Relevant to Foundations in Taxation – United Kingdom (FTX–UK) – June and December 2020 sittings
This appendix outlines the effects of the changes made in the Finance Act 2019 on FTX–UK. The sub headings refer to the headings in the main article on TX-UK.
Rates of income tax
The revised thresholds and the rates of tax shown, with the exception of the transferable amount, will also be used in FTX–UK.
Personal allowance
The personal allowance will be examined in a similar way to TX-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 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, 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.
Dividends
FTX will examine dividends in a similar way to TX-UK, however tax planning between spouses, civil partners and the impact on the decision to incorporate or extract funds from a company will not be examined.
The dividend nil rate band will be given in the FTX–UK tax rates and allowances.
Company car and van benefits and car and van fuel benefits
FTX–UK will examine the same detail as shown for TX-UK.
As explained in the main article for TX-UK, there is a 4% surcharge for diesel cars which do not meet the real driving emissions 2 (RDE2) standard. This means that the company car benefit percentage rates (including the lower rates of 16%, 19% and 22%) are increased by 4% for diesel cars which do not meet the standard, but not beyond the maximum percentage rate of 37%.
As for TX-UK, the company van and company van fuel benefit will be included in the FTX–UK tax rates and allowances.
Approved mileage allowance
FTX–UK will examine this in a similar way as that in TX-UK.
Official rate of interest
The official rate of 2.5% will be used in both of the 2020 examinations.
FTX–UK will examine both annual investment allowance and the new rates of writing down allowance in a similar way to TX-UK, however first year allowance (FYA) for cars with a CO2 emission rate of 50 grams or lower remains outside the FTX–UK syllabus.
The rules announced for the new structures and buildings allowance (SBA) will not be examined in the 2020 examinations.
The rates and allowances section for FTX–UK will show the same detail as that shown for TX-UK.
The rules regarding finance costs remain outside of the FTX–UK syllabus.
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 in the rates and allowances as that given for TX-UK.
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 £12,000 for the tax year 2019/20 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.
As for TX-UK, where a question tests the interaction of the annual exempt amount and brought forward capital losses, the annual exempt amount should be deducted from the gain after the set-off of current year capital losses, but before setting off any brought forward capital losses.
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 new two year qualifying period is required knowledge but the new definition of the 5% shareholding condition and the new rules in respect of the availability of entrepreneur’s relief where a shareholding has been diluted to less than 5% are not examinable.
The rates and allowances section for FTX–UK will show the same detail for capital gains tax as that shown for TX-UK.
Investors’ relief
Investors’ relief is not examinable for FTX–UK.
Hectares
This term, rather than acres, will also be used in the FTX–UK exams from June 2020 onwards.
This remains outside the syllabus for FTX–UK.
Rates of corporation tax
The single rate of 19% will apply in FTX–UK.
As explained in the main article for TX-UK, companies are required to make quarterly instalment payments in respect of their corporation tax liabilities if profits exceed a profit threshold of £1,500,000.
The quarterly instalment payment dates for very large companies (profits above £20 million) have been brought forward by four months. These payment dates for very large companies are not examinable in FTX–UK.
The rates of tax and allowance section of FTX–UK will only show the current rate of 19% and not previous years’ rates.
The calculation of this remains outside of the FTX–UK syllabus.
Registration and deregistration limits
The unchanged registration and deregistration limits will also be used in both the 2020 examinations for FTX–UK.
Standard rate of VAT
The unchanged standard rate of 20% will be used in FTX–UK.
Written by a member of the FTX–UK examining team