The Institute of Chartered Accountants in England and Wales

TAXATION
Advanced Stage

For exams in 2013

Study Guide

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Contents

1 2 3 4 5 6

Introduction Aim of the papers and specification grid Study guide Skills assessment guide Technical knowledge Key resources

1 3 4 25 28 36

1 Introduction
1.1 What is the Advanced Stage?
Structure and progression
The Advanced Stage of the ACA qualification is designed to ensure that candidates are able to integrate and apply their technical, professional and ethical skills in a variety of business environments. The diagram below shows the five modules which form the basis of the Advanced Stage. The Advanced Stage is comprised of two technical integration modules and the Case Study. The two technical integration modules will be examined in a business scenario context which draws together a number of different areas of technical knowledge.

The Professional Stage consists of knowledge modules and application modules. The knowledge modules introduce the core technical knowledge and skills required by a chartered accountant. The application modules further develop and assess practical application of technical knowledge and skills. The technical knowledge acquired at the Professional Stage is developed to an advanced level and integrated in a broader range of business scenarios in the Advanced Stage technical integration modules. The application of technical knowledge in these modules requires an appreciation of the typical issues and problems facing businesses and their relationship to corporate reporting, assurance and taxation. A greater depth of business and financial analysis will be required to understand the implications and risks arising from the business issues. New technical topics are introduced in the technical integration modules, that are not dealt with elsewhere in the syllabus. A deeper level of technical ability is expected of candidates across the entire ACA syllabus to reflect the greater financial and business awareness needs of trainee chartered accountants approaching qualification. This is reflected particularly in assessing candidates proficiency and ability to integrate knowledge and skills both within and across technical subjects in a range of complex business scenarios. Candidates will also be required to apply professional knowledge using more advanced skills in the technical integration modules. These professional skills are then examined to a greater extent in the final

Study guide

ACA module: the Case Study. This module requires higher level cognitive skills, analytical and evaluative skills and emphasises the importance of communication and articulation skills.

Assessment
The two technical integration modules will be examined using traditional paper based assessments. Each paper based exam will be 3.5 hours in length. These exams will contain questions requiring the integration of knowledge both within technical disciplines and across technical disciplines. Questions integrated across all subject streams are an essential step towards the Case Study but will generally have more structure and guidance than those at the Case Study. The Case Study will continue in its present format of a four hour written exam with advance information provided to candidates ahead of the exam and impact information issued in the exam, containing the Case Study requirements.

Flexibility
There are no regulations stipulating the order in which candidates must attempt the technical integration modules. The Case Study must be the final module attempted and can only be attempted in the final year of a training contract. There is no restriction on the number of attempts permitted at each advanced stage module.

Open Book Policy

Candidates may take any written or printed material into the exam hall subject to practical space restrictions.

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2 Aim of the papers and specification grid

2.1 Module aim
The aim of the Business Reporting paper is: To ensure that candidates can apply analysis techniques, technical knowledge and professional skills to resolve real-life compliance issues faced by businesses. Candidates may be put, for example, in the role of a preparer of financial statements, or other corporate reports such as on sustainability and corporate responsibility, an advisor or in an assurance role facing business issues where there are reporting implications. Compliance issues relating to taxation will also feature in this module. Candidates will be required to use professional judgement to identify and evaluate alternatives and determine the appropriate solution(s) to compliance issues, giving due consideration to the commercial impact of their recommendations. The aim of the Business Change paper is: To ensure that candidates can provide technical advice in respect of issues arising in business transformations, mergers, acquisitions, alliances and disposals. Candidates will be required to analyse and interpret both external and internal financial and nonfinancial data in order to plan for change and provide advice. In undertaking this analysis candidates will be expected to evaluate the impact of stakeholder influences on the data, including the impact of choice of reporting policies. Taxation and practical business techniques are particularly important in this module, where business techniques include aspects of business strategy, business finance, performance management and costing. There will also be financial reporting, assurance, ethical and legal implications to be considered when developing and assessing strategic and business plans.

2.2

Specification grid
This grid is a general guide as to the subject matter within this module and assessment coverage over a period of time. BR Weighting (%) 5 10 20 30 30 40 30 40 0 BC Weighting (%) 5 10 25 35 10 20 15 25 30 35

Ethics and law Taxation Audit and assurance Corporate reporting Business analysis

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3 Study guide
3.1 Help yourself study for your ACA exams
The right approach
1 Develop the right attitude Believe in yourself Remember why you're doing it Yes, there is a lot to learn. But thousands have succeeded before and you can too. You are studying for a good reason: to advance your career.

Focus on the exam Read through the Syllabus in this guide This tells you what you are expected to know.

The right method See the whole picture Keeping in mind how all the detail you need to know fits into the whole picture will help you understand it better. The Practical significance and Working context to each chapter in the study guide put the material into context. The Learning objectives and Section overviews in the Study Manual show you what you need to grasp.

Use your own words

To absorb the information (and to practise your written communication skills), you need to put it into your own words. Take notes. Answer the questions in each chapter. Draw mindmaps. Try 'teaching' a subject to a colleague or friend.

Give yourself cues to jog your memory

The Study Manual uses bold to highlight key points. Try colour coding with a highlighter pen. Write key points on cards.

The right recap Review, review, review Regularly reviewing a topic in summary form can fix it in your memory. The Study Manual helps you review in many ways. Each Chapter Summary will help you to recall that study session. The Self-test actively tests your grasp of the essentials. Go through the Examples in each chapter a second or third time.

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3.2

Study cycle
The best way to approach the Study Manual is to tackle the chapters in order. We will look in detail at how to approach each chapter below but as a general guide, taking into account your individual learning style, you could follow this sequence for each chapter. Key study steps Step 1 Topic list Step 2 Introduction Activity This topic list is shown in the contents for each chapter and helps you navigate each part of the book; each numbered topic is a numbered section in the chapter. The practical significance and working context sections for each chapter set out in this study guide give you the big picture in terms of the context of the chapter. The Examination context guidance shows what the examiners are looking for and tells you why the topics covered in the chapter need to be studied. Section overviews give you a quick summary of the content of each of the main chapter sections. They can also be used at the end of each chapter to help you review each chapter quickly. Proceed methodically through each chapter, particularly focusing on areas highlighted as significant in the chapter introduction or study guide. Take brief notes, if you wish. Don't copy out too much. Remember that being able to record something yourself is a sign of being able to understand it. Your notes can be in whatever format you find most helpful lists, diagrams, mindmaps. Work through the examples very carefully as they illustrate key knowledge and techniques. Check yours against the suggested solutions, and make sure you understand any discrepancies. Review it carefully, to make sure you have grasped the significance of all the important points in the chapter. Use the Self-test to check how much you have remembered of the topics covered. Ensure you have ticked off the Learning objectives.

