om FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download ate ria l c ACCA Cli for Paper P6 mo re bo ok so rv ym ck isit ou rw Advanced Taxationi te(UK) (w w as tud ebs w.b ook sg com ) htt p:/ /ac c Complete Text Finance Act 2016 for June 2017 to March 2018 examination sittings FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com m To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download co ial ter British library cataloguinginpublication data C ma A catalogue record for this book is available from the British Library lic kf or bo ok so rv isit dy mo Published by: re Kaplan Publishing Unit 2 The Business Centre Molly Millars Lane Wokingham Berkshire RG41 2QZ ou rw ebs ite stu ISBN 9781784150419 © Kaplan Financial Limited, 2016 (w ww bo ok sg ca co The text in this material and any others made available by any Kaplan Group company does not m) amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials. /ac Printed and bound in Great Britain. Acknowledgements We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions. The answers have been prepared by Kaplan Publishing. htt p:/ All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Kaplan Publishing. ii KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com m To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download co Contents Page Chapter Income tax: Computation Chapter Employment income and related NIC Chapter Property and investment income Chapter Pensions Chapter Income tax planning Chapter CGT: Computations and stamp duty land tax 175 Chapter Cl CGT: Variations to computations 199 ial 39 97 ter 131 157 ma ick f Chapter or CGT: Shares and securities for individuals and 227 mo stamp duty re bo o ks CGT: Reliefs for individuals o Chapter 10 rv isit dy Chapter 261 ou Overseas aspects of income tax and capital rw gains tax e 341 Chapter 11 e( An introduction to inheritance tax w 403 Chapter 12 ook IHT: special valuation rules, reliefs, and the death 449 sg estate c bsi stu t ww b om ) IHT: overseas, administration and tax planning 503 Chapter 14 The taxation of trusts 537 Chapter 15 Personal financial management 557 Chapter 16 Ethics and personal tax administration 569 Chapter 17 New and ongoing unincorporated businesses 607 Chapter 18 Cessation of an unincorporated business 691 Chapter 19 Partnerships: income tax and capital gains tax 723 Chapter 20 VAT: outline 743 Chapter 21 VAT: administration and overseas aspects 781 htt p:/ /ac ca Chapter 13 KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com iii m To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download Chapter 22 Corporation tax: computations and administration Chapter 23 Calculation of corporation tax: income and gains 821 Chapter 24 Corporation tax losses Chapter 25 Business financial management Chapter 26 Family companies and related planning scenarios 901 Chapter 27 Groups and consortia 943 Chapter 28 Overseas aspects of corporation tax 993 Chapter 29 Planning for companies 1021 co ial 869 ter 885 ma Cli 795 1043 ww w.b ook sg com ) htt p:/ /ac ca stu dy cChapter 30 Questions and Answers kf or mo re bo ok so rv isit ou rw ebs ite ( iv KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com ria l.c om To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download cc as tud ym ate For Free Downloading Acca Books, Acca Study Texts, Acca Pass Cards, Acca Revision Kits, Acca Past Papers, Cli Tips And Guidance, Acca Exam Tips , Key Acca Study ck for mo Examinable Areas re And Free Study Material and Study bo ok so Resources For ACCA r v and other professional isit ou r w CIMA, CPA ,CIA ,AAT qualifications such as : CFA, ebs ite (w BBA,BSC And MSC ,CAT, ICAEW ,FRM, MBA,ACA,CA, ww bo ok Visit : sg c p://accm om ) ://a Join Us On Social Media ttp Facebook @ https://www.facebook.com/ACCAGLOBALWALL FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download chapter m Introduction ial co ck for mo bo ok so rv isit dy re ma Cli ter Paper Introduction ou rw ebs (w ww bo ok sg com ) htt p:/ /ac ca stu ite FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com v To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download co m Introduction How to Use the Materials ial These Kaplan Publishing learning materials have been carefully designed to make your learning experience as easy as possible and to give you the best chance of success in your examinations. ter The product range contains a number of features to help you with the study process. They include: (1) Detailed study guide and syllabus objectives (2) Description of the examination ck Tax rates and allowances (4) for ma (3) Study skills and revision guidance Cli mo (5) Complete text or essential text re bo (6) Question practice o ks or dy vis The sections on the study guide, the syllabus objectives, the examination and it o study skills should