Acca F6 Uk

Notes
ACCA Paper F6 (UK)

Taxation (UK)
For exams in 2012
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ExPress Notes
ACCA F6 Taxation UK
Contents
About ExPress Notes
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Introduction Income tax an introduction Income Tax Employment Income Income Tax Trading Income Capital Allowances Trading Income Basis Assessment Trading Losses (For Sole Traders) Trading Income - Partnerships Property Income Investment Income Pensions National Insurance Contributions Corporation Tax Chargeable Gains (For Companies) Corporate Groups and Overseas Tax Issues Capital Gains Tax (CGT) Inheritance Tax (IHT) Value Added Tax (VAT)
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7 9 12 16 19 23 25 28 30 32 34 36 38 44 46 49 54 59
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ExPress Notes
ACCA F6 Taxation UK
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ACCA F6 Taxation UK
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ACCA F6 Taxation UK
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ACCA F6 Taxation UK
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ExPress Notes
ACCA F6 Taxation UK
Chapter 1
Introduction
START The Big Picture

Paper F6 (UK) introduces candidates to the core principles of taxation in the UK. The paper is mainly computational and there are 5 compulsory questions in the exam. Taxation can get very complicated with a number of detailed calculations and lots of intricate rules to remember. A successful candidate must have a good understanding of the core areas of taxation. It is vital therefore that candidates understand the key areas and do not get bogged down in the detail. The main taxes are: Income tax payable by individuals Corporation tax payable by companies Capital Gains tax (CGT) payable by individuals (companies pay corporation tax on their capital gains) Value Added Tax (VAT) payable by both companies and unincorporated businesses National Insurance Contributions (NIC) not strictly a tax but payable by individuals and employers.
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ExPress Notes
ACCA F6 Taxation UK
Question 1 in the exam will focus on income tax and question 2 will focus on corporation tax. Paper F6 has a comprehensive syllabus. These ExPress notes are designed to provide guidance on the core areas of the syllabus. Whilst we believe that the items contained herein have a strong chance of being examined, no guarantee can be provided as to what will be examined. Taxation legislation can change rapidly. These notes are designed to provide assistance for students taking the F6 (UK) ACCA exam in 2012. These notes should not be used for any other purpose. The ExP Group explicitly denies liability for any action taken as a result of using these notes. The ExP Group does not warrant in any form that these notes represent the tax legislation as at the date of reading of these notes.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 2
Income Tax An Introduction

Income tax is a key area and will be examined.
KEY KNOWLEDGE Income Tax An Introduction
Individuals who are UK tax resident will be taxed on their worldwide income. The period of assessment is the tax year. The tax year runs from 6 April to 5 April. For example, the tax year 2011/12 runs from 6 April 2011 to 5 April 2012 (2010/11 runs from 6 April 2010 to 5 April 2011 and so on) All of an individuals income arising in the tax year will be assessed in the tax year.
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ExPress Notes
ACCA F6 Taxation UK
KEY KNOWLEDGE Pro-forma Tax Computation 2011/12
This is the base document for calculating an individuals liability to income tax. The pro-forma income tax computation is as follows: INCOME TAX COMPUTATION 2011/12 Employment income Trading income Property income Bank interest (x 100/80) UK dividends (x 100/90) Total income Less: reliefs Net income Less: Personal allowance (PA) Taxable income Certain income is exempt from income tax including: Income from certain National Savings Products Income from Individual Savings Accounts (ISA) Gambling or betting winnings 10,000 25,000 5,000 1,000 1,000 42,000 (2,000) 40,000 (7,475) 32,525
Personal Allowances (PA) Every tax payer is entitled to a PA. For 2011/12 this amount is 7,475. It is an income tax personal allowance and cannot be set against any other tax liability such as CGT. The PA is deducted from an individuals income to give taxable income. From 2010/11 the PA is reduced for individuals with income >100,000. The reduction is based on adjusted net income (ANI).
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ExPress Notes
ACCA F6 Taxation UK
Adjusted Net Income: Net income Less: gross gift aid donations Less: gross personal pension contributions ANI X X X X
If ANI is >100,000, the PA is reduced by 50% x (ANI - 100,000). Therefore, individuals with ANI >114,950 do not get a PA. Personal Age Allowances (PAA) Individuals who are aged 65 years old are entitled to a PAA (in effect, a higher rate of PA). Individuals aged 65 74: 2011/12 PAA = 9,940 Individuals aged 75: 2011/12 PAA = 10,090 The PAA is given in full in the year the individual becomes 65 or 75. The PAA is aimed to protect elderly people with lower incomes. If however a person who is entitled to a PAA has ANI above 24,000 (2011/12) the PAA is reduced by: 50% x (ANI - 24,000) The PAA can never be reduced to less than the standard PA (7,475) but note that if an individual has ANI > 100,000 there will be a reduction in the PA as mentioned above. Income Tax Liability and Income Tax Payable Once the taxable income has been calculated, the income tax liability can be calculated. Note that taxable income is after Personal Allowances. The rate of income tax depends on the type of income. Employment income, trading income, property income and bank interest (i.e. all income except dividends) are taxed at the following rate for 2011/12: Basic rate Higher rate 1 to 35,000 35,001 to 150,000 20% 40%
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ExPress Notes
ACCA F6 Taxation UK
Additional rate
150,001 and above
50%
Income tax on Dividend income is either at 10%, 32.5% or 42.5%. The summarised income tax rates are: Other income 1 to 35,000 35,001 to 150,000 150,001 and above 20% 40% 50% Saving income * 20% 40% 50% Dividend income 10% 32.5% 42.5%
(these rates will be provided in the exam)
* Note that special rates of tax may apply to savings income if it is in the first 2,560 of income.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 3
Income Tax Employment Income
The Big Picture

Employment income represents all income and benefits an individual receives from his or her employment.
KEY KNOWLEDGE Income Tax Employment Income

