acca applied skills

ACCA

Applied Skills

Taxation (TX‐UK) (Finance Act 2019)

EXAM KIT

For June 2020 to March 2021 examination sittings

TX–UK : TAXATION (FA2019)

P.2 KAPLAN PUBLISHING

British Library Cataloguing‐in‐Publication Data

A catalogue record for this book is available from the British Library.

Published by:

Kaplan Publishing UK

Unit 2 The Business Centre

Molly Millar’s Lane

Wokingham

Berkshire

RG41 2QZ

ISBN: 978‐1‐78740‐416‐8

© Kaplan Financial Limited, 2019.

Printed and bound in Great Britain.

The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials.

All rights reserved. No part of this examination may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without prior permission from Kaplan Publishing.

Acknowledgements

These materials are reviewed by the ACCA examining team. The objective of the review is to ensure that the material properly covers the syllabus and study guide outcomes, used by the examining team in setting the exams, in the appropriate breadth and depth. The review does not ensure that every eventuality, combination or application of examinable topics is addressed by the ACCA Approved Content. Nor does the review comprise a detailed technical check of the content as the Approved Content Provider has its own quality assurance processes in place in this respect.

The past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants. The original answers to the questions from June 1994 onwards were produced by the examiners themselves and have been adapted by Kaplan Publishing.

KAPLAN PUBLISHING P .3

CONTENTS Page

Index to questions and answers P.5

Analysis of past exams P.15

Exam technique P.19

Exam specific information P.23

Kaplan’s recommended revision approach P.27

Kaplan’s TX examination revision plan P.29

Tax rates and allowances P.39

Time limits and election dates P.45

Section

1 Practice income tax and national insurance questions 1

2 Practice chargeable gains questions 77

3 Practice inheritance tax questions 109

4 Practice corporation tax questions 129

5 Practice value added tax questions 177

6 Answers to practice income tax and national insurance questions 205

7 Answers to practice chargeable gains questions 389

8 Answers to practice inheritance tax questions 455

9 Answers to practice corporation tax questions 497

10 Answers to practice value added tax questions 593

11 Specimen exam questions 629

12 Answers to specimen exam questions 643



Key features in this edition

In addition to providing a wide ranging bank of real past exam questions, we have also included in this edition:

An analysis of all of the recent examinations.

Exam specific information and advice on exam technique.

Our recommended approach to make your revision for this particular subject as effective as possible. This includes step by step guidance on how best to use our Kaplan material (study text, pocket notes and exam kit) at this stage in your studies.

A wealth of past real examination questions adapted to the new examination style with enhanced tutorial answers and packed with specific key answer tips, technical tutorial notes and exam technique tips from our experienced tutors.

Complementary online resources including full tutor debriefs and question assistance to point you in the right direction when you get stuck.

You will find a wealth of other resources to help you with your studies on the following sites:

www.mykaplan.co.uk

www.accaglobal.com/en/student.html

Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to [email protected] with full details, or follow the link to the feedback form in MyKaplan.

Our Quality Coordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions.

KAPLAN PUBLISHING P.5

INDEX TO QUESTIONS AND ANSWERS INTRODUCTION

All TX exams have been computer‐based exams (CBEs) from the June 2019 sitting, if you would like further information on sitting a CBE TX examination please contact either Kaplan or the ACCA.

As a result of changes to the TX exam format over time, the majority of past exam questions in their original format are not representative of current TX examination questions. The questions contained in this exam kit are therefore based on past exam questions but it has been necessary to adapt them to ensure that they are representative of questions in the examinations. The adaptations have been made to reflect the new style of exam, new legislative changes in recent Finance Acts, Tax law changes and IFRS® Standards terminology. We have also included new topics brought into the syllabus in some questions.

Many of the questions within the kit are past ACCA exam questions, and the more recent questions (from 2005) are labelled as such in the index. Note that if a question within this kit has been adapted or changed in any way from the original version, this is indicated in the end column of the index below with the mark (A).

Also included are the marking schemes for past ACCA examination questions to assist you in understanding where marks are earned and the amount of time to spend on particular tasks. Note that if a question has been changed from the original version, it will have also been necessary to change the original ACCA marking scheme. Therefore, if a question is marked as ‘ADAPTED’ you should assume that this also applies to the marking scheme.

A number of questions included in the exam kit are referenced to two examination sittings e.g. March/June 2017. This is as a result of a change in policy made by the ACCA regarding the release of examination questions. Previously, examinations were released in their entirety. The ACCA now release a selection of questions from the March/June and September/December examinations. Therefore, questions referenced as such are taken from the sample released by the ACCA.



KEY TO THE INDEX

ANSWER ENHANCEMENTS We have added the following enhancements to the answers in this exam kit:

Key answer tips

All answers include key answer tips to help your understanding of each question.

Tutorial note

All answers include tutorial notes to explain some of the technical points in more detail.

Tutor’s top tips

For selected questions, we ‘walk through the answer’ giving guidance on how to approach the questions with helpful ‘tips from a top tutor’, together with technical tutor notes.

These answers are indicated with the ‘footsteps’ icon in the index.

