Relevant to Foundations in Taxation – United Kingdom (FTX–UK) – June and December 2021 sittings
This appendix outlines the effects of the changes made in the Finance Act 2020 on FTX-UK. The sub headings refer to the headings in the main Finance Act 2020 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.
Homeworking
The new weekly tax free allowance of £6 will be examined in FTX-UK in the same way as TX-UK.
Company car and van benefits and car and van 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.
For examinations in 2021 and beyond electric and hybrid-electric motor cars will be examined in FTX-UK and the syllabus has been amended to reflect this change.
This means that 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.
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 2.25% will be used in both of the 2021 examinations.
FTX-UK will examine the current annual investment allowance limit of £1,000,000 in the 2021 examinations. The new lower limit of £200,000 will not be examined until the 2022 examinations.
The first year allowance (FYA) for motor cars with a CO2 emission rate of 50 grams or lower remains outside the FTX-UK syllabus.
Structures and buildings allowance
The rules for the new structures and buildings allowance (SBA) will be examined in the 2021 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 rules regarding finance costs in respect of residential property 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 £4,000 will be examined in FTX-UK. The employment allowance is not available where employers’ class 1 contributions are £100,000 or more for the previous tax year and this will also 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 £12,300 for the tax year 2020/21 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.
Payments on account for disposals of residential property
Knowledge of the payment on account date (i.e. within 30 days) for disposals of residential property is examinable.
Questions will, however, not be set asking for candidates to calculate the amount due on the payment on account date but will only require calculation of the total capital gains tax (CGT) due for the tax year.
If candidates are asked to state the payment date of CGT and the questions involve residential properties they will be expected to state that tax due on the disposal of the residential property must be paid within 30 days and that the balance of tax due for all of the disposals in the tax year must be paid by 31 January following the tax year (but the two separate amounts will not require calculation).
Business asset disposal relief (formerly entrepreneurs’ relief)
Entrepreneurs’ relief has been renamed and is now called business asset disposal relief. This is how the relief will be referred to in the exam, where necessary, so candidates must be familiar with the new name.
The rate of tax of 10% and the new £1 million lifetime limit remain required knowledge for FTX-UK.
Investors’ relief
This relief remains outside of the FTX-UK syllabus.
Private residence relief
The new nine month period for relief for the final period of ownership will apply for FTX-UK examinations.
The new rules regarding letting relief will not be examined in the FTX-UK examinations. The syllabus has been amended to reflect this exclusion.
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.
Restriction of carry forward of capital losses
As for TX-UK this will not be examined in the FTX-UK examinations
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 2021 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.
Coronavirus (Covid-19) tax deferrals
As for TX-UK, for any questions in FTX-UK involving payments which may be deferred as a result of the coronavirus crisis, it should be assumed that the taxpayer has not deferred them.
Written by a member of the FTX–UK examining team