Step 3 Section overviews Step 4 Explanations Step 5 Note taking Step 6 Examples Step 7 Answers Step 8 Chapter summary Step 9 Self-test Step 10 Learning objectives

Moving on...
When you are ready to start revising, you should still refer back to the Study Manual. As a source of reference (you should find the index particularly helpful for this). As a way to review (the Section Overviews, Examination Context, Chapter Summaries and Self-test questions help you here).

Remember to keep careful hold of the Study Manual you will find it invaluable in your work.

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This chapter is largely revision from Professional Stage and provides the basis for the next six chapters of this study manual. Essential points Tax treatment of dividends received from both UK and overseas companies Enhanced definition of associates R&D and R&D tax credits Tax treatment of intangible fixed assets REITs, AIFs and use of expenses of management Loss relief especially terminal loss relief and use of losses with a change in ownership SSE highly examinable but easily missed

Most UK companies have taxable total profits and must pay UK corporation tax as a result. Most companies would probably prefer to pay as little tax as possible but do not necessarily always understand the complexities of the UK taxation system. Instead, they rely on accurate and up-to-date technical knowledge from professional advisers. Many day to day business decisions will have an impact on the UK tax position and it is essential that professional advisers are involved in these so that the tax implications can be taken into account. Finally work through the self-test questions carefully to ensure that you have grasped the main points in the chapter. Any areas which are unclear should be addressed now as the next six chapters relate to corporation tax and take the fundamental knowledge in this chapter further.

Corporation tax is calculated on an individual company basis. The profit shown in the accounts is the starting point, but the taxable total profit is often a very different figure. The effective rate of tax paid by companies has become very important in recent years as boards of directors are judged on their tax performance as well as their trading profits. A tax rate which is too high may indicate that the company may be missing tax reliefs and credit opportunities; too low and it may be accused of shirking its corporate responsibility to pay its fair share. Companies with investment business earn their profits from different types of activity to trading companies, but the tax is calculated using the same basic principles as for a trading company. The SSE has been one of the most popular reliefs introduced in the past few years. It allows for significant shareholdings to be disposed of without attracting a charge to corporation tax on the gains arising. Read through chapter one of the study manual quickly as it is mostly revision from Professional Stage but note the treatment of dividends received by companies, the capital allowances rules, the changes to the R&D rules, and the loss relief provisions, particularly the worked example on terminal loss relief.

Stop and think

Are all companies engaged in some kind of R&D expenditure aware of the potential benefit from the associated tax relief? Is it possible for a company to pay tax at too low a rate?

CT admin you last studied this at Knowledge level of Professional Stage. You should be able to discuss tax payment dates and penalties eg in loss questions. Refer back to the final worked example in section 5.1 to understand how this knowledge could be brought into TI

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A company has a number of options available to raise funds. Most of the factors to be considered in deciding which best suits the circumstances of a business have nothing to do with tax. However, the tax consequences of choosing debt will be very different from issuing new equity shares. Review the implications of financing via debt or equity in section two. Note the interaction with thin capitalisation and the world-wide debt cap provisions in chapter six.

There have been many attempts to set up complex avoidance schemes which make use of the loan relationships rules, but the government has acted swiftly to legislate and has now successfully stopped many of these schemes.

Read section one. Could you apply the loan relationship rules to different types of interest income and expense.

Debt financing interacts with thin capitalisation which is explained in chapter six, corporate anti-avoidance. Considering how to finance a business will also be critical to any restructuring or transformation of an organisation, this is explained in chapter sixteen. Essential points Allocation of interest items to trading income or non-trading loan relationships Use of a deficit on non-trading loan relationships Priority of loss relief claims EIS, SEIS and VCT rules EIS and SEIS reinvestment relief Claw back of EIS. SEIS or VCT relief Treatment of foreign exchange gains and losses Definition and treatment of a long funding lease and a nonlong funding lease

One of the most important tasks for the accountant is to ensure that the tax consequences of raising loan finance are considered in advance of rather than after the event. Section three explains the schemes which encourage venture capital investments by providing tax relief to investors. You should ensure you can apply the knowledge in the interactive questions. Read section four and ensure you can correctly allocate foreign exchange gains and losses to trading profits or non-trading loan relationships. Section five explains the taxation implications of leasing to finance the purchase of plant and machinery. The area is topical as it interacts with corporate reporting. Learn the definition of a long funding lease. If you are advising a potential investor who is hoping to claim EIS, VCT or SEIS relief, it is important to check that the company itself will qualify and has not exceeded the limits.

The EIS and VCT are both schemes which can attract individual investors to invest in companies seeking money for development and expansion. These have proved very successful. These have been amended in FA 2012 to increase the amounts which companies can raise and extend relief to larger companies. A new SEIS relief has also been introduced for investors in smaller, start-up companies.

External finance has previously been used by some companies to reduce their tax bills under somewhat artificial tax avoidance schemes. The disclosure regime for tax avoidance has however significantly reduced the scope for this.

Stop and think

What is the optimum source of finance? Are shareholders less powerful than lenders? Should taxation alone determine which is the better source of finance?

Finally, attempt the self test questions at the end of the chapter. This chapter contains topics which are likely to be examined in an open-ended way requiring you to think about possible areas of the syllabus which could apply to the question. At this stage the self-test questions may seem hard.

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It is usual for large organisations to operate within a corporate structure. If there are different types of activity within a business or it is operated in different geographical areas, a number of companies will be set up to manage the different functions. Learn what may be surrendered within a loss relief group and which losses can only be surrendered if excess. Review the implications of a foreign group member. Attempt interactive question one. Review the tax rates and tax planning aspects of group loss relief by completing interactive question two. Could you spot a consortium? Remember to always apply the consortium members percentage to the consortium companys result when calculating both loss claims and surrenders.

Many companies, particularly in those groups which do not have an in-house tax department, rely on their external advisers to help them make best use of losses. You must understand the difference between the definition of associates (chapter 1), a loss relief group (chapter 3), and a chargeable gains group (chapter 4).

Group loss relief often interacts with chargeable gains groups (chapter 4) although not all companies will be members of both types of group. Corporate transformations (chapter 16) and liquidations (chapter 7) also have an impact on group relationships and the surrender of losses.
Essential points

Where one company within a group suffers a loss, the group as a whole may be able to make use of the loss by setting it against one or more of the other companies profits.

There are many different definitions of a group for tax purposes. Different tax reliefs require different structures before they can be used, and these are not the same definitions as those used for financial reporting.

There are many factors to be considered, such as the timing of relief and the marginal rates of corporation tax being paid by the different group members. The number of companies within a group is critical to establishing the applicable rate of tax, so identifying acquisitions and disposals around the world is also very important.

Learn the definition of a loss relief group and compare to a chargeable gains group in chapter 4 Types of losses and which must be excess to be surrendered Corresponding accounting periods Identifying a consortium Calculating the maximum amount of consortium relief possible

Group relief provisions now extend relief for certain overseas companies within a group. This has made the relief more flexible, and means accountants have to have an international perspective.