Within the questions in the exam kit you will see the following icons, shown in the question requirements:

= word processing

= spreadsheet

The icons highlighting the constructed response workspace tool alongside some of the questions are for guidance only – it is important to recognise that each question is different and that the answer space provided by ACCA in the exam is determined by both the technical content of the question as well as the quality assurance processes ACCA undertakes to ensure the student is provided with the most appropriate type of workspace.

INDEX TO QUESTIONS AND ANSWERS


ONLINE ENHANCEMENTS

Question debrief

For selected questions, we recommend that they are to be completed in full exam conditions (i.e. properly timed in a closed book environment).

In addition to the examining team’s technical answer, enhanced with key answer tips and tutorial notes in this exam kit, online you can find an answer debrief by a top tutor that:

works through the question in full

points out how to approach the question

advises you how to ensure that the easy marks are obtained as quickly as possible, and

emphasises how to tackle exam questions and exam technique.

These questions are indicated with the ‘clock’ icon in the index.

Online question enhancements and answer debriefs will be available on MyKaplan at:

www.mykaplan.co.uk



PRACTICE INCOME TAX AND NATIONAL INSURANCE QUESTIONS Page number

Question Answer Past exam (Adapted)

SECTION A OBJECTIVE TEST QUESTIONS 1 205

SECTION B OBJECTIVE TEST CASES

Income tax basics and employment income

89 Philip & Charles

27 240 Dec 11 (A)

90 Kim Baxter

29 243 Jun 08 (A)

Income tax basics and income from self‐employment

91 Foo Dee 31 246 Dec 06 (A)

SECTION C CONSTRUCTED RESPONSE QUESTIONS

Income tax basics and employment income

92 Array Ltd

33 247 Dec 16 (A)

93 Martin

34 251 Sep/Dec 18 (A)

94 Kaya

36 255 Mar/Jun 18

95 Patience

37 258 Mar/Jun 16 (A)

96 Alimag

38 262 Sep/Dec 17

97 Dill

39 265 Sep/Dec 17

98 Richard Tryer

41 269 Jun 14 (A)

99 Petula

42 273 Mar/Jun 17 (A)


100 Carol Courier 44 277 (A)

101 Idris Williams

45 279

102 Ethel 46 282

103 Sam White

47 286 Jun 08 (A)

104 George

48 289 Mar/Jun 16 (A)

105 Sophia Wong

49 292 Dec 12 (A)

106 Fergus

50 298 Jun 15

107 Dembe 50 300 Mar/Jun 19(A)

108 Fang, Hong and Kang

42 302 Dec 13

109 Na Style

53 307 Dec 09 (A)



Page number



110 Zhi

53 311 Mar/Jun 17 (A)

111 Tim Burr

55 314 Jun 11 (A)

112 Richard Feast

56 318 Dec 13 (A)

113 Tonie 58 322 Mar/Jun 19 (A)

114 Danh

59 325 Mar/Jun 18

Trading losses

115 Norma 61 328 (A)

116 Ashura

62 332 Sep 16 (A)

117 Dee Zyne

63 335 Jun 05 (A)

118 Samantha Fabrique

64 337 Dec 07 (A)

119 Michael and Sean

64 341 Jun 12

Partnerships

120 Peter, Quinton and Roger

66 346 (A)

121 Ae, Bee, Cae and Dee

66 348 Dec 08 (A)

122 Auy Man and Bim Men

67 351 Jun 10 (A)

123 Daniel, Francine and Gregor

69 357 Sept/Dec 15

Pensions and NIC

124 John Beach

70 360 Jun 13 (A)

125 Kat

71 366 Sep/Dec 18 (A)

126 Ann, Basil and Chloe

71 370 Dec 08 (A)

127 Jack

72 375 Dec 16 (A)

Self‐assessment

128 Pi Casso 73 379 Jun 08 (A)

129 Ernest Vader

74 383 Jun 10 (A)

130 Sophie Shape

75 386 Jun 15 SP (A)



PRACTICE CHARGEABLE GAINS QUESTIONS Page number




Individuals – capital gains tax

163 Michael Chin 87 404 Jun 05 (A)

164 Bo 89 407 Dec 09 (A)

165 Alphabet Ltd

90 410 Jun 11 (A)

166 Jorge Jung 92 412 Dec 11 (A)

167 Albert and Charles

93 414 Dec 13 (A)

168 Zoyla

95 417 Dec 16 (A)

169 Hali and Goma 96 418 Mar/Jun 19 (A)

Companies – chargeable gains

170 Hawk Ltd

98 420 Dec 08 (A)

171 Kat Ltd

100 423 Sep 16 (A)


Individuals – capital gains tax

172 David and Angela Brook

102 426 Dec 07 (A)

173 Bill Ding

103 530

174 Jerome

103 433 Mar/Jun 16 (A)

175 Ginger and Nigel

104 436 Jun 13 (A)

176 Mick Stone

105 440 Jun 14 (A)

177 Ruby

105 443 Sept/Dec 15 (A)

178 Daljeet

106 446

Companies – chargeable gains

179 Forward Ltd 107 449 (A)

180 Luna Ltd

108 451 Jun 15



PRACTICE INHERITANCE TAX QUESTIONS Page number




200 Lebna and Lulu 115 463 Mar/Jun 19 (A)

201 Tom

117 465 Dec 12 (A)