Earnings Earnings are taxed on the receipts basis. i.e. the amount of earnings received in the tax year. There are special rules for directors to prevent them manipulating the receipt date. Earnings include salaries, wages, bonuses and benefits received by an individual. As an example, if an individual receives a salary of 20,000 and benefits of 6,500 his total employment income will be 26,500. This figure then goes to the income tax computation.
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ExPress Notes
ACCA F6 Taxation UK
Benefits Benefits are regularly tested at Paper F6. Exempt benefits include: One mobile phone. Relocation and removal expenses up to 8,000. Employer funded training (if training relevant for the job). Staff canteen or restaurant (provided its made available to all employees)
The calculation of the taxable benefit is reduced proportionally if the benefit is provided for only part of the tax year. In most cases, contributions towards the provision of the benefit are deducted in the calculation of the benefit. Assessable benefit Living Accommodation An employee provided with living accommodation as a result of his employment and which is not exempt job related accommodation would be assessed as follows: Benefit Higher of: 1. Annual value of the accommodation (figure will be given in the exam). 2. The rent paid by the employer. (Cost* minus 75,000) x official rate of interest (interest rate will be provided in the exam).
All properties
Additional charge for expensive properties
* If the employer acquired the property more than 6 years before providing it to the employee the market value, when first provided to the employee, should be used rather than cost. Assessable benefit motor cars This is one of the most common benefits provided to employees and is examined on a regular basis.
Benefit:
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ExPress Notes
ACCA F6 Taxation UK
List price when new x relevant %. Note the list price is the published brochure price when the car was first registered. The relevant % depends on the CO2 emissions of the car with the broad concept being that the more un-environmentally friendly the car is the higher the tax charge. For petrol cars the % is calculated as follows: CO2 emissions 75 grams 76 - 120 grams 121 to 125 grams Each complete 5 grams above 125 grams % (for petrol cars) 5% 10% 15% Add an additional 1% to the 15% up to a maximum of 35%.
For diesel cars 3% is added to the figures above but the maximum is still 35%.
EXAMPLE 1 Petrol Car

John is provided with a petrol car with a list price of 22,000 and CO2 emissions of 147 grams. He makes a contribution of 100 per month for the use of the car. Answer 1: Percentage: Base % Plus 1% for each complete 5 grams of CO2 above 125 grams (i.e. 125 to 145 = 4%) Relevant % % x list price = 19% x 22,000 Less contributions (100 x 12 months) Taxable benefit 15% 4% 19% 4,180 (1,200) 2,980
Note that the benefit present when a car is provided is inclusive of servicing and maintenance costs but does not include any private fuel that is paid for by the employer.
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ExPress Notes
ACCA F6 Taxation UK
Assessable benefit private fuel Some employers may pay all or part of the private fuel bill of an employee. The provision of fuel for private use is a separate benefit from the provision of a car. The benefit is calculated as follows: Relevant % as calculated for the car benefit x base figure. For 2011/12 the base figure is 18,800 and will be given in the exam. Using the previous example, if the individual had been provided with fuel for private use the calculation of the benefit for the provision of private fuel would be: (Relevant % as calculated for the car benefit x base figure) = 19% x 18,800 = 3,572. Assessable benefit private use of vans The benefit for the private use of a van is a flat rate scale of 3,000 pa. Private use of employers assets For private use of assets other than cars, vans and mobile phones (which have different rules) the general rule is that the benefit is: 20% of an assets market value at the time it was first provided. Gift of asset no previous private use. If an employer buys an asset and then it is given to an employee the benefit is the cost of the asset to the employer. Gift of asset after previous private use If an asset has been used by an employee and then given to him the benefit is calculated as follows: Higher of: 1. The market value of the asset when gifted. 2. The market value of the asset when first made available less the benefits assessed on the individual during the time the individual used it but didnt own it.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 4
Income Tax Trading Income

Trading income is a very important part of the syllabus and is almost always examined in one way or another.
KEY KNOWLEDGE Income Tax Trading Income

A person receives trading income if he has his own business. A person who receives trading income is known as one of the following: a sole trader self employed independent consultant A person who is employed by a company receives employment income and not trading income.
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ExPress Notes
ACCA F6 Taxation UK
Note that a person can receive both employment income (e.g. he has a part time job) and trading income (e.g. he has a part-time business whereby he trades by selling items on eBay) Badges of trade This is the term which refers to various tests (or badges) to ascertain whether a particular transaction that an individual undertakes is a capital item (and hence treated under CGT) or a trading item (and hence treated under income tax). Badges: 1. Subject matter are the items that were transacted typically items that are used for trading? 2. Frequency of transactions the more often the transaction is undertaken the more likely it is that the item will be trading. 3. Length of ownership a shorter period of ownership is more likely to indicate trading. 4. Profit motive a clear indication to make a profit may indicate a trading item. 5. Supplementary work and marketing additional work undertaken on the items to make them more marketable may indicate trading. 6. Method of acquisition an involuntary acquisition of the item (e.g. through inheritance) may indicate capital. Basis of assessment An individual who is self employed must prepare accounts. These accounts can be for whatever accounting period end that he chooses. The accounts are then adjusted for tax purposes to get the trading income figure (see adjustment of accounting profit section below). The trading income figure is then assessed on the individual using the current year basis rules. This is where the trading income assessed in a tax year is the amount in the 12 month accounting period ending in that tax year. For example, an individual that prepares accounts to 31 December and has adjusted trading income of 35,000 for the year ended 31 December 2011 would have trading income of 35,000 in the tax year 2011/12.
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ExPress Notes
ACCA F6 Taxation UK
Adjustment of the accounting profit An individuals accounts must be adjusted to obtain the tax adjusted trading profit. Tax adjusted trading profit Net profit per accounts Add: Disallowed expenditure Taxable trading income not included in accounts Income included within the accounts but not taxable as trading income Expenditure not in the accounts but allowable as a trading deduction Capital allowances 5,000 4,250 28,000
9,250 37,250
Less:
1,000 250 3,000 (4,250) 33,000
Tax adjusted trading profit Disallowable expenditure
General rule Only expenditure incurred wholly and exclusively for the purposes of the trade is allowable. Some of the more common forms of disallowable expenditure include: Capital expenditure Depreciation or amortization charges Appropriations (withdrawals) of funds from the business by the sole trader Excessive salary paid to a sole traders family member 3rd party entertaining (note that employee entertaining is allowable) The write off of a non-trade debt Subscriptions that are not related to the trade Gifts to customers are disallowable unless they satisfy all of the following: o o o Cost less than 50 per recipient per year The gift is not food, drink or tobacco The gift carries the name, logo or advert for the business
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ExPress Notes
ACCA F6 Taxation UK
Chapter 5
Capital Allowances

