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    UK Finance Act 2015

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    15 views19 pages

    Technical Article - Finance Act 2015

    Uploaded by

    Anthony Dunkley
    UK Finance Act 2015

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    © All Rights Reserved
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    anan016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global tivities Help & support i Giot Think Ahead Search| myacca “The global body for professional accountanis About us Contactus Workforus Technical Homa > Shudents > Exam rsousces > Fundamantals evel > F Taxation > Technica mtisies FINANCE ACT 2015 bogoo RELATED LINKS Finance Act 2014 article Student Accountant hub Relevant to F6 (UK) for the September 2016, December 2016 and March 2017 exam sessions “This atc looks atthe changes made by the Finance Act 2015 and the Finance (No 2) Act 2015 (which isthe legislaton as it relatos to the tax year 2015-16) and should be read by those of you who are taking 6 (UK) in an exam inthe period 1 September 201 to 31 March 2017. The aim af the article is to ‘summarise the changes made by these two Finance Acts and to look atthe more important changes in greater detail “The article also includes detals of legislation that was enacted prior to 31 July 2015, but has only come: into effect from 6 April 2015, The article dovs not refer to any amondments tothe F6 (UK) syllabus ‘coverage unless they directly relate to legislative changes and candidates should therefore consult the FS (Uk Syllabus and Study Guide forthe period 1 September 2016 to 31 March 2017 for tals of such ‘amendments, Please note that if you ae sting F6 (UK) in the period 1 Apr 2016 fo 30 June 2016, you wil be ‘examined on the Finance Act 2014, whic isthe legislation as it relates to the tax year 2014-15. Therefore, this atte isnot relevant to you, and you should instead refer tothe Finance Act 2014 article published on the ACCA website (see Related links) INCOME TAX RATES OF INCOME TAX “The rates of income tax forthe tax year 2015-16 are as follows: Normal rats Basic ate £3 0 691,705 20% 10% Higher rate £39,788 0 £160,000 40% 25% Adational rate £150,001 and over 45% a78% For the tax year 2015-16, the starting rate has been reduced from 10% to 0%. This rate applies to ‘savings income where it falls within the frst £5,000 of taxable income. If non-savings income exceeds £25,000, then th stating rate of 0% for savings does not apply. n this case, savings income is taxed at the basic rate of 20% if it falls below the higher rate thrashold of £91,725, atthe higher rate of 40% iit falls betwoen the higher rate threshold o £31,785 and the adkitionalratethrashold of £150,000, and at the additional ate of 45% iit exceeds the additonal rate threshold of £150,000. eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm ne an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global PERSONAL ALLOWANCE “The personal allowance forthe tax year 2015-16 is £10,600. This is gradually reduced to nil where a person's adjusted net income exceeds £100,000. Adusted net income is net income (total income less deductions for loss raf and interest payments) less the gross ‘amount f personal pension contributions and gif aid donations. The personal allowance is reduced by £1 for every £2 by which a person's adjusted net income exceeds £100,000. Therefore, a person with adjusted net income of £121,200 or more is not entitled to any 10,600). Whore @ person has an adjusted not income of between £100,000 and £121,200, then the effective marginal rate of income tax is 60%. This isthe highor rate of 40% on income plus an additional 20% as a result ofthe withdrawal ofthe personal allowance. In this situation, It may be beneftal to make adalional personal pension contbutions or gf acl donations, personal alowance ((121,200 - 100,002 The higher personal allowance for those born before 6 April 1938 Is no longer examinable. Therefore {questions wil no longer provide the taxpayer's date of birt or age unless otherwise relevant to the question. EXAMPLE 1 For he tax year 2015-16, Ingrid has a salar of £37,600, bulding society interest of £800 (net) and dividends of £9,000 (net). Her income tax lability is Employment income Bulking society interest (900 x 100180 Dividends 2,000 x 10090) Personal llonance "28,000 at 20% 3,785 a 10% 6.215 822.5% Tex tty EXAMPLE 2 For the tax year 2015-16, June has a vading profit of £184,000. Her income tax abil is: Trading pot Personal allowance ‘31,785 at 20% 316,218 a 40% 234,600 at 45% “ex laity tnipsiwwrw accagobal comigbler/tuertiexam-suppert-resourcesundamertals-exame-stuy-tesourcesiétecinical-arilesiinarce-ac-2015 Nm 7.600 1.000 10000 (10,600) 5.600 2020 7998 Ni eas7 27266 16.300 saa a9 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Stadonts |ACCA Global No personal allowance is available because Juno's adjusted not income of £184,000 exceeds £121,200. EXAMPLE 3 For the tax yoar 2015-16, Trevor has a trading proft of £132,000, bullaing sacety Interest of £3,200 (net) and dividends of £34,200 (net). The income tax payable by Trevor: “Trang prot 132,000 Bulking society interest 4.000 (6.200 x to080) Dividends 9,000 (4,200 x 100/90) Personal allowance Ni "3,785 at 20% 6.67 504,215 at 40% 1.606 14600 at 325% 4.550, 24,000 at 37.5% 9.000 “Tax laity 61.590 Dividends (23,000 at 10%) 2.800) Bling society (4.000 at 20%) (200) 58.009 The 10% tax crest on dividend income is avaiable regardless ofthe rate of tax payable EXAMPLE 4 For the tax year 2015-16, May has a trading proft of £188,000. During the year, May made net personal pension contributions of £32,000 and a net gi aid donation of £9,600. Her income tx lability is Trang profit 159,000 Personal allowance 7.100) Taxable income 151,900 183,785 at 20%, 18.757 “ax fabity 46,003 eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm a9 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global oss personel pension contibuons are £40,000 (32,000 x 10080) ad he goss ala donations £12,000, (21500 x ro0e0). Mays nouses ret income inerefore £107,000 (189,000 -40,000- 12,000, <0 her persona allowance of 10,600, feraduced to 7109 (90600 3300 (167 609-100 000)2). ‘he basic and highs rate ax bands ae extanded o £85,785 (81785 + 40,000 + 12,000 and £202,000 (150,000 + 40,00 + 12000) respecte EXAMPLE 5 For the tax year 2015-16, All has pension income of £12,000 and bank interest of £4,600 (net). His income tax ropayable is: Pension income 12000 Bank interest 5.760 (4.500 x 10080) s1780 Personal allowance 10,600) “Texatle income 7480 "400 at 20% 200 3.800 at ° 2.150 at 20% 490 ‘ex laity no “Tex suferd at source Bank intrest 750 st 20%) (9.150) Income tax repayable (0) Nonsavings income E1400 (12000 ~ 10,800), 0 £3,600 (000 - 1400 ofthe savingsincome Benes fom ‘TRANSFERABLE AMOUNT OF PERSONAL ALLOWANCE Itis now possible to elect o transfer a feed amount ofthe personal allowance toa spouse or registered ul partner. ‘The transferable amount (also known as the marriage allowance or marriage tax allowance) is £1,060 for the tax year 2015-16, and in subsequent years willbe 10% of the actual personal allowance, The benefit is vento the recipient as a ceducton from thei income tax lability atthe basic rate of ax rather than as ‘an actual increase to ther own personal allowance. The tax reduction is therefore £212 (1,060 at 20%). If the recipient’ tax labily is less than £212, thon the tax reduction is restricted so that the recipient's tax lablity isnot reduced below zero ‘A transfer is not permits f ether spouse or ell partners a higher or adtional rate taxpayer, and a ‘transfer wil generally anly be benefcal where one spouse or cul parner is not making full use of their personal allowance. Ian election is made before the end ofthe tax year 201516, then it will main in force for future tax years unless the election is withdrawn or the conditions for the tax reduction are nat met. Alleratvely, an ‘lection in respect of the tax year 2015-16 can be made before 5 April 2020 (four years after the en of the tax yoar, but inthis ease it il only apply forthe tax year 2015-16, “The transferable amount of personal allowance wil be given in the tax rates and allowances section of the eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm a9 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global EXAMPLE 6 Paul and Ral are a marred couple. For the tax year 2015-16, Ral has a salary of £35,000 and Paul has a trading profit of £7,000, They have made an election to ansfer the fixed amount af personal allowance from Paulto Ral Pau’ porsonal alowanco is reduced to £8,540 (10,600 - 1,060), and bocause tis is highor than his trading profit of £7,000 he does not have any tax abit. Rais income tax lability is: Employment income 36,000 Persona! allowance (10,600) ‘Texatle income 2.400 Income tax: 24,400 at 20% 4.200 Personal llonance tax reduetion (1,050 at (era) 20%) “ex atity 4.558 EMPLOYMENT INCOME, ‘Company car benefit For the tax yoar 2015-16, the base level of CO: emissions used to calulate company car benefits is unchanged at 6 grams per klometre. However, the base percentage has been increased from 12% to 1% and the maximum percentage is now 7% instead of 35%, There are lower rates for company motor ‘ars with low CO> emissions: Fora mor ear wit @ COs emission al ofbetwoen 51 and 75 grams perklomave, ie percentage lS. Fora mores wit @ CO: emiseion at ofbeteen 76 and 94 grams perklomede