Stop and think

A form of group loss relief is also available to members of a consortium. The rules are similar, but not the same and it is important to identify precisely what the corporate relationships are before making any plans. Note that a group relief claim made by a consortium is colloquially known as consortium relief. Claims for consortium relief can be made for the same types of losses as claims for any other form of group relief.

Review group/consortium companies and link companies by applying the rules as to which companies can surrender or claim losses to your own structures. Work through the final worked example in section three. Ensure you understand how group payment arrangements work. Finally, work through the self-test questions at the end of the chapter.

Attempt final worked example in section three Group payment arrangements

How should a group make use of its losses? Is cash-flow an issue or should group taxation overall be minimised? Are minority interests prepared to pay for the benefit of group losses?

Group payment arrangements can provide a useful way of improving a groups cash flow position. They can also be used to minimise the interest burden suffered for any late paid tax by the group as a whole.

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Companies pay corporation tax on capital gains. All companies within a 75% group structure (>50% effective ownership), UK resident or otherwise, are part of a capital gains group.

Many groups have large portfolios of property and share investments. Add to this other chargeable assets such as goodwill (if pre 1 April 2002 goodwill), and in practice this can lead to complex calculations.
Essential points

Group gains generally interact with group losses (chapter 3) and group transformations (chapter 16). Note that, the liquidation of a company has no impact on chargeable gains groups (chapter 7). Learn the definition of a chargeable gains group and compare to a loss relief group in chapter 3 Implications of nil gain/nil loss transfers of assets and transfer of gains and losses around the group. Degrouping charges Pre-entry capital losses Group rollover relief Successions

Assets are transferred around a group at nil gain/nil loss. There is now the equivalent of group loss relief for capital gains and losses. It is only available to UK resident companies and UK PEs. A group must plan its capital disposals to minimise the tax paid by the group as a whole There have been many attempts to set up complex avoidance schemes to make use for example of pre-entry capital losses, or to convert income into capital, but the government has now successfully legislated to stop many of these schemes. One of the most important tasks for the accountant is to ensure that the tax consequences of a planned restructuring are considered in advance of rather than after the event.

Degrouping charges can be expensive where a company leaves the group within six years of an intra-group transfer. However, as SSE now exempts degrouping charges arising due to share disposals which themselves qualify for SSE, as well as on certain hive-downs, they are much less of an issue than they used to be.

Stop and think

How best can the capital gain and losses on the disposal of assets be matched to ensure that group gains overall can be minimised?

Read quickly through section one of chapter four. It is critical to your understanding. Section two should also be mainly revision. Degrouping charges are highly examinable at this level. There were changes to the rules in FA2011. Work through these carefully as they will be relevant in any corporate transformation question (see later in chapter 16). Pre-entry capital losses are also highly examinable . Again there were changes in the rules in FA2011. Use interactive question one to test your understanding. Quickly review the transfer of other assets in section three. Review group rollover relief. The final section on succession to trade is also highly examinable at this level and will be revisited in chapter 16. Ensure you can recognise when a succession occurs and its implications. Quickly review the implications for losses transferred. The self-test questions at the end of the chapter cover the most important points learnt so finish the chapter by working through them.

How should acquisitions and disposals be timed to maximise the opportunity for group-wide rollover relief?

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Read quickly through section one of chapter five. E-commerce is still topical so ensure you could answer a discursive question explaining a companys residency status. Briefly review section two. Section three is difficult. Ensure you understand the basic concepts. You should work through all of the worked examples very carefully.

Company residence is no longer just a concern for large international conglomerates. The existence of a permanent establishment (PE) will usually determine where profits are taxed and you will need to look out for signs of inward and outward migration in all businesses. You will also need to be aware of how a business uses the internet to expand sales and to understand how this may create an international dimension to its tax affairs.

E-commerce also has considerable implications for VAT (chapter 8) as well as residency. The use of losses (chapter 1) is also critical in the decision as to the choice of business structure when first expanding overseas. Double taxation relief for companies interacts with the corporation tax computation (chapter 1). Essential points Residence Residence and e-commerce Definition of a PE and how it is taxed in the UK Company migration Choice of overseas business structure Incorporating an overseas PE Taxation of foreign income and DTR

Business is increasingly global in nature. Advances in technology, and especially the use of trading through the internet have created real challenges for the tax authorities both in the UK and elsewhere. A companys residency dictates which country may collect tax on its profits. However, determining where a company is resident is not as simple as determining where its head office is located. Where a company operates both in the UK and overseas, it may suffer both UK tax and foreign tax. It will claim relief via a double tax treaty, or via unilateral relief in the absence of a treaty. Double tax treaties are conventions between two countries and aim to eliminate the double taxation of income or gains arising in one territory and paid to residents of another territory. They work by dividing the tax rights over the same income and gains, claimed by each of the countries. In the absence of a treaty, unilateral relief must be used, either by allowing a credit for the foreign tax suffered, or by deducting the foreign tax as an expense. You will need to consider whether a treaty applies and then, if not, to use a form of unilateral relief. Section four is highly examinable. Ensure you fully understand the implications of choice of overseas trading structure. Ensure you understand the basic implications of incorporating an overseas PE. Work through interactive question one. This is a specialist area and in cases which are not straightforward, you are likely to seek advice from someone who deals regularly with international tax matters. Read section five and learn the three methods of obtaining DTR. Ensure you understand how foreign income is taxed and in particular the tax treatment of overseas dividends. You should note the wide ranging exemptions available and appreciate that almost all dividends are now exempt from corporation tax. Make sure you can calculate DTR available when income is taxed both overseas and in the UK. Finish the chapter by attempting all of the self-test questions.

Stop and think

What should determine where a company is located? How should a new overseas business be structured? How important should taxation be in making such decisions? Can double taxation be avoided by simply trading in countries with which the UK has agreed a double taxation treaty?

For up-to-date information, the ICAEW library has a useful reference section (found at http://www.icaew.com/index.cfm/ro ute/154793/icaew_ga/en/Library/Lin ks/Tax/International_tax/International _Tax )

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Although the main UK rate of corporation tax might seem low, many other countries have much lower rates which make overseas operations very attractive. Profits of a non-UK resident subsidiary would normally be outside the scope of UK corporation tax. To avoid UK companies manipulating their affairs to take advantage of this, antiavoidance legislation exists. Read through section two on CFCs. Note that this interacts with corporate reporting. Ensure you understand the technical aspects of both modules. Read through sections three and four on transfer pricing and the provision of loan finance. At this level this is highly topical. It interacts with group relationships, foreign aspects of tax and debt financing. Finish the chapter by attempting the self-test questions.