all be read before you commence your studies. They are ur we designed to familiarise you with the nature and content of the examination bsi and give you tips on how to best approach your learning. te (w w stu w.b The complete text or essential text comprises the main learning materials ook and gives guidance as to the importance of topics and where other related sg com resources can be found. Each chapter includes: ) The learning objectives contained in each chapter, which have been carefully mapped to the examining body's own syllabus learning objectives or outcomes. You should use these to check you have a clear understanding of all the topics on which you might be assessed in the examination • The chapter diagram provides a visual reference for the content in the chapter, giving an overview of the topics and how they link together • The content for each topic area commences with a brief explanation or definition to put the topic into context before covering the topic in detail. You should follow your studying of the content with a review of the examples. These are worked examples which will help you to understand better how to apply the content for the topic p:/ /ac ca • htt • vi Test your understanding sections provide an opportunity to assess your understanding of the key topics by applying what you have learned to short questions. Answers can be found at the back of each chapter KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com Summary diagrams complete each chapter to show the important links between topics and the overall content of the paper. These diagrams should be used to check that you have covered and understood the core topics before moving on • Questions to practice are provided at the back of the text ria l.c • om To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to mykaplanreporting@kaplan.com with full details, or follow the link to the feedback form in MyKaplan. ate Our Quality Coordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions. Icon Explanations Definition – These sections explain important areas of knowledge which Cli ck must be understood and reproduced in an exam environment. f or m so r ym ore Key Point – Identifies topics that are key to success and are often bo examined. ok vis Helpful tutor tips – These sections give tips on the examinability of topics it o and whether information is provided in the tax rates and allowances in the ur we examination ca stu d bsi te (w Expandable Text – Within this complete text and in the online version ww bo expandable text provides a more detailed explanation of key terms. These ok sections are printed in the text, and appear hidden in the online version but sg com can be shown on screen. They will help to provide a deeper understanding ) of core areas. Reference to this text is vital when self studying. htt p:/ /ac Test Your Understanding – Following key points and definitions are exercises which give the opportunity to assess the understanding of these core areas. Within the text the answers to these sections are at the end of the chapter; within the online version the answers can be hidden or shown on screen to enable repetition of activities. Example – To help develop an understanding of topics the illustrative examples and the test your understanding (TYU) exercises can be used. New topic – This symbol indicates new areas of study, building on knowledge gained from previous studies or the introduction of a completely new topic. KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com vii To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Introduction Online subscribers co Our online resources are designed to increase the flexibility of your learning materials and provide you with immediate feedback on how your studies are progressing. ial If you are subscribed to our online resources you will find: (1) Online reference material: reproduces your Complete or Essential Text online, giving you anytime, anywhere access ter (2) Online testing: provides you with additional online objective testing so you can practice what you have learned further (3) Online performance management: immediate access to your online testing results. Review your performance by key topics and chart your achievement through the course relative to your peer group ma Cli ck Ask your local customer services staff if you are not already a subscriber and for wish to join. m ore bo Paper background o ks or dy vis The aim of ACCA Paper P6, Advanced Taxation, is to apply relevant it o knowledge and skills and exercise professional judgement in providing ur we relevant information and advice to individuals and businesses on the impact bsi of the major taxes on financial decisions and situations. te stu Objectives of the syllabus (w ww bo ok sg co On the successful completion of this paper