te percentage s 13%. “The percentage rates (including the lower rates of 5%, 9% and 13%) are increased by 3% for diesel cars, bt not beyond the maximum percentage rat of 37% “The company car benefitinformation which wil be given in the tax rates and allowances section of the ‘exam for exams in the period 1 September 2016 to 31 March 2017 is ar benefit percentage “The relevant base level of CO: emissions is 85 grams per klometre “The percentage rates applying to petrol cas wih COz emissions upto this level ar: 50 grams per klometre or ess 5% 51 grams to 75 grams per kilometre om 76 grams to 8 grams per kilometre 13% 95 grams por kilometre 18% EXAMPLE 7 During the tax year 2015-18, Fashionable ple provided the following employees with compary motor Amanda was provided with @ new petrol pavierad company car troughout the tax year 2015-16, The rotor car has alist price of £12,200 and an offcial CO> emission rate of 84 grams per kilometre. Betty was provided with a new petrol powered company car trroughout the tax year 2015-16, The motor ‘car has alist price of £16,400 and an official CO> emission ral of 109 grams per klometre eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm 19 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global Charles was provided with anew diesel powered company car on 6 August 2075. The motor car has @ ist price of £13,500 and an official CO: emission rate of 137 grams per kilometre Diana was provided with a new patrol powered company car throughout the tax year 2015-16. The motor ‘car has Ist price of £84,600 and an oficial CO2 emission rate of 228 grams per klometre. Diana paid Fashionable ple £1,200 during the tax year 2015-16 forthe use ofthe motor ca. ‘Amanda “The CO2 emissions are between 76 grams and 84 grams per klomette so the relevant percentage is. 13%, The motorcar was avallable throughout 2016-16, so the benefit ls £1,586 (12,200 x 13%) Betty “The CO2 emissions are above the base level Agure of 85 grams per klometre, The CO2 emissions figure ‘of 109 is rounded down to 105 so that tis cvsilo by five. The minimum percentage of 14%. is increased in 19 steps for each fe grams per klometre above the base level, so the relevant percentage is 16% (1435 + 2% ((105 ~ 95)5)), The motorcar was available throughout 2015-16, so the benefits £2,624 (16,400 x 16%), charles “The CO» emissions are above the base level gure of 95 grams per kilometre, The relevant percentage is 25% (14% + 83 ((135 ~ 95)/5) + 3% (charge fora diesel car). The motor car was only avalable fr eight ‘months of 2015-16, so the benefits £2,250 (13,500 x 25% x 8/12) Diana “The CO» emissions are above the base level igure of 95 grams per kilometre. The relevant percentage is 40% (14% + 26% ((225 - 95)5), but this fs restricted to the maximum of 37%. The motorcar was available tiroughout 2015-18, so the benef is £30,102 (31,302 (84,600 x 37%) - 1,200}. The Contribution by Diana towards the use ofthe motorcar reduces the benefit, ‘Company van benefit “The annual ecale charge used to calculate the beneft where an employee is provided with a company vvan has been increased from £3,000 to £3,150. ‘Company car fuel benefit “The fuel benefits calculated as a percentage ofa base figure which is announced each year. For the tax year 2015-16, the base figure has been increases from £21,700 to £22,100, The percentage used inthe calculation is exactly the same as thal used for calculating the related ‘company car benefit EXAMPLE 8 Continuing wih Example 7. ‘Amanda was provided with fuel fr private use between 6 Apri 2015 and § Apri 2016. Betty was provided with uel for privat use between & April 2015 and 31 December 2015. Charles was provided with fuel for private use between 6 August 2015 and 5 Apri 2016. Diana was provided with fel or private use belwoen 6 Apri 2016 and 6 Apri 2016. She paid Fashionable ple £600 during the tax year 2015-16 towards he cost of private fue, although the actual ‘cost of tis fuel was £1,000. ‘Amanda “The motorcar was avaliable throughout 2015-16, so the benefit is £2,873 (22,100 x 13%). Betty Fuel was only avalabl fo rine months of 2015-16, 60 the fuel benef is £2,652 (22,100 x 16% x 9/12). Charles ‘The motorcar was only avaliable for eight months of 2015-16, so the fuel benoits £3,683 (22,100 x 25% x8/12), Diana “The motorcar was avallable throughout 2015-16, so the benefits £8,177 (22,100 x 37%). There is no reduction for the contribution made by Diana since the cost af private fuel was nat fully reimbursed. ‘Company van fuel benefit “The fuel benefit where private fue is provided fora company van has been increased from £581 to £594, Beneficial loans ‘The limit below which a beneficial loan to an employae is ignared has been increased from £5,000 to £10,000. There