investment income

Remember the material already studied in F6 Taxation

under 'property and investment income'.
Calisia (6/11)
Kesme and Soba (6/14)
Hyssop Ltd (2H/15)
Recognise income subject to the accrued income

scheme.
Understand the income tax position of trust beneficiaries.

Poblano (6/10)
King (6/15)
31
Property income
UK property business
Accruals basis
Deductions
Incidental
expenses
(including
interest)
10% wear and
tear allowance
(net rent) if
furnished or
renewals basis
FHL
Lease premiums
Commercial let in EEA

Available for 210 days
pa
Let for 105 days pa
Not more than 155
days involve long term
occupation (one
person stays >31
days)
Relevant earnings for
pensions
CGT reliefs ie ROR,
gift relief,
entrepreneurs' relief
On grants of short lease

( 50 years)
Premium
P
Less 2% (n-1)
P
(X)
Rental
assessment
X
n = no. of years of
lease
Trader gets trading
profit deduction
(spread over lease
term)
Rent a room
Exempt if gross rents

4,250. (If gross
rents exceed 4,250
either assessed on:
Normal rental
income or
Excess over
4,250 (no
deduction for
expenses)
Other investment income
Accrued income scheme

Sell 'cum' interest
Seller assessed on
accrued interest to date of
sale
Buyer entitled to relief
against interest received
equal to amount
assessable on seller
32
Trust income
Income from
discretionary trust is
received net of 45%
and is treated as non savings income
Income from interest in
possession trusts is
paid net of 20%, if paid
out of trust's non
savings income or
trust's savings income
and net of 10%, if paid
out of trust's dividend
income
Employment income

Remember the material covered in F6 Taxation under

the headings 'income from employment' and 'national
insurance'.
Faure (6/11)
Hail (12/11)
Morice(12/11)
Jerome (6/12)
Dana (12/12)
Shuttelle (6/13)
Spike (6/13)
Spetz Ltd group (12/13)
Pita plc (6/14)
Bamburg Ltd (6/14)
Cate and Ravi (6/15)
Jonny (2H/15)
Hyssop Ltd (2H/15)
Identify personal service companies and advise on the

tax consequences of providing services via a personal
service company.
Robusto Ltd (12/10)
33
Employment income
Types of income
Salary
Bonus, tips
Pensions
Benefits
Personal service
companies
See page 36
Basis of assessment
Cash received
34
Benefits
Allowable deductions
Company pension scheme
contributions
Fees and subscriptions to
professional bodies
Statutory mileage allowance
deductions
Qualifying travel expenses
Payroll deduction scheme
Other expenses wholly,
exclusively and necessarily
incurred in performance of
duties
Apply where individual would

be employee of Top company
but for Intermediary co (use
employed vs self-employed
rules to determine).
Treat payments from Top co to
Intermediary (relevant
engagements) as deemed
salary to extent income is not
actually paid as salary.
Proforma
Income from relevant engagements
Less 5% statutory deduction
Less salary/benefits paid to worker
Less employer's NIC on actual
payments
Less expenses allowable under
employment income
Gross amount of deemed payment
Employer's NIC on gross deemed
payment
13.8
G
113.8
Actual deemed payment to
individual
PAYE/employee's NI applied to
D above
X
(X)
(X)
(X)
(X)
G
(X)
NIC
Class 1A
Class 1
Employer
13.8% benefits
Primary
Employee
Cash earnings
over 8,060
12% (8,060 42,385)
2% (above
42,385)
Secondary
Employer
Cash earnings
over 8,112
13.8% (above
8,112)
No upper limit
Employment
allowance
max 2,000
35
Benefits
Type
Accommodation
(a)
(b)
Rule
If job related
If not job related
Living expenses
(a)
If job related
(b)
Cost of providing,
limited to 10% of net earnings.
If not job related
Cost of providing
Goods received on credit cards
Cost of goods and

services obtained
Use of employers assets
20% of original value or rental cost, if higher
Assets given to employees
Cost
OR if used first
HIGHER of
the MV on date given; and
the MV on date of provision

less benefits assessed
Less any price paid by employee
Beneficial loans
Interest at official rate

Ignore loans < 10,000
Calculate using average method or strict
method
Loans written-off
Amount written-off
Medical insurance
Cost of providing
Use of car
36
Nil
Higher of annual value; or
Rent actually paid by employer
Additional charge if cost of accommodation
is > 75,000. (Cost 75,000) official
rate of interest
Max 37% list price

Min 14% list price
Starts @ 14%
Builds up by 1% for every 5g of carbon
dioxide emitted per kilometre in excess of
95g/km
Diesel cars have 3% supplement added to
benefit. Minimum 17%, but max % still 37%
Lower emission cars use 5%/9%/13% (see
tables) increased by 3% for diesel cars
Car fuel for private motoring
22,100 %
Company vans
3,150 if private use

Additional benefit of 594 if private fuel provided
Tax free benefits
On site childcare
Car parking
Staff canteen available to all
Relocation expenses (max 8,000)
Staff suggestion scheme (max 5,000)
150 per head Christmas Party
One mobile phone
Recommended medical treatment up to 500 per employee per tax year
37
38
Employment income additional

aspects

Advise on the tax treatment of share option and share

incentive schemes including employee shareholder
shares
Dokham (6/10)
Morice (12/11)
Flame plc Group (12/12)
Spike (6/13)
Pita plc (6/14)
Klubb plc (12/14)
Advise on the tax treatment of lump sum receipts

(on termination of employment).
Tetra (6/12)
Dana (12/12)
Pita plc (6/14)
Klubb plc (12/14)
39
Termination payments
Exempt
Taxable
Partially taxable
For death, injury and

disability
pay
Approved lump sum on
retirement
Reward for past/future

services
Pay in lieu of notice
IT and NIC
Genuine compensation
for loss of office
30,000 exempt
pay uses up 30,000
IT no NIC
Share schemes
Schedule 2
Share incentive
plan (SIP)
All employees (full
or part time)
Free shares up to
3,600 pa
Buy partnership
shares up to
1,800 from gross
salary.
Matching shares
can be given
max 2 for every
partnership share
Held for 5 years +
no IT/NIC
Held 3-5 years
IT/NIC on lower of
value at award or
value at
withdrawal
Held <3 years
IT/NIC on value at
withdrawal
40
Schedule 3
Savings related
schemes (SAYE)
All employees
5min/500 max
per month
Max discount @
grant = 20% of MV
of shares
No IT on exercise
CGT on sale
3 or 5 years
contributions
Employee
shareholder
shares
Employee receives
shares worth at least
2,000 in exchange
for giving up some
employment rights
First 2,000 of
shares are tax free.
Any shares in excess
of 2,000 are subject
to income tax (and
NIC)
Any gain on the first
50,000 in value is
exempt (losses not
allowable)
Schedule 5
Enterprise
management
incentives (EMI)
Max of 250,000
options per
employee (max
3m in total)
EIS/VCT type
companies gross
assets <30m,
<250 full time
employees
Key employees
must be full time:
25 hours per week
and <30% of
shares
No IT/NIC at
exercise unless
issued at discount
when charged at
MV at grant minus
exercise price
CGT on sale
Schedule 4
Share option
plans
Selected employees
No discount @
grant of option
Value of shares
over which
employee holds
options = max
30,000
Exercisable
between 3-10 years
from grant
No tax on exercise
CGT on sale
Trade profits

Remember the contents of F6 Taxation under the

headings 'income from self-employment' and 'national
insurance'.
Faure (6/11)
Mirtoon (12/11)
Jerome (6/12)
Dana (12/12)
Ziti (6/14)
Jonny (2H/15)
Advice on change of accounting date
Piquet and Buraco (12/14)
41
Trade profits
Badges of trade
Adjustment to profit
Net profit
Add back: disallowable
expenditure
Deduct: income not taxable/
assessable elsewhere
Deduct: capital allowances
Trading income
Subject matter
Frequency of transactions
Length of ownership
Reason for sale
Profit motive
Supplementary work
CYB
Tax accounting
period ending in
fiscal year
Commencement
1st tax year date of assessment 5 April
2nd tax year Is there an AP ending in Yr 2
Yes
How long is it?
< 12 mths
42
Tax actual
6 April 5 April
12mths
Tax first Tax 12 mths

12 mths to A/c date
3rd tax yr
No
CYB generally
3rd tax yr
Basis of assessment
X
X
(X)
(X)
X
Cessation
Penultimate CYB
Last what is left
less overlap relief
Change of
accounting date
Steps
Establish year of change (ie first tax
year where CYB isn't possible)
Fiscal year before 12 mths to old
accounting date
Fiscal year following 12 mths to
new accounting date
For year of change GAP equals
the assessment
If gap >12 mths assess all profits
of gap get relief for any overlap
profits to reduce gap to 12 mths
If gap < 12 mths assess all profits
of gap and some months from
previous year creates overlap
profits to make up 12 months
NIC
Class 2
Flat rate 2.80 p/w
Class 4
9% of profits between 8,060 and
42,385
2% above 42,385
Profits = trading profits less loss relief
43
Opening and closing trades
Lecture Example 1
Denise started to trade on 1 January 2013. Her profits since then are as follows:
6 months to 30.6.13
Y/e 30.6.14
Y/e 30.6.15
Y/e 30.6.16
6 months to 31.12.16
She ceases to trade on 31 December 2016.
Required
Calculate the trading profit assessments for all relevant years.
Solution
44
10,000
25,000
30,000
15,000
5,000
Change of accounting date
Lecture Example 2
Mona has always made up accounts to 30 June until changing her accounting date to 30 April. Her results are:
Y/e 30.6.14
y/e 30.4.16
45,000
21,600
54,000
Required
What are Mona's assessments for 2014/15, 2015/16 and 2016/17?
Solution
45
46
Capital allowances


the heading 'income from self employment'.

Simone (6/09)
Liza (6/13)
FL Partnership (12/13)
Ziti (6/14)
Bamburg Ltd (6/14)
Bond Ltd Group (12/14)
Nocturne Ltd (6/15)
Advise on the allocation of the annual investment

allowance between related businesses.
Sank Ltd and Kurt Ltd (6/12)

Identify the enhanced capital allowances in respect of

expenditure on green technologies.
47
Capital expenditure
Function vs setting
Fulfils a function in trade
Part of setting in which

trade is carried on
P&M
Not P&M
FYA/ECA
100%
Low emission
cars/energy saving
plant
AIA
8%/18% WDA
No allowances
First 500,000
on P&M
(not cars)
Cars
based on CO2 emissions
48
75g/km
76-130g/km
>130g/km
100% FYA
Main pool
18% WDA
Special rate
pool
8% WDA
Continue to depool if private use by sole trader/partner.
Plant and machinery
Annual investment allowance
Short-life assets
Election on asset by asset basis

'Depools' asset
Allows BA/BC on sale
Once 9 WDAs claimed, reverts to main pool
Not for cars
Special rate pool
Related businesses entitled to one AIA between them

Businesses are related if carried on or controlled by same individual/partnership and either
engaged in same activity or share same premises
Businesses allocate AIA between them as they think fit
Consider nature of expenditure, rates of tax payable by each business and whether AIA would
create loss
Expected working life > 25 years, plant and machinery integral to a building and cars acquired
with CO2 emissions > 130g/km
WDA @ 8%
Disclaiming capital allowances
Can be disclaimed in part/full

To reduce losses and avoid wasting PAs
To avoid balancing charges
49
50
Trading losses

Remember the material already covered in F6 Taxation

under the heading 'income from self employment'.
Desiree (6/10)
Faure (6/11)
Mirtoon(12/11)
Dana (12/12)
Spike (6/13)
Kantar (12/14)
Jodie (6/15)
Jonny (2H/15)
Establish the relief for capital losses on shares in

unquoted trading companies.
Capstan (6/11)
Advise on the relief available for trading losses following

the transfer of a business to a company
51
Trading losses
Loss relief against

general income
Against
general
income of
year of loss
+/or
preceding
year
All or nothing
Claim by 1 yr
10 mths (31
Jan + 1 yr)
after end of tax
year of loss
Maximum
higher of
50,000
25% of total
income
Share loss relief

against general
income
Carry forward
relief
Carry forward
against first
available profits
from same trade
Automatic, no
claim required
Loss relief against

capital gains
Extension of loss
relief against
general income
Claim loss relief
against general
income for the
current year first
Extended to capital
gains
Max set off net
gains less capital
losses b/f
Capital losses on EIS

shares can be offset
vs NI of year of loss
+/or preceding year
Maximum higher of
50,000
25% of total income
Trade transferred
to company
Early year loss

relief
Losses in first four
tax years
Carry-back against
NI of three years
preceding
FIFO basis
All or nothing
Claim by 1 yr 10
months after end of
tax year of loss
c/fwd vs
employment
income/dividends/
interest received
from company
Need 80% of
consideration in
form of shares
Terminal
loss relief
Maximum higher of
Loss in last 12 months of trade
50,000
Set vs trading profits of final tax
25% of total
income
year and three years before
(LIFO)
Calculation of terminal loss
Last tax year
Trading loss
Overlap relief
X
X
X
Penultimate tax year (part falling

within 12 m of cessation)
Unrelieved trade loss
X
(if profit ignore)
Terminal loss
X
52
Partnerships and limited liability

partnerships


under the heading 'income from self-employment'.
Simone (6/09)
Faure (6/11)
Tetra (6/12)
53
Partnerships
Allocation rules for

profits/losses
Split profits using PSR
for AP
Watch
salary/interest on
capital
Watch change in
agreement
Losses split in same
way
Each partner
makes own loss
claim
54
Limited liability
partnerships
Taxed in virtually the
same way as normal
partnerships
New partnerships
commencing
Changes in partnership
personnel
Split profits/losses
using arrangement
during AP
Profit assessed on
opening year rules
Loss options
Loss relief against
general income
Carry forward loss
relief
Early year loss relief
Remaining partners
Continue on CYB
New partners
Apply opening year
rules to profit share
Early year loss relief
Outgoing partners
Apply closing year
rules to profit share
Deduct overlap profits
Terminal loss relief
Overseas aspects of income tax

Explain and apply the concepts of residence and

domicile and advise on the relevance to income tax.
Sushi (12/10)
Mirtoon (12/11)
Shuttelle (6/13)
Jodie (6/15)
Advise of the availability of the remittance basis to UK

resident individuals.
Shuttelle (6/13)
Advise on the tax position of individuals coming to and

leaving the UK.
Mirtoon (12/11)
Determine the income tax treatment of overseas income.