Read quickly through section one of chapter six as it is revision of Professional Stage. Remember that most family run companies will be close. Note section 1.4 on qualifying interest. In section 1.6 consider the interaction of being close with ceasing to trade or liquidating (see chapter 7).

CFC rules tax a UK parent company on certain types of profits of non-UK subsidiaries. These are typically trading profits which have a strong UK connection, and financing income. Credit is given for any tax paid by the non-UK subsidiary.

Various exceptions exist eg a de minimis test. There are also rules which limit the amount which is taxed in relation to certain intra-group loans to the lower of 25% of the interest on the loans and the groups net UK interest deduction.

Stop and think

Did you realise at Professional Stage that close company rules were a form of anti-avoidance legislation? Would it be better to amend the source of the attempted anti-avoidance or continue to produce anti-avoidance legislation?

Many small family businesses operate as a company. With family owned companies always consider whether the close company rules apply. These exist to stop the owners using loans from the company, or using other company assets without paying tax on them as taxable benefits or paying out dividends. You should look out for overdrawn directors current accounts, which will count as a loan on which s. 455 CTA 2010 tax may be payable. Intra group sales or other business arrangements can affect where profits arise. The transfer pricing rules require profits to be adjusted if they have been understated as a result of non arms length prices. Documentary evidence to support the prices used must be maintained. After a long period of consultation, FA 2012 introduced completely new CFC rules, which apply from 1 January 2013. Any clients with overseas subsidiaries will need to consider their impact.

Corporate anti-avoidance legislation stems from the utilisation of taxation law for unintended purposes. Close company legislation prevents abuse of the corporate structure. CFC legislation prevents abuse of residency rules. Transfer pricing legislation prevents abuse of corporate residency. Thin capitalisation and the world-wide debt legislation prevent abuse of interest as a deductible expense. Essential points Recognition of close companies and implications Qualifying interest Recognise CIHC Recognise a CFC and understand how and when to apportion profits Recognise when transfer pricing adjustments are required Recognise thin capitalisation and its implications Recognise when world-wide debt cap restrictions may apply and the adjustments required

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Many thousands of new companies are set up each month. However, many are also wound up or simply cease trading.

Section one of chapter seven provides the technical knowledge for the final two sections. Ensure you understand section one before proceeding to the rest of the chapter. Repurchase of shares owned by a company interacts with the SSE (see chapter 1).

Some owner managers choose to liquidate their company in order to revert to an unincorporated status. Colloquially this is known as a disincorporation and is considered further in chapter 15. Other liquidations may also arise as a result of corporate transformations or reorganisations (chapter 16). Essential points Repurchase of shares owned by a company Repurchase of shares owned by an individual when capital distribution route applies and when income distribution route applies Administration Liquidation Group relationships in a liquidation see diagram, section 3.3

In practice, not all companies in this position will have been suffering losses. Sometimes, the owners of a family company just want to retire but there is no one willing and able to buy the business from them as a going concern. This has been something which concerns governments throughout Europe and there has been much academic research into how the problem of successful business successions can be resolved. Ensure you fully understand the implications of entering both administration and liquidation. The tax planning points are the most important aspect at this level. Remember there is little scope for tax planning in a forced liquidation. Finally complete the self-test questions at the end of the chapter. Those companies which are forced into liquidation by a third party, an involuntary liquidation, have less scope for tax planning. Although this is a specialist area, it is useful to understand the options available and help the client find the best solution to fit their own circumstances

As the UK economy has entered a recession, more companies have and are likely to continue to fail. Those which are forced into liquidation through adverse trading conditions will have a number of tax planning options open to them. Loss relief, the timing of cessation and what can be salvaged from the operations, either as individual assets or perhaps even as a viable section of the business, are all important considerations for the adviser.

The ability of a company to buy back its own shares from shareholders can be very useful. It has many practical uses: buying shares from a dissident shareholder, buying shares from a retiring shareholder, paying back surplus cash held by the company, or as part of a major restructuring exercise.

Stop and think

Why would a company choose to repurchase its own shares?

Is it possible to benefit from tax planning during a liquidation?

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The government collects a huge proportion of its annual revenue in the form of VAT which makes the tax extremely important in practice.

The level of the VAT threshold means that many businesses which are large enough to use a professional adviser will need to register for VAT.

Read through section one of chapter eight quickly as it should all be revision of Professional Stage.

VAT on property interacts with Stamp Duty Land Tax (chapter 9). VAT within a corporate transformation will be critical as VAT on property, or the sale of a trade within the scope of VAT will be considerable. Essential points VAT groups VAT on property Option to tax (OTT) TOGC Capital goods scheme VAT and e-commerce VAT and SDLT

There are special rules for certain types of transactions, especially sales of property, where mistakes can be very costly. The sale of new (less than three years old) commercial property is standard rated, whereas it is exempt if it is older. In this case, exercising the option to tax, or not, will be an important decision. Review the interaction of VAT and SDLT in section 1.4.4. The interaction of the different aspects of VAT is particularly important at this level. Attempt the worked example at the end of section two. Read the overseas implications of VAT. Finally complete the self-test questions at the end of the chapter. It is important to understand VAT accounting. VAT is dealt with during a business accounting period, ie it is a real time tax. If a client is unsure about how to account for a particular transaction, the problem will need to be resolved within a matter of weeks. It is not always clear from legislation whether goods are chargeable to VAT, nor what rate should be used.

VAT registration brings with it extra administrative requirements and also means that the prices charged to the general public will be higher. It may be beneficial to register for VAT voluntarily.

Ensure you understand VAT on property and VAT in a TOGC as these interact with the capital goods scheme in section two. The most important points are covered in interactive question one so work through it carefully.

Many businesses change hands each year and remain going concerns. Provided that the conditions are all met, this will not give rise to a VAT charge. If any of the conditions fail however, the result could be costly.

Other countries within the EU have their own VAT equivalent taxes and there are strict rules governing how each Member State can operate the tax. In practice you may need to advise a client on the VAT consequences of a larger transaction, for example the sale of a business as a going concern, where special relief is available. If a trader is selling both taxable and exempt supplies, then partial exemption will apply and your advice can help a business maximise its recoverable VAT. A business trading abroad will also need specialist VAT advice.

Stop and think

Is the payment of tax on a property transaction worth say 10m at 20% significant enough for you to give it due consideration?

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Stamp duty, stamp duty reserve tax and stamp duty land tax are transaction based taxes. The name stamp is historical since most transactions these days are conducted electronically. It usually helps to think of the first two in relation to the purchase of shares and the latter to purchases of property. Make sure you understand when SD/SDRT and SDLT apply. The rules for group relief are very examinable and are highly likely to be tested in any groups question. Note that group relief is withdrawn in certain circumstances. Quickly review section four which simply highlights the SD and SDLT implications of incorporation and liquidation. Finally complete the self-test questions at the end of the chapter. Essential points SD SDRT SDLT Stamp duty land tax is payable when a lease is granted on both the premium and the net present value of rent payable to the landlord. As usual, interest and penalties apply if the tax is paid late. In practice much of the work involving this area will be undertaken with the assistance of a specialist.