candidates should be able to: m ) Apply further knowledge and understanding of the UK tax system through the study of more advanced topics within the taxes studied previously and the study of stamp taxes • Identify and evaluate the impact of relevant taxes on various situations and courses of action, including the interaction of taxes • Provide advice on minimising and/or deferring tax liabilities by the use of standard tax planning measures • Communicate with clients, HM Revenue and Customs and other professionals in an appropriate manner htt p:/ /ac ca • viii KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com m To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download co Syllabus objectives ial We have reproduced the ACCA’s syllabus below, showing where the objectives are explored within this book. Within the chapters, we have broken down the extensive information found in the syllabus into easily digestible and relevant sections, called Content Objectives. These correspond to the objectives at the beginning of each chapter. Syllabus learning objective Chapter reference A ou B2 Income from employmentr we – B3 Income from self employment – B4 Property and investment income – ok B5 The comprehensive computation of taxable income sg com and the income tax liability – B6 National insurance contributions for employed and selfemployed persons – B7 The use of exemptions and reliefs in deferring and minimising income tax liabilities stu – bsi te (w ww bo The following additional material is also examinable: (b) The scope of income tax: [3] /ac isit B1 The scope of income tax dy – rv ca ma ter APPLY FURTHER KNOWLEDGE AND UNDERSTANDING OF THE UK TAX SYSTEM THROUGH THE STUDY OF MORE ADVANCED TOPICS WITHIN THE TAXES STUDIED PREVIOUSLY AND THE STUDY OF STAMP TAXES Cli (1) Income ck and income tax liabilities in situations involving further overseas aspects and in relation to for trusts, andmthe oreapplication of exemptions and reliefs (a) The contents of the Paper F6 study guide for income bo ok so tax and national insurances, under headings: [2] (i) Explain and apply the concepts of residence and domicile and advise on the relevance to income tax p:/ (ii) Advise on the availability of the remittance basis to UK resident individuals [2] htt (iii) Advise on the tax position of individuals coming to and leaving the UK KAPLAN PUBLISHING (iv) Determine the income tax treatment of overseas income ) 1,10 10 10 10 FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com ix To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs Ordinary commuting is the journey made each day between home and a permanent workplace • Private travel is a journey between home and any other place that is not for the purposes of work co • ial Relief is given where an employee travels directly from home to a temporary place of work. A temporary workplace is defined as one where an employee goes to perform a task of limited duration, or for a temporary purpose • However, a place of work will not be classed as a temporary workplace where an employee works there continuously for a period that lasts, or is expected to last, more than 24 months ter • ma Where an employee passes their normal permanent workplace on the Cli way to a temporary workplace, relief will still be available provided the ckemployee does not stop at the normal workplace, or any stop is for incidental (e.g. to pick up some papers). m ore dy bo Where an employee's business journey qualifies for relief, then the ok so amount of relief is the full cost of that journey. There is no need to take rv account of any savings the employee makes by not having to make his isit ou or her normal commuting journey to work. rw ebs ite (w stu Approved mileage allowance payments ww bo ok s g.c Employees who use their own vehicles for work will normally be paid a om mileage allowance. ) ca There are approved mileage allowance payment (AMAP) rates set by HMRC as follows: Cars and vans 45p Over 10,000 miles p.a. 25p /ac First 10,000 miles p.a. Passenger rate p:/ Motorcycles htt Bicycles 46 5p 24p 20p • The car and vans rate is given in the examination, but not the other rates • Provided the mileage allowance received is within these rates; no assessable benefit arises KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download • m chapter Effect on employment income: Excess = assessable benefit AMAP rates co Where the mileage allowance received is: However, no deduction claim is allowed for any shortfall on the passenger rate where less than 5p a mile is paid ck for mo bo ok so rv isit dy re ma Cli ter Summary ou rw ebs (w ww bo ok sg com ) ca stu ite Test your understanding /ac Bernard uses his own car for business purposes for which his employer pays an agreed allowance. Bernard drives 12,000 business miles in 2016/17. p:/ Bernard took a work colleague on some business trips totalling 5,000 miles for which he received an extra 4p per mile from his employer. Calculate the assessable benefits on Bernard, or the mileage expenses claims, for the tax year 2016/17 assuming Bernard's employer pays a mileage allowance for the car of: htt (a) 20p per mile or (b) 50p per mile. KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 47 To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs co 3 Employment benefits The benefit rules were covered in detail at F6. This section provides a reminder of the key rules that need to be retained for P6. • • ial Employment benefits can be divided into two catagories: Exempt benefits Taxable benefits ter Exempt benefits A reminder of the rules relating to the types of exempt benefits is given in expandable text and the examples include some exempt benefits to check your retention of the required F6 knowledge. ma Cli Entertainment from a third party to generate goodwill and gifts from a third party up to £250 from any one source in a tax year Welfare counselling Workplace nurseries run by employer at the workplace or at other nondomestic premises (including facilities run jointly with other employers or local authorities) /ac • • Staff parties of up to £150 p.a. per employee ca • • stu dy ckExempt benefits for mo re • Employer’s contribution to a registered pension scheme bo ok so • Pensions advice up to £150 per employee per year rv isit • Subsidised canteen, unless part of a salary sacrifice scheme ou rw • Car parking space ebs ite • Provision of work buses, bicycles, subsidies for public transport (w ww • One mobile phone per employee (including smart phones) bo • Work related training provided by employer oksg co m) • Inhouse sports and recreational facilities Child care costs up to £55 per week (reduced to £28 for higher rate taxpayers and £25 for additional rate taxpayers) • Contribution towards home worker expenses up to £4 per week or £18 per month without documentation, more with documentation • • Job related accommodation htt p:/ • 48 Relocation and removal expenses up to £8,000 KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m chapter Overnight expenses up to £5 per night in UK and £10 per night overseas • Employer liability insurance, death in service benefits and permanent health insurance • • • Medical insurance and treatment while working abroad • Loans with a beneficial interest rate, provided the loan is ≤ £10,000 throughout the year (see later) ial Eye care tests co • ter Long service awards up to £50 per year of service to mark employment of 20 years or more C lic An exemption applies: kf or m ma Recommended medical treatment ore for expenditure incurred by employers on recommended medical bo treatment o • ks or by a health care professional v • • • • is dy it o for an employee assessed as unfit for work due to injury or ill health u r we after a period of sickness absence of at least 28 consecutive days b sit stu e( for the purpose of assisting the employee’s return to work w ww b ook per tax The exempt benefit is a maximum of up to £500 per employee sg year. co m) ca Any amount incurred in excess of the £500 exemption limit is assessed to income tax and NICs as a benefit of employment in the normal way. /ac Trivial benefits From the tax year 2016/17, a new exempt benefit has been introduced in respect of ‘trivial’ benefits provided by employers to employees. A benefit is trivial if it meets the following conditions: the cost of providing the benefit does not exceed £50 p:/ • • • it is not cash or a cash voucher it is not provided in recognition of services htt If any of these conditions are not met, the benefit is taxed in the normal way. KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 49 To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs Taxable benefits ial co Prior to the tax year 2016/17, certain taxable benefits were only assessed on employees earning £8,500 or more (‘P11D exmployees’) and not on employees earning less than this amount. This distinction has now been abolished and taxable benefits are now assessed on all employees regardless of amount of earnings in the tax year. Note that a benefit is taxable if • • it arises ‘by reason of employment’, and • either directly by the employer or by a third party ter is provided either to the employee or to a member of his family or household Expenses relating to living accommodation co m) Use and gift of assets ca Cars, fuel and vans Beneficial loans Scholarships Payment of a director’s liability htt p:/ /ac • • • • • • stu dy ma CliThe following table summarises the key taxable benefits: ck for General rule = Assessed on: mo re bo • Cost to the employer ok so rv • Marginal cost to the employer if an 'in house' benefit isit ou Specific valuation rules