202 Afiya

119 468 Dec 13 (A)

203 Roman

120 471 Dec 16 (A)

204 Adana

122 473 Sep 16 (A)


205 Blu

124 475 Dec 11 (A)

206 Jack and Tom

125 479 Dec 12 (A)

207 Pere Jones

125 482 Jun 13 (A)

208 Kendra Older

126 486 Jun 14 (A)

209 James

127 489 Mar/Jun 16 (A)

210 Marcus

128 493 Sept/Dec 2015

PRACTICE CORPORATION TAX QUESTIONS Page number




Corporation tax basics and administration

246 Greenzone Ltd

141 513 Jun 13 (A)

Relief for trading losses

247 Loser Ltd 143 516 Pilot 07 (A)

With group aspects

248 Deutsch Ltd

145 519 Jun 13 (A)



Page number



Corporation tax basics and administration

249 Tenth Ltd and Eleventh Ltd

146 522 Sep 16 (A)

250 Aoede Ltd, Bianca Ltd and Charon Ltd 147 525 Mar/Jun 19 (A)

251 Solo Ltd

149 529 Mar/Jun 18 (A)

252 Online Ltd

150 534 Mar/Jun 17 (A)

253 Stretched Ltd 152 537 Jun 05 (A)

254 Starfish Ltd

152 539 Dec 11 (A)

255 Heavy Ltd

154 544 Jun 12 (A)

256 Softapp Ltd

156 547 Dec 13 (A)

257 E‐Commerce plc

158 552 Dec 14 (A)

258 Lucky Ltd

160 556 Sept/Dec 15

Relief for trading losses

259 Last Orders Ltd 161 561 Sep/Dec 17 (A)

260 Wretched Ltd

163 565 Dec 16 (A)

261 Retro Ltd

165 568 Jun 15

With group aspects

262 Music plc 167 573 Dec 05 (A)

263 Jump Ltd 168 575 Mar/Jun 16 (A)

264 Ash Ltd

170 579 Sep/Dec 18 (A)

265 Clueless Ltd

172 583 Dec 12 (A)

266 Long Ltd and Road Ltd

175 588 Jun 14 (A)



PRACTICE VALUE ADDED TAX QUESTIONS Page number




288 Thidar 184 599 Mar/Jun 19 (A)

289 Candy Apple and Sugar Plum

186 601 Dec 13 (A)

290 Lithograph Ltd 188 603 Jun 06 (A)

291 Alisa

190 605 Sep 16 (A)

292 The Whitlock Sisters

191 607 Jun 12 (A)

293 Knight Ltd

193 609 Jun 13 (A)

294 Ardent Ltd

195 612 Dec 16 (A)


295 Garfield

197 614 Mar/Jun 16 (A)

296 Victor Style 198 616 (A)

297 Denzil Dyer 199 618 Jun 07 (A)

298 Silverstone Ltd

200 619 Dec 12 (A)

299 Tardy plc

200 620 Dec 14

300 Smart Ltd

201 623 Sept/Dec 15

301 Zia

202 625 Jun 15


ANALYSIS OF PAST EXAMS The table below summarises the key topics that have been tested in recent exams.

Key:

Q The question references are to the number of the question in this edition of the exam kit.

Refers to questions which have not been included in the kit due to similarity to other recent questions.

* Refers to topics that were included in the question when originally set, but with the adaptation of the question to the new style exam, this topic element has been removed from this question in the exam kit.