Depreciation is an accounting adjustment. There are various methods that a business can use to calculate depreciation. For example, straight line method and reducing balance method. Chapter 4 told us that depreciation charged to the income statement is not an allowable expense and instead is added back in the calculation of the tax adjusted trading profit.
KEY KNOWLEDGE Capital Allowances
Capital allowances are tax allowable amounts that are calculated according to set specific rules. In simple terms, capital allowances could be regarded as the tax equivalent of the accounting depreciation charge. Capital allowances are claimed on qualifying expenditure incurred on Plant (defined) and Machinery (not defined)
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ExPress Notes
ACCA F6 Taxation UK
Plant and Machinery (P&M) P&M includes a number of items. The most common ones found in the exams include: Machinery Vehicles (cars and lorries) Computers (hardware and software) Office furniture and equipment Moveable partitioning
Writing down allowance (WDA) An annual WDA of 20% is given on a reducing balance basis. Annual Investment Allowance (AIA) The AIA is a 100% allowance for the first 100,000 spent on P&M by a business in its 12 month accounting period. Available to all businesses. Not available on cars. For accounting periods >12 months or <12 months (long or short accounting periods), the 100,000 is pro-rated. If a business spends more than 100,000 in a 12 month period, the first 100,000 is eligible for AIA and the balance is eligible for WDA.
Motor cars purchased on or after 6 April 2009 Cars purchased on or after 6 April 2009 are treated according to their CO2 emissions. Cars do not qualify for AIA. However, any expenditure on a low emission car (i.e. CO2 110g/km) will qualify for a First Year Allowance of 100% instead of the WDA. CO2 Emissions 110g/km 111 160 g/km 160 g/km Treatment 100% FYA Include in general pool (no AIA or FYA) Eligible for 10% WDA (part of special rate pool)
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ExPress Notes
ACCA F6 Taxation UK
Motor cars purchased before 6 April 2009 Cars purchased before 6 April 2009 are treated according to their cost. AIAs are not available on cars. Cars costing 12,000 or less: These are included in the general pool. Cars costing more that 12,000: These are classified as Expensive cars and are kept outside of the general pool and instead are shown in a separate column for each expensive car. The maximum WDA for an expensive car is 3,000 pa. Once the written down value of the car is below 15,000 the WDA is calculated as 20% of the balance. Note that the car always remains in the separate column even when the balance falls below 12,000. Private use assets If the sole trader uses an asset partly for business purposes and partly for private purposes, the asset is kept in a separate column and only the business proportion of the asset is eligible for capital allowances. Note that private use assets are only present for individuals. Companies never have private use assets in their calculation as companies never use assets privately! Special Rate Pool Qualifying expenditure on long life assets (assets with a life >25 years) or high CO2 emission cars (which are privately used by owner of a business) attract a WDA of 10% rather than 20%.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 6
Trading Income Basis Assessment

Chapter 4 introduced the concept of the Current Year Basis (CYB) whereby the adjusted trading profit in an accounting period is assessed in the tax year in which the accounting period ends. There are a number of other rules which need to be looked at.
KEY KNOWLEDGE Trading Income Basis Assessment

Opening Year Rules There are special rules for when a sole trader commences business: Year 1. The profits assessed in year one are the actual basis. This is the adjusted profits from the commencement of business until the following 5 April. Year 2. If there is a 12 month period of account ending in the 2nd tax year then use the CYB. If there is not a 12 month accounting period then use one of the following:
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ExPress Notes
ACCA F6 Taxation UK
Period of Account a) the period of account is less than 12 months after commencement b) the period of account is more than 12 months after commencement c) there is no period of account ending in the 2nd tax year
Period Assessed 1st 12 months of trading. The 12 months ended on the accounting date. The actual profits between 6th April and 5th April.
Year 3. Assess the 12 months ended on the accounting date in that year. This will normally be the CYB. As a result of the above rules there is a possibility that profits for certain periods will be assessed in more than one year. These profits are known as overlap profits. These overlap profits are carried forward and usually deducted from the assessment in the year the business ceases. Ongoing business rules These rules have already been discussed and are the adjusted profits for an accounting period that end in a particular tax year. This is known as the CYB. Change of accounting date There are special rules for when a sole trader changes accounting date. Closing year rules The broad idea here is that when a business ceases there will be no periods which have not been taxed. The calculation method is as follows: 1) Identify the tax year in which the business ceases. 2) For the penultimate tax year, identify the CYB assessment. 3) Calculate the profits for the period from the date last assessed in 2) above until the date of cessation and from this figure delete any overlap profits.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 7
Trading Losses (For Sole Traders)

When an individual has a tax adjusted trading amount which is negative, he has a trading loss. The trading profit figure is nil. A trading loss may be offset against certain other income in accordance with the rules discussed in this chapter. The main reliefs are: Carry forward of the trading loss against future trading profits. Offset the loss against total income in the year of the loss and / or the preceding year. If a claim against total income has been made there is an optional claim against chargeable gains in the tax year of the loss and / or the preceding tax year.
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ExPress Notes
ACCA F6 Taxation UK
Offset of opening year loss against total income Offset of terminal loss against previous trading profits
Carry forward of trading loss The trading loss is carried forward and set against the first available profit from the same trade. The amount of the loss to be set off is as much as possible. Offset of loss against total income The loss can be offset against total income in the year of the loss and / or the preceding year. As an example, a loss in an accounting period ending 31 December 2011 arises in the tax year 2011/12 (under CYB). The loss could therefore be offset against total income in either 2011/12 or 2010/11. Loss relief under this method is optional and subject to a claim by the individual. The loss relief is against total income. Total income is before the offset of Personal Allowances (PA) and therefore there is a risk that utilising a loss under this method could result in the PA being wasted. Relieving trading losses against chargeable gains If a loss remains after a claim against total income a trading loss in 2011/12 can be offset against chargeable gains in 2011/12 and / or 2010/11. Offset of opening year loss against total income A trading loss incurred in the first 4 tax years of operation can be offset against total income from the 3 years preceding the tax year of the loss. The loss is offset on a FIFO basis (i.e. against the earliest year first) Offset of terminal loss against previous trading profits Unrelieved trading losses of the last 12 months of a businesss activity can be relieved against: 1) Trading profits in the year of cessation, and 2) Carried back and offset against trading profits for the 3 preceding years on a LIFO basis.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 8
Trading Income - Partnerships