Stamp duty reserve tax is payable on the electronic transfer of shares and securities.

You are unlikely to have to do much more than recognise where these taxes are relevant. Be aware that there are different rates of stamp duty land tax for residential and nonresidential property. The new 15% rate for certain transfers to companies only applies to transfers of residential dwellings, so is less likely to be relevant in a business context.

The whole of this chapter is new technical knowledge.

Both stamp duty/stamp duty reserve tax and stamp duty land tax are likely to be relevant in any corporate transformation. The impact of stamp duty land tax on incorporation can be significant. Stamp duty land tax also interacts with the calculation of VAT due.

These taxes between them raise a large sum for the Treasury each year and can be very expensive for a business. There are exemptions available for transactions such as those involving gifts or divorce, and for certain intra group transfers of shares.

Group relief and withdrawal of group relief

Stop and think

Stamp duty land tax is payable on the purchase of all land including on incorporation.

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10

When an individual or company sells an interest in a lease, there will almost always be a disposal giving rise to a possible capital gain. Essential points

Entrepreneurs relief is important so you should study section one carefully.

Most of this chapter will be of critical importance in any question on corporate transformations. Entrepreneurs relief availability and conditions Leases prepare a mind-map if necessary Complete self-test question 8 to illustrate how different topics studied so far can interact to form an exam standard question involving sale and leaseback of property Dividend stripping Earn-outs Share for share rules Definition of a QCB Interaction of SSE with the share for share rules for a corporate shareholder

It is very important to revert to tax speak rather than just normal English to work out exactly what has happened when dealing with leases. Has a new lease been granted, or has an existing interest in the property been sold (assigned) in its entirety? Hopefully the seller will have taken advice about this in advance because the tax charge will be calculated very differently. Preparation of a mind-map will probably be particularly useful for leases. Review section three quickly and attempt interactive question two. Section four details the technical knowledge which is essential to chapter sixteen and is highly examinable at this level. Finally, complete the self-test questions at the end of the chapter.

Takeovers and reconstructions, mergers and acquisitions, will usually have tax specialists as key members of the advising professional team. You will need to keep in mind the basic principles of the calculations for share and asset disposals whilst also bringing in some special rules in situations where the proceeds are contingent on future events, such as the business continuing to be profitable. Next work through the section on leases in relation to property. This is particularly long and has numerous examples to help you learn. You need to understand what is happening in any disposal in order to be able to understand why it is treated in a particular way eg that an assignment is always a complete disposal whereas a grant is always a part disposal as the vendor retains some interest in the property; or that a short lease is treated as a wasting asset and must therefore use an adjusted cost.

Stop and think

Has the vendor of a lease retained an interest in the property or sold it in its entirety?

Has a disposal occurred on a takeover or has one interest simply been swapped for another?

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Study Period Working context Approach

Practical significance

Syllabus links and essential points

Due Date

11

How to use losses and basic tax calculations for income tax and national insurance are key areas of great practical significance for personal tax work. Given the length of the Comprehensive Tax Calculation Guide published by HMRC, it is hardly surprising then that most accountants use some form of software to calculate their clients tax liabilities. However, the underlying principles of the calculations are an essential tool in your knowledge bank. Essential points

Even if you do not choose to specialise in tax, it will help you to give rounded professional advice in other areas if you can understand your clients personal tax position.

Chapter eleven moves on to personal tax. This chapter should be pure revision of Professional Stage topics. Read through the chapter quickly and attempt all the worked examples and interactive questions.

The extraction of wealth from a business has considerable influence on the choice of business structure (chapter 14). The use of trading losses may also be important in the transformation of an unincorporated business (chapter 15).

Stop and think

Income tax computation Loss relief NIC IHT Interaction of IHT and CGT

Is the overall taxation of a sole trader less than an employee?

How important are national insurance contributions?

The same applies to using losses from trading activities. The options available are limited and you should be able to list them, but more important is the way in which they are tailored to each clients circumstances. This is where an accountant adds significant value.

Note how the additional rate taxpayer has an impact on extension of the basic rate band for personal pension contributions and Gift Aid donations. There are two top rates of tax: 50% on non-savings and savings income and 42.5% on dividends. This gives an effective dividend rate for an additional rate taxpayer of 36.1% compared to 25% for a higher rate taxpayer. Use of trading losses will interact with chapters fourteen and fifteen. NIC is particularly important when considering how to extract profits from a company (see chapter 14). At this level, the interaction of IHT and CGT is particularly important. Attempt the self-test questions at the end of the chapter.

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Study Period Working context Approach

Practical significance

Syllabus links and essential points

Due Date

12

Employers recognise that one of the largest costs of running a business will be the cost of the payroll, so it is important to get it right.

The way a remuneration package is structured affects net pay.

Whilst there are some basic rules for what is taxable, a persons take home pay can be altered dramatically by the make up and timing of his remuneration.

Read through section one of chapter twelve quickly as it merely revises Professional Stage.

Taxable benefits interact with national insurance contributions (chapter 11) and extraction of wealth from a company (chapter 14). Share schemes and pension schemes may also be important in a corporate transformation question. Essential points Approved and unapproved share schemes CSOP, EMI, SAYE, SIP summary table Pension rules SIPP / SSAS

Whilst we have some basic rules which identify what is taxable and when, the government also uses the tax system to influence what employment benefits people prefer. For example, damage caused by CO2 emissions is a major concern and therefore tax legislation is aimed at encouraging use of less polluting cars. Understanding your client means looking beyond his business needs and it will be common to advise not only a company, but also to prepare tax returns and give advice to the directors on their personal tax as well. Read through section three as again it is mostly revision of Professional Stage but also note the FA 2011 rules which reduce the annual allowance and introduced a three year carry forward of unused annual allowance. Review your knowledge by attempting interactive question three. Remember to attempt the self-test questions at the end of the chapter.

An accountant will be expected to understand how an individuals employment income will be taxed and give advice on how this could be minimised. The rules in this area change constantly and when giving advice, it is important to keep the position under constant review.

Ensure you understand how share schemes are taxed according to the table in section 2.1.2 and that you are familiar with the rules in the table in section 2.2.4. This could be tested in an extraction of wealth from a company question or a corporate reorganisation question.

Remuneration packages often involve share schemes and pensions since these are tax efficient. The government encourages employee share ownership because it benefits the economy and the pension crisis makes it vital that employees are encouraged to save for their retirement.

Stop and think

Why do higher rate taxpayers receive more tax relief for pension savings than basic rate taxpayers? Why dont employees pay NIC on taxable benefits?

