Finance Act 2016

Relevant to Foundations in Taxation (FTX) (UK) –
June and December 2017 sittings

This appendix outlines the effects of the changes made in the Finance Act 2016 on FTX (UK). The sub headings refer to the headings in the main article on F6 (UK).

INCOME TAX

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 F6 (UK). 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 transferable amount of personal allowance to a spouse or civil partner is not examinable and will not be given in the FTX (UK) rates and allowances sheet.

Savings income
FTX (UK) will examine the new rules regarding savings income in a similar way to F6 (UK). Therefore, both the savings income nil rate bands of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers and the use of the starting rate of 0% are examinable. However, tax planning remains outside of the FTX (UK) syllabus and therefore the impact of transferring savings income to a spouse or a civil partner will not be examined.

The savings income nil rate bands and the starting rate for savings income will be given in the FTX (UK) tax rates and allowances sheet as for F6 (UK).

Dividends
FTX (UK) will examine dividends in a similar way to F6 (UK) and therefore the £5,000 nil rate band for dividend income is examinable. 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.

Self-assessment payments on account
Payments on account will be examined in a similar way to F6 (UK).

EMPLOYMENT INCOME

£8,500 threshold
FTX (UK) candidates should be aware that the taxable benefits regime now applies to all employees regardless of the level of their earnings, as for F6 (UK).

Company car and van benefit and company car and van fuel benefit
FTX (UK) will examine the same detail as shown for F6 (UK).

Trivial benefits
FTX (UK) will examine the exemption in a similar way to F6 (UK).

Tax free childcare
In line with F6 (UK) the new tax free childcare scheme to be introduced in early 2017 will not be examined in FTX (UK).

Dispensations
Dispensations were outside the scope of the FTX (UK) syllabus and the new automatic exemption is also outside the scope of the FTX (UK) syllabus.

Payrolling of benefits
This new option will not be examined in FTX (UK).

Official rate of interest
The official rate of 3% will be used in both of the 2017 examinations.

CAPITAL ALLOWANCES

FTX (UK) will examine the current annual investment allowance of £200,000 in the June and December 2017 exams, as for F6 (UK). Questions examining the restriction of the annual investment allowance and writing down allowances for short periods may be examined.

The rates and allowances section for FTX (UK) will show the same detail as that shown for F6 (UK) but first year allowances (FYA) remain outside of the syllabus .

PROPERTY INCOME

Replacement furniture relief
The new rules replacing the wear and tear allowance will be examined in FTX (UK) in a similar way to F6 (UK).

Rent-a-room relief
The new annual threshold of £7,500 will be examinable at FTX (UK).

INDIVIDUAL SAVINGS ACCOUNTS (ISAs)

Detailed knowledge of these remains outside the syllabus for FTX (UK) but knowledge of income from these accounts being non-taxable is examinable.

ACCRUED INCOME SCHEME

This is outside the scope of the FTX (UK) syllabus.

NATIONAL INSURANCE CONTRIBUTIONS (NIC)

Class 1, Class 1A NIC, Class 2 and Class 4 NIC
The same detail will be examinable in FTX (UK) as that shown for F6 (UK) and therefore the rates and allowances sheet for FTX (UK) will show the same detail for national insurance contributions as that shown for F6 (UK).

Employment allowance
The increased allowance of £3,000 will examined in FTX (UK). The new restriction for companies where a director is the sole employee will not be examinable.

PENSION SCHEMES

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.

CAPITAL GAINS TAX

Annual exempt amount
The unchanged limit of £11,100 for the tax year 2016–17 will continue to be used in FTX (UK).

Rate of capital gains tax
The rates of 18% and 28% which apply to gains arising on the disposal of residential property and the new rates of 10% and 20% for gains arising on the disposal of other assets will be examined in FTX (UK).

Questions may be set which require candidates to apply capital losses and the annual exempt amount in the most beneficial manner.

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 remain required knowledge for FTX (UK). The new external investors’ relief will not be examinable in FTX (UK).

The rates and allowances section for FTX (UK) will show the same detail for capital gains tax as that shown for F6 (UK).

INHERITANCE TAX

This remains outside the syllabus for FTX (UK).

CORPORATION TAX

Rates of corporation tax
The single rate of 20% continues to apply in FTX (UK).

Quarterly instalment payments
FTX (UK) will continue to examine these. An exam question will not require dividend income to be considered in the determination of whether a company has profits in excess of £1.5 million or not. Candidates are expected to understand that dividend income received is treated as non-taxable income.

The rates of tax and allowance section of FTX (UK) will show the same detail as F6 (UK).

VALUE ADDED TAX (VAT)

Registration and deregistration limits
The new registration and deregistration limits will also be used in both the June and December 2017 examinations for FTX (UK).

Standard rate of VAT
The unchanged standard rate of 20% will be used in FTX (UK).

Penalties for late filing of VAT returns and late payment of VAT
These remain outside the syllabus for FTX (UK). The only penalties examinable in FTX (UK) continue to be the late registration penalties.

Written by a member of the FTX (UK) examining team