In simple terms, partnerships are collections of sole traders that are working together. Profits from a partnership need to be allocated between the partners and then each partner includes their share of the partnership profit as trading income within their own income tax computation. The profits for the partnership are firstly adjusted to obtain the tax adjusted trading profit (as per the adjustments required for a sole trader mentioned at chapter 4). The tax adjusted partnership profits are then allocated to each partner. Calculation The tax adjusted profits of the partnership are allocated to the partners in accordance with their partnership profit sharing arrangements. Partners may be entitled to a fixed element such as salary or interest on loans and these amounts are withdrawn first. Example: Andrew and Barry are in partnership sharing profits equally after allocating a salary of 10,000 to Andrew. In the year ended 31 December 2011, the adjusted trading profits of the partnership were 50,000.
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ExPress Notes
ACCA F6 Taxation UK
Y/E 31/12/11 Salary Balance to allocate (1:1) Trading profits
Total 10,000 40,000 50,000
Andrew 10,000 20,000 30,000
Barry 20,000 20,000
The accounts end on 31 December 2011. Therefore under the CYB the trading profits will be assessed in 2011/12 with Andrew being assessed on 30,000 and Barry on 20,000. Loss relief in partnerships Trading losses are allocated between the partners in the same manner as trading profits are. Each partner can decide how they obtain relief. For example, partner A could carry the loss forward whilst partner B decides to offset against current year total income.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 9
Property Income

Property income represents income received by an individual from property. Property business profits This represents rental income received by a landlord. The assessable property income on an individual is calculated as follows: Rental income Less: deductible expenses Assessable property income 12,000 2,500 9,500
Income and expenses are treated according to the accruals concept and if the individual has more than one property the income and expenses are combined together in the calculation. The rules concerning whether expenses are deductible broadly follow the rules found within trading income. Examples of deductible expenses include interest on a loan to acquire the property, insurance, etc.
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ExPress Notes
ACCA F6 Taxation UK
Losses on property are offset against any property income in the year of the loss. If there are any unrelieved property losses they are carried forward and offset against future property income. Furnished holiday lettings (FHL) Property lettings which qualify as FHL have a number of taxation advantages. There are various requirements for a letting to be able to qualify as FHL. Broadly speaking the furnished property must actually be let for 70 days a year, on a commercial basis and be available to let for 140 days a year. Long term lets must not exceed 155 days. There are various advantages of being treated as a FHL. One of them being that the losses are treated as though they are trading losses and therefore can be offset against other income. Premiums received on the grant of a short lease A short lease is a lease for 50 years or less. Part of the premium received will be treated as though it was property income received by the landlord. The property income proportion of the premium received will be calculated as follows: The premium Less: 2% x (length of lease 1) x premium Example: Premium: 20,000; Length of lease: 15 years Premium received Less: 2% x (length of lease 1) x premium Property business income [2% x (15-1) x 20,000] 20,000 (5,600) 14,400
Rent a room relief Gross annual rent of 4,250 and below received for the rent of a room in a persons main residence is exempt. If an individual receives such rent in excess of 4,250, the individual can either: 1) Choose to pay tax on the excess of the rent over 4,250 or, 2) Be taxed in the normal way for property income (rent minus expenses).
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ExPress Notes
ACCA F6 Taxation UK
Chapter 10
Investment Income
Savings income - Bank and Building Society interest Note that for the purposes of the exam; assume that a Bank and a Building Society is the same thing. Bank interest is received net of 20% tax by individuals. In other words, individuals receive interest after tax of 20% has been withheld by the Bank and paid to HMRC on behalf of the individual. An individual must show the gross figure of any interest received in their tax computation. The gross amount is the amount including the tax withheld by the bank. Example: An individual receives bank interest of 800. The gross amount of interest shown in the income tax computation is: 800 x 100/80 = 1,000 The tax withheld by the Bank is 200 (1,000 - 800). Any tax withheld can be used by the taxpayer to offset against his tax payable. Rate of tax on savings income Savings income is normally taxed at the same rates as other income (see Chapter 2). However, a starting rate of tax of 10% will apply to the first 2,560 in certain circumstances.
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ACCA F6 Taxation UK
To ascertain whether this 10% rate applies, savings income goes on top of other income. If the savings income is within the first 2,560 of taxable income then the 10% rate applies to the savings income. Dividend income As with savings income, dividends are received net so will need to be grossed up. Dividends are deemed to be received net of a notional tax credit of 10%. Dividend income needs to be grossed up as follows: Dividends received x 100/90 The tax credit of 10% can be set against the individuals tax payable. Rate of tax on dividend income. Dividends are treated as being the top part of an individuals income and go on top of other income and savings income. Dividends are then taxed as follows: Dividend income in the basic rate band (the first 35,000): Dividend income in the higher rate band (35,001 to 150,000): Dividend income in the additional rate band (above 150,000): 10% 32.5% 42.5%
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ACCA F6 Taxation UK
Chapter 11
Pensions

Pensions are in effect tax efficient retirement savings scheme.
KEY KNOWLEDGE Pensions

There are two main types of pension schemes: 1. Occupational pension schemes (certain employees) 2. Personal pension schemes (employees, sole traders and unemployed) Individuals can make contributions to a pension scheme of any amount but will only be eligible for tax relief on contributions as follows: The higher of: 1. 3,600, and
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ACCA F6 Taxation UK
2. 100% of the individuals relevant earnings (relevant earnings include trading profits and employment income) Method of obtaining relief occupational pension scheme Payments to an occupational pension scheme obtain tax relief at source. The pension payment made by the employee is deducted from the employment income and the employer calculates PAYE on the net amount. If an employer also makes contributions to the employees occupational scheme, those deductions are tax deductible in calculating the employers trading income. The contributions will not be treated as a benefit on the employee. Method of obtaining relief personal pension scheme Basic rate tax relief relief is given automatically as the contributions are made net of the basic rate of income tax (20%). Higher rate tax relief relief is given by extending the basic rate band. If an individual pays a contribution of 8,000 (net), the contribution is grossed up by 100/80 to obtain a gross contribution of 10,000. The basic rate band of 35,000 is then extended by the gross contribution of 10,000 to obtain a revised basic rate band of 45,000. The additional rate threshold is extended to 160,000 (150,000 + 10,000).
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ACCA F6 Taxation UK
Chapter 12
National Insurance Contributions
National Insurance Contributions (NIC) are not tax as such. Instead they are social security contributions which are payable in addition to any taxes that may be due. There are various classes of NIC: Class Class 1 primary Class 1 secondary Class 1A Class 2 Class 4 Payable by Employee Employer Employer Self employed Self employed
Class 1 primary and secondary NIC calculated as a % on gross earnings (in effect on cash remuneration such as salary and bonuses but not on most benefits) over 7,225. The percentages are Class 1 Employee 1 - 7,225 per year 7,225 - 42,475 per year Above 42,475 Nil % 12.0 % 2.0%
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ACCA F6 Taxation UK
Class 1 Employer
1 - 7,072 per year Above 7,072
Nil % 13.8 %
Class 1A NIC is payable at a rate of 13.8% by employers on most taxable benefits provided to an employee. Class 2 NIC is payable at a flat rate of 2.50 per week by self employed individuals. Class 4 NIC is also paid by self employed individuals. Class 4 NIC is calculated according to the percentages below on the individuals taxable trading profits. Class 4 1 - 7,225 per year 7,226 - 42,475 per year Above 42,475 Nil % 9.0 % 2.0%
NIC rates will be provided in the exam.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 13
Corporation Tax