is no taxable benefit ifthe loan does not exceed the lit of £10,000 at anyime during the eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm arg an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global tax year Modical treatment ‘An annual £500 exemption per employes has been introduced where an employer pays for mecical ‘restment. The exemption applies where medical treatment is provided to an employee to assist them to return to work after a period of absence due to i-health or injury. Official rate of interest The offical rate of interests used when calculating the taxable benef arsing from a beneficial laan or {rom the provision of ving accommodation costing in excess of £75,000, For exams in the period 1 September 2016 to 31 March 2017 the actual offal rate of interest of 3% for the tax yoar 2015-16 willbe used. AYE - Real time reporting late filing penalty With coal ime reporting, employers submit income tax and NIC information to HM Revenue and Customs electronically everytime emplayees are aid, Penalties are now imposed on a monthly basis if these. ‘submissions are made las. There is no penalty forthe frst month in a tax year for which submissions are late, but thereafter a monthly late fling penalty of between £100 and £400 is charged depending on the number of employees. An additonal penalty of §% ofthe tax and NIC due can be charged where a ‘submission fs more than three months late, HM Revenue and Customs permits a three-day grace period before imposing a penalty, but this aspect Is not examinable CAPITAL ALLOWANCES ‘Annual investment allowance ‘The current annual investment allowance (AIA) limit of £500,000 wil expre on 31 December 2015 and be replaced by arate of £200,000 fram 1 January 2018, However, for exams in the period + September 2016 to 31 March 2077, i will be assumed thatthe limit of £500,000 continues to apply. This willbe the ‘case regardless ofthe period covered by an exam question, so, for example, the AIA lit forthe year ended 31 March 2016 wil be £500,000. The AIA provides an allowance of 100% forthe first £500,000 af expenditure on plant and machinery in a ‘12 month peri. Any expenetture in excess ofthe £500,000 lit qualifies for wrtng down allowances as normal. The AIA apalies to all expenditure on plant and machinery wth the exception of motor cars. The £500,000 limits proportionally recucad or increased where a period of accaunt is shorter or longer than +12 months. For exemple, forthe three-month period ended 31 March 2016, the AA limit would be ££128,000 (500,000 x 3/12). 100% first year allowance “The 100% frst year allowance for low emission cars is now only available where CO: emissions are 75 ‘rams per klometre or less. Previously, the mit was 85 grams per klomotre. “The capital allowances information which willbe given in the tax rates and allowances section of the exam for exams in the period 1 September 2016 to 31 March 2017 is Rates of allowance Plant and machinery Main poo! 18% Special rate pool % New car with CO> emissions up to 75 gram 100% CO» emissions between 76 and 130 grams per a ‘ome CO» emissions over 130 grams por kilometre 2% eiputwwrw accagobal comigblertuertiexam-suppert- resources undamertal-exams-stiy-tesourcesiGtectnical-arileslinarce-ac-2015 Nl ms an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global Rate of allowance 100% Exper tnt 500,000 Uniess there is private use, motor cars qualifying for wing down allowances at the ate of 18% are included inthe main p00, whilst motor cars qualiying for wring down allowances atthe rate of 8% included inthe special rate pool Motor cars with private use (by a sol trader or pariner) are not pooled, but are kept separate so thatthe private use adjustment can be calculated EXAMPLE 9 Ming prepares accounts to 5 April On 6 April 2015, the tax written dow value of plant and machinery in her main pool was £18,700. “The following transactions took place during the year ended 5 Apri 2016: 8 Ap 2015, Purchased motor ea (1) 15,600 +4 Ap 2015 Purchased motor ea (2) 10,100 12 August 2015 Purchased equipment 18780 2 Soptembor 2015 Purchased motorcar (3) 2.00 19 Noverbor 2015 Purchased motorcar (¢) 18,800 +2 December 2015 ‘Sold motor ca (6.300) Motor cr (1) purchased on & April 2015 has COs emissions of 120 grams per klometre, This motorcar is usec by Ming and 20% ofthe mileage is fr private journeys. Motor car (2) purchased on 14 April 2015 and sald on 12 December 2015 has COs emissions of 155 grams per klometre. Motor car (3) purchased ‘on 2 September 2015 has CO2 emissions of 125 grams per klometre, Motor car (4) purchased on 19 November 2016 has COr emissions of 70 grams per klomete, Ming's captal allowance caim forthe year ended § Apri 2016 i: .WOA brought forward 16,700 ‘Adon qualifying Eauipment I= 100% 518,750 (600,000) 500,000 18.750 other Motor ert 15600 Motor cx) 10,100 Motor tnipsiwwrw accagobal comigbler/tuertiexam-suppert-resourcesundamertals-exame-stuy-tesourcesiétecinical-arilesiinarce-ac-2015 Nm ang an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Stadonts |ACCA Global Proceeds motor (2) (6,300) 63,750 15600 1,800 Won — 10% na7s) 11475 WDA — 10% (2.08) x 20% 2206 Won 0% aa) iu ‘Aiton quatying forFVA Motor car) FYA- 18,900 00% (53,800) 18800 OV canted forward 52.275 some 1886 “otal allowances ror oor ar (1) koptsopaataly because thers sprouse by Ming. This motor cr hat COs omisionsbswoen 76 nd 190 grams per Klomet, ana ertore gus is fring down allowance al xa 98% oar er 2) nas COs emssins ever 150 grams per klomste ai ertore qualifes fr wing down allowances theraie a Even ough ls he only asteln he spacial ale soa, ee sa elancngslowarce onthe disposal otra) as COr omissions botweon 76 and 130 rams permet, and sersforequalfes er wrtng down Motor ar) hes COs emissions of es an 75 grams peril and hesore quale arthe 100% fil ye INDIVIDUAL SAVINGS ACCOUNTS Despite the renaming of incvidual savings accounts (ISAs) as new individual savings accounts (NISAs) last year, the NISA name has ganerally not been used. Therefore, exams from September 2016 going forward wil ever to the ISA name, “The ISA investment int for te tax year 2015-16 has been increased from £15,000 to £15,240. The ££15,240 limit is completely flexible, so a person can invest £15,240 in a cash ISA, or they can invest £215,240 ina stocks and shares ISA, or in any combination ofthe two — such as £10,000 ina cash ISA ‘and £5,240 In a stocks and shares ISA, ‘An additional ISA allowance has been introduced fora surviving spouse or registered civil partner ‘equivalent tothe value of ISAs which were held by their deceased spouse or partner atthe date of death From 1 December 2015, a new help-o-buy ISA isto be invoduced for fs-ime hone auyere. Bath the ‘additional ISA allowance and the helpo-buy ISA are net examinable. NATIONAL INSURANCE CONTRIBUTIONS (NIC) Class 1 and class 1A NIC For the tax year 2015-16, the rates of emplayee dass 1 NIC are unchanged at 12% and 2%6, The rate of 12% is paid on earings between £8,061 per year and £42,885 per year, and the rate of 2% is pald on all ‘earnings over £42,385 per year. ‘The rate of employers class 1 NIC is unchanged at 13.8% and is paid on all earings over £8,112 por year. Note that this iit no longer aligned with the employee limit ‘An exemption from employer's class 1 NIC has been introduced for employees aged under 21. This ‘exemption is not examinablo, ‘The rate of class 1A NIC which employers pay on taxable benefits provided to employees is also Unchanged at 13.8%. Employment allowance “The annual employment alowance fo the tax year 2015-16 is unchanged at £2,000. This can be used by businesses to reduce the amount of employer's class 1 NIC whichis paid to HM Revenue and Customs, eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm a9 anan016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global For example, a business's total employer's lass 1 NIC forth tax year 201S-16 s £4,600, than only £2,600 (4,600 ~ 2,000) willbe paid to HM Revenue and Customs. If total employers class 1 NIC is £2,000 ‘Floss, then the Habit wil be “The class and class 1A NIC information which wil be given in the tax rates and allowances section of the exam for exams inthe period 1 September 2016 to 31 March 2017 is: £1 £8,080 por year Ni £8,061 — £42,985 per your 10% £40,308 and above par year 2% Class 1 1 ~ £8,112 poryoar Ni employer £8,119 and above por year 120% Employment allowance 2000 EXAMPLE 10 Simone Ltd has only one employee who is palé £50,000 per year and was provided with the flowing taxable benefits curing the lax year 2015-16: ee ee aan 4,888 60,000 0,112) 5781 at3.8% Employment allowance (2.000) are Employer's class 1A NIC 13,625 (6.200 + 5,625 + 1,800) 1.280 at 13.8% tnipsiwwrw accagobal comigbler/tuertiexam-suppert-resourcesundamertals-exame-stuy-tesourcesiétecinical-arilesiinarce-ac-2015 Nm si9 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Stadonts |ACCA Global Class 2 NIC For the tax year 2015-16, the rate of class 2 NIC has been increased to £2.80 per week. Class 2 NIC is payable where profs exceed a small profits threshold of £5,965. The profs used to ‘esablsh whether or not the tweshold has been exceeded are now the same as those used for clase 4 NIC purposes, being the taxable profits forthe tax year. Previously, lass 2 NIC was either collected in two instalments or pai on a four-weekly bass by direct, dob. Class 2 NIC ie now payable under the eelkassessment gystem and wil be due on 31 January {allowing the tx year. This