Mar/Jun 2016

Sep 2016

Dec 2016

Mar/Jun 2017

Sep/Dec 2017

Mar/Jun 2018

Sep/Dec 2018

Mar/Jun 2019

Principles of taxation/Ethics

Extra statutory concession Q75

Direct tax Q71

Income tax

Exempt income Q97 Q113

Basic income tax computation

Q95 Q104

Q16 Q96 Q94 Q114

Q125

Savings income Q99 Q93 Q113

Dividend income Q96 Q94 Q125 Q93

Reduction of personal allowance

Property income Q95 Q20 Q99 Q114 Q125 Q93

Q113

Furnished holiday lettings

ISAs Q127

Residence Q13 Q10 Q97 Q114 Q113

Qualifying interest Q99 Q114

Employed individual

Employed vs. self‐employed Q104 Q113

Salary and bonus Q95 Q116 Q99 Q97 Q94 Q93 Q113

Exempt benefits Q95 Q92 Q97

Car and fuel benefit Q92 Q93

Living accommodation

Payroll giving Q93

Beneficial loan Q95 Q92 Q97 Q93

Use/gift of assets Q30 Q92 Q97 Q93

Mileage allowance Q116 Q99 Q97 Q113

Professional subscriptions Q116 Q99 Q97

Removal expenses Q92



Mar/Jun 2016

Sep 2016

Dec 2016

Mar/Jun 2017

Sep/Dec 2017

Mar/Jun 2018

Sep/Dec 2018

Mar/Jun 2019

Self‐employed individual

Adjustment to profits Q116 Q114

Capital allowances Q95 Q116 Q114

Basis of assessment rules Q95

Partnerships – allocation Q114 Q93

Tax planning Q110

Pensions

Pension income

Occupational pension Q95 Q116 Q99 Q97

Personal pension contributions

Q95 Q64 Q116

Q127 Q107

Annual allowance Q64 Q127 Q99 Q97

Income tax losses

Relief against income Q116 Q97 Q114

Opening year loss relief Q116

National Insurance contributions

Class 1 Q104 Q96 Q94

Class 1A Q92

Class 2 Q104

Class 4 Q104 Q57 Q61

Capital gains

Basic CGT computation Q95 Q174

Q171

Exempt assets Q169

Part disposal Q174

Shares Q171 Q157 Q168

Q169

Wasting asset Q140

Insurance for destroyed assets

Q169

Husband and wife Q174 Q134 Q169 Q107

Capital losses Q169

Planning Q168 Q107

Reliefs

Entrepreneurs’ relief Q168 Q169

Principal private residence relief

Q149

Gift relief Q174 Q157

Rollover relief Q171 Q110

ANALYSIS OF PAST EXAMS


Mar/Jun 2016

Sep 2016

Dec 2016

Mar/Jun 2017

Sep/Dec 2017

Mar/Jun 2018

Sep/Dec 2018

Mar/Jun 2019

Self‐assessment – individual

Payments on account Q85 Q110

Compliance checks Q93

Interest and penalties Q87 Q93

Record retention Q79

Inheritance tax

PETs Q209 Q182 Q184

Q200

CLTs Q209 Q184

Q203

Exemptions Q209 Q203 Q200

Diminution in value Q203

Estate computation Q204 Q193

After tax inheritance

Reduction of tax Q209 Q204

Due dates Q204 Q203 Q200

Transfer of nil rate band Q204 Q199 Q200 Q107

Residence nil rate band Q200 Q107

Corporation tax

Residence Q260 Q264

Definition of accounting periods

Q264

Adjustment to profits Q263 Q214 Q249

Q260 Q252 Q259 Q251 Q264 Q250

Capital allowances Q263 Q249 Q260 Q252 Q259 Q251 Q250

Lease premiums Q249 Q260 Q252 Q251

Basic TTP computation Q252 Q96 Q259

Q251 Q264 Q250

Property income Q249 Q221 Q260

Q259 Q251

Interest income

Chargeable gains Q171 Q249

Q252

Q259 Q251 Q264 Q250

Long period of account

Qualifying donations Q249 Q252

Q259 Q251 Q264 Q250

Corporation tax losses

Capital losses Q260 Q252

Q264 Q250

Trading losses Q263 Q222 Q260 Q259 Q251 Q264 Q250

Property losses Q260 Q252



Mar/Jun 2016

Sep 2016

Dec 2016

Mar/Jun 2017

Sep/Dec 2017

Mar/Jun 2018

Sep/Dec 2018

Mar/Jun 2019

Groups

Group relief Q263 Q259 Q264 Q250

Capital gains group Q231

Group structure planning

Self‐assessment – companies

Quarterly instalments Q218 Q252

Compliance check Q212

Value added tax

Registration Q291 Q294 Q288

VAT return computation Q295 Q294

Tax point Q110

Due dates Q291 Q294

VAT invoices Q291 Q288

Default surcharge Q294

Errors in a VAT return Q288

Pre‐registration input VAT Q288

Annual accounting scheme Q295 Q283

Cash accounting scheme Q295

Input VAT recovery Q277 Q294

Q288


EXAM TECHNIQUE

GENERAL COMMENTS

We recommend that you always read the questions and examination requirements carefully.

Divide the time you spend on questions in proportion to the marks on offer:

– one suggestion for this examination is to allocate 1.8 minutes to each mark available (180 minutes/100 marks), so a 10 mark question should be completed in approximately 18 minutes.

– within that, try to allow time at the start to read the question and plan your answer (see P.24 below) and at the end of each question to review your answer and address any obvious issues.

If you get completely stuck with a question:

– flag the question in the CBE software and return to it later.

Spend the last five minutes of the examination:

– reading through your answers, and

– making any additions or corrections.

SECTION A OBJECTIVE TEST QUESTIONS

Decide whether you want to attempt these at the start of the examination or at the end.

Stick to the timing principle of 1.8 minutes per mark. This means that the 15 OT questions in section A (30 marks) should take 54 minutes.

No credit for workings will be given in these questions; the answers will either be correct (2 marks) or incorrect (0 marks).

Work steadily. Rushing leads to careless mistakes and questions are designed to include answers that result from careless mistakes.

If you don’t know the answer, eliminate those options you know are incorrect and see if the answer becomes more obvious.

Remember that there is no negative marking for an incorrect answer. After you have eliminated the options that you know to be wrong, if you are still unsure, guess.

SECTION B OT CASE QUESTIONS

There is likely to be a significant amount of information to read through for each case. You should begin by reading the OT questions that relate to the case, so that when you read through the information for the first time, you know what it is that you are required to do.

Each OT question is worth two marks. Therefore you have 18 minutes (1.8 minutes per mark) to answer the five OT questions relating to each case. It is likely that all of the cases will take the same length of time to answer, although some of the OT questions within a case may be quicker than other OT questions within that same case.