Corporation tax is a key area of the syllabus and will be examined.
KEY KNOWLEDGE Corporation Tax

A period of account is the period that the company prepares accounts for. A company can generally prepare accounts that end on any date that the company chooses and whilst it is normally 12 months long, it can be shorter or longer. An accounting period is the period for which the charge to corporation tax is made. An accounting period can never exceed 12 months. Most of the time, the period of account and the accounting period are the same dates (i.e. when the period of account is 12 months long)
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ACCA F6 Taxation UK
If a company has a period of account longer than 12 months the period of account is divided with the maximum length of an accounting period being 12 months. For example, a period of account of 18 months would have an accounting period of 12 months followed by an accounting period of 6 months. Corporation tax computation year ended 31 March 2012 Trading profits Property income Interest income Chargeable gains Total profits Less: Gift Aid Profits chargeable to corporation tax (PCTCT) 150,000 30,000 5,000 50,000 235,000 (35,000) 200,000
There are a number of similarities between how items are treated for corporation tax purposes and how they are for income tax purposes. The main differences are: 1. Trading income main differences for companies There are no private use asset adjustments. Within income tax a self employed person would need to make adjustments to the deductibility for private use. With companies, the companies themselves clearly dont use it privately. The private use is taxed on the employees via the benefit on private use. Similarly for capital allowances purposes there are no private use assets for a company. 2. Property income main differences for companies Property income is still assessed on the accruals basis but a company is assessed according to the companys accounting period whilst an individual is assessed according to the tax year. Interest on a loan acquired to purchase or improve an investment property is treated under the loan relationship rules unlike individuals who can treat it as a deduction from property income. 3. Interest income main differences for companies Bank interest received by a company is received gross with no tax withheld (unlike individuals that receive bank interest net of 20% tax).
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ExPress Notes
ACCA F6 Taxation UK
4. Dividends main differences for companies Dividends received BY companies are not included within PCTCT. Individuals however include dividends received within their income tax computations. 5. Chargeable gains main differences for companies Companies include capital gains as chargeable gains within PCTCT and pay corporation tax on them. Individuals pay Capital gains Tax on gains and not income tax. 6. Gift Aid main differences for companies Companies make gift aid payments gross and the amount paid is deducted within PCTCT. Individuals extend the basic rate band. To calculate the corporation tax liability we need to identify the profits of a company. Profits = PCTCT + Franked Investment Income (FII) FII = Gross dividends received from non associated companies. In other words, FII = (dividends received from companies in which the company has a 50% or less shareholding) x 100/90 Profits are used to identify the tax rate that will be used. Note that to identify the actual tax charge we apply the tax rate to PCTCT and not to Profits. The rate of corporation tax used depends on the financial year. The financial year runs from 1 April to the following 31 March. For financial year 2011 (i.e. the period from 1 April 2011 to 31 March 2012) the rates are: Profits below the lower limit of 300,000 Profits between 300,000 and 1,500,000 Profits above the upper limit of 1,500,000 20% Marginal Relief 26%
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ACCA F6 Taxation UK
EXAMPLE 1 Profits below the lower limit

PCTCT = 200,000 FII = 15,000 Profits = 215,000. This is below the 300,000 limit so the lower rate of corporation tax of 20% applies (FY 2010). Corporation tax = 20% x 200,000 = 40,000
EXAMPLE 2 Profits above the upper limit

PCTCT = 2,000,000 FII = 50,000 Profits = 2,050,000. This is above the 1,500,000 limit so the full rate of corporation tax of 26% applies (FY 2010). Corporation tax = 26% x 2,000,000 = 520,000
EXAMPLE 3 Profits in the marginal relief band

If profits fall within the marginal relief band the following calculation is needed: PCTCT@ full rate Less: marginal relief 3/200 x (upper limit profits) x PCTCT/Profits Example: PCTCT = 1,000,000 FII = 50,000
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Profits = 1,050,000. This is above the 300,000 limit and below the 1,500,000 limit so marginal relief applies. Corporation tax = 26% x 1,000,000 = Less: 3/200 x (1,500,000 - 1,050,000) x (1,000,000/1,500,000) Corporation tax: Short Accounting Periods If an accounting period is less than 12 months the upper and lower limits are reduced proportionally. Example: A company has a 3 month accounting period ending 31 March 2011. The upper limit is: 1,500,000 x 3/12 = 375,000 The lower limit is: 300,000 x 3/12 = 75,000 Associated companies The upper and lower limits are divided by the number of associated companies Example: Company A owns 100% of company B. Associated companies = 2 Upper limit: 1,500,000/2 = 750,000 Lower limit: 300,000/2 = 150,000 Accounting Periods that straddle 31 March. The corporation tax rates for the following years are: Financial Year Small companies rate Full rate Lower limit Upper limit Marginal relief fraction
(Relevant details will be provided in the exam)
260,000 (4,500) 255,500
2008 21% 28% 300,000 1,500,000 7/400
2009 21% 28% 300,000 1,500,000 7/400
2010 21% 28% 300,000 1,500,000 7/400
2011 20% 26% 300,000 1,500,000 3/200
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ACCA F6 Taxation UK
When an accounting period covers 2 separate Financial Years and the rates or fractions are different then separate calculations have to be made for each financial year. The corporation tax payable will still be based on the accounting period but the calculation will be split into two.
EXAMPLE Company A
Company A has PCTCT of 2,000,000 for its year ended 31 December 2011. It did not receive any FII. The year ended 31 December 2011 is partly in FY 10 (1 January 2011 to 31 March 2011) and partly in FY 11 (1 April 2011 to 31 December 2011) The upper limit is 1,500,000 in both FY 10 and FY 11 so we know that the company will be paying tax at the full rate: FY10 2,000,000 x 3/12 x 28%: FY11 2,000,000 x 9/12 x 26%: Total tax payable for the y/e 31 December 2011 140,000 390,000 530,000
Trading losses (for companies) If the corporation tax computation shows a loss, PCTCT is nil. The company can utilise the loss in the following ways: Carry forward the loss to offset against future trading income of the same trade under s393(1) ICTA 1988 Offset of current year trading loss against current year total profit (before deduction of gift aid) (s393A ICTA 1988) If a current year loss offset has been made and there are losses remaining, unused losses can be carried back and offset against total profits (before deduction of gift aid) of the previous 12 months.
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ACCA F6 Taxation UK
Chapter 14
Chargeable Gains (For Companies)