is the same due dale as for capital gains tax. Therefore, lass 2 NIC forthe ‘ax yoar 2015-18 willbe payable on 31 January 2017, However, the actual amount af lass 2 NIC i stil based on the numberof weeks of se-employment ‘uring a tax year EXAMPLE 11 Billy commenced self-employment on § October 2015. His trading proft for the period § October 2075 to 5 Apri 2018 is £22,800. Billys class 2 NIC labilty for 2015—16 's £73 (26 wooks x2.80) and this is payable on 31 January 2017. Class 4 NIC. The rates of class 4 NIC are unchanged at 9% and 2%, The rate of 8% ls pad on profits between £8,081 ‘and £42,385, ané the rate of 2% is paid on all profits over £42,385, The class 4 NIC information which willbe given in the tax rates and allowances section of the exam for ‘©xams inthe periad 1 September 2018 to 31 March 2017 i: Class 4 £1 £8,080 por year Ni £8,061 ~ £42,285 per year om £42,308 ane above per yoar 2% EXAMPLE 12 Jimmy is @ sat-employed builder and Jonny is @sol-omployed consultant. Their tracing profs forthe tax ‘year 2018-16 are respectively £25,000 and £50,000. The class 4 NIC lables are: ioumy 16,940 (25,000 8060) st 9% 1925 enny $4325 (2,388 — 8060) at 98, 3089 7.675 (60 000 42.365) a 2% 182 PENSION SCHEMES Annual allowance The annual allowance forthe tax year 2015-16 is unchanged at £40,000 the annual allowance isnot fully used in any tax year, then its possible to cary forward any unused allowance fr up to three years. The carry forward from the tax years 2012-13 and 2013-14 is based on the annual allowance of £50,000 which was applicable to those years, Carry forward is only possible ia person is a member ofa pension scheme fora particular tax year. Therefore, for any year in which a person is nota member of a pension scheme the annual allowance Is ost, eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm se an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global “The pension scheme information which willbe given inthe tax rates and allowances section ofthe exam for exams in the period 1 September 2016 to 31 March 2017 is Pension scheme limit ‘Anna allowance = 2014-18 and 2015-16 40,000 = 2012218 and 20 “4 £50,000 The maximum contribution that can qualty for tax rellef without any earnings s £3,600. EXAMPLE 13 Monica and Nicola have made the folowing gross personal pension contributions during the tax years 2012-13, 2013-4 and 2014-18: © 21-15 22,000 Ni Monica Monica has unused allowances of £8,000 (60,000 — 42,000) fom 2013-14 and £12,000 (40,000 - 28,000) from 2014-16, go with the annual allowance of £40,000 for 2015-16 a total af £60,000 (40,000 + 8,000 + 12,000) is available for 2015-16. She was not a member ofa pansion scheme for 2012-13 60 the annual allowance for that year is lost Nicola Nicola nas unused allowances of £2,000 (50,000 ~ 28,000) from 2013-14 and £40,000 from 2014-18, ‘0 with the annual allowance of £40,000 for 2015-16 a total of £101,000 (40,000 + 21,000 + 40,000) i avaliable for 2015-16. The annual allowance fr 2012-13 i full uiised, but Nicola was a member of a pension scheme for 2014-15 so the annual allowance for that year is avaiable in ful The annual allowance forthe sar 2015-16 is ulised frst, then any unused allowances from earlier, ‘years with those from the earliest year used fist. EXAMPLE 14 Perry has made the following gross personal pension contributions: aint «1,000 2-15 19000 2015-16 49,000 The pension contibution of £48,000 for 2015-16 has used al of Pertys annual allowance of £40,000 for 2015-16 and £8,000 (48,000 — 40,000) ofthe unused allowance of £18,000 (50,000 - 32,000) from 2012-13. Perry therefore has unused allowances of £9,000 (50,000 — 41,000) from 2013-14 and £21,000 (40,000 ~ 19,000) from 2014-15 to carry forward to 2016-17. The remaining unused allowance from 2012-13 cannot be carrie forward to 2016-17 because this is more than tree years ago. [Atthough fax relies avalable on pension contributions up to the amount of earnings for a particular tax year, the annual allowance acs as an effective annual limit, Where tax releved contributions are pad in ‘excess ofthe annual alowance (including any brought forward unused allowances), then there will be an annual allowance charge. This charge Is subject to income tax at a person’s marginal rates. EXAMPLE 15 For the tax year 2015-1, Frank has a trading prof of £210,000 and made gross personal pension eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm wai8 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global ‘contrbutions of £60,000. He does nat have any brought forward unused annual allowances. Frank's income tax habit i Trading prof 210,000 Annual allowance charge 20,000 Laosy 230,000 Personal allonance Ni Taxable income 230,000 19,785 at 20% 18257 118,218 