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Study Period Working context Approach

Practical significance

Syllabus links and essential points

Due Date

13

The residence, ordinary residence and domicile status of an individual determine which sources and how much of the persons worldwide income/gains are chargeable to UK tax. This is another area where giving tax advice to a company may also affect the tax advice given to its key shareholders and employees. It is more important than ever to have all the facts available before setting out the options for the client.

Ensure you understand the definitions of residence, ordinary residence and domicile. Test your understanding of the implications of arriving in the UK or leaving the UK by attempting interactive question one. ESC A11 is particularly important in providing relief for individuals sent overseas to work.

Personal residence, ordinary residence and domicile status carry significant tax planning opportunities for high net worth individuals. For example, a person who has significant gains on the disposal of a business may choose to emigrate prior to disposal to minimise the UK tax paid. Essential points Definition of residence, ordinary residence, and domicile Implications of arriving in or departing from the UK ESC A11 Arising or remittance basis for income tax Remittance basis users Income tax DTR with multiple sources of foreign income Liability to UK CGT Liability to UK IHT Deemed domicile for IHT

The tax advantage of being non-UK domiciled has been subject to political scrutiny in recent years as many wealthy individuals have moved to the UK. The overseas earnings of these people are not generally taxable in the UK. There are clear economic arguments for wishing to retain their businesses here but recent rules have lead to well-publicised debate about the tax treatment of these individuals. Because domicile will have an impact on estate planning for inheritance tax, you will often be planning for the long term and a regular review of the clients affairs is needed. Section two is also important. You must understand how employment income and other income will be taxed for different individuals. Complete the worked example on the remittance basis. You must be able to calculate DTR for an individual with more than one source of income. Work through the worked example and interactive question at the end of section two. Quickly review section three on CGT. You must know who is liable to UK CGT and who is exempt so section 3.2 is particularly important. Quickly review section four on IHT. You must know who is liable to UK IHT and who is exempt, ensure you understand the extended definition of domicile for IHT purposes. Learn the location of asset rules. Remember to attempt the self-test questions at the end of the chapter.

Meanwhile, there are also rules which allow certain earnings of UK resident employees who are based abroad for long periods, to be treated more favourably for tax purposes.

Residence and domicile also impact on an individual's liability to capital gains tax and inheritance tax.

Stop and think

Recent case law and changes to HMRC guidance has cast doubt on what had been long understood to be the position in this area. A new statutory definition of residence (which was originally expected to apply from April 2012) is now expected to apply from 6 April 2013. In the meantime, clients who are based abroad but who travel back to the UK regularly are advised to keep careful note of where their time is spent.

Why should residence, ordinary residence and domicile affect the amount of UK taxation paid? Why isnt leaving the UK permanently sufficient to immediately end a persons liability to UK inheritance tax?

IHT location of assets rules

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Study Period Working context Approach

Practical significance

Syllabus links and essential points

Due Date

14

The choice of trading medium is one where the accountant can give particularly valuable advice. There is an opportunity here to save the client money very easily, although be warned, because there are also traps.

Read through section one of chapter fourteen and ensure you understand the implications of trading as a company or an unincorporated business and how to extract profits from a company.

The use of intermediaries continues to be topical with the introduction of Managed Service Company legislation. It interacts with employment income in chapter 12 and the choice of business structure and extraction of wealth. Essential points Company versus unincorporated business Extracting profits from a company PSC & IR35 MSC Corporate structures

It is very important that a business chooses the most suitable form for its own commercial needs without being driven by the tax considerations. That said, the opportunity to save tax has led to many smaller businesses in particular, incorporating just for this reason. The accountants job will be to ensure that the advice given is both practical and relevant. One such problem area is the use of intermediary companies by service businesses which are trying to avoid paying employee levels of tax and national insurance. Sometimes the client company will only use a worker if he has set himself up within a company. This is particularly common in the information technology business. Review the difference between a PSC and a Managed Service Company (MSC) and the implications of being a MSC. Quickly review the different available corporate structures. Remember to attempt the self-test questions at the end of the chapter. Read through section two. Ensure you could recognise when to apply personal service company (PSC) rules and that you could calculate the deemed employment income payment.

The government has encouraged incorporation through the tax regime on more than one occasion. A small company can pay its employees who are also shareholders using dividends rather than salaries and will make a saving on tax and national insurance. Also, certain reliefs are only available to companies, for example the R&D tax credit. There are special rules which may apply here. Unfortunately, much of the detail on this area has been left to HMRC guidance rather than legislation. This makes it far more difficult for the adviser to be certain of his advice and will inevitably lead to more case law in future.

Stop and think

Is it better to trade as a company or an unincorporated trader? How best can profits be extracted from a company? Why is there such a need for antiavoidance legislation for service businesses which exploit differences in the taxation of employees and the profits of an owner managed business?

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Study Period Working context Approach

Practical significance

Syllabus links and essential points

Due Date

15

Historically, the trend has been to encourage businesses to incorporate. This is because a company is a more visible unit economically on which it is much easier to focus reliefs or tax charges. Essential points Incorporation Read through section one quickly as it is pure revision of Professional Stage. Ensure you understand how gift relief and incorporation relief work.

Normally larger businesses are more permanent. The practical significance of incorporation reliefs are important for the continuity of a business.

Much will depend on the size and future prospects of the business. The standard list of reliefs for incorporation will quickly become familiar to the professional working in this area, as will the lack of them for disincorporation.

Chapter fifteen is the first of the scenario based chapters. There is no new technical knowledge, it reviews your knowledge from earlier chapters and Professional Stage knowledge.

Incorporation has potential interaction with stamp duty land tax, VAT and chargeable gains. Disincorporation interacts with the same taxes but less favourably.

Disapplying incorporation relief Gift relief v incorporation relief Entrepreneurs relief Disincorporation Bankruptcy and TLR

Unfortunately, there is still virtually no tax relief for disincorporation. In fact, this is not even a recognised tax term in tax legislation. Nevertheless, the consequences of ceasing to operate through a company can be significant.

Often one of the more important decisions will be about property; whether that should be owned directly by an individual or held within a company, particularly bearing in mind that the rules for calculating capital gains are very different for companies and that the tax rates will also be different. Section two considers the implications of disincorporation, simply a solvent liquidation (see chapter 7) and a reversion to unincorporated status. Section three reviews the implications of bankruptcy and interacts with the use of trading losses (see chapter 11). Remember to attempt the self-test questions at the end of the chapter. However, remember that there is a commercial side to the decision and the trader may decide that a business needs the protection of limited liability.

Stop and think

Why is the government so keen to promote incorporation? Why are business tax reliefs not available to unincorporated businesses?

Is the amount of tax saved by incorporation sufficient to offset the increased administrative burden? When is it beneficial to incorporate? When is it beneficial to disincorporate? What impact will gift relief and incorporation relief have on future gains and any future decision to disincorporate?