The taxation of capital gains on individuals is dealt with in depth at chapter 16.
KEY KNOWLEDGE Chargeable Gains (For Companies)

The calculation of chargeable gains for companies is similar to that found for individuals except for a number of major differences. The main ones being: Companies Pay corporation tax on chargeable gains (i.e. the gains are part of PCTCT). Companies do not receive an annual exemption. Companies receive indexation allowance (IA). The share matching rules are different. Individuals Pay Capital Gains tax (CGT) on the gains and not income tax on the gains. Individuals do receive an annual exemption. Individuals do not receive indexation allowance The share matching rules are different.
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ACCA F6 Taxation UK
Chargeable gains Pro forma (for companies) Disposal proceeds Less: incidental costs of disposal (e.g. advertising or auction fees) Net Proceeds Less: allowable expenditure Unindexed gain Less: indexation allowance (see below) Chargeable gain / (loss) 100,000 (2,000) 98,000 (38,000) 60,000 (15,000) 45,000
Indexation allowance gives a company some relief for the effect of inflation during the period of ownership of the asset. IA= the cost of the asset x the movement in the Retail Price Index (RPI) Share matching Rules (for companies) When shares in a company are sold, the calculation needs to identify which shares were sold. The shares sold are matched with the following purchases: 1. Shares acquired on the same day. 2. Shares acquired in the 9 days before the sale. 3. Shares in the share pool (or s104 pool or FA 85 pool)
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ExPress Notes
ACCA F6 Taxation UK
Chapter 15
Corporate Groups and Overseas Tax Issues
CORPORATE GROUPS The Big Picture

Corporate Groups When a group of companies exist there are a number of relationships that you need to be aware of. The 2 main ones being: Associated companies (>50% control) Group loss relief (75% control)
Associated Companies Definition of associated companies. Two companies are associated with each other if: One controls the other, or Both are controlled by another company or individual
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ACCA F6 Taxation UK
Implication of being associated: 1. The upper and lower limits used for determining the rate of corporation tax are divided by the number of associated companies. Example: A Ltd owns 65% of B Ltd. The number of associated companies is 2. The upper and lower limits are 750,000 (1,500,000/2) and 150,000 (300,000/2) respectively for both A Ltd and B Ltd.
2. Any dividends between associated companies are not treated as FII for the purposes of calculating a companys profits. 3. Only one annual investment allowance of 100,000 is available for the group. Group loss relief group Definition of group relief group. Two companies are part of a group relief group if: One owns 75% of the other, or Both are 75% subsidiaries of a 3rd company
For sub-subsidiaries to be included within a group relief group then top company should own at least 75% of the sub-subsidiary. Implications of being part of a group relief group: The main implication is that any amount of the trading losses of one company may be surrendered (given) to another group relief group company. In order to maximise the tax saving, the loss should be surrendered in the following order: 1. To companies that are paying tax in the marginal relief band and who will be suffering a marginal tax rate of 29.75% (FY 2008 to FY 2010) or 27.5% (FY2011). 2. To companies that are paying tax at the full rate of 28% (FY 2008 to FY 2010) or 26% (FY2011). 3. To companies that are paying tax at the small companies rate of 21% (FY 2008 to FY 2010). 20% FY2011.
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ACCA F6 Taxation UK
OVERSEAS ISSUES The Big Picture

Overseas dividend income is exempt from UK corporation tax. If a UK company receives foreign income such as overseas branch income it will be included within PCTCT. It will therefore be liable to both UK and foreign tax. The company will be eligible for double tax relief. Double Tax Relief (DTR) Deduct from the UK tax liability the lower of: 1. UK on foreign income, and 2. Overseas tax suffered.
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ACCA F6 Taxation UK
Chapter 16
Capital Gains Tax (CGT)

