See also ACCA P5 Flashcards: Set 1 | Set 2 | Set 3 | Set 4
In what circumstances will an Annual Allowance (AA) Charge arise on a personal taxpayer
Where tax relieved contributions are paid in excess of the AA limit (including any brought forward unused allowances), then there will be an AA charge. This charge is subject to income tax at a person’s marginal rate(s).
What categories of NIC are suffered by employers
Class 1 Employer / Secondary contributions and Class 1A contributions
What categories of NIC are suffered by an employee
Class 1 Employee / Primary contributions
What categories of NIC are payable by the self employed
Class 2 and Class 4 NIC
If an employee is provided by an employer with the use of an asset for which no specific rule already applies (like the specific rules for the use of a car or van) then what generic rule is applied to determine the assessable benefit
20% × market value of the asset when first provided for the private use of an employee
What reduction is made to the assessable fuel benefit if the employee contributes towards the cost of fuel for private use.
No reduction is made if the employee contributes towards the cost of fuel for private use. If an employee fully reimburses the employer for all private mileage then no assessable benefit will arise
What information about a car is needed to be able to determine the assessable benefit on the employee when the car is provided to them by the employer
In computing the assessable benefit for each car it is necessary to know the level of CO2 emissions, if any, whether the car is petrol or diesel powered, the electric range of a hybrid car and the list price of the car.
What is job related accommodation
Where the accommodation is necessary for the proper performance of the employee’s duties (e.g. a caretaker); or
It is for the better performance of the employee’s duties and (for that type of employment) it is customary for employers to provide living accommodation (e.g. hotel-worker); or
Where there is a special threat to the employee’s security and he resides in the accommodation as part of special security arrangements
If an employee has the use of job related accommodation what assessable benefit arises in relation to the property
There is no taxable benefit if the accommodation is job-related
How should each partner’s share of adjusted trading profit then be assessed on the partners.
If a partner is a continuing partner then the normal CYB of assessment will apply.
If a new partner joins the partnership then the opening years bases of assessment will apply for that partner using the date the partner joined the partnership as his / her start date.
If a partner leaves the partnership then the closing years bases of assessment will apply for that partner using the date the partner leaves the partnership as his / her cessation date.
How should the adjusted trading profit or loss of a partnership be divided between the partners of a partnership.
According to the profit sharing agreement in force during the accounting period in which the trading profit or loss was made.
An unincorporated trader has always been profitable and prepared accounts to 31 December in each year, but for the accounting year ended 31 December 2022 incurred an adjusted trading loss of £30,000. Explain the tax reliefs available to the trader in relation to the loss sustained
Set off the loss against the total income of the current tax year (2022/23), and or the preceding tax year (2021/22) – no partial claims allowed.
If a claim has firstly been made against the total income of a tax year and some loss still remains, then for that tax year a claim may also be made against the net gains of that tax year
Any loss not utilised in the reliefs above will be carried forward to set off against the next available future trading profits of the same trade.
Describe what capital allowances would be available if an unincorporated trader commenced trading and bought 2 cars in the opening accounting period of 9 months, one to be used by an employee of the business and the other to be used by the business owner with both cars having a mix of business and private use
Depending on the CO2 emissions of the car used by the employee, it will be allocated to either the main pool or special rate pool and a WDA of either 18% pa or 6% pa will be available – as these allowances are per annum the annual figure will be time apportioned to 9/12 of the annual amount irrespective of the date within the period when it was purchased.
The car purchased for the business owner will have its own separate CA calculation with a WDA computed as above based on the CO2 emissions. The claim will then be limited to the level of business use.
Describe what tax relief would be available if a trader paid a premium when granted an 11 year lease on business premises.
An annual deduction against trading income would be available in relation the premium paid, computed as the property income assessment on the lessor divided by the number of years of the lease. The rental payable in each accounting period would also be an allowable deduction against trading income.
In what circumstances would the election to transfer the transferrable amount of the PA be worthwhile and when must the election be made
The election is only likely to be made when one spouse is a non taxpayer and has an amount of unused PA that would otherwise be wasted and the other spouse is a basic rate taxpayer.
The election must be made within 4 years of the end of the tax year to which it should apply though if made within the tax year concerned the election will remain in force for future years until it is either withdrawn or the conditions are not met.
Explain how the transferrable amount of the PA of £1,260, given in the Tax Rates and Allowances information provided by the examiner applies and the circumstances in which it is available
An election may be made to transfer a fixed amount of £1,260 of the PA to a spouse or civil partner and is only available when both taxpayers are either just basic rate taxpayers or non taxpayers.
The relief is not given as an increase in the PA of the transferee but as a tax credit to be deducted in deriving the Tax Liability of the transferee taxpayer and is taken at the basic rate of tax 20% – for 2021/22, computed as £1,260 x 20% = £252.
This amount can only reduce the tax liability, it cannot create a repayment.
What conditions must be satisfied for a property to be treated as a furnished holiday letting
The lettings must be of UK or European Economic Area furnished accommodation made on a commercial basis with a view to the realisation of profit. In addition the following conditions must also be satisfied:
(a) The accommodation must be available to let for at least 210 days in the tax year.