a 40% 47288 20,600 at 45% ‘9,000 “ex tity ma983 Franknas exmings £210,000 for 2018-16. Al fia pensloncontroutons of £60,000 erfore quality for txrai lowance charge i £20.00 (601000 4,000) being he exces ofthe person cortouions over he nual allowance for 2015-16, Frank wave pai £48,000 (60,000 lass 20% the personal pension company. Higher an acona rate arb given by extending Pe base an higher atx bands 1,785 (91.785 + '.00) and 210000 (160,000 » 60.900) respectively “The amount of annual alowance for the tax year 2015-16 is subject to some complex transitional rules ‘hich mean tht it could actualy be more than £40,000. The transitional rules are net examinable, and you should assume that in any exam question involving pensions the timing of contributions means thal ‘only an annuslalowance of £40,000 is avaliable for the tax year 2015-16. Given the three-year carry forward, this assumption wil continue to apply for future years. Pension flexibility Inivicuas with personal pension schemes now have complete flexiity as regards how they can access thei pension fund upon reaching the minimum pension age of $5. [As previously, 25% of the pension fund can be withdrawn as a tax-free lump sum. The balance of the pension fund can be withdrawn as income whenever the ncvidual wishes, with withdrawals treated as incame and eubjeet to the normal rates of income tax. Previously, individuals were generally restricted to using the balance of thei pension fun to purchase @ pension any. ‘To prevent abuse ofthe new fly, an ant-avodance annual allowance mt of £10,000 has been introduced, Ths annual alowance limi is not examinable, Lifetime allowance Thellfetme allowance for the tax year 2015-16 Is unchanged at 1,250,000. ‘The ifeime allowance apples to the fotal funds which can be bul up within a person's pension schemes. Where the Imitis exceeded, there wil be an additional ax charge when that person subsequently withdeawe the funds in the form of @ pension, CAPITAL GAINS TAX ANNUAL EXEMPT AMOUNT “The annual exempt amount forthe tax year 2015-16 has been increased from £11,000 to £11,100. RATES OF CAPITAL GAINS TAX eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm swi9 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global “The lower rate and the higher rate of capital gains tax forthe tax year 2015-16 are unchanged at 18% and 28%. Chargeable gains are taxed atthe lower rate of 18% where they fall within the basic rate tax band of £831,785, and at tha higher rato of 28% wharo they excoed this threshold. The basic rato band is, ‘extended if person pays personal pension contributions or makes a git aid donation. EXAMPLE 16 For the tax year 2018-18, Adam has a salary of £40,600. During the year, he made net personal pension Contributions of £4,400. On 15 June 2015, Adam sold an antique table and this resulted in @ chargeable ‘gain of £17,600. For the lax year 2015-16, Bee has a trading profit of £50,000, On 20 August 2016, she sold an antique ‘vase and this resulted ina chargeable gain of £19,100. For tho tax year 2015-16, Chostor has a salary of £36,600. On 25 Octobor 2018, he sold an antique wring bureau and this resuited in a cnargeable gain of £23,900. Adam ‘Adam's taxable income is £80,000 (40,600 less the personal allowance of 10,600). His basic rate tax band is extended to £37,285 (31,785 + 5.500 (4,400 x 100/80), of which £7,285 (37,285 ~ 30,000) is unused, ‘Adam's taxable gain of £6,500 (17,600 lss the annul exempt amount of 11,100) is fully within the tunused basic rate tax band, s0 his capital gain tax labilty i therefore £1,170 (6,500 at 18%). Bee Bee's taxable income is £49,400 (60,000 — 10,600), so allt her basi rate tx ban has been used. The: ‘capital gains tax Fabilty on her taxable gain of £8,000 (19, 100 ~ 17,100} s therefore £2,240 (8,000 at 28%), chester CChester’s taxable income is £26,000 (36,800 - 10,600}, so £5,785 (31,785 ~ 26,000) of his basic rat tax band is unused. The capital gains tax lablty on Chester's taxable gain of £12,800 (23,900 - 11,100) Is therefore calculated as: 5785 a 10% 4.081 “ax ity 3.008 In each case, the capital gains tax liability willbe due on 31 January 2017, ENTREPRENEURS’ RELIEF Entrepreneurs reli can be claimed when an individual disposes of a business or a part of a business. For the tax year 2015-16, the Ifetime qualifying mt is unchanged at £10 millon. Gains qualifying for entrepreneurs reli are taxed ata rate of 10% regardless ofthe level af a person's taxable income. EXAMPLE 17 (0n 25 January 2016, Michael sold a 30% shareholding in Green Ltd, an unquoted trading company. The lisposal resulted ina chargeable gain of £800,000. Michael had owned the shares since 1 March 2008, ‘and was an employee ofthe company from that date untl ths