Once you have read through the information, you should first answer any of the OT questions that do not require workings and can be quickly answered. You should then attempt the OT questions that require workings utilising the remaining time for that case.

All of the tips for section A are equally applicable to each section B question.

SECTION C CONSTRUCTED RESPONSE (LONG) QUESTIONS

The constructed response questions in section C will require a written response rather than being OT questions. Therefore, different techniques need to be used to score well.

Unless you know exactly how to answer the question, spend some time planning your answer. Stick to the question and tailor your answer to what you are asked. Pay particular attention to the verbs in the question e.g. 'Calculate', 'State', 'Explain'.

If you do not understand what a question is asking, state your assumptions. Even if you do not answer in precisely the way the examining team hoped, you should be given some credit if your assumptions are reasonable.

You should do everything you can to make things easy for the marker. Your answer should:

– have a clear structure

– be concise.

It is better to write a little about a lot of different points than a great deal about one or two points.

Section C Computations:

– It is essential to include all your workings in your answers. Many computational questions require the use of a standard format e.g. income tax computations, corporation tax computations and capital gains.

– Be sure you know these formats thoroughly before the examination and use the layouts that you see in the answers given in this book and in model answers.

– Adopt a logical approach and cross reference workings to the main computation to enable the marker to find them easily. Do not leave a large gap between your answer and the workings.

– You will be presented with a blank spreadsheet. A number of standard spreadsheet functions are available via the menu and tool bar for you to use when responding to the question. It is important to practise answering questions using the CBE software and to familiarise yourself with the CBE functionality, particularly the spreadsheet functions.

Section C Reports, memos and other documents:

– Some questions ask you to present your answer in the form of a report, a memo, a letter or other document.

EXAM TECHNIQUE


ADDITIONAL TIPS

Do not attempt a CBE until you have completed all study material relating to it.

On the ACCA website there is a CBE demonstration. It is ESSENTIAL that you attempt this before your real CBE. You will become familiar with how to move around the CBE screens and the way that questions are formatted, increasing your confidence and speed in the actual examination.

There is an additional constructed response (CR) workspace on the ACCA website which you can use to practice questions from this exam kit in a CBE environment.

Be sure you understand how to use the software before you start the examination. If in doubt, ask the assessment centre staff to explain it to you.

Questions are displayed on the screen and answers are entered using keyboard and mouse.

In addition to multiple choice type questions, CBEs will also contain other types of questions. You need to be sure you know how to answer questions of these types before you sit the examination, through practice. The types of objective test questions you could see in your CBE are as follows:

Question type Description Example exam kit

question

Multiple choice Select one correct answer from a choice of four

2

Multiple response Select a given number of correct answers

31

Fill in the blank Input a numerical answer 3

Drag and drop Match chosen answer to chosen areas of the screen

145

Drop down list Select one correct answer from a drop down list

156

Hot area Select one or more areas in an image as a correct answer (e.g. true or false)

1


EXAM SPECIFIC INFORMATION

THE EXAM

FORMAT OF THE EXAM The exam will be in THREE sections, and will be predominantly computational.

Section A will consist of 15 objective test questions, each worth 2 marks.

Section B will consist of three 10 mark questions which each comprise five objective test questions of 2 marks each.

Section C will consist of one 10 mark question and two 15 mark questions.

All questions are compulsory.

Number of marks Section A: 15 objective test questions of 2 marks each 30 Section B: Three 10 mark questions covering any area of the syllabus 30 Section C: One 10 mark question covering any area of the syllabus 10 Two 15 mark questions, one focusing on income tax and one on corporation tax 30 ––– Total 100 ––– The CBE will be 3 hours long and students will have up to 10 minutes to familiarise themselves with the CBE system before starting the exam.

Note that:

Section A and section B questions can be drawn from any area of the syllabus.

The two 15 mark section C questions could include a small number of marks in respect of other taxes.

There is no set order for the section C questions. In the specimen exam the 10 mark question appeared before the 15 mark questions, but the examining team could change the order.

PASS MARK

The pass mark for all ACCA Qualification examinations is 50%.



SUGGESTED APPROACH TO THIS EXAM

Decide in advance whether you will attempt section A, B or C first so that you are not wasting time on this decision in the real examination.

This is a personal choice and you have time on the revision phase to try out different approaches, for example, if you sit mock examinations.

A common approach is to tackle the short section A questions first, so they are out of the way, then section B and finally the longer constructed response questions in section C.

Others may prefer to tackle the longer section B and C questions first, as they will take longer than the individual questions in section A.

You should complete at least one mock examination under examination conditions to try out your chosen approach in advance.

Whatever your approach though, you must make sure that you leave enough time to attempt all questions fully and be very strict with yourself in timing each question.

READING AND PLANNING

Reading and planning are crucial elements of your examination technique and it is important that you allocate time in the examination to this. Spend time reading the questions carefully, particularly in sections B and C, where questions will be based on longer scenarios than the 2 mark OTs in section A.

Whatever happens, always keep your eye on the clock and do not over run on any part of any question!

As all questions are compulsory, there are no decisions to be made about choice of questions, other than in which order you would like to tackle them.

Therefore, in relation to TX we recommend that you take the following approach to planning your answers:

Note down the amount of time you should spend on each part of each question.