for some benefits: rw ebs ite • Noncash vouchers (w ww • Credit cards bo ok sg • Living accommodation 50 KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m chapter co Remember that: Where a benefit is only available for part of the year; the assessable amount is time apportioned • Where an employee contributes towards the benefit; the employee contribution is an allowable deduction (exception = the provision of private fuel) • Where employers provide inhouse benefits (such as free air tickets for employees of an airline) the measure of the benefit is the additional or marginal cost incurred by the employer, not a proportion of the total cost ter ial • kf or m or and credit cards Noncash vouchers eb ook so rv isit dy Noncash vouchers ma A reminder of the rules relating to these benefits is given in expandable text and the rules are summarised in the diagram in section 4. Revision examples are provided to check your retention of the required F6 Cli knowledge. c Credit cards stu ou Employees provided with noncash vouchers are taxed on the cost to the rw employer of providing the voucher. Noncash vouchers are vouchers that ebs ite can be exchanged for goods or services (e.g. retail vouchers) and (w includes transport vouchers (e.g. travel season tickets). w w.b ook sg com htt p:/ /ac ca ) Employees provided with credit cards by their employer will be taxed on the value of any costs charged to the card for personal use. KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 51 To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs Living accommodation Basic charge Higher of • • ck for mo bo ok so ial Rent paid by employer, if any (only applicable if property rented on behalf of employee) Only applicable if property purchased by employer (not rented) and the property ‘cost’ in excess of £75,000 • Benefit=(Costofaccommodation lessÊ75,000)ìORI% ã 'ORI'istheofficialrateofinterest, currently3%. Theofficialrateof interestwillbeprovidedinthe examination ter ã • rv isit ‘Cost’ = purchase price of property plus the cost of capital improvements made before the start of the tax year dy re Annual value of property ma Additional charge for expensive accommodation Cli co Taxable benefit ou rw ebs If property is owned by the employer ite for more than 6 years before providing (w ww it to the employee: bo Use MV of property when first ok sg provided (not purchase price) co m) htt p:/ /ac ca stu • 52 KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m chapter No benefit arises where the property is jobrelated accommodation. • – for the better performance of the employee's duties and, for that type of employment, it is customary for employers to provide living accommodation (e.g. hotelworker) – where there is a special threat to the employee's security and the employee resides in the accommodation as part of special security arrangements (e.g. prime minister). ter • ial To qualify as JRA, the property must be provided: – where it is necessary for the proper performance of the employee's duties (e.g. a caretaker) co Job related accommodation (JRA) A director can only claim one of the first two exemptions if: ma Cli they have no material interest in the company (i.e. holds no ck for more than 5% in the company's ordinary share capital), and mo re – they are a fulltime working director or the company is a non bo profit making organisation ok so rv isit ou rw Living accommodation expenses ebs ite (w Expenses connected with living accommodation (i.e. ancillary ww bo benefits), such as lighting and heating, and use of assets provided in the ok accommodation are taxable on an employee where the cost is met by sg com the employer as follows: ) stu dy – If not JRA ca Benefit Cost to Expenses in connection with living accommodation employer 20% rule (see below) Total benefits = limited to 10% rule (see note below) htt p:/ /ac Use of assets If JRA KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 53 To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs • co Notes The 10% JRA limit applies to the following types of expense: – heating, lighting and cleaning repairing, maintaining or decorating the premises, and – the use of furniture/goods normal for domestic occupation ial • – Use of assets Cli ck ma ter The total accommodation benefits taxed on an employee for JRA is limited to 10% of ‘net earnings’ – ‘net earnings’ = employment income (including all assessable benefits other than the living accommodation ancillary benefits) for Where the ownership of the asset is retained by employer, but the mo employee has private use of the asset, the taxable benefit is: r eb ook so 20%ìopenmarketvaluewhenfirstmadeavailable(usuallycost) r ã ã v 20%rule stu – dy isit Where the employer rents the asset made available to the employee ou instead of buying it, the employee is taxed on the higher of: rw e – the rent paid by employer bsi te (w ww b ook The provision of one mobile phone to an employee is an exempt sg benefit. However, the 20% rule will apply to any additional mobile com phones provided ) ca • Example – Living accommodation /ac Mr X, a director of X Ltd, lives in a furnished company flat that cost the company £105,000 on 1 June 2012. He occupied the property from 15 June 2012. The accommodation is not job related. p:/ The annual value of the flat is £2,500 and Mr X pays X Ltd rent of £150 a month. Furniture was worth £6,000 in June 2012. The company pays £2,000 for the running costs of the flat and £1,500 in council tax. htt Calculate Mr X’s total taxable benefits for 2016/17. 