Jodie (6/15)
Sushi (12/10)
Mirtoon (12/11)
Shuttelle (6/13)
Understand the relevance of the OECD model double

tax treaty to given situations.
Calculate and advise on the double taxation relief
available to individuals.
Grifter (12/09)
Boson (12/08)
Advise on the overseas aspects of income from

employment including travelling and subsistence
expenses.
Mirtoon (12/11)
Recognise the tax treatment of overseas trade travelling

expenses.
55
Overseas aspects of
income tax
Status and effect
Residence
Statutory test see
page 57
DTR
Lower of
Foreign tax suffered
UK IT on foreign source
UK tax is the difference
between
UK tax before DTR on
all income including
foreign
UK tax on all income
except foreign income
Effect
Domicile
Permanent home
UK income
(i) Non resident
(ii) R but
NON D
(iii) R, D
Basis of assessment
56
Foreign
income
X
remittance
arising
R, D arising basis allocate as normal

R, ND remittance basis all overseas
income NSI
Remittance basis
Remittance basis is automatic if unremitted
overseas income and gains are less than
2,000 otherwise it must be claimed
If R for 7 out of last 9 years will need to:
pay 30,000 annual change and
be liable to UK tax on remitted foreign
income and gains
No UK personal allowance or UK annual
exempt amount
If R for 12 out of last 14 tax years annual
charge increased to 60,000 or if 17 out of
last 20 years to 90,000
Otherwise liable to UK tax on all foreign
income and foreign gains but receive UK
personal allowance and UK annual exempt
amount
Definitions
Residence
1.1
Statutory test of residence used to determine an individuals residence.

Does the individual satisfy
any of the automatic
overseas tests?
Yes
No
Yes
Does the individual satisfy

any of the automatic
UK tests?
No
Yes
Does he satisfy the sufficient

ties test?
UK resident
No
Non resident
Automatic overseas tests

1.2
The following will automatically be treated as not UK resident:
A person who is in the UK for less than 16 days during a tax year and who has been UK resident for one
or more of the previous three tax years
A person who is in the UK for less than 46 days during a tax year and who has not been resident during
the previous three tax years
A person who works full time overseas subject to them not being in the UK for more than 90 days during
a tax year.
Automatic UK tests
1.3
The following will automatically be treated as UK resident:
A person who is in the UK for 183 days or more during a tax year
A person who is in the UK for 30 days in the tax year and whose only home is in the UK
A person who carries out full time work in the UK during a 365 day period some of which fall within the
tax year.
57
Sufficient ties tests

1.4
58
If a persons residence cannot be determined by any of the automatic tests their status will be determined by the
number of ties they have with the UK. There are five ties:
Having close family (spouse/civil partner or minor child) in the UK
Having a house in the UK which is available for at least 91 days in the tax year and is made use of
during the tax year
Doing substantive work in the UK where 40 days or more is viewed as substantive
Being in the UK for more than 90 days during either of the two previous tax years
Spending more time in the UK than in any other country in the tax year.
Remittance basis
Lecture Example 1
Matt has been resident in the UK for the last 8 years but he is not UK domiciled.
He received the following income and gains in 2015/16:
UK trading income
Foreign trading income
UK gains
Foreign gains
75,000
20,000
10,000
30,000
Matt has remitted 10,000 foreign income and 15,000 foreign gains to the UK in 2015/16.
Required:
Should Matt claim the remittance basis for 2015/16 or not?
Solution
59
Double tax relief
Lecture Example 2
Dylan has UK trading income of 31,000 for 2015/16. He is resident and domiciled in the UK.
He also received rental income from a property in Italy of 12,000 (gross of 35% tax).
Required
Compute Dylan's income tax payable for 2015/16.
Solution
60
Chargeable gains: an outline


the headings 'scope of taxation of capital gains', 'basic
principles of computing gains and losses' and 'the
computation of capital gains tax payable by individuals'.
Capstan (6/11)
Mirtoon (12/11)
Una (6/12)
Brad (6/13)
FL Partnership(12/13)
Pescara (12/13)
Monisha And Horner (12/13)
Ziti (6/14)
Kantar (12/14)
King (6/15)
Advise on the impact of dates of disposal and conditional

contracts.
Evaluate the use of capital losses in the year of death.
Cada (12/14)
Determine the tax implications of independent taxation

and transfers between spouses.

Identify the occasions when a capital gain would arise on

a partner in a partnership.
Identify connected persons for capital gains tax purposes
and advise on the tax implications of transfers between
connected persons.
Advise on the tax implications of a part disposal

including small part disposals of land.
Ash (12/12)
Kantar (12/14)
61
Chargeable gains
Chargeable persons,
disposals and assets
Capital losses
CGT payable on gains
Set AE against gains not qualifying for ER first

Gains qualifying for ER taxed @ 10%
Gains qualifying for ER use up BRB first
Other gains taxed @ 18% within BRB
(extended by gross PPCs) and @ 28%
thereafter
Valuing quoted shares
Value at lower price plus onehalf of the difference between

the two prices
To connected persons
Proceeds deemed to be OMV
Losses can only be used vs
gains on sales to same person
Connected persons for CGT
are:
Direct relatives
Business relationships
62
Current year losses offset

vs current year gains in full,
against gains not qualifying
for ER first
Losses b/f can be
restricted to preserve
annual exempt amount
Computing gain or loss
Part disposals
Transfers
allowable cost
A B
where A = gross proceeds
B = MV of remaining asset
Small part disposal of land (elect)
Proceeds < 20% value of land
predisposal
Proceeds all land sales in year
< 20,000
Deduct proceeds from cost of
land
Use
Between spouses/civil
partners
Transfers assets @ NG/NL
By partnerships
Apportion gain/loss using
capital profit sharing ratio


under the heading 'gains and losses on the disposal of
shares and securities'.
Pescara (12/13)
Extend the explanation of the treatment of rights issues

to include the small part disposal rules applicable to
rights issues.
Define a qualifying corporate bond (QCB) and
understand what makes a corporate bond non-qualifying.
Understand the CGT implications of the disposal of
QCBs in exchange for cash or shares.
Capstan (6/11)
Apply the rules relating to reorganisations,

reconstructions and amalgamations and advise on the
most tax efficient options available in given
circumstances.
Capstan (6/11)
Banger Ltd and Candle Ltd (12/12)
63
Shares and
securities
Takeovers/reorganisations
Matching rules
Same day
Next 30 days (FIFO)
Share pool
Bonus and rights issues

Bonus issue treat as acquired
on same date as underlying
shares
Rights issue as per bonus issue
except cost treated as
enhancement expenditure
Sale of rights nil paid treat as
part disposal
A
use
A B
where A = proceeds from sale of
rights
B = MV of shares retained
If proceeds are less than the
higher of 3,000 or 5% of the
value of the shareholding at the
time of sale, no gain arises.
Instead proceeds are deducted
from cost (automatic but can
choose to use part disposal
instead)
64
Paper for paper exchange no disposal.

Assume new holding acquired on same date
and for same amount as old holding
Cash element treat as part disposal using
A
AB
where A = cash element and
B = MV of non cash element ie MV at
date of takeover
If QCBs given in exchange. Gain arises on
shares using proceeds as MV at takeover.
Gain is deferred until QCB is sold.
If the cash element is less than the higher of
3,000 or 5% of the total holding post
takeover no gain arises. Instead proceeds
are deducted from cost (automatic but can
choose to use part disposal instead)
Gilts and QCBs

Exempt
Takeovers/reorganisations
Lecture Example 1
Roddy buys 1,000 Smith plc ordinary shares for 20,000 on 15 January 2015. On 28 August 2015 the company is taken
over by Jones plc. Roddy receives 8 Jones ordinary shares and 4 cash for each Smith share held. The value of Jones'
ordinary shares on 28 August 2015 are 2.40.
Required
Show the acquisition cost of the Jones shares and Roddys gain on the cash element received as a result of the
takeover.
Solution
65
66
Chargeable gains: reliefs


under the heading 'use of exemptions and reliefs in
deferring and minimising tax liabilities arising on the
disposal of capital assets'.
Capstan (6/11)
Mirtoon (12/11)
Una (6/12)
Dana (12/12)
Brad (6/13)
Ziti (6/14)
Bamburg Ltd (6/14)
Jodie (6/15)
Christiana (2H/15)
Hyssop Ltd (2H/15)
Advise on the availability of entrepreneurs relief in

relation to associated disposals.
Calisia (6/11)
Understand and apply the relief that is available on the

transfer of an unincorporated business to a limited
company.
Understand and apply enterprise investment scheme

reinvestment relief.
Pescara (12/13)
Ash (12/12)
Advise on the CGT implications of transfers of property

into trust.
Understand and apply seed enterprise investment
scheme reinvestment relief.
Understand the CGT implications of the variation of wills.
Cada (12/14)
67
Reliefs
Entrepreneurs' relief
Gift relief
EIS reinvestment relief
10% tax rate

First 10m of qualifying gains
Lifetime limit
Qualifying gains are disposals
of:
Sole trader
Partnership interest
Furnished holiday lettings
Shares in trading company
where individual has 5%
shareholding and is
employee of company
Goodwill: restriction if disposal
to close company by related
party
Business run or shares owned
for one year prior to disposal
Available on associated
disposals ie sells one of the
above and at the same time
sells a separate asset that has
SEIS reinvestment relief

Gain on any chargeable asset
Invest in SEIS shares
Maximum exemption lower of
50% of gain invested in SEIS
shares (up to maximum of 50%
of 100,000)
Amount specified
Relief withdrawn or reduced if shares
sold within 3 years
68
Disposal @ MV (ignore any

proceeds)
Donee must be UK R
Qualifying assets
Business asset
Unquoted shares
Quoted shares in personal
trading Co( 5%)
Gifts immediately chargeable
to IHT eg gifts into a
discretionary trust or exits
from discretionary trust
Sale at undervalue
Excess of proceeds over cost
is taxed immediately
Joint claim
CBA/CA if shares in personal
company
ER may be claimed for gain left
in charge
Replacement of business
asset relief
Old and new asset must be used in
taxpayer's trade
Qualifying assets
Land and buildings
Fixed plant and machinery
Goodwill
Timing of replacement
12 months before 3 years after
disposal
Any proceeds not reinvested = taxable
immediately
Depreciating assets
Short (<60 yr) lease, fixed P&M
Gain 'held' over until earlier of
Sale of new asset
Date new asset not used in trade
10 years after new asset was
acquired
'Hold over' gain
Gain on any chargeable asset