Decide the order in which you think you will attempt each question in sections B and C:

A common approach is to tackle the question you think is the easiest and you are most comfortable with first.

Others may prefer to tackle the longest questions first, or conversely leave them to the last.

It is usual however for students to tackle their least favourite topic and/or the most difficult question in their opinion last.

Whatever your approach, you must make sure that you leave enough time to attempt all questions fully and be very strict with yourself in timing each question.

For each section C question in turn, read the requirements and then the detail of the question carefully.

Always read the requirement first as this enables you to focus on the detail of the question with the specific task in mind.

For section C computational questions:

Note key numbers/information and key words in the question, scribble notes to yourself to remember key points in your answer.

Jot down pro formas required if applicable.

EXAM SPECIF IC INFORMATION


For section C written questions:

Take notice of the format required (e.g. letter, memo, notes) and identify the recipient of the answer. You need to do this to judge the level of financial sophistication required in your answer and whether the use of a formal reply or informal bullet points would be satisfactory.

Plan your beginning, middle and end and the key areas to be addressed and your use of titles and sub‐titles to enhance your answer.

For all section C questions:

Spot the easy marks to be gained in a question and parts which can be performed independently of the rest of the question. For example, writing down due dates of payment of tax, due dates for making elections, laying out basic pro formas correctly.

Make sure that you do these parts first when you tackle the question.

As mentioned in the ‘Exam Technique’ section earlier, you should decide in advance of the real examination whether to attempt section A, B or C first.

Always keep your eye on the clock and do not over run on any part of any question!

DETAILED SYLLABUS

The detailed syllabus and study guide written by the ACCA can be found at:

www.accaglobal.com/en/student.html


TAX RATES AND ALLOWANCES Tax rates and allowances will be produced in the examination for TX for the June 2020 to March 2021 sittings which will contain the following information.

SUPPLEMENTARY INSTRUCTIONS

1 Calculations and workings need only be made to the nearest £.

2 All apportionments should be made to the nearest month.

3 All workings should be shown in Section C.

INCOME TAX

Normal rates

Dividend

rates

Basic rate £1 – £37,500 20% 7.5%

Higher rate £37,501 – £150,000 40% 32.5%

Additional rate £150,001 and over 45% 38.1%

Savings income nil rate band – Basic rate taxpayers £1,000

– Higher rate taxpayers £500

Dividend nil rate band £2,000

A starting rate of 0% applies to savings income where it falls within the first £5,000 of taxable income.

Personal allowance

Personal allowance £12,500

Transferable amount £1,250

Income limit £100,000

Where adjusted net income is £125,000 or more, the personal allowance is reduced to zero

Residence status

Days in UK Previously resident Not previously resident

Less than 16 Automatically not resident Automatically not resident

16 to 45 Resident if 4 UK ties (or more) Automatically not resident

46 to 90 Resident if 3 UK ties (or more) Resident if 4 UK ties

91 to 120 Resident if 2 UK ties (or more) Resident if 3 UK ties (or more)

121 to 182 Resident if 1 UK tie (or more) Resident if 2 UK ties (or more)

183 or more Automatically resident Automatically resident



Child benefit income tax charge

Where income is between £50,000 and £60,000, the charge is 1% of the amount of child benefit received for every £100 of income over £50,000.

Car benefit percentage

The relevant base level of CO2 emissions is 95 grams per kilometre.

The percentage rates applying to petrol cars (and diesel cars meeting the RDE2 standard) with CO2

emissions up to this level are:

50 grams per kilometre or less 16% 51 grams to 75 grams per kilometre 19% 76 grams to 94 grams per kilometre 22% 95 grams per kilometre 23%

Car fuel benefit

The base figure for calculating the car fuel benefit is £24,100.

Company van benefits

The company van benefit scale charge is £3,430, and the van fuel benefit is £655.

Individual Savings Accounts (ISAs)

The overall investment limit is £20,000.

Property income

Basic rate restriction applies to 75% of finance costs relating to residential properties.

Pension scheme limits

Annual allowance £40,000

Minimum allowance £10,000

Income limit £150,000

The maximum contribution that can qualify for tax relief without any earnings is £3,600.

Approved mileage allowance: cars

Up to 10,000 miles 45p Over 10,000 miles 25p

TAX RATES AND ALLOWANCES


Capital allowances: rates of allowance

Plant and machinery Main pool 18% Special rate pool 6% Motor cars New cars with CO2 emissions up to 50 grams per kilometre 100% CO2 emissions between 51 and 110 grams per kilometre 18% CO2 emissions over 110 grams per kilometre 6% Annual investment allowance Rate of allowance 100% Expenditure limit £1,000,000

Cash basis

Revenue limit £150,000

Cap on income tax reliefs

Unless otherwise restricted, reliefs are capped at the higher of £50,000 or 25% of income.