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Study Period Working context Approach

Practical significance

Syllabus links and essential points

Due Date

16

The tax implications of a corporate reorganisation usually play a significant role in the decision making process. Whatever the size of the client or deal you are working on, remember that the principles are largely the same. Look out for hidden tax charges which crystallise on a company leaving a group following earlier transfers of assets. Beware also of the possible loss of brought forward losses following a change in ownership. Read through section two on sale of shares. Consider the implications for a sale by an individual or by a company. There are also implications for the company being sold. Read through section three on the sale of trade and assets. Most important of all, it can be easy to become carried away with tax computations without considering the vendor/purchasers desired objectives, so always keep these in mind.

Sometimes a groups total tax bill can be reduced by restructuring, but usually a reorganisation is triggered for business reasons.

Chapter sixteen is a long chapter but contains no new technical knowledge. Mind-maps might help you to see what is actually happening in each section rather than simply focussing on the technical knowledge.

A company which operates under a single corporate umbrella through separate divisions will have a single tax computation. A group which uses a separate corporate vehicle for each of its business segments will have a tax computation for each company.

The use of losses; the effect on loss relief groups and chargeable gains groups; and the possible application of stamp taxes and VAT all need to be considered in a corporate reorganisation. Successions may also be important (chapter 4). The substantial shareholding exemption (chapter 1) may apply to a sale by a corporate vendor. Share for share relief may apply to the reorganisation of shares owned by a private individual (chapter 10). Essential points Sale of shares Sale of trade and assets Transfers within a 75% group Hive down

A business may be sold by selling the companys shares, or just part of the trade and some of the assets could be sold, either as a parcel of assets, or within a new corporate wrapper.

It is important to consider the timing of the sale: all in one go; or piecemeal over a longer period. This may have an effect on the reliefs and exemptions available and it all needs careful planning to minimise the tax payable.

Sections four and five are linked. In section four ensure you understand the implications of a transfer of trade and assets within a 75% group from one subsidiary to another (S1 to S2). Consider the implications from the perspective of all the companies. In section five you then need to appreciate the implications of then selling S2 outside of the group. Finally, quickly review management buy outs (MBO). Remember to attempt the self-test questions at the end of the chapter.

MBO

Stop and think

What is the difference between a disposal of shares and a disposal of trade and assets? What difference does it make if the vendor is a company or a private individual?

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Study Period Working context Approach

Practical significance

Syllabus links and essential points

Due Date

17

Ethical considerations underpin all of your studies as well as your work experience. You will often make ethical decisions without even realising it, but sometimes you may find yourself in a quandary and be unsure how to act. This is when the Code of Ethics will be of assistance. Ethics is a fundamental part of your training to become a Chartered Accountant and will feature in the assessment. Ensure you read Section 11 on answering ethics exam questions which uses a real exam question to demonstrate good technique in this area. Finish the chapter by attempting the self-test questions at the end of the chapter.

Belonging to a professional body requires adherence to a code of ethics. This is part of what differentiates a Chartered Accountant from unqualified accountants. Clients, members of the public, and the government recognise that we are required to adhere to exacting standards and so expect a certain standard of behaviour from us.

The best approach is to read the chapter in several short sittings making notes on the essential points as you go along.

In your previous studies, you have learnt about ethical issues in relation to tax work. This specifically included elements of the IFAC Code of Ethics for Professional Accountants and the ICAEW Code of Ethics. In this chapter we review this knowledge and then extend it by giving greater consideration to practical scenarios. Essential points The five fundamental principles Threats Disclosure of information Conflicts of interest Principles of taxation work HMRC errors Money laundering Tax evasion v tax avoidance Answering ethics exam questions

Money laundering has been a major problem in the past and as part of the laws designed to combat this, professionals are required to participate in its prevention by reporting certain activities which may relate to the proceeds of crime. You need to know what to look out for and how to act. You should always take particular care in relation to client confidentiality.

In order to tackle the loss of tax revenues through tax avoidance schemes, laws have been introduced requiring disclosure of certain schemes to HMRC.

Stop and think

Not all clients have the same ethical standards as you have. You should always ensure that you ask relevant questions of clients to obtain the full understanding of their business.

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Taxation

4 Skills assessment guide

4.1 Introduction
As a Chartered Accountant in the business world, you will require the knowledge and skills to interpret financial and other numerical and business data, and communicate the underlying issues to your clients. In a similar way to the required knowledge, the ACA syllabus has been designed to develop your professional skills in a progressive manner. These skills are broadly categorised as: Assimilating and using information Structuring problems and solutions Applying judgement Drawing conclusions and making recommendations

4.2

Assessing your professional skills

Set out below is a pictorial representation of the different mix of knowledge and skills that will be assessed in the examinations that comprise the ACA qualification.

The work experience requirements for students provide a framework to develop appropriate work experience, completion of which is essential in order to qualify for membership. Work experience is also an essential component for examination preparation. The work experience framework is built around five key skills: Business awareness being aware of the internal and external issues and pressure for change facing an organisation and assessing an organisations performance. Technical and functional expertise applying syllabus learning outcomes and where appropriate, further technical knowledge to real situations. Ethics and professionalism recognising issues, using knowledge and experience to assess implications, making confident decisions and recommendations. Professional judgement making recommendations and adding value with appropriate, targeted and relevant solutions. Personal effectiveness developing, maintaining and exercising skills and personal attributes necessary for the role and responsibilities.

The examinations, and in particular the Advanced Stage, embrace all of these skills. The link between work experience and the examinations is demonstrated by the skills development grids produced by the examiners. This will help candidates see that their practical knowledge and skills gained in the workplace feed back into the exam room and vice-versa.

Study guide

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4.3

Assessment grids
The following pages set out the learning outcomes for Taxation that are addressed under each of the four skills areas. In addition, for each skills area, there is a description of: The specific skills that are assessed How these skills are assessed

Using these grids will enable you to determine how the examination paper will be structured and to consider whether your knowledge of Taxation is sufficiently strong to enable you to apply it in the required manner.