CGT is paid by individuals on chargeable disposals of chargeable assets. Companies do not pay CGT but instead pay corporation tax on their chargeable gains. This chapter only deals with individual issues. Only individuals that are UK tax resident or UK ordinarily resident will pay CGT. The assets disposed of can be located anywhere in the world. Individuals have a CGT annual exemption (2011/12: 10,600). Gains up to this amount are not taxed. Capital gains are taxed after taxable income (i.e. as the top portion). Taxable gains within the basic rate band are taxed at 18%. Taxable gains within the additional rate band are taxed at 28%.
If an individual is neither UK tax resident nor UK ordinarily resident then they will not be liable to CGT even if the asset disposed of is located in the UK. The majority of capital assets are chargeable to CGT. There are however a small number of exempt assets which are outside the scope of CGT. These include:
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ACCA F6 Taxation UK
Principal private residence Cars (including antique or vintage cars) Certain chattels National Savings Certificates Assets held within ISAs
Pro forma for computation of capital gains for individuals Disposal proceeds Less: incidental costs of disposal (e.g. advertising or auction fees) Net Proceeds Less: allowable expenditure Cost of acquisition Cost of enhancements (28,000) (10,000) 60,000 100,000 (2,000) 98,000
Capital gain / (loss)
The gains and losses for an individual are then combined and taxed. The calculation of CGT is as follows: Capital gain on asset #1 Capital gain on asset #2 Capital loss on asset #3 Net gains for the tax year Less: capital loss brought forward Net capital gain Less: annual exemption Taxable gains CGT @ 18% or 28%. 10,000 5,000 20,000 35,000 (4,900) 30,100 (10,600) 19,500
Note that capital losses brought forward are only used to the extent of bringing the net gains for the current year down to the level of the annual exemption.
Transfers between husband and wife (or civil partners)
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ACCA F6 Taxation UK
Assets transferred between spouses are deemed to be transferred at such a value that neither a gain nor a loss will be created. The spouse transferring the asset is deemed to have transferred it at the original acquisition cost. When the receiving spouse subsequently disposes of it they will have an acquisition cost equal to the original acquisition cost. Part disposals When an asset is part disposed of, we need to identify the proportion of the original cost that relates to the part disposed of. The proportion of the original cost allocated to the disposal is based on the value of the part disposed of and the value of the part retained. Example: John bought 5,000 m2 of land for 100,000 in January 2004. He has just sold 3,000m2 for 80,000. The market value of the remaining 2,000m2 is 30,000. The cost of the land sold for inclusion within the disposal calculation is: Cost x [A / (A+B)] where A is the MV of the part sold and B is the MV of the part retained. Therefore, the cost for the part disposed in this example is 100,000 x [80,000 / (80,000 + 30,000)] = 72,727 Chattels Chattels are tangible, movable items. Examples include antiques such as vases or paintings. There are special rules for chattels that were bought or sold for less than 6,000. Bought for < 6,000 Sold for <6,000 Sold for >6,000 Exempt from CGT Gain calculated as normal but gain limited to a maximum of 5/3 x (gross proceeds - 6,000) Bought for > 6,000 Sale proceeds deemed to be 6,000 CGT computed in normal manner
Share matching Rules (for individuals) When an individual sells shares in a company, the calculation needs to identify which shares were sold. The shares sold are matched with purchases in the following order: 1. Shares acquired on the same day.
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ACCA F6 Taxation UK
2. Shares acquired in the next 30 days after the sale. 3. Shares in the share pool (or s104 pool or FA 85 pool) The share pool contains details of the purchase and sale of shares in a particular company. When shares are disposed of out of the share pool, the shares are disposed of at their average cost. Reliefs Principal Private Residence (PPR) PPR relief is available when an individual sells a property that has been his main residence at some stage. The gain that is exempt is calculated as the gain x (period of occupation / total period of ownership). Occupation includes both actual occupation and deemed occupation. Deemed occupation includes: The last 3 years of ownership (if it was actually occupied at some stage) Up to 3 years absence for any reason (if preceded and followed by actual occupation) Up to 4 years absence if working elsewhere in the UK (if preceded and followed by actual occupation) Any period of absence if working abroad (if preceded and followed by actual occupation)
Reliefs Entrepreneurs Relief Entrepreneurs relief reduces the CGT payable on certain qualifying business disposals. The relief is: The first 10m of gains on qualifying business disposals will be taxed at 10%. Gains above 10m will be taxed at the standard rate of 18% / 28%. Qualifying business disposals include: Businesses carried on by the individual (including partnership shares) Shares in an individuals personal trading company (if the individual is an employee of the company).
Reliefs Rollover Relief When a qualifying business asset is sold, any gain arising can be rolled into a replacement qualifying asset. The gain is therefore deferred by reducing the base cost of the replacement asset by the gain rolled over.
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ACCA F6 Taxation UK
Qualifying assets include: Land & buildings Goodwill Fixed plant & machinery
The replacement asset must be acquired between one year in advance of the disposal and 3 years after the disposal. If the replacement asset is a depreciating asset (in effect, an asset with a life of 60 years) the gain cannot be rolled over. Instead, the gain will be deferred until the earlier of the following: The date the replacement asset is sold. The date the replacement asset ceases to be used. 10 years from the date of acquisition of the replacement asset.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 17
Inheritance Tax (IHT)

IHT is a capital tax that is charged on a transfer of value of chargeable property by a chargeable person. A charge to IHT occurs on: 1. The death of an individual. 2. Lifetime gifts in the 7 years preceding death. 3. Certain lifetime transfers.
KEY KNOWLEDGE Transfer of Value, Chargeable Property & Chargeable Person.

The amount of the transfer of value is based on the fall in value of the donors estate. Note that this is does not have to necessarily be the open market value of the item.
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ACCA F6 Taxation UK
For example, the market value of a 2% shareholding in a company will be lower than the fall in value for an individual that owns 51% of the company and then sells 2% of his shareholding. (i.e. because the transfer of the 2% has resulted in control of the company being lost). Chargeable property represents property that a person owns or is entitled to. Unlike CGT, there are no exempt assets for IHT purposes. For the purposes of the F6 exam a chargeable person will be a UK domiciled individual who is liable for IHT on their worldwide assets.
KEY KNOWLEDGE When is IHT charged?

IHT is charged: 1. When a person dies. 2. On certain lifetime transfers. On death: The main occasion when IHT is charged is on the death of an individual. In this situation IHT is levied on the estate at death as well as any transfers of non-exempt assets in the 7 years before death. Lifetime transfers: 3 different types of transfers can be made by an individual during his lifetime: Treatment during life Exempt from IHT Treatment if donor lives for 7 years. Exempt from IHT Treatment on death within 7 years. Exempt from IHT PET becomes chargeable to IHT.
Type of transfer Exempt Potentially Exempt Transfers (PETs) Chargeable Lifetime Transfers (CLTs)
Examples Small gift exemption Annual exemption. Most gifts by individuals.
No IHT payable.
Exempt from IHT
For F6, all gifts into Trusts.
IHT to pay.
No further IHT to pay.
Possibly extra IHT to pay.
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ACCA F6 Taxation UK
Exemptions (lifetime gifts only) Small gift exemption ( 250 per recipient per year). Annual exemption (3,000 per year and can be carried forward for one year if not used). Habitual expenditure exemption. Marriage exemption.
Exemptions (both lifetime and on death) Transfers between spouses.
KEY KNOWLEDGE Calculation of IHT on Lifetime Transfers