54 KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m chapter Solution co Total taxable benefits – 2016/17 ial Basic charge (annual value) Additional charge (£105,000 – £75,000) × 3% Less: Contribution (£150 × 12) Total taxable benefits C for mo re ok so rv isit dy Gift of assets bo ma ter Accommodation benefit Use of furniture (20% × £6,000) Living expenses benefit Council tax lick ou If an employer purchases a new asset and gives it to an employee rw immediately, the employee is taxed on the cost to the employer eb • si te Where an employee has had the private use of an asset which is (w ww then given to him, the employee is taxed on the higher of: stu • o£ ksg X (X) ––– £ coX m ) X Any employee contribution can be deducted from the taxable amounts computed according to the rules above Where the asset being given to an employee is a used car or van or bicycle provided for work: Benefit = method (i) above (i.e. ignore method (ii)) htt p:/ • bo /ac ca (i) MV of asset when gifted (ii) MV of asset when first made available to the employee Less: Benefits already taxed on employee for private use • £ 2,500 900 –––––– 3,400 (1,800) –––––– 1,600 1,200 2,000 1,500 –––––– 6,300 –––––– KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 55 To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs co Example – Use and gift of asset ial Rooney was provided with a new video camera by his employer on 6 October 2014 costing £2,000. He was allowed to keep the camera on 5 January 2017 when its value was £500. Show the benefit taxable on Rooney for all years. Solution Taxable benefits 2015/16 Use of asset: (£2,000 × 20%) ck f or 2016/17 m Use of asset: (£2,000 × 20% × 9/12) stu dy ore Plus bo ok Gift of asset: (working) so rv isit Total amount taxable in 2016/17 ou rw ebs ite Working: Gift of asset (w ww 1,100 –––––– 1,400 –––––– bo Further benefit on gift of asset – higher of £ £ ok s g (i) MV at date of gift 500 co m) (ii) MV when first made available 2,000 Less: Taxed to date (£200 + £400 + £300) (900) –––––– 1,100 –––––– /ac ca 2016/17 £ 200 –––––– 400 –––––– 300 ter Use of asset: (£2,000 × 20% × 6/12) ma Cli 2014/15 Motor cars htt p:/ ã 56 Whereacarismadeavailableforprivateuse,thetaxable benefitis: Appropriate%ìListpriceofcarwhenfirstregistered Less:Employeecontributionsforprivateuseofcar Taxablebenefit Ê X (X) ––– X ––– KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download • – can be reduced by any capital contribution made by the employee, subject to a maximum of £5,000 The appropriate percentage: – depends on the rate at which the car emits carbon dioxide • The rules can be summarised as follows: CO emissions per km Petrol car % 7 50 grams or less 51 – 75 grams 11 76 – 94 grams 15 Diesel car % 10 ter ial • co The list price of the car is the price when first registered – includes the cost of extras, both those provided with the car and any made available subsequently m chapter 14 18 ma C95 grams 19 16 lick for An additional 1% is added to Each complete additional 5 m the 16% or 19% up grams emission above 95 grams ore bo to a maximum % of 37% ok so The benefit rv isit – is reduced by periods for which the car was unavailable for ou rw more than 30 consecutive days ebs – is reduced if the employee makes contributions towards the ite (w running costs ww bo – takes into account all running expenses of the vehicle. ok sg Therefore, there is no additional charge for insurance, repairs, com car tax, etc ) stu dy • • • ca If more than one car is provided to employee/relative, then separate benefits for the car and private fuel are calculated for each car No benefit on pool cars /ac The maximum % that can be applied to any car is 37%. htt p:/ • • A separate benefit applies if private fuel is provided KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 57 To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs • Where an employer provides private fuel the benefit is: The £22,200 is given in the tax rates and allowances in the examination • Contributions made by the employee towards the private fuel are ignored unless all private fuel is