Invest in EIS shares
Maximum deferred = lower of
Amount subscribed for the shares
Amount specified by taxpayer
Freeze gain until:
Shares sold
Shares cease to be eligible for
relief
taxpayer becomes NR within 3
years of issue of shares
Deferred gain will qualify for ER when
crystallises if original gain qualified for
ER
Same reinvestment period as for
replacement of business asset relief
Incorporation
relief
Gain deferred =
MV of shares
received
Gain X
MV of total consideration
All assets (except cash) must be
transferred
Transfer of a going concern
Deferred gain reduces base cost of
shares
Automatic (can elect to disapply)
ER may be claimed for gain left in
charge
ROLL-OVER
RELIEF
ENTREPRENEURS'
RELIEF
GIFT
RELIEF
WHAT
disposals
qualify?
Land & building

Goodwill
Fixed P&M used
in trade
All of business
(but restriction on
goodwill)
Shares:
Trading co
5%
Employee
Associated
disposals
Gifts immediately
chargeable to IHT
Business assets
Shares:
Trading co
Unquoted or 5%
Trader
transferring
business to a
limited co
(Automatic)
HOW
does it work?
Gain deferred to
extent proceeds are
reinvested
Tax rate 10%

(lifetime limit 10m)
Full deferral for outright

gifts.
Deferred gain = net

gains
Restriction:
share consideration
total consideration
Shares in personal
CBA
co.
CA
INCORPORATION
RELIEF
Consideration
received
WHERE
Replacement
asset
Gain on disposal
Non depreciating:
Depreciating:
Reduces base cost of

replacement
Crystallises on earlier
of
10 years
Cease to use
replacement asset
Disposal of
replacement asset
Reduces base cost of

gifted asset for donee.
Reduces base cost

of shares in co
69
Entrepreneurs relief
Lecture Example 1
Larry sets up a business on 1 January 2005. He sells the business on 17 July 2015 for 940,000.
On 17 July 2015 the business was valued as follows:
Factory
Rental property
Net current assets
Market value
625,000
275,000
40,000
940,000
Cost
275,000
67,500
31,500
344,000
Required
Calculate Larry's capital gains tax liability for 2015/16. He has not made any previous claims for entrepreneurs' relief
and has no other chargeable assets. Larrys taxable income is 10,000 in 2015/16.
Solution
70
Gift relief
Lecture Example 2
Jack gave his 40% holding in Sheaf Ltd, a trading company to his son on 1 August 2015, when the market value was
240,000. The shares had cost 120,000 on 31 March 1988. Jack had never been an employee of Sheaf Ltd.
The assets of Sheaf Ltd comprised the following at the date of the gift.
Freehold property
Leasehold property
Quoted investments
Plant (cost and proceeds < 6,000)
Net current liabilities
270,000
130,000
20,000
50,000
(40,000)
430,000
Required
Assuming a gift relief claim is made, what is the chargeable gain arising on Jack and his son if his son sold the shares
on 1 September 2016 for 260,000?
Solution
71
Replacement of business asset relief
Lecture Example 3
Christopher buys a business asset for 47,000 on 1 October 1999 and sells it for 70,000 on 1 August 2015.
He buys a replacement business asset on 1 October 2015 for 65,000.
Required
Calculate Christopher's chargeable gain and the base cost of the replacement asset.
Solution
72
Incorporation relief
Lecture Example 4
Tony Shaw commenced trading in August 2001. On 20 August 2015 he transferred his business to a newly formed
company in exchange for 10,000 ordinary 1 shares in the company and 50,000 in cash.
The asset and liabilities transferred were:
Freehold buildings
Goodwill
Stock
Other net current assets
Cost
11,000
Nil
3,000
3,900
17,900
MV @
20.8.15
60,000
50,000
6,000
4,000
120,000
Required
Compute the gain and the base cost of the shares received.
Solution
73
EIS reinvestment relief
Lecture Example 5
Robert made a gain of 196,000 on the disposal of a property in 2015/16.
He subscribed for some shares in a company which qualified under the EIS rules.
The shares cost 200,000 if Robert has no other chargeable gains in 2015/16 and has a capital loss b/f of 24,000?
Required
How much should Robert claim to defer.
Solution
74
Chargeable gains: additional aspects


under the headings 'scope of the taxation of capital
gains' and 'gains and losses on the disposal of moveable
and immovable property'.
Sakura (12/10)
Identify the concepts of residence and domicile and

determine their relevance to CGT.
Mirtoon (12/11)
Mirtoon (12/11)
Nocturne Ltd (6/15)
Brad (6/13)
Jodie (6/15)
Determine the UK taxation of foreign gains, including

double taxation relief.
Mirtoon (12/11)
Conclude on the CGT position of individuals coming to

and leaving the UK.
Mirtoon (12/11)

Brad (6/13)
Jodie (6/15)
Advise on the availability of the remittance basis to nonUK domiciled individuals.
Capstan (6/11)
Advise on the UK taxation of gains on the disposal of UK

residential property owned by non-residents.
Advise of the CGT implications of transfers of property
into trust.
Surfe (12/11)
Advise on the CGT implications of property passing

absolutely from a trust to a beneficiary.
Surfe (12/11)
Determine the gain on the disposal of leases and

wasting assets.
Ash (12/12)
Establish the tax effect of capital sums received in

respect of the loss, damage or destruction of an asset.
Sakura (12/10)
Advise on the tax effect of making negligible value

claims.
Cada (12/14)
King (6/15)
75
CGT additional aspects
Chattels and wasting assets
Wasting chattels are exempt

except for plant and
machinery qualifying for
capital allowances
Any loss on sale of P&M
Take NG/NL
Any gain chargeable in full
Principal private residence

PPR relief = gain
period of occupation
period of ownership
Leases
Assignment of long lease (> 50 yrs)
Normal computation
Assignment of short lease ( 50
yrs)
Cost is depreciated using lease
depreciation tables
Occupation = actual + 'deemed'

occupation
Last 18 months of ownership always
treated as deemed occupation
(provided some actual occupation
beforehand)
If preceded and followed by actual
occupation include the following:
(1) Up to 3 years for any reason
(2) Any period when employed
overseas
(3) Up to 4 years if required to live
elsewhere in UK due to work
(includes self employment)
Business use PPR withdrawn
proportionately
Letting relief lower of:
PPR relief
40,000
Gain arising in let period
More than one residence
Elect to choose PPR
Negligible value claims

Claim to treat asset as sold and
immediately reacquired @ value stated in
claim to create allowable loss
76
CGT additional aspects
Trusts
Overseas aspects
See page 78
Compensation for loss,

damage, destruction
Disposal @ MV
Gift relief available as transfer
subject to immediate IHT charge
Destroyed assets
Insurance money received will normally be
chargeable to CGT
If proceeds are used in replacement of asset within
twelve months, gain can be deducted from cost of
replacement asset
For each 1 of proceeds not reinvested, 1 of gain
remains immediately chargeable
Damaged assets
Normally treat as part disposal. Use A/A+B where:
A = compensation received
B = unrestored value of asset
Can elect to deduct compensation from cost of asset
if
95% of sum is used in restoring asset
Capital sum is < higher of 5% of asset value/3k
If above isn't satisfied taxpayer can elect for amount
used in restoration to be deducted from cost. The
balance will be treated as part disposal
77
Overseas aspects
Resident?
Yes
NO
Gains not taxable
(unless disposing of
UK residential
property or
temporary absence
rules)
Gains potentially taxable

Domiciled?
NO
UK gains + foreign gains if
proceed remitted
Yes
Worldwide gains
Remittance basis, if individual resident for 7 out of last 9 tax years can choose:
Pay 30,000 annual tax charge and pay UK tax on remitted foreign income and gains
or
Pay tax on all foreign income and gains
If resident in the UK for 12 out of the last 14 tax years the remittance basis charge is increased to 60,000 or
17 out of last 20 years 90,000.
If claim for remittance basis then no annual exempt amount.
Foreign losses relief automatically available unless individual claimed the remittance basis when they need
to elect to claim relief
UK residential property disposal by non-UK resident after 6/4/15 is chargeable gain/allowable loss. PPR
relief may apply.
Temporary absence, if UK R leaves UK for < 5 complete years:
78
Gains made in year of departure taxed in that year

Gains made subsequently chargeable in tax year of return (unless on UK residential property already
taxed)
Leases
Lecture Example 1
J acquired a 25 year lease on 1 July 1995 for 20,000. He sold it on 31 March 2016 for 32,000.
Required
What is J's gain?
Lease percentages
25 years
5 years
4 years
81.10
26.722
21.983
Solution
79
Principal private residence
Lecture Example 2
Gary makes a gain of 64,000 on the disposal of his house on 10 August 2015 which he has owned for ten years. The
house was owner-occupied in the first year, let as residential accommodation for the next six years and thereafter
unoccupied.
Required
Calculate Gary's chargeable gain.
Solution
80
Self-assessment for individuals and

partnerships

Determine when CGT can be paid by instalments and

evaluate when this could be advantageous to taxpayers.
Una (6/12)

under the headings:
Ava (12/09)
'Systems for self-assessment and making-up returns'
Ash (12/12)
'The time limits for submission of information, claims and

payment of tax including payments on account'
Cuthbert (12/12)
Cuthbert (12/12)
Sakura (12/10)
Kantar (12/14)
'The procedures relating to compliance checks, appeals

and disputes; and
'Penalties for non-compliance'
Advise on the increased penalties which apply in relation
to offshore matters.
81
Self-assessment
Notification of chargeability
By 5 October following end of year
of assessment
Compliance checks
HMRC must give notice by
First anniversary from date return submitted
Returns and penalties
82
By 31 October following end of tax year if paper return

By 31 January following year of assessment for
electronically submitted returns
Penalties for late return
0 to 3mths 100
3 to 6 mths 100 + 10 daily penalty (max 90
days)
6 to 12mths 100 + 10 daily penalty (max 90
days) + greater of 5% of tax liability and 300
12mths 100 + 10 daily penalty (max 90
days) + greater of 5% of tax liability and 300 +
greater of 5 100% of tax liability (conduct
related) and 300
Penalties for late payment of tax
Interest runs from due date until day before actual
payment
Penalty on balancing payment and CGT of:
within 30 days (penalty date)
0%
within 5 mths of penalty date
5%
within 5 to 11 mths of penalty date 10%
more than 11 mths of penalty date 15%
Common penalty regime
Applies to incorrect IT returns, CT returns and
VAT returns
No penalty if taxpayer simply made a mistake
Up to 30% if lack of reasonable care
Up to 70% if error is deliberate
Up to 100% if error is deliberate and concealed
Penalty for late notification of new source of income
30% of unpaid tax if non-deliberate
70% of unpaid tax if deliberate
100% of unpaid tax if deliberate and
concealment
Payment dates
Income tax
2 equal payments on account on
31 January during year of assessment and
31 July following year of assessment (50%
of previous year's IT and NIC liability)
Balancing payment 31 January after year of
assessment
CGT
31 January following year of assessment
CGT can be paid over ten years in respect

of following transfers:
Land
Controlling holding of shares
Minority holding of unquoted shares
An introduction to inheritance tax


the headings scope of IHT, basic principles of
computing transfers of value, the liabilities arising on
chargeable lifetime transfers and on the death of an
individual, the use of exemptions in deferring and
minimising IHT liabilities identify excluded property.
Surfe (12/11)
Una (6/12)
Dana (12/12)
Cuthbert (12/12)
Brad (6/13)
Pescara (12/13)
Ziti (6/14)
Cada (12/14)
Kantar (12/14)
Jonny (2H/15)
Sushi (12/10)
Identify excluded property.

