Relevant to Foundations in Taxation FTX (UK) –
June and December 2018 sittings
This appendix outlines the effects of the changes made in the Finance Act 2017 (which is the legislation as it relates to the tax year 2017–18) on FTX (UK). The sub headings in this article refer to the headings in the main article on Taxation – United Kingdom (TX-UK) (F6). The article does not refer to any amendments to the FTX (UK) syllabus coverage unless they directly relate to legislative changes and candidates should therefore consult the FTX (UK) Syllabus and Study Guide for June and December 2018 for details of such amendments.
Please note that if you are sitting FTX (UK) in December 2017, you will be examined on the Finance Act 2016, which is the legislation as it relates to the tax year 2016–17. Therefore this article is not relevant to you, and you should instead refer to the Finance Act 2016 article published on the ACCA website.
Rates of income tax
The revised thresholds and the rates of tax shown will also be used in FTX (UK).
Personal allowance
The personal allowance will be examined in a similar way to TX-UK (F6). Both the withdrawal of the allowance – where income exceeds £100,000, and the impact of personal pension contributions and gift aid donations on the calculation of adjusted net income will be examinable. The rules regarding the transfer of some of the personal allowance to a spouse or civil partner will not be examined.
Savings income
FTX (UK) will examine savings income in a similar way to TX-UK (F6), however tax planning remains outside of the FTX (UK) syllabus therefore the impact of transferring savings income to a spouse or a civil partner will not be examined.
The savings income nil rate bands will be given in the FTX (UK) tax rates and allowances sheet.
Dividends
FTX (UK) will examine dividends in a similar way to TX-UK (F6), however tax planning between spouses, civil partners and the impact on the decision to incorporate will not be examined.
The dividend nil rate band will be given in the FTX (UK) tax rates and allowances sheet.
Company car and van benefit and car and van fuel benefit
FTX (UK) will examine the same detail as shown for TX-UK (F6).
Tax free childcare
In line with TX-UK (F6) the new tax free childcare scheme will not be examined in FTX (UK) but the rules regarding childcare vouchers remain examinable.
Official rate of interest
The official rate of 2.5% will be used in both of the 2018 examinations.
FTX (UK) will examine both annual investment allowance and writing down allowance in a similar way to TX-UK (F6).
The rates and allowances section for FTX (UK) will show the same detail as that shown for TX-UK (F6).
The new rules regarding the tax relief for finance costs will not be examined in FTX (UK).
Detailed knowledge of these remains outside the syllabus for FTX (UK) but knowledge of income from these accounts being non-taxable is examinable.
Class 1, Class 1A NIC, Class 2 and Class 4 NIC
The new rates and thresholds will apply to FTX (UK) and the same detail will be given on the rates and allowances sheet as that given for TX-UK (F6).
The employment allowance
The threshold of £3,000 will be examined in FTX (UK).
Awareness of the annual allowance and lifetime allowance limits is required but the additional tax charges for excess contributions and for exceeding the lifetime allowance continue not to be examinable. The method of obtaining tax relief for contributions to both occupational and personal schemes remains examinable.
The carry forward provisions for the annual allowance will continue not to be examinable in FTX (UK) therefore only the annual allowance limit of £40,000 will be shown in the tax rates and allowances section.
The rules regarding the tapered annual allowance are not examinable.
Annual exempt amount
The new limit of £11,300 for the tax year 2017–18 will be used in FTX (UK).
Rate of capital gains tax
The rates of capital gains tax will be examined in FTX (UK) in a similar way to that used in TX-UK (F6).
No capital gains tax questions will be set which involve the effects of pension contributions and gift aid payments on the income tax thresholds.
Entrepreneurs’ relief
The rate of tax (10%) and the £10 million lifetime limit remains required knowledge for FTX (UK).
The rates and allowances section for FTX (UK) will show the same detail for capital gains tax as that shown for TX-UK (F6).
This remains outside the syllabus for FTX (UK).
Rates of corporation tax
The single rate of 19% will apply in FTX (UK).
The rates of tax and allowances section of FTX (UK) will only show the current rate of 19% and not previous years’ rates.
Accounting periods that span two financial years where there has been a change in the rate of tax are not examinable.
Losses
The existing basis of relieving losses remains examinable in FTX (UK) in a similar way to that used in TX-UK (F6).
Group loss relief remains outside of the FTX (UK) syllabus.
Registration and deregistration limits
The new registration and deregistration limits will also be used in both the 2018 examinations for FTX (UK).
Standard rate of VAT
The unchanged standard rate of 20% will be used in FTX (UK).
Flat rate scheme
As there is no real advantage in using the new 16.5% rate, the flat rate scheme will continue to be examined in the same way as before and the rate to be used will be given in the question.
Written by a member of the FTX (UK) examining team.