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27

5 Technical knowledge
The tables contained in this section show the technical knowledge covered in the ACA taxation syllabus. For each individual topic the level of knowledge required in the relevant Professional Stage module and the Advanced Stage content is shown. The knowledge levels are defined as follows: Level C A general knowledge with a basic understanding of the subject matter and training in its application sufficient to identify significant issues and evaluate their potential implications or impact. Level B A working knowledge with a broad understanding of the subject matter and a level of experience in the application thereof sufficient to apply the subject matter in straightforward circumstances. Level A A thorough knowledge with a solid understanding of the subject matter and experience in the application thereof sufficient to exercise reasonable professional judgement in the application of the subject matter in those circumstances generally encountered by Chartered Accountants. Key to other symbols: the knowledge level reached is assumed to be continued

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Taxation
Professional Stage Advanced Stage A A A B A A A A A
Study guide

Principles of Taxation C A B C B C B B B C C C B C B

Title Objectives of taxation Ethics HM Revenue & Customs Tax evasion and avoidance

BUSINESS TAXATION
Administration Appeals Payments Penalties and interest Self assessment Chargeable gains Chargeable assets Chargeable disposals Chargeable persons Chattels: wasting and non wasting Costs of acquisition and disposal Indexation Leases Nil gain/nil loss transfers Part disposals Pre 31 March 1982 assets Qualifying corporate bonds Relief for capital losses Reorganisations and reconstructions Shares and securities (including bonus and rights issues) Chargeable gains reliefs Entrepreneurs relief Gift relief Incorporation relief Roll-over relief A A A A B B B B A A A A

Taxation

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Professional Stage Advanced Stage A C A B B B A B B B A A A B B A A A B B A A A A Principles of Taxation B B B B B B B B B

Title Substantial shareholding exemption Trading profits Adjustments to profits Badges of trade Capital allowances Foreign currency transactions Long periods of account Pension contributions Royalty payments Royalty receipts Unincorporated businesses Basis of assessment current year basis Change of accounting date Commencement and cessation of trade Overlap profits and treatment of opening year losses Partnerships Trading losses Companies Taxable total profits Property income (including lease premiums) Trading profits Loan relationships Loan relationships worldwide debt cap Intangible assets Research and development expenditure Research and development tax credits Miscellaneous income Chargeable gains Relief for capital losses Indexation Qualifying donations Trading losses Use of deficit on non-trading loan relationships

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Taxation

Taxation A A A A A B A A A A A A A

Professional Stage Advanced Stage A B A A B C A B A A B A A A A A A A A A A A A B B B

Study guide

Principles of Taxation C B C

Title Corporation tax computation Chargeable accounting periods Close companies Corporation tax liability Distributions Double tax relief (including underlying tax and withholding tax) Liquidation Provision of services through a company Rates of tax Residence Groups Associated companies Capital gains groups Changes in group structure Change in ownership Consortium relief Controlled foreign companies Degrouping charges Group loss relief Group relationships Non-coterminous accounting periods Overseas companies and branches Pre-acquisition gains and losses Roll-over relief Transfer of assets Transfer pricing Stamp Duty and Stamp Duty Land Tax Basic principles Chargeable occasions Exemptions

Taxation B A A B B A

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Professional Stage Advanced Stage A A A A A B A A A A A A A B A A A B A B Principles of Taxation B C B C B B B B B

Title VAT Administration Appeals Capital goods scheme Group aspects Input VAT Output VAT Overseas aspects Partial exemption Payments Penalties and interest Property transactions Registration and deregistration Small business reliefs Taxable person Taxable supplies Transfer of a business as a going concern VAT records and accounts

PERSONAL TAXATION
Administration Administration Appeals PAYE Payments Penalties and interest Self assessment Employees Allowable deductions against employment income Employment income Share schemes Statutory Mileage Rates Scheme Taxable and exempt benefits Termination payments A A A A A

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Taxation

Professional Stage Advanced Stage B B B C A B A A B A B A A A A

Study guide

Principles of Taxation B B B B B B B B C B C C C B C

Title Other income Dividends from UK companies Enterprise Investment Scheme Investment income ISAs Property income Lease premiums Savings income Venture Capital Trusts Income tax computation Exempt income Gift Aid Income tax charge on child benefit Income tax liable and payable Independent taxation and jointly owned assets Married couples allowance Pension contributions: provision for retirement Pension contributions: tax reliefs Personal age allowance Personal allowance Rates of tax Taxable persons Capital gains tax Annual exempt amount Chargeable assets Chargeable disposals Chargeable persons Chattels: wasting and non wasting Connected persons Converted trading losses Costs of acquisition and disposal Leases

A B B

Taxation A A A B A B A B B A A A A A B B B

33

Professional Stage Advanced Stage A B A A A A B Principles of Taxation C C

Title Nil gain/nil loss transfers Part disposals Pre 31 March 1982 assets Qualifying corporate bonds Rates of tax Relief for capital losses Reorganisations and reconstructions Shares and securities (including bonus and rights issues) Capital gains tax reliefs Letting relief Principal private residence relief Reinvestment relief under EIS National insurance contributions Administration Classes of NIC Directors Maximum contributions Taxable benefits Basic principles of inheritance tax Chargeable persons Chargeable property Excluded property Inter-spouse transfers Rate of tax Related property Seven year accumulation period Inheritance tax on lifetime transfers Discretionary trusts Potentially exempt transfers Inheritance tax on death Death estate Deeds of variation

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Taxation

Taxation A B A A A B B B C B B B B A A B A A A A B

Professional Stage Advanced Stage A A A A A A A A A A

Study guide

Principles of Taxation

Title Lifetime transfers Reliefs and exemptions from inheritance tax Agricultural property relief Annual exemption Business property relief Gifts to charities and political parties Gifts with reservation of benefit Marriage exemption Normal expenditure out of income Quick succession relief Small gifts exemption Taper relief Overseas aspects of personal taxation Arising basis Deemed domicile for IHT Domicile Foreign assets, income and gains Double tax relief Ordinary residence Remittance basis Residence Temporary absence UK taxation of non-domiciled individuals

Taxation A B B A A B A A B A A

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Ethics Codes and Standards

Ethics Codes and Standards IFAC Code of Ethics for Professional Accountants (parts A, B and C and Definitions) ICAEW Code of Ethics A Level A Professional Stage modules Assurance Business and Finance Law Principles of Taxation Audit and Assurance Business Strategy Financial Reporting Taxation APB Ethical Standards 1-5 (revised) Provisions Available to Small Entities (revised) A Assurance Audit and Assurance

6 Key resources
STUDENT SUPPORT TEAM T +44 (0)1908 248 250 E studentsupport@icaew.com STUDENT WEBSITE icaew.com/students student homepage icaew.com/exams exam applications, deadlines, regulations and more icaew.com/cpl credit for prior learning/exemptions icaew.com/examresources examiners comments, syllabus, past papers, study guides and more icaew.com/examresults exam results TUITION If you are receiving structured tuition, make sure you know how and when you can contact your tutors for extra help. If you arent receiving structured tuition and are interested in classroom, online or distance learning tuition, take a look at our tuition providers in your area on icaew.com/exams ONLINE STUDENT COMMUNITY The online student community allows you to ask questions, gain study and exam advice from fellow ACA and CFAB students and access our free webinars. There are also regular Ask an Expert and Ask a Tutor sessions to help you with key technical topics and exam papers. Access the community at icaew.com/studentcommunity THE LIBRARY & INFORMATION SERVICE (LIS) The Library & Information service (LIS) is ICAEWs world-leading accountancy and business library. You have access to a range of resources free of charge via the library website, including the catalogue, LibCat. icaew.com/library

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