Advise on the tax implications of chargeable lifetime
transfers.
Advise on the tax implications of transfers within seven
years of death.
Advise on the relief for the fall in value of lifetime gifts.
Identify exempt transfers.
Advise on the use of reliefs and exemptions to minimise

inheritance tax liabilities.
Pescara (12/13)
Pescara (12/13)
Poblano (6/10)
Dokham (6/10)
Calisia (6/11)
Surfe (12/11)
Una (6/12)
Dana (12/12)
Kantar (12/14)
Jonny (2H/15)
Calisia (6/11)
Brad (6/13)
Ziti (6/14)
Cada (12/14)
83
An introduction to IHT
Basic principles
On transfers of value
During lifetime
On death
Transfer of value
Loss to donor principle
Value before gift
Less value after gift
Transfer of value
Fall in value of lifetime gifts
X
(X)
X
Value of lifetime gift has fallen

Tax calculated using value @
death
NB reduced value cannot be
used for cumulation purposes
Exempt transfers
Spouse/civil partners (if non
domiciled exempt up to 325,000)
UK charity
Qualifying political parties
Gift for national purpose
Gifts of land to a housing association
84
An introduction to IHT
Types of lifetime transfers

and exemptions
Lifetime tax
Death tax
Exemptions against lifetime gifts

Annual exemption
3,000 per tax year
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
Donor left with sufficient income to maintain
standard of living
Gifts in consideration of marriage
To son/daughter
5,000
To descendant/other
2,500
party to marriage
Any other case
1,000
Potentially exempt transfers (PETs)
Gifts by individual to individual
No life tax but still uses AEs
Chargeable lifetime transfers (CLTs)
Gift to any trust
Chargeable in lifetime as follows:
Value of CLT
X
Nil rate band at gift
X
Less GCT in
( X)
(X)
prev 7 yrs
X
Apply 20% if trustees pay tax or 20/80 if donor pays
tax
All PETs and CLTs in previous seven

years of death are chargeable at death
Value of gift
Nil rate band
Less GCT in
prev 7 yrs from
date of gift
Apply 40%
X
325,000
( X)
(X)
(X)
Taper relief if gift is within 3 to 7 years of

death tax is reduced as follows:
3 to 4 years
20%
4 to 5 years
40%
5 to 6 years
60%
6 to 7 years
80%
Tax paid by donee
85
Fall in value of lifetime gifts
Lecture Example 1
Mrs Curtis made a gross chargeable transfer of 281,000 on 1 January 2006.
On 10 December 2011 she gifted a house worth 141,000 to a discretionary trust and she paid the tax. She died on 1
December 2015.
The value of the house at 1 December 2015 was 136,000.
Required
Compute the IHT due on the gift.
Solution
86
Inheritance tax: valuation, reliefs and

the death estate

Advise on the tax liabilities arising on a death estate.
Surfe (12/11)
Una (6/12)
Cuthbert (12/12)
Cada (12/14)
Jonny (2H/15)
Advise of the operation of quick succession relief.

Advise on the principles of valuation.
Brad (6/13)
Advise on the availability of business property relief

(BPR) and agricultural property relief (APR).
Calisia (6/11)
Una (6/12)
Brad (6/13)
Pescara (12/13)
Ziti (6/14)
Advise on the use of reliefs and exemptions to minimise

IHT liabilities.
Calisia (6/11)
Una (6/12)
Brad (6/13)
Ziti (6/14)
87
Valuation rules
Foreign property
Quoted shares and securities

Lower of
up or
Average of highest and lowest marked
bargains
Adjust to cum div/cum interest by including net
value of next dividend/interest receivable
Unit trusts
Take lower of two published prices
Can deduct expenses of administering

(up to 5% of value of foreign asset)
Jointly-owned property
Normally divided 50:50
Related property valuations

Property owned by:
Spouse/civil partner
Charity/charitable trust, political party, national
heritage body acquired from donee or
spouse/civil partner and held within last five
years
Value transfer as a proportion of related property
holding
88
Reliefs
BPR
APR
Reduces transfer value (before AEs if lifetime

transfer)
Rates of relief
Sole proprietor's business or partnership 100%
Share
Any unquoted shares in a trading co
100%
Quoted shares where transferor had
50%
voting control
Land, buildings, plant and machinery
50%
owned by individual and used either
in a partnership in which he is a partner
or a company which he controls
Minimum period of ownership
2 years if purchased
2 out of 5 years if replacing
None if inherited
Excepted assets
No BPR on excepted assets eg investments
Death tax on lifetime gifts
Donee must retain property until donor's death
100% against agricultural value of UK

property
Two years ownership if owner occupied,
seven years if tenanted
Death estate
Chargeable estate
Tax payable
See page 90 and 91
QSR
Spouses and civil

partners
Any unused nil band
can be transferred to
remaining spouse (or
civil partner)
89
Death estate
Chargeable estate
Proforma death estate

X DECEASED
DATE OF DEATH ......
FREE ESTATE
Freehold property
Less mortgages and accrued interest
X
(X)
X
X
X
X
X
X
X
X
X
Stocks and shares

Insurance policy proceeds
Leasehold property
Cars
Personal chattels
Debts due to deceased
Cash
Less:
Debts due by deceased (e.g. unpaid tax liabilities)

Reasonable funeral expenses
X
X
Less:
Exempt transfers
Gifts with reservation
CHARGEABLE ESTATE
Tax payable
Treat death estate as top slice of lifetime transfers in previous seven years
Tax @ 40% on balance not covered by any remaining nil band
Tax @ 36% if at least 10% of an individuals net estate is left to a charity
Paid by
UK free estate executor, suffered by residuary legatee
foreign free estate executor, suffered by beneficiary
90
(X)
X
(X)
X
X
QSR
Percentage as
determined below
Original net transfer

Original gross transfer
Tax paid on
earlier transfer
Rate of relief
>
>
>
>
Period between
transfers
0 1 years
1 2 years
2 3 years
3 4 years
4 5 years
Percentage of first
tax charge credited
100%
80%
60%
40%
20%
Related property valuations
Lecture Example 1
Fred owns 40% of Bloggs Ltd, an investment company. His wife Jo owns 20% and his brother Phil owns 10%.
Values are as follows:
20%
40%
50%
60%
70%
100,000
230,000
350,000
750,000
880,000
Fred gives one half of his shares to his son.

Required
Show the value transferred for IHT.
Solution
91
Death tax computation
Lecture Example 2
Joe had made the following gifts.
19 June 2008
148,000 to a trust
14 August 2011
25,000 to his son on his birthday
12 May 2014
30,000 to his granddaughter on her marriage
17 November 2014
193,000 to a trust
22 December 2015
90,000 to a trust
Joe paid any lifetime tax arising on the gifts.

Joe dies 30 November 2018 leaving a chargeable estate including a car valued at 30,000 to his daughter and all his
other assets valued at 70,000 to his son.
Required
Calculate the IHT arising on lifetime transfers and also any tax payable on death. State who suffers the tax on the death
estate and who pays it.
Solution
92
Inheritance tax: additional aspects

Remember the contents of F6Taxation under the

heading payment of inheritance tax
Explain the concepts of domicile and deemed domicile

and understand the application of these concepts to IHT.
Sushi (12/10)
Calisia (6/11)
Cuthbert (12/12)
Sushi (12/10)
Calisia (6/11)
Cuthbert (12/12)
Identify and advise on the tax implications of the location

of assets.
Identify and advise on gifts with reservation of benefit.
Identify and advise on the tax implications of associated

operations.
Advise on the operation of double tax relief for IHT.
Advise on the IHT effects and advantages of the

variation of wills.
Poblano (6/10)
Mirtoon (12/11)
Pescara (12/13)
Mirtoon (12/11)
King (6/15)
Calisia (6/11)
Una (6/12)
Cuthbert (12/12)
Sushi (12/10)
Cada (12/14)
Define a trust.
Distinguish between different types of trust.
Advise on the implications of transfers of property into a
trust.
Capstan (6/11)
King (6/15)
Advise on inheritance tax implications of property

passing absolutely from a trust to a beneficiary.
Identify the occasions on which IHT is payable by
trustees.
Surfe (12/11)
Identify the occasions on which IHT may be paid by

instalments.
Grifter (12/09)
Advise on the due dates, interest and penalties for IHT

purposes.
Capstan (6/11)
Cuthbert (12/12)
93
IHT additional aspects
Overseas aspects
Domicile
DTR
UK domiciled or deemed domicile

Yes
Payment of tax and

instalment option
NO
Taxed on
Taxed on UK
worldwide
assets only
assets
Domicile permanent home
Deemed domicile if:
Resident for 17 out of last
20 years or
< 3 yrs since becoming nondomiciled
Lower of
(1) Foreign tax
suffered
(2) UK tax
attributable to
foreign asset (use
average rate after
QSR)
Location of assets
Land and buildings
Debtor
Registered shares
and securities
Bearer securities
Bank accounts
Tangible property
Goodwill
94
Physical location
Residence of debtor
Country of registration
Location of certificate
Branch location
Physical location
Where business is
conducted
Lifetime transfers
Due six months from end of
month of transfer or following
30 April if made between 6
April 30 September
On death
Lifetime gifts six mths from
end of month of death
Death estate six mths from
end of month of death or
delivery of accounts if
earlier
Instalment option
Ten equal annual
instalments starting on due
date
Applies to
Land and buildings
All shares (quoted and
unquoted where donor
had control)
Unquoted shares if value >
20,000 and 10%
owned
Unquoted shares, where
tax on instalment property
at least 10% total IHT, or
undue hardship
Business or an interest in
a business
Interest charged on balance
outstanding if it relates to
land and buildings
IHT additional aspects
GWRB
GWR
Reservation
ceased or death
X
PET/Estate
X
PET
or
No GWR if
Full consideration given for use of
asset
Reason for reservations = care/
maintenance of elderly or infirm
relative
Associated
operations
Anti-avoidance
provision
To prevent 'loss of tax'
where a scheme of
events is designed to
avoid tax where
ultimate beneficiary is
the same person
Deeds of variation
Rewrite will
Within two years of death by
an instrument in writing
signed by all original
beneficiaries
Will automatically apply for
both IHT and CGT purposes
95
Trusts
Types
IHT aspects of trusts
See page 97
Interest in
possession
Discretionary
Nobody has an
Income from trust
entitlement to income or
passes to life tenant for
capital.
life
On death of life tenant Trustees have
discretion over the
assets pass to
distribution
remainderman
96
IHT aspects of trusts

Trust with an immediate post death interest
Can only be created on death
Settlor
Dead
IPDT
Death estate
Life tenant dies:

Life tenant's death estate
Any other trust is a 'relevant property trust'

Settlor
CLT
Alive
RPT
Death estate
Exit charge
(max 6%)
Dead
Principal charge
10 yearly charge
(max 6%)
97
TABLE 1: OVERVIEW OF CGT AND IHT
98
CGT
IHT
Arises on
Sales
Gifts or sales at an undervalue
Lifetime transactions only
Gifts or sales at an undervalue

On death or within seven years of
death
Relevant Value
Market value of the gift
Fall in value of the donor's estate
Relevance of residence, ordinary

residence and domicile
Liability to CGT:
Only if resident
If non-UK domiciled:
Gains on overseas assets
taxed on remittance basis
(may require payment of
(30,000/60,000/90,000 RBC)
If non-UK domiciled:
Overseas assets are not subject
to UK IHT
Residency is relevant when
considering deemed UK domicile
Transfer to spouse or civil partner
Takes place at no gain, no loss
Exempt
The importance of timing
Need to consider the tax year of

disposal which will determine:
Utilisation of losses
Availability of the
annual exemption
Rate of tax payable by the
vendor/donor
Need to consider:
The availability of the annual
exemption
The use of the nil rate band in the
previous seven years
The availability of taper relief
No IHT if survive gift for seven
years
Exemptions
Various assets are

exempt, including:
Wasting chattels
Low value non-wasting chattels
Main residence
There is also the annual exemption
All assets are subject to IHT with one

important exception:
Overseas assets owned by an
overseas domiciled individual
Certain gifts are exempt including:
Small gifts, marriage gifts
Gifts out of income
There is also the annual exemption
Reliefs available in respect of

business assets
Rollover relief
Requires proceeds to be invested
in replacement business assets
Gifts holdover relief
Entrepreneurs' relief
Business property relief
Other reliefs
Gift holdover relief for agricultural

property
Enterprise investment scheme:
Requires proceeds to be invested
in unquoted trading company
shares
Agricultural property relief
Other matters to consider
The availability of double

tax relief
Due dates
The availability of quick

succession relief
The availability of double
tax relief
Due dates
Who is responsible for paying any
tax due
Stamp taxes

Identify the property in respect of which stamp taxes are

payable.
Grifter (12/09)
Advise on the stamp taxes payable on transfers of

shares and securities.
Calisia (6/11)
Brad (6/13)
Advise on the stamp duty land tax payable on transfers

of land.
Calisia (6/11)
Identify transfers involving no consideration.
Una (6/12)
Calisia (6/11)
Brad (6/13)
Advise on group transactions.
Helm Ltd group (6/15)
Understand and explain the systems by which stamp

taxes are administered.
99
Stamp duty
Rates
Exemptions
Applies to transfers of shares

Payable by purchaser
0.5% of consideration
Gifts
Changes in trustees
Divorce arrangements
Variation of Wills
Stamp duty land tax
Rates
Exemptions
Applies to transfer of land or interest

in or right over land
Non-residential (one rate)
Up to 150,000
0%
150,001 250,000
1%
250,001 500,000
3%
500,001 +
4%
Residential (banded)
Up to 125,000
125,001 250,000
250,001 925,000
925,001 1,500,000
1,500,001 +
.
100
0%
2%
5%
10%
12%
Gifts of land
Transfer on divorce/separation
Variation of Will
Transfers to charities

Remember the material already covered at P6 Taxation

under the heading corporation tax'.
Poblano (6/10
Petzold (6/11)
Forti Ltd Group (12/13)
Helm Ltd Group (6/15)
Sprint Ltd (2H/15)
Hyssop Ltd (2H/15)
Identify qualifying research and development

expenditure, both capital and revenue and determine the
amount of relief by reference to the size of the
company/group.
Poblano (6/10)
Recognise the relevance of a company generating

profits attributable to patents.