reimbursed in full (in which case no benefit arises) • The benefit charge is reduced for periods of nonavailability, unless nonavailability during the tax year is only temporary ck ter • fo Testr your m understanding ore b ma Cli ial (same percentage used for car benefit × £22,200). co Private fuel ook Charles took up employment with Weavers Ltd on 1 July 2016. so rv dy isit His remuneration package included a twoyear old petroldriven car, list ou price £24,000. He took delivery of the car on 1 July 2016. The CO rw 2 ebs emission rating is 229 g/km. ite (w stu ww As a condition of the car being made available to him for private bo motoring, Charles paid £100 per month for the car and £50 per month ok sg for petrol during 2016/17. co m) Weavers Ltd incurred the following expenses in respect of Charles' car: ca £ 450 780 2,500 240 /ac Servicing Insurance Fuel (of which £1,150 was for business purposes) Maintenance htt p:/ Calculate Charles' taxable car and fuel benefits for 2016/17. 58 KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m chapter Where a van is made available for private use to an employee the taxable benefit is: • • • ial £3,170 p.a. for unrestricted private use of the van co Van benefit £598 p.a. if private fuel is provided by the employer ter These benefits are time apportioned if the van is unavailable to the employee for 30 consecutive days or more during any part of the tax year • Taking the van home at night is not treated as private use and incidental private use is also ignored if insignificant • Contributions by the employee towards the van (not the fuel) reduce the benefit chargeable • ick Where employees share the private use of the van, the scale charge for is divided between the employees, on a just and reasonable basis mo (e.g. by reference to the amount of private use) re bo ok so ma Cl rv dy isit Example – Company car vs van ou rw eb stu site A plc is offering Tom, a higher rate taxpayer, two possible new vehicles (w for his private use. The first vehicle on offer is a petrol engined car with a ww list price of £15,000 including VAT and CO2 emissions of 94 g/km. b ook sg ca co The second vehicle is a petrol engined van with the same list price and m) CO2 emissions. Private use of the van is not considered to be insignificant. A plc will pay for all running costs including fuel for both vehicles. /ac Calculate the benefit taxable on Tom in 2016/17 for the two vehicles and advise him which one he should select. Solution p:/ Option – Provision of company car Car benefit (£15,000 × 15%) (W) Fuel benefit (£22,200 × 15%) htt Total benefits KAPLAN PUBLISHING £ 2,250 3,330 –––––– 5,580 –––––– FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 59 To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download m Employment income and related NICs Option – Provision of company van £ 3,170 598 ––––– 3,768 ––––– co Van benefit Fuel benefit ial Total benefits Conclusion: The company van would be more tax efficient. Working: Appropriate percentage for company car Beneficial loan ck ma Cli ter CO2 emissions = between 76 – 94 g/km, the appropriate % = 15%. stu dy f • orBeneficial loans are loans made to an employee with an interest mo re rate below the official rate of interest (3% for 2016/17) bo ok • The benefit is calculated as follows: so rv £ isit o Interest at the official rate ur we (using either the average or precise method) X bsi te Less: Interest actually paid in the tax year (X) (w ww –– b Taxable benefit X ook sg –– com • A small loan exemption applies where the total of an employee’s ) Twomethodsofcalculatingtheinterestattheofficialrate: Averagemethod=chargeisbasedontheaveragecapital /ac ã ca beneficialloansisÊ10,000throughoutthetaxyear averagecapital=(openingbalance+closingbalance)ìẵ ã Either the taxpayer or HMRC can elect for the precise method • HMRC will only elect where it appears that the average method is being exploited and the precise method gives a materially higher figure p:/ htt 60 Precise method = calculate interest on a day to day basis on the balance of the loan outstanding KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2017-2018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com ... cash flows of a business. [3] 15 15 ,25 15 ,25 15 ,25 KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2 017 -2 018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com 5 ,13 ,17 18 ,26,29 ... minimising inheritance tax liabilities: [3] 14 co m To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN EXAM KIT 2 017 -2 018 Click for Download KAPLAN PUBLISHING FREE ACCA KAPLAN EXAM KIT 2 017 -2 018 Click... ACCA KAPLAN EXAM KIT 2 017 -2 018 Click for Download To Access More Free Study Material Visit : accastudymaterial.com To Access More Free Study Material Visit : accastudymaterial.com FREE ACCA KAPLAN