CORPORATION TAX

Rate of tax – Financial year 2019 19%

– Financial year 2018 19%

– Financial year 2017 19%

Profit threshold £1,500,000

VALUE ADDED TAX

Standard rate 20%

Registration limit £85,000

Deregistration limit £83,000



INHERITANCE TAX: nil rate bands and tax rates

Nil rate band £325,000

Residence nil rate band £150,000

Rate of tax on excess – Lifetime rate 20%

– Death rate 40%

Inheritance tax: taper relief

Years before death

Percentage reduction

More than 3 but less than 4 years 20%




CAPITAL GAINS TAX

Normal rates

Residential property

Lower rate 10% 18%

Higher rate 20% 28%

Annual exempt amount £12,000

Entrepreneurs’ relief – Lifetime limit £10,000,000

– Rate of tax 10%

TAX RATES AND ALLOWANCES


NATIONAL INSURANCE CONTRIBUTIONS

Class 1 Employee £1 – £8,632 per year Nil

£8,633 – £50,000 per year 12%

£50,001 and above per year 2%

Class 1 Employer £1 – £8,632 per year Nil

£8,633 and above per year 13.8%

Employment allowance £3,000

Class 1A 13.8%

Class 2 £3.00 per week

Small profits threshold £6,365

Class 4 £1 – £8,632 per year Nil

£8,633 – £50,000 per year 9%

£50,001 and above per year 2%

RATES OF INTEREST (assumed)

Official rate of interest 2.50%

Rate of interest on underpaid tax 3.25%

Rate of interest on overpaid tax 0.50%

STANDARD PENALTIES FOR ERRORS Taxpayer behaviour Maximum

penalty Minimum penalty – unprompted disclosure

Minimum penalty – prompted disclosure

Deliberate and concealed 100% 30% 50%

Deliberate but not concealed 70% 20% 35%

Careless 30% 0% 15%


TIME LIMITS AND ELECTION DATES

Income tax

Election/claim Time limit For 2019/20

Agree the amount of trading losses to carry forward

4 years from the end of the tax year in which the loss arose

5 April 2024

Current and prior year set‐off of trading losses against total income (and chargeable gains)

12 months from 31 January following the end of the tax year in which the loss arose

31 January 2022

Three year carry back of trading losses in the opening years

12 months from 31 January following the end of the tax year in which the loss arose

31 January 2022

Three year carry back of terminal trading losses in the closing years

4 years from the end of the last tax year of trading

5 April 2024

National Insurance Contributions

Class 1 employee and employer’s – pay days

17 days after the end of each tax month under PAYE system

(14 days if not paid electronically)

22nd of each month

Class 1 A NIC – pay day 22 July following end of tax year

(19 July if not paid electronically)

22 July 2020

Class 2 NICs – pay day Paid under self‐assessment with balancing payment

31 January 2021

Class 4 NICs – pay days Paid under self‐assessment with income tax See self‐assessment

Capital gains tax

Replacement of business asset relief for individuals

(Rollover relief)

4 years from the end of the tax year:

– in which the disposal occurred or

– the replacement asset was acquired

whichever is later

5 April 2024

for 2018/19 sale and 2019/20

acquisition

Holdover relief of gain on the gift of a business asset (Gift relief)

4 years from the end of the tax year in which the disposal occurred

5 April 2024

Entrepreneurs’ relief

12 months from 31 January following the end of the tax year in which the disposal occurred

31 January 2022

Determination of principal private residence

2 years from the acquisition of the second property



Self‐assessment – individuals

Election/claim Time limit For 2019/20

Pay days for income tax and class 4 NIC

1st instalment:

31 January in the tax year

2nd instalment:

31 July following the end of tax year

Balancing payment:

31 January following the end of tax year

31 January 2020

31 July 2020

31 January 2021

Pay day for CGT and class 2 NIC 31 January following the end of tax year 31 January 2021

Filing dates

If notice to file issued by 31 October following end of tax year

If notice to file issued after 31 October following end of tax year

Paper return:

31 October following end of tax year

Electronic return:

31 January following end of tax year

3 months from the date of issue of the notice to file

31 October 2020

31 January 2021

Retention of records

Business records

Personal records

5 years from 31 January following end of the tax year

12 months from 31 January following end of the tax year

31 January 2026

31 January 2022

HMRC right of repair 9 months from date the return was filed

Taxpayer’s right to amend a return

12 months from 31 January following end of the tax year

31 January 2022

Taxpayer’s claim for overpayment relief

4 years from the end of the tax year 5 April 2024

HMRC can open an enquiry 12 months from submission of the return

HMRC can raise a discovery assessment

– No careless or deliberate behaviour

– Tax lost due to careless behaviour

– Tax lost due to deliberate behaviour

4 years from the end of the tax year



5 April 2024

5 April 2026

5 April 2040

Taxpayer’s right of appeal against an assessment

30 days from the assessment

– appeal in writing

TIME LIMITS AND ELECTIONS DATES


Corporation tax

Election/claim Time limit

Replacement of business asset relief for companies (Rollover relief)

4 years from the end of the chargeable accounting period:

– in which the disposal occurred or

– the replacement asset was acquired

whichever is later

Offset trading losses brought forward against total profits (income and gains)

2 years from the end of the chargeable accounting period in which the loss is relieved

Current year set‐off of trading losses against total profits (income and gains), and

12 month carry back of trading losses against total profits (income and gains)

2 years from the end of the chargeable accounting period in which the loss arose

Surrender of trading losses to other group companies (Group relief)