Cinnabar Ltd (2H/15)
Identify the enhanced capital allowances available in

respect of expenditure on green technologies, including
the tax credit available in the case of a loss making
company.
Recognise the alternative tax treatments of intangible
assets and conclude on the best treatment for a given
company.
Janus plc (6/12)
Advise on the impact of transfer pricing and thin

capitalisation rules on companies.
101
CT computation
See page 103
Loan relationships
Long periods of account
See page 103
Patent box
Net patent profit 80% (MR 10%)/MR
Two computations.
(a) FIRST lasting 12 months
(b) SECOND for the remaining months.
Splitting income and expenditure
Trading income
Time
apportioned
CAs
Two separate
computations
Property income
Time
apportioned
Investment income
Accruals
Other income (including FII) Date of receipt
Qualifying charitable donations Date of
payment
Intellectual property
See page 104
Transfer pricing
Anti-avoidance legislation
Transactions between
companies under
common control adjusted
to arm's-length value
102
Research and
development
230% deduction for small or
medium sized companies
130% deduction for large
companies or above the line
tax credit of 11% of costs
incurred
Enhanced capital
allowances (ECAs)
Companies able to surrender
tax losses to ECAs for cash
payment (first-year tax credit)
19% of loss surrendered
Upper limit is greater of:
PAYE & NIC liabilities;
and
250,000
Pro-forma corporation tax computation
1.1
A Ltd
Corporation Tax Computation
for the X months to.......
Adjusted profits
Less capital allowances
Trading profit
Investment income
Overseas income
Miscellaneous income
UK property income
Chargeable gains (deduct capital losses b/f)
Total profits
Losses deductible from total profits
Less qualifying charitable donations(paid basis):
X
(X)
Taxable total profits
X
X
X
X
X
X
X
(X)
(X)
X
Augmented profits (for determining when tax is due) = taxable total profits and non-group FII.
Loan relationships
2.1
Trading
(e.g. to buy p+m)
Non-trading
(e.g. to buy investment)
Income = Trading income (unlikely)

Expense = Trading expense
(Accruals)
* Income = Investment income

* Expense = Investment expense
Usual trading income rules apply
If expenses > income
Non-trading deficit (see later)

*
Examples include:
Interest income
Gains/losses on sale of debentures/government stock
Loans to employees written-off
Interest expense on loan to buy investment property
103
Patents
Follow accounting practice; or
Elect to deduct 4% straight line on cost
On disposal treat profit as trading income

Proceeds
Less TWDV
Trading income/ (Trading loss)
X
(X)
X/(X)
Goodwill
Amortisation not tax deductible
On disposal taxed on
Proceeds
Less cost
Trading income/ (Non-trading loss)
X
(X)
X/(X)
Rollover
If reinvest in replacement intangible asset 12 months before and 36 months after disposal rollover relief
available.
Proceeds
Less cost
Maximum gain eligible for relief
104
X
(X)
X
For full rollover, all proceeds must be reinvested. If not, proceeds not reinvested are taxable now and the
balance is deferred by reducing the base cost of the replacement intangible.
Lecture Example 1
In August 2015 Sun Ltd sells patent rights which it acquired in July 2008.
Sale proceeds
Original cost
NBV in accounts
2,000,000
1,250,000
800,000
Sun Ltd acquired another patent for 1,500,000 in June 2016.

Required
Calculate
(i)
(ii)
(iii)
The amount of gain that is available for rollover

The amount taxable in accounts
The base cost of the second patent.
Solution
105
Patent Box
Lecture Example 2
Barnaby plc had net patent profits of 450,000 for the year ended 31 March 2016. The companys taxable total profits
which included these net patent profits was 3,500,000.
Required
Calculate the corporation tax payable for Barnaby plc for the year ended 31 March 2016.
Solution
106
Chargeable gains for companies


under the headings:
Petzold (6/11)
'Scope of corporation tax'

'Taxable total profits'
'Use of exemptions and reliefs in deferring and
minimising corporation tax liabilities'
Janus plc (6/12)

Liza (6/13)
Forti Ltd group (12/13)
Sprint Ltd (2H/15)
Determine the application of the substantial shareholding

exemption.
Hail Ltd (12/11)

Opus Ltd Group (6/14)
Sprint Ltd (2H/15)
Advise on the availability and the application of

disincorporation relief.
107
Chargeable gains for

companies
Computing gains or
losses
Indexation allowance
Gains part of total profits

No annual exempt amount
IA round to 3 dp
IA can't create/increase a loss

Matching rules
Same day
Previous 9 days
1985 pool
Replacement of
business asset relief
As for individuals
except goodwill is not
a qualifying asset
Substantial
shareholding
exemption
Disincorporation relief
Conditions:

All assets (except cash) must
be transferred
Total MV of land and buildings
and goodwill 100K
All shareholders must be
individuals and held shares for
12 months prior to transfer
Consequence:
Company is deemed to
dispose of land and buildings
and goodwill for the lower of
cost and market value
meaning any gain is not taxed
but any loss is allowable
(Claim)
108
Gains and losses are

exempt
Investing companies must
hold at least 10% for 12m in
last 2 years
Trading groups
Aggregate ownership of 51%
group members
Computing corporation tax payable


under the headings:
Petzold (6/11)
'Computation of corporation tax liability'.
Janus plc (6/12)
'Systems for self assessment and making of returns'.
Jerome (6/12)
'Time limits for the submission of information, claims and

payment of tax'.
'Procedures relating to compliance checks, appeals and

disputes' and
Epon Ltd group (6/13)
'Penalties for non-compliance'.
Hail Ltd (12/11)

Opus (6/14)
Klubb plc (12/14)
Christiana (2H/15)
109
Computing CT
payable
Tax calculation
TTP x 20%
110
Returns and payment dates (CTSA)

Non large company due date 9 m and one
day following end of CAP
Return date 12 mths after AP end
Quarterly payment
Large companies (ie Augmented
profits exceed 1,500,000)
Estimate CT liability
Pay tax 4 instalments in month 7, 10,
13, 16 (14th of each month)
Exception
If not large in previous year and profit
10m or
Tax liability 10,000
For short accounting periods each
3 CT
instalment =
n
(n = no of months of AP)
Final instalment always due 14th of fourth
month following end of AP
Filing penalties
1 day 3 mths
100 fixed
3 mths 6 mths
200 fixed
6 mths 12 mths
+ 10% of unpaid tax
18 mths after AP end
> 12 mths
+ 20% of unpaid tax
18 mths after AP end
Administration, winding up, purchase

of own shares

Identify and evaluate the significance of accounting

periods on administration or winding-up.
Conclude on the tax treatment of returns to shareholders
after winding up has commenced.
Advice on the tax implications of a purchase by a

company of its own shares.
Trifles Ltd (12/10)

111
Administration,
winding-up
Accounting periods
AP ends on winding-up and
new AP begins
Co remains liable to CT on
profits arising during the
winding-up
Trade losses
No c/fwd
TLR
BC/BA on P&M
Trading profit on stock
Distributions
Pre-liquidation dividend
Distributions after windingup
Treated as dividend taxable on

individual @ 32.5% or 37.5%
Cash treated as capital receipt

Normal CGT
Company purchase of
own shares
Distribution method
Normal method
Distribution = proceeds less
original subscription price
112
Capital method
Conditions
Unquoted Co
To benefit trade
Vendor R
Shares held 5 years ( 3 years if
inherited)
Vendor holding reduced by 25%
Vendor holds 30% afterwards
Normal CGT disposal
Losses and deficits on non-trading loan

relationships


under the heading the use of exemptions and reliefs in
deferring and minimising corporation tax liabilities.
Loriod plc Group (6/11)

Hail Ltd (12/11)
Janus plc (6/12)
Determine the tax treatment of non trading deficits on

loan relationships.
Sperry Ltd (12/11)

Advise on the restriction of the use of losses on a

change in ownership of a company.
113
Trading losses
Current year and carry back

Against total profits of current AP
and then carryback 12 months
against total profits
Carry back extended to 36
months (LIFO) for loss of last 12
months of trade
No partial claims
Carry forward
Against trading profits of same
trade
Automatic
Change of ownership
Restriction on c/fwd (and c/b)
where change in ownership and
major change in nature or
conduct of trade within 3 years or
revival of activities
Other losses
Rental
Set vs total profits of current AP
C/fwd vs total profits of future
Group relief
114
Non-trading deficits
Set vs profit of current AP

C/b against investment income in
previous twelve months
C/fwd against non-trading income
Group relief
Capital losses
Set vs current and future capital

gains
Close companies and investment

companies

Identify and calculate corporation tax for companies with

investment business.
Apply the definition of a close company to given

situations.
Fedora (12/09)
Trifles Ltd (12/10)
Conclude on the tax implications of a company being a

close company.
Trifles Ltd (12/10)

Hail Ltd (12/11)
Bamburg Ltd (6/14)
Nocturne (6/15)
115
Close companies and

investment companies
Close companies
Definition
UK company controlled
by either:
Any no. of directors
Five or fewer
shareholders
Benefits provided to
shareholders
If employee taxed under
employment income
If not employee treated
as net dividend
Loans to shareholders
Co pays penalty tax @ 25% due on
normal due date for CT
Penalty tax refunded if loan
repaid/written-off
If loan written-off grossed up loan is
taxed on shareholders as deemed
dividend
Excluded loans if:
Total outstanding 15,000 +
Borrower works full-time +
Borrower doesn't own > 5%
Investment companies
Definition
Income derived from
making investments
e.g. interest, dividends
116
Tax implications
Management expenses offset
vs current income
Any excess c/fwd or
group relieved
Groups and consortia


under the heading of 'the effect of a group structure for
corporation tax purposes'.
Petzold (6/11)
Hail Ltd (12/11)
Sperry Ltd (12/11)
Janus plc (6/12)
Liza (6/13)
Sprint Ltd (2H/15)
Advise on the allocation of the annual investment

allowance between group or related companies.
Advise on the tax consequences of a transfer of

intangible assets.
Advise on the tax consequences of a transfer of a trade

and assets where there is common control.
Understand the meaning of consortium owned company

and consortium member.
Advise on the operation of consortium relief.
Janus plc (6/12)

Determine pre-entry losses and understand their tax
treatment.
Determine the de-grouping charge where a company
leaves a group within six years of receiving an asset by
way of a no gain/no loss transfer.
Hail Ltd (12/11)

Determine the effects of the anti-avoidance provisions,

where arrangements exist a company to leave a group.
117
Transfers of trade/sale of
company
See page 122
Groups
Allocation of AIA between

group companies
Consortia
One AIA available per group

Group basically parent co. and
subsidiaries in which it holds
majority of voting rights
Group decides how to allocate
AIA between companies
Consider nature of expenditure,
whether would create loss
See page 121
Group relief groups

See page 119
118
Capital gains groups

See page 120
Group relief
Group Relief
Definition
75% ownership and

effective interest
UK resident companies
only
Can look through nonUK companies
Surrendering
company
Can transfer any amount of
current period:
Trading loss
Excess qualifying
charitable donations
Excess management
expenses (if an
investment company)
Rental losses
Deficits on non-trading
loan relationships
Claimant
company
Must be able to use

surrendered amounts in
current period
Relief against taxable total
profits
Time Limit two years from
end of a/c period
Tax planning
Use the loss as early as possible
Avoid wasting QCDs
119
Capital gains
Capital Gains
Implications
Definition
75% ownership
> 50% effective interest
of ultimate UK holding
company
UK company or asset
chargeable to UK tax
Automatic transfer of
capital assets @ no
gain/ no loss
Group carries on one

trade for roll-over
relief
Can elect for gains and

losses to be treated as
made by any group member.
Tax Planning
Ensure gains made by co with
Capital losses
Selling a subsidiary
Gain on sale of shares

by parent. Probably
exempt by 'substantial
shareholding' rules
De-grouping charge
when subsidiary
sold if within 6
years of acquiring
an asset via a
NG/NL transfer
whilst still owning
asset
De-grouping charge
is gain not charged
at date of transfer
and is added to the
consideration
received
120
Buying a subsidiary
Pre-acquisition losses cannot be
set off against gains on assets
sold having been transferred from
a group company at no gain/no
loss
Consortia
Consortia
Definition
Each investing company owns 5% of a

company and together own 75%
Effect
Relief only for UK companies
Maximum relief is:
No one company owns 75%
Lower of
CM
Results
CM's interest
in CC's trading profit/loss
CM = Consortium Member (shareholder)

