Relevant to Foundations in Taxation – United Kingdom (FTX–UK) – June and December 2022 sittings
This appendix outlines the effects of the changes made in the Finance Act 2021 on FTX-UK. The sub-headings refer to the headings in the main Finance Act 2021 article on TX-UK.
Rates of income tax
The same 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. 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 and therefore the transferable amount will not be given in the FTX-UK rates and allowances.
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-UK 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 fuel benefits
FTX-UK will examine the same detail as shown for TX-UK, using only the benefit percentages that apply for motor cars registered from 6 April 2020 onwards.
Electric and hybrid-electric motor cars are examinable and therefore all of the following will be examinable in FTX-UK:
The same motor car benefit percentage detail will be given in the FTX-UK rates and allowances as that given in TX-UK.
Company van and fuel benefits
Company van and fuel benefits will continue to be examinable in FTX-UK and the scale charges will be included in the FTX-UK tax rates and allowances. Zero emission vans will, however, not be examined and the scale charges will not be shown in the tax rates and allowances table. The syllabus will be amended to reflect this omission.
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% will be used in both of the 2022 examinations.
FTX-UK will examine the current annual investment allowance limit of £1,000,000 in the 2022 examinations. The new rate of £200,000 will not be examined in the 2022 examinations.
The first year allowance (FYA) for motor cars with a zero CO2 emission rate will be examinable from the 2022 examinations and the FTX-UK syllabus will be amended to reflect this change.
Structures and buildings allowance
The structures and buildings allowance (SBA) of 3% will be examined in the 2022 examinations in the same way as they are for TX-UK. This will include future disposals of qualifying structures and buildings and the effect of the allowances claimed on the capital gain calculation.
The rates and allowances section for FTX-UK will show the same detail as that shown for TX-UK.
The new temporary loss relief rules will not be examinable in FTX –UK.
The reduction in the CO2 emission threshold for the leased motor cars will be examined in FTX-UK.
The rules regarding finance costs of residential property remain outside 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, 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 £4,000 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 unchanged limit of £12,300 for the tax year 2021/22 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.
No capital gains tax questions will be set which involve the effects of pension contributions and gift aid payments on the income tax thresholds.
Business asset disposal relief
The rate of tax of 10% and the £1 million lifetime limit remain required knowledge for FTX-UK.
Investors’ relief
This relief remains outside of the FTX-UK syllabus.
Gift holdover relief
This standardised term will be used in future FTX-UK examinations.
The rates and allowances section for FTX-UK will show the same detail (with the exception of the detail on investors’ relief) for capital gains tax as that shown for TX-UK.
This remains outside the syllabus for FTX-UK.
Rates of corporation tax
The single rate of 19% will apply in FTX-UK.
Loss relief
The new temporary rules for loss relief will not be examined in FTX-UK.
Enhanced capital allowances for companies only
The new temporary super deduction of 130% for main pool items and the 50% first year allowance for special rate pool items will be examined in the same way as TX-UK.
Indexation allowance
Indexation factors, where required, will only be given up to December 2017.
Accounting reference date
The term ‘accounting reference date’ (in place of ‘accounting date’) will be used when describing the date to which a company’s accounts have been prepared.
The calculation of these remains outside of the FTX-UK syllabus.
Registration and deregistration limits
The unchanged registration and deregistration limits will also be used in both the 2022 examinations for FTX-UK.
Standard rate of VAT
The unchanged standard rate of 20% will be used in FTX-UK.
The impact of the UK leaving the European Union (EU)
The treatment of overseas transactions (both EU and non-EU) remains outside of the syllabus for FTX-UK.
Freeports
These are not examinable in FTX –UK.
None of these claims or grants are examinable in FTX-UK.
Written by a member of the FTX–UK examining team