2 years after the claimant company’s chargeable accounting period

Election for transfer of capital gain or loss to another company within the gains group

2 years from the end of the chargeable accounting period in which the disposal occurred by the company actually making the disposal

Self‐assessment – companies


Pay day for small and medium companies 9 months and one day after the end of the chargeable accounting period

Pay day for large companies Instalments due on 14th day of:

– Seventh, tenth, thirteenth, and sixteenth month after the start of the chargeable accounting period

Filing dates Later of:

– 12 months from the end of the chargeable accounting period

– 3 months from the issue of a notice to deliver a corporation tax return

Company’s claim for overpayment relief 4 years from the end of the chargeable accounting period

HMRC can open an enquiry 12 months from the actual submission of the return

Retention of records 6 years from the end of the chargeable accounting period



Value added tax


Compulsory registration

Historic test:

– Notify HMRC

– Charge VAT Future test:

– Notify HMRC

– Charge VAT

30 days from end of the month in which the threshold was exceeded

First day of second month after the month when taxable supplies exceeded the threshold

30 days from the date it is anticipated that the threshold will be exceeded

The date it is anticipated that the threshold will be exceeded (i.e. the beginning of the 30 day period)

Compulsory deregistration Notify HMRC 30 days from cessation

Filing of VAT return and payment of VAT One month and seven days after the end of the return period

KAPLAN PUBLISHING 1

Section 1

PRACTICE INCOME TAX AND NATIONAL INSURANCE QUESTIONS

PRACTICE SECTION A OBJECTIVE TEST QUESTIONS

INCOME TAX BASICS AND EMPLOYMENT INCOME

1 Said has made a number of investments during the tax year.

Tick the appropriate box to show which of the following investments will generate taxable income and which will generate exempt income.

Taxable Exempt

£400 in shares in the company he works for

£1,000 in an Individual Savings Account

£800 in a NS&I investment account

£500 purchasing a NS&I certificate

2 Specimen exam June 2015 OT question

Martina is self‐employed, and for the year ended 5 April 2020 her trading profit was £111,900. During the tax year 2019/20, Martina made a gift aid donation of £800 (gross) to a national charity.

What amount of personal allowance will Martina be entitled to for the tax year 2019/20?

A £12,500

B £6,950

C £6,550

D £600

TX–UK: TAXATION (FA2019)

2 KAPLAN PUBLISHINGH

3 Fiona is a sole trader. During the tax year 2019/20 she had taxable trading income of £106,800 and received dividend income of £1,500. Fiona made a gift aid donation of £2,000 (gross) during the tax year 2019/20.

What amount of personal allowance is Fiona entitled to for the tax year 2019/20?

4 Genna and Wayne are a married couple. In the tax year 2019/20 Genna had a salary of £5,000 and Wayne had property income of £40,650. They have made an election to transfer the fixed amount of personal allowance from Genna to Wayne.

What is Wayne’s income tax liability for the tax year 2019/20?

A £4,380

B £4,130

C £5,380

D £5,880

5 Tick the appropriate box to show which of the following items of expenditure are deductible in the calculation of an individual’s taxable income.

Deductible Not deductible

A contribution into a personal pension scheme

A charitable gift aid donation

A contribution into an employer’s HM Revenue and Customs registered occupational pension scheme

A charitable donation made under the payroll deduction scheme

6 June 2015 OT question

For the tax year 2019/20, Chi has a salary of £53,000. She received child benefit of £1,789 during this tax year.

What is Chi’s child benefit income tax charge for the tax year 2019/20?

A £1,789

B £0

C £1,252

D £536

£

PRACTICE INCOME TAX AND NATIONAL INSURANCE QUESTIONS : SECTION 1

KAPLAN PUBLISHING 3

7 Ifram has been employed for many years and has also recently become a partner in a partnership. He is in the process of completing his tax return and has asked your advice regarding the interest payments he has made.

Identify, by ticking the appropriate box, whether his interest payments represent qualifying interest and are deductible from his total income or are not qualifying.

Qualifying interest Not qualifying

Interest paid on a loan he incurred to purchase a laptop for use in his employment

Interest paid on the mortgage for his principal private residence

Interest paid on an amount he borrowed to finance the acquisition of 2,000 shares in a quoted company

Interest paid on a loan he took to invest capital in a partnership in order to become a partner

8 June 2015 OT question

Samuel is planning to leave the UK to live overseas, having always previously been resident in the UK. He will not automatically be treated as either resident in the UK or not resident in the UK. Samuel has several ties with the UK and will need to visit the UK for 60 days each tax year. However, he wants to be not resident after he leaves the UK.

For the first two tax years after leaving the UK, what is the maximum number of ties which Samuel could keep with the UK without being treated as resident in the UK?

A One

B Four

C Two

D Three

9 Bao spent 37 days travelling in the UK during the tax year 2019/20. He has never been resident in the UK prior to the tax year 2019/20.

Minh arrived in the UK from Vietnam on 10 November 2019 to work full time in the UK. Minh did not work full‐time in Vietnam before arriving in the UK.

Identify, by ticking the appropriate box, who is treated as UK resident in the tax year 2019/20.

Resident Not resident

Bao

Min

acca applied skills

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