CC = Consortium Company
121
Transfers of trade / sale of company
Gains arising
SALE OF A
COMPANY TO A
THIRD PARTY
SALE OF A
COMPANYS TRADE
TO A THIRD PARTY
Possible degrouping charge

Gain on sale of
shares but exempt
due to SSE
c/fwd in company
sold unless new
owner makes
major changes to
nature/ conduct of
trade (e.g.
customer base,
geographic
location, type of
business) within 3
years before or
after change
c/fwd in company
sold
(= pre-entry)
No effect
company is
continuing
No VAT
implications on sale
of shares (exempt)
Sale of chargeable
assets
Possible relief if
proceeds reinvested
in qualifying assets
Lost
0.5% on value of
consideration paid
by the purchaser
Unrelieved trade losses
Unrelieved capital
losses
Capital allowances
VAT
Stamp duty
122
TRANSFER OF A
COMPANYS TRADE
WITHIN A 75%
GROUP
No gain/no loss
rules will apply to
capital assets
Transferred with the

trade (reduced by
net liabilities
remaining in the
transferor)
Transferee only sets
off against future
profit of that trade
Remains with
transferor
Remains with
transferor
P&M transferred at
MV (BC may arise)
Transfer of business
as a going concern
outside scope if
transferee
is/becomes
registered
Up to 4% on value
of land and buildings
paid by purchaser
P&M can be
transferred at WDV
by election
Transfer of
business as a
going concern
outside scope if
transferee
is/becomes
registered
No stamp duty
(unless transferee
sold within 3 years
of transfer)
Capital gains group
Lecture Example 1
Ibiza Ltd owns 90% of Benidorm Ltd. In June 2012 (RPI =213.4) Ibiza Ltd transferred a building to Benidorm Ltd for
100,000. On this date its market value was 325,000 and it had cost Ibiza Ltd 150,000 in April 1990 (RPI = 101.8).
Required
(a)
What are the tax implications of this transfer?
(b)
If Benidorm Ltd sells the building for 360,000 to a third party in July 2015 (RPI = 242.9) what is the capital gain
arising?
(c)
Or if Ibiza Ltd sold shares in Benidorm Ltd in July 2015 for 300,000 what are the tax implications?
Solution
123
Consortium relief
Lecture Example 2
Mansell Ltd is owned by a consortium of companies as follows:
Palmer Ltd
25%
Herbert Ltd
35%
Warwick Ltd
40%
Mansell Ltd
Required
(a)
Mansell Ltd has a trading loss of 30,000. What is the maximum consortium relief claim possible by Palmer Ltd
if Palmer Ltd had a trading profit of 24,000.
(b)
Alternatively if Palmer Ltd has a trading loss of 50,000 and Mansell Ltd had a trading profit of 25,000. What is
the maximum consortium relief claim?
Solution
124
Overseas aspects of corporate tax

Assess the impact of the OECD model double tax treaty

on corporation tax.
Evaluate the meaning and implications of a permanent
establishment.
Identify and advise on the tax implications of controlled

foreign companies.
Klubb plc (12/14)
Calculate double taxation relief
Advise on the tax position of overseas companies

trading in the UK.
Advise on the tax treatment of an overseas branch.
Advise on the relief for trading losses incurred by an

overseas subsidiary.
125
Overseas aspects of
corporate tax
Residence
Double tax relief
Incorporated in UK or controlled
and managed from UK
UK resident company taxed on
worldwide profits
Non-UK resident company only
subject to CT generated from
permanent establishment in UK
See page 127
Structure of overseas
operations
Branch
Taxed on 100% profits
UK capital allowances available
Losses can be offset as trading
losses
UK companies can make an
irrevocable election to exempt
from corporation tax all profits
and losses of their overseas
branches
126
Subsidiary
No CT on profits
No loss relief in UK
Controlled foreign companies

See page 127
Transfer pricing
Sells to overseas subsidiary at
below MV
Buys from overseas subsidiary
at above MV
Adjust UK taxable total profits to
MV
Self assess
Double tax relief
DTR is the lower of:
Foreign tax suffered on the overseas income

UK corporation tax on the overseas income.
Relief for WHT is always available.
Allocation of qualifying charitable donations and losses
Set against UK income first.

Then against foreign source which suffers lowest rate of foreign tax.
Controlled foreign companies

Controlled by persons resident in UK
A Ltd
40%
B Ltd
5%
Indiv
10%
C Inc
45%
UK Co 25% interest
Share of profits 20%
Less foreign CT paid
X
(X)
X
CFC
Resident outside UK
No charge if:
Exempt period exemption a 12 month exemption from the CFC charge applies when a non-UK
resident company is acquired by a UK resident person
Tax exemption the local tax paid is at least 75% of the amount of tax the CFC would have paid
in the UK if it were UK resident
Excluded territories exemption the CFC is resident in one of the territories specified
Low profits exemption CFCs profits <500,000 and its non trading income <50,000
Low profit margin exemption CFCs accounting profits are no more than 10% of its expenditure
Self-assess
127
DTR
Lecture Example 1
Goring plc, a UK resident company has trading profits for the year ended 31 March 2016 of 156,000.
It received rental income of 50,000 (net of 15% withholding tax) from an overseas property.
In addition it received a dividend of 29,000 from a foreign subsidiary in which it had an 80% interest. The subsidiary is
not a CFC.
Goring plc paid a qualifying charitable donation of 60,000 on 1 November 2015.
Required
Compute the corporation tax liability of Goring plc for the year ended 31 March 2016.
Solution
128
Value added tax 1


under the headings:
Desiree (6/10)
'Scope of VAT'
Mirtoon (12/11)
'VAT registration requirements' and
Sperry Ltd (12/11)
'The computation of VAT liabilities'.
Petzold (6/11)
Jerome (6/12)
Ash (12/12)
Liza (6/13)
Kantar (12/14)
Jodie (6/15)
Sprint Ltd (2H/15)
Advise on the impact of the disaggregation of business

activities for VAT purposes.
Simone (6/09)
Advise on the impact of divisional registration.
129
Value of supplies
Discounts
VAT on invoice price less all trade discounts
For prompt payment discounts VAT calculated on
actual amount
Mixed supply different goods/services are invoiced
together VAT accounted for separately
Composite supply can't split, charge one VAT rate
Private use business use only recoverable
Value added tax 1
Registration
Compulsory
Group
If taxable turnover
exceeds 82k in past
12 months or will
exceed 82k in next
30 days
Pre-registration
expenses recover
input tax on
Inventory if still held
Fixed assets if still
held
Services if supplied
< 6 months
Holding company must

control subsidiaries (ie votes)
and all companies must have
a fixed place of business in
UK
Subsidiaries under common
control of an overseas
company can apply for group
registration
Group nominates
'representative member' who
prepares one VAT return for
entire group
Intra group sales are ignored
All members of group are
jointly and severally liable
A VAT group may contain
exempt companies; thus
making group partially exempt
Individual companies can opt
out of group registration
Voluntary
Advantages
Reclaim input VAT
Status
Disadvantages
Charge VAT on sales
Admin
If business ceases to make

taxable supplies
(compulsory)
If in next year taxable
supplies will be below
80,000 (voluntary)
Disaggregation
Divisional
130
Deregistration
A company divided into divisions which each

prepare accounts can apply
Each division makes a separate return
Administrative advantage only
Supplies between divisions are not supplies for
VAT purposes
Company is still liable for VAT from all divisions
Two trades of same 'person'

normally aggregated e.g. two
sole trades
However, if individual operates
one sole trade and is a
member of partnership,
normally trades not
aggregated
However, HMRC have power
to treat a number of
businesses as a single taxable
person for registration
purposes to prevent one
business being operated
through two or more entities
Value added tax 1
Admin and penalties
Tax periods
Quarterly return due one
month + 7 days after end
of return period
Monthly repayment
traders
Annual accounting if
taxable supplies
<1,350,000
Payments on account if
VAT liability > 2.3m
Penalties
Default surcharge notice if

late payment of tax/late
filing of return, for 12 mth
if default again 2%, 5%,
10%, 15% plus extension
of notice period
Common penalty regime
for incorrect returns
131
132
Value added tax 2


under the headings 'scope of VAT' , 'computation of VAT
liabilities', transfer of a going concern and effect of
special schemes.
Petzold (6/11)
Hail Ltd (12/11)
Janus plc (6/12)
Ziti (6/14)
Bamburg Ltd (6/14)
Advise on the VAT implications of the supply of land and

buildings in the UK.
Jerome (6/12)
Hyssop Ltd (2H/15)
Advise on the VAT implications of partial exemption.
Robusto (12/10)
Petzold (6/11)
Ash (12/12)
Nocturne (6/15)
Advise on the application of the capital goods scheme.
Janus Plc (6/12)

Hyssop Ltd (2H/15)
133
Value added tax 2
Partial
exemption
VAT rates
See page 137
Standard
Most goods
/services
Zero
Non-luxury food
books
exports
children's clothing
new dwellings
Outputs charged at 0%
Supplier can register
and recover VAT on
inputs
Exempt
Burial/cremation services
Postal/health services
Insurance
Land (usually)
Outputs not chargeable
but supplier cannot
register
No recovery of VAT on
inputs
Imports/exports
See page 136
Capital goods scheme

See page 138
Deduction of input tax

Not deductible:
VAT on cars if used privately
VAT on business entertaining (except
overseas customers)
VAT on non business items
VAT on private fuel
Reclaim all input tax
Charge output tax based on scale
charges
Bad debt relief
Debts > 6 months old
W/O in books
134
Value added tax 2
Commercial property
Sale of new (<3 yrs old) commercial
property = standard rated
Construction of new dwellings or
residential/charitable buildings =
zero rated
Other commercial property
transactions = exempt
Landlord can OTT 'opt to tax' (waive
exemption)
Recover related input tax
VAT status of potential tenants
important
Outside scope of VAT if:

Must be transfer of a business (not
just the assets)
The assets transferred must be
intended to be used by the
purchaser in a similar trade as that
carried on by vendor
Purchaser must be (or become) a
taxable trader
If assets include buildings which are
new only outside scope of VAT if
purchaser opts to tax otherwise
treated as standard rated supply
Special schemes
Flat-rate scheme
Cash accounting
Annual accounting
See page 138
135
Imports and exports
Outside EU
sale of goods
UK
USA
= EXPORT
zero-rated
receipt of goods
UK
USA
= IMPORT
HMRC hold goods at point of entry to UK
Input VAT paid on value of goods imported
Input VAT deductible on next VAT return
Within EU: Acquisitions and despatches

supply of goods
UK
136
EU
STATE
= DESPATCH
If UK supplier
has VAT no. of
EU recipient
If UK supplier
does not have
VAT no. of EU
Recipient
ZERO-RATED
STANDARD-RATED
supply of goods
EU
STATE
UK
ACQUISITION
UK trader accounts for
output VAT at point of
acquisition
Treated as input tax
(provided tax invoice issued
by supplier)
VAT neutral
Partial exemption
Applies when taxable person making both taxable and exempt supplies.
Only input tax relating to taxable supplies is recoverable need to split input tax as follows:
INPUT TAX
TAXABLE SUPPLIES
SUPPLIES (eg Overheads)
UNATTRIBUTABLE
EXEMPT
Fully
recoverable
Partially
recoverable
ie
Not
recoverable
unless
Unattributable
Input Tax
SUPPLIES
Value of taxable supplies

%*
Value of total supplies
= RECOVERABLE
Satisfies one of three tests

eg Test 3
(a) < 625 per month
on average
& (b) is 50% of
total input tax
If so, RECOVERABLE
* rounded UP to nearest whole %
137
Applies to partially exempt business which acquire computers costing 50k+ and/or land/buildings
costing 250k+
Computers dealt with over 5 VAT years, land and buildings over 10 VAT years
In VAT year of purchase, input VAT recovered based on use of asset for quarter of purchase, adjusted
at end of VAT year
For each subsequent VAT year over the recovery period of 5 or 10 years, an adjustment will be required
to the initial VAT recovery if the % of use for taxable purposes changes
Adjustment is equal to difference in % between first VAT year and VAT year now 1/5 (computers) or
1/10 (land and buildings) original input tax
Adjustment is made in the second VAT return following end of VAT year
If the capital item is sold within the adjustment period, two adjustments are made:
Normal adjustment as if the item was used for the whole year
Additional adjustment for each remaining VAT year of recovery calculated assuming 100% use
for taxable supplies in each of those years, but limited to VAT charged on sale of asset.
Special schemes
4.1
Annual accounting
4.2
4.3
138
Capital goods scheme
If taxable supplies 1,350,000 in next 12 months
Pay 90% of previous years VAT liability in nine equal instalments between months 4 and 12 of the
accounting period
One annual return (+ any further payment) within two months of year-end
Cash accounting
Annual turnover 1,350,000 in next 12 months
Tax point date cash received/paid
Flat rate scheme
Optional
Taxable supplies 150k in next 12 months
VAT liability = % total supplies (incl VAT)
% depends on industry sector
No input tax recovery
Still charge standard rate to customers
Admin simplified
Partial exemption
Lecture Example 1
The 'Finance Matters' partnership provides accountancy services, insurance and sells books on finance. Its VAT
exclusive turnover for the year ended 31 December 2016 is as follows):
Accountancy services
Insurance
Finance books
120,000
60,000
15,000
The input VAT can be split as follows:

Accountancy services
Insurance
Finance books
Unattributable input tax
12,000
6,500
1,000
3,500
Required
What is the partnership's net VAT liability for the year?
Solution
139
140

Identify and advise on the taxes applicable to a given

course of action and their impact.
Ziti (6/14)
King (6/15)
Epon Ltd Group (6/13)
Brad (6/13)
Sprint Ltd (2H/15)
Ziti (6/14)
Bamburg Ltd (6/14)
Sprint Ltd (2H/15)
Robusto (12/10)
Capstan (6/11)
Petzold (6/11)
Sperry Ltd (12/11)
Identify and understand that the alternative ways of

achieving personal or business outcomes may lead to
different tax consequences.
Advise how taxation can affect the financial decisions
made by businesses (corporate and unincorporated) and
individuals.
Assess the tax advantages and disadvantages of

alternative courses of action.
Understand the statutory obligations imposed in a given
situation including any time limits for action and advise
on the implications of non-compliance.
Identify and advise on the types of investment and other
expenditure that will result in a reduction in tax liabilities
for an individual and/or a business.
Advise on legitimate tax planning measures by which the
tax liabilities arising from a particular situation or course
of action can be mitigated.
Advise on the appropriateness of such investment,

expenditure or measures given a particular taxpayer's
circumstances or stated objectives.
Calisia (6/11)
Sperry Ltd (12/11)
141
Advise on the mitigation of tax in the manner

recommended by reference to numerical analysis
and/or reasoned argument.
Be aware of the ethical and professional issues arising

from the giving of tax planning advice.
Petzold (6/11)
Brad (6/13)
Hail Ltd (12/11)

Una (6/12)
Flame Plc Group (12/12)
Kantar (12/14)
Be aware of and give advice on current issues in

taxation.
Communicate advice, recommendations and
information in the required format. For example the use
of:
Reports
Memoranda
Letters
Jonny (2H/15)
Poblano (6/10)
Meeting notes
Present written information, on language appropriate
to the purpose of the communication and the intended
recipient.

Communicate conclusions reached together where

necessary with relevant supporting computations.

Poblano (6/10)
Calisia (6/11)
Capstan (6/11)
State and explain assumptions made or limitations in the

analysis provided, together with any inadequacies in the
information available and/or additional information
required to provide a further analysis.
Identify and explain other, non tax factors that should
be considered.
142
Employment/self-employment
Employment is a 'contract of service'
Self-employment is a 'contract for
service'
Factors
Control
Provision of equipment
Hire of helpers
Financial risk
Integral position
No. of people he works for
Degree of responsibility for investment
and management
Remuneration packages
Choice of business medium

Sole trader
Company
For individual
Taxable?
NIC?
For company
Deductible?
Ethics
Tax planning
Prospective clients
Conflicts of interest
Money laundering
Disclosure of
information
Tax irregularities
Incorporation of a business
Profits overlap relief
recoverable on cessation
Incorporation relief
TOGC outside scope of VAT
C/fwd of losses vs income
from company
Tax efficient exit routes

Sole trader
IT closing yr rules
TLR
CGT reliefs
IHT PET/BPR
VAT deregistration
Company
CGT reliefs
Pre-sale dividend
No VAT on sale of shares
Tax efficient profit extraction

If company
Salary
Benefits
Dividends
Loan interest
Pension contributions
Group tax minimisation

strategies
Restrict MI
Capital losses
VAT group
Corporate growth
New company
Overseas
branch/subsidiary
143
144
Answers to
lecture examples
145
146
Chapter 1
No lecture examples
Chapter 2
Answer to Lecture Example 1
Diana has made a net contribution of 48,000 into the pension scheme which grosses up to (48,000 100/80) =
60,000.
This is all tax relievable since it is lower than the greater of:
Her relevant earnings of 85,500 and

3,600
However the excess pension contributions are:

Individual contribution
Less annual allowance 2015/16
Less unused allowance b/f
60,000
(40,000)
(5,000)
15,000
Her basic and higher rate bands are increased by 60,000 to take account of the gross pension contribution as follows:
BR band 91,785 (31,785 + 60,000)
HR band 210,000 (150,000 + 60,000)
Earnings
Excess pension contribution
Less PA
85,500
15,000
(10,600)
89,900
Tax 89,900 20%
17,980
Chapter 3 to Chapter 5
No Lecture Examples
147
Chapter 6
12/13
1.1.13 5.4.13
3/ 10,000
6
13/14
1st 12 months
1.1.13 31.12.13
10,000 + 6/12 25,000
22,500
14/15
y/e 30.6.14
25,000
15/16
y/e 30.6.15
30,000
16/17
y/e 30.6.16
Less overlap profits (W1)
15,000
5,000
(17,500)
2,500
(W1)
Overlap profits
1.1.13 5.4.13
1.7.13 31.12.13
5,000
5,000
12,500
17,500
45,000
14/15
y/e 30.6.14
15/16
Gap < 12 months

( 2 12 45,000) + 21,600
29,100
y/e 30.4.16
54,000
16/17
Overlap profits
1.5.14 30.6.14 2/12 45,000
No Lecture Examples
148
7,500
Chapter 10
Claim to use remittance basis
Income tax
UK trading income
Non UK income remitted
Taxable income (no PA)
31,785 20%
53,215 40%
Plus annual charge on unremitted income
Gains
UK gains
Foreign gains remitted
Taxable gains (no AEA)
Tax @ 28%
Total tax liability (57,643 + 7,000)
75,000
10,000
85,000
6,357
21,286
30,000
57,643
10,000
15,000
25,000
7,000
64,643
No claim to use remittance basis

Income tax
UK trading income
Foreign income
Less PA
75,000
20,000
(10,600)
84,400
31,785 20%
52,615 40%
84,400
6,357
21,046
27,403
Gains
UK gains
Foreign gains
Less AEA
Tax @ 28%
Total tax liability (27,403 + 8,092)
10,000
30,000
(11,100)
28,900
8,092
35,495
Matt should not claim the remittance basis for 2015/16.
149

UK trading income
Foreign rental income
Net income
PA
Taxable income
Non savings
income
31,000
12,000
______
43,000
(10,600)
32,400
6,357
246
31,785 20%
615 40%
32,400
Less DTR (W1)
6,603
(2,523)
4,080
Tax liability and payable

(W1) Exclude rental income
(31,000 10,600) = 20,400 20%
4,080
DTR lower of:

(1)
Foreign tax 35% 12,000 =
4,200
(2)
UK tax
2,523
Chapter 11
No Lecture Examples
150
6,603 4,080 =
Chapter 12
The values for apportionment are:
Ordinary shares 1,000 8 2.40
Cash
1,000 4
19,200
4,000
23,200
The acquisition cost of the new holding and cash are:
Ordinary shares
Cash
19,200
20,000
23,200
4,000
20,000
23,200
Gain on the cash element is:

Proceeds
Cost
16,552
3,448
20,000
4,000
(3,448)
552
Chapter 13
Disposal of business
Factory
Less cost
Taxable gain
Rental property not a 'relevant business asset' so does not attract entrepreneurs' relief.
Proceeds
Less cost
Gain
Less annual exempt amount
Taxable gain
CGT liability
CGT on factory @ 10%
CGT on rental property @ 28% (N)
Taxable gain
625,000
(275,000)
350,000
275,000
(67,500)
207,500
(11,100)
196,400
35,000
54,992
89,992
Note: the gain of 350,000 qualifying for entrepreneurs relief uses up the remainder of the BRB so that the gain
on the rental property is entirely taxable @ 28%.
151

Proceeds (deemed)
Cost
240,000
(120,000)
120,000
Gain eligible for gift relief

120,000
270 130
270 130 20
(114,286)
5,714
Base cost to son

MV
Less gain held over
Base cost
Sale by son on 1 September 2016
Sale proceeds
Less base cost
240,000
(114,286)
125,714
260,000
(125,714)
134,286

Proceeds
Cost
70,000
(47,000)
23,000
Taxable now (proceeds not reinvested)

(70,000 65,000)
Gain rolled over
(5,000)
18,000
Chargeable gain
5,000
Base cost of replacement asset

Cost
Less rolled over gain
65,000
(18,000)
47,000

Chargeable gains on disposal of business
Freehold property proceeds
Cost
Goodwill proceeds
Cost
152
60,000
(11,000)
49,000
50,000
Nil
50,000
Gains before incorporation relief

Less gain deferred
99,000 70,000 (120,000 - 50,000)
120,000
Gain after incorporation relief
99,000
(57,750)
41,250
Base cost of shares

MV
Less deferred gain

Gain before relief
Less EIS reinvestment relief (balancing figure)
Gain
Less capital loss b/f
Less AE
Taxable gain
70,000
(57,750)
12,250
196,000
(160,900)
35,100
(24,000)
(11,100)
Nil
Robert should claim to defer 160,900.
Chapter 14
32,000
Proceeds
Cost
20,000
(4y 3m)
23.168 (W1)
81.1
(25y)
(5,713)
26,287
(W1)
% for: 5 years
4 years
26.722
(21.983)
4.739 3/12
= 1.185
4 yrs 3m = 21.983 + 1.185 = 23.168

Gain arising on disposal
Less PPR 30/120 64,000
(1st year + last 18 mths)
Less letting relief lowest of:
(i)
PPR relief - 16,000
(ii)
40,000
(iii)
48,000 gain in let period
64,000
(16,000)
48,000
(16,000)
32,000
153
Chapter 15
No Lecture Examples
Chapter 16
Life tax
10.12.11 CLT
Less AE 11/12
10/11 b/f
Nil band
Less GCT < 7 years
325,000
(281,000)
141,000
(3,000)
(3,000)
135,000
(44,000)
91,000 20/80
Lifetime IHT payable
= 22,750
Gross chargeable transfer = 135,000 + 22,750

= 157,750
Death tax
GCT
Less fall in value (141,000 136,000)
Nil band
Less GCT < 7 years
325,000
(281,000)
157,750
(5,000)
152,750
(44,000)
108,750 40%
Death tax
Less taper relief (3-4 yrs) 20% 43,500
Less life tax
Additional IHT payable
154
= 43,500
30 (8,700)6,8006,
(22,750)
12,050
Chapter 17
The wife's holding is 'related property' and therefore must be considered when valuing the transfer by Fred to his son.
Before gift
40%
MV (60%)
40% 20%
40%
750,000
60%
500,000
After
20%
MV (40%)
20% 20%
20%
230,000
40%
Value transferred for IHT
(115,000)
385,000

Life tax
1
148,000
(3,000)
(3,000)
142,000
19.6.08 CLT
AE
08/09
07/08 b/f
Covered by nil band
GCT = 142,000
14.8.11 PET
- gets 11/12, 10/11 AEs
12.5.14 PET
- gets 2.5k marriage exemption, 14/15, 13/14 AEs
17.11.14 CLT
No AE remaining
Nil band
Less GCT < 7 years
325,000
(142,000)
193,000
193,000
(183,000)
10,000 20/80
IHT payable
= 2,500
GCT (193,000 + 2,500)
195,500
22.12.15 CLT
AE 15/16
Nil band
Less GCT < 7 years
No IHT payable
GCT = 87,000
325,000
(195,500)
90,000
(3,000)
87,000
(129,500)
155
Death estate
The earliest dated transfer on which death tax could be payable is 30 November 2011 (ie. 7 years before death).
ie. 1st transfer to consider in terms of tax liabilities is 12 May 2014. However, when calculating the tax on 12
May 2014 transfer, all chargeable transfers in the preceding 7 years (ie. as far back as 12 May 2007) must be
included in the cumulation.
Note however, that the value of the 14.8.11 PET is not cumulated, since this PET never becomes a chargeable
transfer as the donor survives past 13.8.2018.
(1)
12.5.14 PET
Marriage exemption
AE - 14/15
13/14 b/f
Nil band
Less GCT < 7 years before 12.5.14
325,000
(142,000)
GCT = 21,500
(2)
17.11.14 GCT
Nil band
Less GCT < 7 years before 17.11.14
30,000
(2,500)
(3,000)
(3,000)
21,500
325,000
(142,000)
(21,500)
(183,000)
195,500
(161,500)
34,000 40%
= 13,600
Less taper relief (4 to 5 years ) 13,600 40%

Less life tax
Tax payable by trustees
(3)
22.12.15 GCT
Nil band
Less: GCT < 7 years before 22.12.15
(5,440)
(2,500)
5,660
325,000
(21,500)
(195,500)
IHT payable
(4)
Estate
Nil band
Less GCT < 7 years before death
87,000
(108,000)
100,000
325,000
(21,500)
(195,500)
(87,000)
(21,000)
79,000 40%
= 31,600
The death tax on the estate is suffered by the son although the executors actually make the payment of tax out
of the estate assets.
156
Chapter 18 and Chapter 19

No Lecture Examples
Chapter 20
Profit per accounts on sale of patent rights.
2,000,000
(800,000)
1,200,000
Sale proceeds
NBV
Accounting profit
Would like to defer 750,000
from gain (2,000,000 1,250,000)
but not all proceeds re-invested
Gain eligible for rollover

Actual gain (P C)
Proceeds not reinvested
Amount taxable
750,000
(500,000)
250,000
Remaining accounting profit
(1,200k 250k)
950,000
950k = amortisation + proceeds not reinvested = (1,250k 800k) + 500k

Base cost of patent
Actual cost
Less rolled over gain
1,500,000
(250,000)
1,250,000

Taxable total profits
Less deduction for patent profits
450,000 80% (20% 10%)/20%
CT @ 20%
3,500,000
(180,000)
3,320,000
664,000
No Lecture Examples
157
Chapter 26
(a)
Building automatically transferred at no gain/no loss = cost + indexation to date of transfer.