IHT on CLTs (transfers into a Trust)
Transfer of value Less: exemptions Chargeable amount
X (X) X
Nil Rate Band (NRB) all individuals are entitled to a NRB (2011/12: 325,000) Chargeable amount Less: NRB available after deduction of gross transfers in the last 7 years Amount chargeable to IHT X (X) X
The rate of IHT depends who pays the tax: If the recipient pays the tax - i.e. the trustees (donee). The gift is referred to as a gross gift and the tax rate is 20%. If the transferor pays the tax (i.e. the donor) the gift is referred to as a net gift and the tax is 25%
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ACCA F6 Taxation UK
KEY KNOWLEDGE Calculation of IHT as a result of Death
On the death of an individual there will be IHT payable on: 1. Transfers within the previous 7 years (i.e. PETs that now become chargeable and potential additional IHT on CLTs) Broadly speaking, the tax on transfers within the previous 7 years will be taxed at 40% and relief will be given for taper relief (see below) as well as IHT already paid on lifetime transfers.
Taper Relief the idea behind this is that if people survive for at least 3 years after the transfer the IHT charge is reduced. The rates of taper relief are as follows:
Time between date of gift and date of death. 0 3 4 5 6 to to to to to 3 4 5 6 7 years years years years years
Taper Relief % applied to the tax due Nil 20% 40% 60% 80%
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ExPress Notes
ACCA F6 Taxation UK
EXAMPLE Death after a lifetime transfer
John made a gift (PET) of 350,000 on 10 January 2008. He died on 10 April 2011. He made no other lifetime transfers. The death occurred in 2011/12. PET Less: Nil Rate Band IHT due on 350,000 (325,000) 25,000
IHT due at 40% [25,000 x 40%] Less: Taper Relief of 20% (within 3 to 4 years of death) IHT due after Taper Relief
10,000 (2,000) 8,000
2. The value of the estate at death. Calculation of IHT at 40% on the estate at death is looked at after the lifetime transfers have been dealt with.
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ExPress Notes
ACCA F6 Taxation UK
Chapter 18
Value Added Tax (VAT)

VAT is an indirect tax which is ultimately borne by the final customer. VAT occurs when a taxable person makes a taxable supply. Taxable person: an individual or company that is or should be registered for VAT. Taxable supply: sales and purchases of goods or services which are not VAT exempt or outside the scope of VAT. Input VAT Taxable person Output VAT
Input VAT: A taxable person pays input VAT on its purchases of goods or services. Output VAT: A taxable person charges output VAT on its sales of goods or services. At the end of each tax period (normally a 3 month period) the input and output VAT is netted off and an excess of output VAT is paid to HMRC whilst an excess of input VAT is recovered from HMRC. Standard rated supplies: 17.5% VAT rate (up to 3 January 2011) and 20% (from 4 January 2011). Most goods and services are standard rated.
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ACCA F6 Taxation UK
Zero rated supplies: 0% VAT rate (but importantly still within the scope of VAT so can claim input VAT). Examples of zero rated include: Childrens clothes Books & newspapers Non luxury food
Exempt supplies: no VAT is charged and input VAT cannot be reclaimed. Examples of exempt supplies include: Land Financial services Education
VAT Registration Requirements Compulsory registration is required when either: 1. The taxable supplies over the previous 12 months (or since trade commencement date) exceed the registration limit (currently 73,000). HMRC must be notified within 30 days of the end of the month in which the registration limit is exceeded. Registration begins from the end of the month after the month in which the limit was exceeded. or 2. The taxable supplies over the next 30 days alone are anticipated to exceed the registration limit (currently 73,000). HMRC should be informed prior to the end of the 30 days. Registration begins at the start of the 30 days. Voluntary registration is possible. Advantages include being able to recover relevant input VAT as well as providing an impression of a business being bigger than it really is. Disadvantages include the increased administrative burden. Pre-registration expenses Input VAT on goods acquired for business purposes can be recovered if they are still within inventory at date of registration. Given that they are in stock when the business registers for VAT, output VAT will be charged when the goods are sold so it is only fair that input VAT can be claimed (goods acquired more than 3 years prior to registration are excluded). Input VAT on services provided in the 6 months prior to registration can be recovered.
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ExPress Notes
ACCA F6 Taxation UK
Tax point The tax point is the official date of supply for VAT purposes. For goods, the basic tax point is when the goods are made available to the customer. For services, the basic tax point is when the service is performed. The basic tax point is amended in the following situations: 1. Before the basic tax point if an invoice is issued or payment is received before the basic tax point the date of the invoice or the payment becomes the tax point. 2. After the basic tax point if an invoice is issued within 14 days of the basic tax point the date of the invoice becomes the tax point. VAT relief for bad debts If a taxable person makes a sale, output VAT is chargeable and will be payable to HMRC. If the debt subsequently becomes a bad debt, the taxable person can obtain VAT bad debt relief by in effect claiming the VAT on the bad debt as input VAT. In order to qualify for VAT bad debt relief the debt must be >6 months old and be written off in the sellers accounts.
(end of ExPress Notes)
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Notes

ACCA Paper F6 (UK)

START About ExPress Notes

How to get the most from these ExPress notes

At the start of the learning phase

Your stage in study for each paper Practice phase

These ExPress notes

ACCA online past exams

The night before the real exam

At the door of the exam room before you go in.

Our ExPress notes fit into our portfolio of materials as follows:

START About The ExP Group

START The Big Picture

Income Tax An Introduction

START The Big Picture

KEY KNOWLEDGE Income Tax An Introduction

KEY KNOWLEDGE Pro-forma Tax Computation 2011/12

150,001 and above

(these rates will be provided in the exam)

Income Tax Employment Income

The Big Picture

KEY KNOWLEDGE Income Tax Employment Income

Additional charge for expensive properties

EXAMPLE 1 Petrol Car

Income Tax Trading Income

START The Big Picture

KEY KNOWLEDGE Income Tax Trading Income

1,000 250 3,000 (4,250) 33,000

Tax adjusted trading profit Disallowable expenditure

START The Big Picture

KEY KNOWLEDGE Capital Allowances

Trading Income Basis Assessment

START The Big Picture

KEY KNOWLEDGE Trading Income Basis Assessment

Trading Losses (For Sole Traders)

START The Big Picture

Trading Income - Partnerships

START The Big Picture

Y/E 31/12/11 Salary Balance to allocate (1:1) Trading profits

Total 10,000 40,000 50,000

Andrew 10,000 20,000 30,000

Barry 20,000 20,000

START The Big Picture

START The Big Picture

KEY KNOWLEDGE Pensions

National Insurance Contributions

1 - 7,072 per year Above 7,072

NIC rates will be provided in the exam.

START The Big Picture

KEY KNOWLEDGE Corporation Tax

EXAMPLE 1 Profits below the lower limit

EXAMPLE 2 Profits above the upper limit

EXAMPLE 3 Profits in the marginal relief band

260,000 (4,500) 255,500

2008 21% 28% 300,000 1,500,000 7/400

2009 21% 28% 300,000 1,500,000 7/400

2010 21% 28% 300,000 1,500,000 7/400

2011 20% 26% 300,000 1,500,000 3/200

Chargeable Gains (For Companies)

START The Big Picture

KEY KNOWLEDGE Chargeable Gains (For Companies)

Corporate Groups and Overseas Tax Issues

CORPORATE GROUPS The Big Picture