(b) The accommodation must actually be let for at least 105 days in the year
(c) No one person occupies the property for more than 31 consecutive days. If one or more persons do occupy the property for more than 31 consecutive days then these periods of long letting must not exceed 155 days in the year.
What is the tax treatment of mortgage (loan) interest paid by a taxpayer on a let property
There is no tax relief for the interest payments against property income. Tax relief is instead given as a tax credit / reduction taken at the 20% basic rate of tax in computing the Tax Liability of the taxpayer – hence a finance expense charge of £3,000 in the 2021/22 tax year will reduce the Tax Liability by £600 (20% x £3,000)
If a husband and wife jointly own a property that is let out, how is the net property income treated on the income tax computations of the spouses
The 50/50 rule applies and the net property income is split equally between the computations of the spouses. A joint election may however be made by the spouses to split the income according to the actual ownership of the property.
Are pension contributions paid by an individual treated the same way for tax purposes as gift aid payments
Only personal pension contributions are treated the same way as gift aid payments. Payments into an occupational Pension scheme are deducted in computing the amount of employment income to include in the employment income assessment on the Income Tax computation.
What is the tax treatment of a gift aid payment in preparing the Income Tax computation
A gift aid payment is not included on the Income Tax computation of the taxpayer, but the gross amount of any gift aid payments made in the tax year are deducted in deriving the adjusted net income of the taxpayer and will also serve to extend the basic rate and higher rate bands of tax in the calculation of the Tax Liability of the taxpayer.
Why is ANI computed
If ANI exceeds £100,000 then the PA of the taxpayer is reduced by 50% of the excess, such that when ANI exceeds £125,140 the PA is reduced to nil.
How do you calculate the adjusted net income (ANI) of the taxpayer
It is the Net Income of the taxpayer from the Income Tax computation reduced by the gross amount of both personal pension contributions and gift aid payments made by the taxpayer.
What is the difference between Tax Liability and Tax Payable
Income tax deducted under the PAYE system is deducted from Tax Liability to derive Tax Payable
In what order are the categories of Taxable Income charged to Income Tax
Non Savings Income, followed by Savings Income and then Dividend Income
What types of interest income are exempt from Income Tax
Interest income from National Savings & Investment certificates and from an ISA
In what order are the deductions from both Total and Net Income deducted
The deductions should be made in the following order – from Non Savings income, Savings income and finally Dividend income
What is the difference between Net Income and Taxable Income
The Personal Allowance is deducted from Net Income to derive the figure of Taxable Income.
What deductions are made from Total Income to compute Net Income
Allowable loan interest payments and certain loss reliefs
What basis of assessment applies to dividend income.
Actual amounts received in the tax year.
What basis of assessment applies to interest income
Actual amounts received in the tax year.
What is the normal basis of assessment to apply to property income and what option is available to the taxpayer and when is that option compulsory
A cash basis – a taxpayer may choose to use the accruals basis but must use the accruals basis where property income receipts exceed £150,000.
What is the basis of assessment for a continuing source of trading income
Current Year Basis (CYB) where the adjusted trading profit of the business to be assessed in any tax year is that of the Accounting Year ended in the tax year of assessment.
Note – the bases of assessment that apply in the opening years of a new business and the closing years of an old business ceasing to trade must also be learned.
What is the basis of assessment for employment income
Employment Income is assessed on the basis of actual amounts received, with the received date being taken as the earlier of the date when the taxpayer became entitled to the income or the date of actual receipt.
Name the sources of income included in each category
Non Savings Income is made up of Employment Income, Trading Income, Pensions and Property Income.
Savings income is interest income and dividend income is of course dividends received from companies.
What are the 3 different categories of Total Income included on the Income Tax Computation and what is the purpose of this analysis?
Non Savings Income, Savings Income and Dividend Income. The purpose of this analysis is to know the correct rate(s) of tax to apply to each part of the Taxable Income of the taxpayer.
binachansaliwa39 says
This is fantamarvelogorgeous flashback and thanks for the idea. I can,t wait to see the paper on 7th sep.
landmak15 says
Helped jog my memory! Time for the paper!
sunda66 says
this is really good
maggs says
Extremely helpful for memory refreshing, they are great .
fchieza says
nice
severin says
P7 flash cards please
togunrole says
The flash cards are a great way to help acquired knowledge stick. Pls can we have same for P7.
Nadine says
Awesome….. Good job OT
shahid506 says
This is fantastic stuff. Hard work and a good time spend by the opentution
sharee4real says
Thank You Opentuition. God Bless. I wish everyone the best today.
evalstngj says
Fantastic!!! Wonder what i would have done without OT!
sadaf86 says
really helpfull.. good job open tuition
dgoldsmith says
I found these flashcards really helpful.
Thanks
penshik says
Thanks, this is good.
alabid says
its great which is very helpful for students who are appering in examine.
okikijo says
the flashcards are super owesome. thanks to the person(s) behind the idea. they are cool for brainstorming.
dinox says
good
amusheche says
good stuff
tlloyd2007 says
can we please have the P7 flashcards as well
tumy says
This flashcards are so great, what about the ones for P7?