(213.4 101.8)
ie 150,000 +
= 1.096 150,000
101.8
= 314,400
Benidorm Ltd has a base cost for the building of 314,400 for a further disposal.
(b)
A gain arises when building is sold to a third party outside the 75% group.
360,000
(314,400)
Proceeds
Cost (from (a))
Indexation allowance
242.9 213.4
= 0.138 314,400
213.4
(c)
(43,387)
2,213
De-grouping charge arising as Benidorm Ltd leaves the group within 6 years of the original transfer.
Proceeds (MV at date of transfer)

325,000
Cost
(150,000)
(164,400)
IA 1.096 150,000
10,600
This gain is added to the consideration of 300,000 Ibiza Ltd receives from selling Benidorms shares.
This will increase the gain on this disposal..
However, assuming both companies are trading, any gain on the sale of shares will be exempt under the
substantial shareholding rules.

(a)
Maximum claim is the lower of

(i)
25% of Mansell's loss ie
(ii)
Palmer's profit ie
claim 7,500
(b)
Maximum claim is the lower of:

(i)
Palmer's loss
(ii)
25% of Mansell's profit ie
claim 6,250
158
7,500
24,000
50,000
6,250
Chapter 27
Trading profits
Overseas income (W1)
Less qualifying charitable
donations
Total
156,000
58,824
(60,000)
UK income
156,000
154,824
96,000
CT @ 20%
Less DTR (W2)
Overseas income
58,824
(60,000)
58,824
30,965
(8,824)
22,141
Workings
(W1)
Rental income received
+ WHT 15/85
50,000
8,824
58,824
Foreign dividend is exempt from CT.

(W2) DTR lower of:
(1)
(2)
Foreign tax suffered

8,824
UK tax on overseas income
58,824 20%
11,765
Chapter 28
No Lecture Examples
Chapter 29
Accountancy services standard rated
Insurance
exempt
Finance books
zero rated
Partial exemption tests
Test 1
Total input tax is (12,000 + 6,500 + 1,000 + 3,500) = 23,000/12 = 1,917 per month exceeds 625 per month
on average so test not satisfied even though exempt supplies are less than 50% of total supplies.
159
Test 2
Total input tax incurred less input tax directly attributable to taxable supplies is (23,000 12,000 - 1,000) =
10,000/12 = 833 which is more than 625 per month on average so test not satisfied even though exempt
supplies are less than 50% of total supplies.
Test 3
Directly attributable
Accounting services
Insurance
Finance books
Taxable
supplies
12,000
Net VAT payable

Output tax 20% 120,000
Less recoverable input tax
Chapter 30
No Lecture Examples
160
6,500
1,000
13,000
Unattributable
Apportioned:
120,000 15,000
= 70%
120,000 15,000 60,000
Exempt
supplies
6,500
3,500
70%
30%
2,450
1,050
15,450
7,550
De minimis?
< 625 pm no
Recoverable
Irrecoverable
24,000
(15,450)
8,550
Appendices
161
162
Appendix A: Relevant articles

Articles that provide further insight into the P6 syllabus are available on the ACCA website at:
http://www.accaglobal.com/ie/en/student/exam-support-resources/professional-exams-study-resources/p6/technicalarticles.html
The attached list of articles has been compiled to provide you with some structure during the home study phase of your
revision and includes the most recent or more important articles that we recommend you read as part of your study for
this exam. Make sure you read the FAs 2015 version of these Articles.
Finance Act 2015
How FA 2015 and F(No.2) 2015 will be examined
Exam technique and fundamental technical issues
for Paper P6 (UK)
Outlines two important aspects of examination
technique and a number of fundamental technical
areas that need to be mastered.
Corporation tax
Concerns the taxation of a company as it begins
trading, acquires an additional business, and
eventually invests overseas.
Corporation Tax Groups and chargeable gains
Principally concerned with capital gains groups.
Corporation tax Group relief
Principally concerned with group relief.
Capital gains tax and inheritance tax
Examines the position where both taxes are
relevant to a transaction and illustrates some of the
matters that need to be considered when giving
advice in the context of the P6 exam.
International aspects of personal taxation
Begins with some basic rules, an understanding of
which enables the particular areas of tax affected
by an individual coming to, or leaving, the UK to be
identified. It then goes on to review those areas in
some detail, and provides a clear set of questions
to ask in order to determine an individuals liability
to UK taxes. Finally, it deals briefly with the impact
of double tax relief and treaties.
Taxation of the unincorporated business -the new
business
Covers some of the issues relating to a new
business including the choice of business vehicle
and the first years of trading.
Taxation of the unincorporated business -the
existing business
Covers some of the issues relating to extraction of
profits, change of accounting date and the final
years of a business.
Trusts and tax
Sets out the rules that may be examined and those
areas where knowledge is not required.
Author
F6 and P6
examining team
P6 examining team
Date
Read
P6 examining team
P6 examining team
P6 examining team
P6 examining team
P6 examining team
P6 examining team
P6 examining team
P6 examining team
163
Appendix B: Tax rates and allowances

SUPPLEMENTARY INSTRUCTIONS
1.
You should assume that the tax rates and allowances for the tax year 2015/16 and for the financial year to 31
March 2016 will continue to apply for the foreseeable future unless you are instructed otherwise.
2.
Calculations and workings need only be made to the nearest .
3.
All apportionments may be made to the nearest month.
4.
All workings should be shown.
TAX RATES AND ALLOWANCES

The following tax rates and allowances are to be used in answering the questions.
Income tax
Basic rate
Higher rate
Additional rate
1 31,785
31,786 150,000
150,001 and over
Normal rates
20%
40%
45%
Dividend rates
10%
32.5%
37.5%
A starting rate of 0% applies to savings income where it falls within the first 5,000 of taxable income.
Personal allowances
Personal allowance
Transferable amount
Income limit
10,600
1,060
100,000
Residence status
Days in UK
Less than 16
16 to 45
46 to 90
91 to 120
121 to 182
183 or more
Previously resident
Automatically not resident
Resident if 4 UK ties (or more)
Resident if 1 UK tie (or more)
Automatically resident
Not previously resident

Resident if 4 UK ties
Automatically resident
Remittance basis charge

UK resident for:
7 out of the last 9 years
Charge
30,000
60,000
90,000
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
51 grams to 75 grams per kilometre
76 grams to 94 grams per kilometre
95 grams per kilometre
Car fuel benefit
The base figure for calculating the car fuel benefit is 22,100.
164
5%
9%
13%
14%
Individual savings accounts (ISAs)

The overall investment limit is 15,240.
Pension scheme limits
Annual allowance
2014/15 and 2015/16

2012/13 and 2013/14
Lifetime allowance
The maximum contribution that can qualify for tax relief without any earnings
40,000
50,000
1,250,000
3,600
Authorised mileage allowances: cars

Up to 10,000 miles
Over 10,000 miles
45p
25p
Capital allowances: rates of allowance
Plant and machinery

Main pool
Special rate pool
18%
8%
Motor cars
CO2 emissions up to 75 grams per kilometre
CO2 emissions between 76 and 130 grams per kilometre
CO2 emissions over 130 grams per kilometre
100%
18%
8%
Annual investment allowance

Rate of allowance
Expenditure limit
100%
500,000
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
Profit threshold
20%
1,500,000
Patent box deduction from net patent profit

Net patent profit x ((main rate 10%)/main rate)
Value Added Tax (VAT)
Standard rate
Registration limit
Deregistration limit
20%
82,000
80,000
165
Inheritance tax: nil rate bands and tax rates
325,000
325,000
325,000
325,000
325,000
325,000
325,000
312,000
300,000
285,000
275,000
263,000
255,000
250,000
242,000
6 April 2015 to 5 April 2016

Excess
Death rate
Lifetime rate
40%
20%
Inheritance tax: taper relief
Years before death
Percentage
reduction
20%
40%
60%
80%
Over 3 but less than 4 years

Capital gains tax
Rates of tax
Lower rate
Higher rate
18%
28%
Annual exempt amount
11,100
Entrepreneurs relief Lifetime limit

Rate of tax
Class 1 employee
Class 1 employer
10,000,000
10%
National insurance (not contracted out rates)
1 8,060 per year
8,061 42,385 per year
42,386 and above per year
1 8,112 per year
Employment allowance
Class 1A
Class 2
Class 4
Nil
12%
2%
Nil
13.8%
2,000
13.8%
2.80 per week

Small profits threshold
1 8,060 per year
8,061 41,385 per year
5,965
Nil
9%
2%
Rates of interest (assumed)

Official rate of interest
Rate of interest on underpaid tax
Rate of interest on overpaid tax
166
3%
3%
0.5%
Stamp Duty Land Tax

Non-residential properties
150,000 or less
150,001 to 250,000
250,001 to 500,000
500,001 and above
Nil
1%
3%
4%
Residential properties
125,000 or less
125,001 to 250,000
250,001 to 925,000
925,001 to 1,500,000
1,500,001 and above
Nil
2%
5%
10%
12%
Stamp duty
Shares
0.5%
167
168
169
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What is the structure and format of the ACCA Advanced Taxation exam?

What is the structure and format of the ACCA Advanced Taxation exam?

What are the main taxes covered in the ACCA Advanced Taxation syllabus?

What are the main taxes covered in the ACCA Advanced Taxation syllabus?

ACCA

Advanced Taxation (FAs 2015)

The examination paper and syllabus aims

Analysis of past papers

Skills bank (in these notes)

Read the question effectively

Knowledge bank (in these notes)

Question and answer bank

Questions that will be covered in class

The examination paper and syllabus aims

Format of the Exam

Question 1 will be 35 marks including 4 professional skills marks

Three questions of 20 marks each. Two only to be answered.

Time pressure warning

Analysis of past papers

Principles of income tax

Pensions and other tax efficient investment

Property and other investment income

Employment income: additional aspects

Overseas aspects of income tax

Shares and securities

Chargeable gains: additional aspects

Self assessment for individuals and

An introduction to inheritance tax

Inheritance tax: valuation, reliefs and the

Inheritance tax: additional aspects

Administration, winding up, purchase of own

Close companies and investment companies

Value added tax

Impact of taxes and tax planning

Key skills required to pass

1 Effective reading and

Skill 1 Effective reading and planning to understand the

Read the requirements

Read the question slowly highlighting the data

Plan how you are going to tackle this question

See key skill 2 for detailed guidance.

Skill 2 Analysis of a question's requirements

1 Be aware of the verbs used in exam questions

2 Identify ALL the questions requirements in your answer plan

Skill 3 Time management

1 Planning your time

UK tax residence status and liability to UK income tax.

2 Handling time pressure in numerical aspects of questions

Concentrating on all the easy marks

3 Using your time effectively in the discussion aspects of questions

Think whether my point is relevant

Skill 4 Effective and professional communication

2 Effective presentation of answer

Management of Hutt plc

Subject: Acquisition of Lucia Ltd

For example in Q2 December 2007 paper:

Prepare schedules required by Kara

Tax adjusted trading profit/loss of the new business (Aral)

The tax relief available in respect of the anticipated