date of disposal He nas taxable income of £8,000 fr the tax year 2015-16. Michaets capital gains tax labiltyis Shareholding in Groen Lia 200,000 ‘Annual pt amount (11300) eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm wie an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global 788,200 [Atthough chargeable gains that qualify for entropreneurs rll are always taxed at rate of 10%, they ‘must be taken into account when establshing the rate which apps to other chargeable gains, Chargeable gains qualifying for entrepreneurs reli therefore reduce the amount of any unused basle rate tax band. The annual exempt amount and any capital losses should be intlaly deducted from those chargeable ‘gain which do not qualify for entrepreneurs’ rele. This approach wil save capital gains tax at ether 18% ‘0 28%, compared to just 10% ifused against chargeable gains whicn do qualify for rel Thore are several ways of presenting computations involving such a mix of chargeable gains, but tre ‘simplest approach is to keep chargeable gains qualiying for entrepreneurs’ relief and other chargeable gains separate EXAMPLE 18 (0n 30 September 2015, Mika sold a business which she had run as a sole trader since 1 January 2008, Tho sale resulted in the folowing chargeable gains: ood 200,000 Frechala office bulsing 370,000 00.000 “The assets were all onned for more than one year prit tothe date of disposal. The warehouse had never boon used by Mika for business purposes, Mika as taxable income of £4,000 forthe tax year 2018-16. She has unused capital losses of £28,000 brought forward from the tax year 2014-18. Mika's capital gains tax abit is Gains qualitying fo niveproneursrallat ood 200.000 Frechla office buliing 370,000 20.000 ther gains Freshld warehouse 170.000 Capital losses brought forward (22,000) 12.000 ‘Annual exempt amount (11,100) eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm wwi9 an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Stadonts | ACCA Global 130.900 Capital gains tax 30,900 at 26% 5.652 Tex city oo.s2 warehouse because hs doesnot quai for neprnaurs fee. £21,785 (31.785 ~ 4000 of Ma's base rao tax band is nus fsnropreneirs rela of £630 000 even rough esas no ate the 10% tx rae, nsthe gens guatityng for VALUING QUOTED SHARES ‘The basis of valuing quoted shares when they ae disposed af by way of a git has changed. The basis is ow simply the mid-price based on the day's quoted price. For example, if shares are quoted at £5.10 — £25.18, then the value per share to be used is £5.14 (5.10 + £5.18)2). Previously, quoted shares were valued atthe lower of the quarter up pre and the average ofthe days highest and lowast bargain. Bargain prices no longer have any relevance for capital gains tax purposes. The capital gains tax information which wil be given in the lax rates and alowances section of te exam for exams in the period 1 September 2016 to 31 March 2017 is: = Lower rate 12% = Higher rate 28% ‘Annual exempt amount e100 Eriroprenour' roller Trateot tar 3 INHERITANCE TAX RATES OF INHERITANCE TAX The nil rate band forthe tax year 2015-16 is unchanged at £326,000. “The inheritance tax information which willbe given in the tax rates and allowances section of the exam for exams in the period 1 September 2016 to 31 March 2017 i: 1 -£225,000 NI Excess “Death rate oy Lifetime rate 20% ‘Years before death Percentage reduction % (Over 3 but eas than & years 2 ver 4 bt ess than 5 years “0 eipsiwww accagobal comigblen/tuertiaxam-suppert-resourcesundamertale-exame-stuy-tesourcesiétecinical-arilesinarce-ac-2015 Nm wie an22016 Finance Act 2015 F6 Taxation | ACCA Qualification | Students |ACCA Global (over Stat ess than 6 years 6 over 8 but ess than 7 years a ‘Where eater rilrate bands may be relevant, they wil be given to you within the question, CORPORATION TAX RATE OF CORPORATION TAX For the fnancial year 2015, there is usta single rate of corporation tax of 20% which applies regardless ‘ofthe level of a company’s profs, The rates and limits appleable to previous financial years are ne longer examinable. Ia question s set involving ether an accounting period spanning 1 April 2015 or an accounting period ‘ending prior to 1 Apri 2015, then the company's lval of profit willbe such that only a corporation tax rate of 20% is applicable. EXAMPLE 19 For the year ended 31 March 2016, Simpiifod Lid has taxable total profs of £600,000 Corporation tax is £120,000 (600,000 at 20%), LOSS RELIEF AND GROUP RELIEF “The rate of corporation tax sno longer a factor when it comes tothe choice between loss rolls or when ‘considering group rele claims, “The only relevant factors are now the ming ané cash fw in relation to the rei obtained (an earlier

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