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finance act 2010

This article looks at the changes made by the Finance Act (No 1) 2010 and the Finance Act (No 2) 2010, and should be read by those of you who are taking Paper F6 (UK) at either the June or December 2011 exam sessions. CAT 9 (UK) and P6 (UK) students should read this article in the context of the appendices on pages 13 and 14. The aim of the article is to summarise the changes made by these two Finance Acts and to look at the more important changes in greater detail. The article also includes details of legislation that was enacted prior to the two 2010 Finance Acts, but has only come into effect from 6 April 2010. If you are sitting Papers F6 (UK), CAT 9 (UK) or P6 (UK) in December 2010, you will be examined on the Finance Act 2009, which is the legislation as it relates to the tax year 200910. Therefore, this article is not relevant to you, and you should instead refer to the Finance Act 2009 article published on the ACCA website at www.accaglobal.com/FA09. INCOME TAX Rates of Income Tax For the tax year 201011 an additional rate of 50% applies where taxable income exceeds 150,000. A starting rate of 10% applies to savings income where it falls within the first 2,440 of taxable income. If non-savings income exceeds 2,440, the starting rate of 10% for savings does not apply. In this case, savings income is taxed at the basic rate of 20% if it falls below the higher rate threshold of 37,400, at the higher rate of 40% if it falls between the higher rate threshold of 37,400 and the additional rate threshold of 150,000, and at the additional rate of 50% if it exceeds the additional rate threshold of 150,000. The additional rate for dividends is 42.5%. Therefore dividends are taxed at the basic rate of 10% if they fall below the higher rate threshold of 37,400, at the higher rate of 32.5% if they fall between the higher rate threshold of 37,400 and the additional rate threshold of 150,000, and at the additional rate of 42.5% if they exceed the additional rate threshold of 150,000. The payment of personal pension contributions and gift aid donations will result in both the basic rate and higher rate tax bands being extended. For example, if a person pays gross personal pension contributions of 20,000 then the basic rate tax band is extended to 57,400 (37,400 + 20,000) and the higher rate tax band is extended to 170,000 (150,000 + 20,000). The tax rates information that will be given in the tax rates and allowances section of the exam paper for the June and December 2011 sittings is as follows:

RElEVANT TO pApERs F6 (uK), CAT 9 (uK) ANd p6 (uK)

Basic rate 1 to 37,400 Higher rate 37,401 to 150,000 Additional rate 150,001 and over

Normal rates % 20 40 50

Dividend rates % 10 32.5 42.5

A starting rate of 10% applies to savings income where it falls within the first 2,440 of taxable income. pERsONAl AllOwANCEs For the tax year 201011, the standard personal allowance of 6,475 is gradually reduced to nil where a persons adjusted net income exceeds 100,000. Adjusted net income is net income (total income less deductions for loss relief and interest payments) less the gross amount of personal pension contributions and gift aid donations. The personal allowance is reduced by 1 for every 2 that a persons adjusted net income exceeds 100,000. Therefore, a person with adjusted net income of 112,950 or more is not entitled to any personal allowance (112,950 - 100,000 = 12,950/2 = 6,475). Where a person has an adjusted net income of between 100,000 and 112,950, the effective marginal rate of income tax is 60%. This is the higher rate of 40% on income plus an additional 20% as a result of the withdrawal of the personal allowance. In this situation it may be beneficial to make additional personal pension contributions or gift aid donations. The same reduction applies in respect of age-related personal allowances. Where a persons adjusted net income exceeds 22,900, age-related allowances are reduced to a minimum of the standard personal allowance of 6,475. However, there will then be a further reduction if adjusted net income exceeds 100,000. This means that regardless of a persons age, no personal allowance will be available where their adjusted net income is 112,950 or more. The personal allowances information that will be given in the tax rates and allowances section of the exam paper for the June and December 2011 sessions is as follows: 6,475 9,490 9,640 22,900 100,000

Personal allowance Standard Personal allowance 65 to 74 Personal allowance 75 and over Income limit for age-related allowances Income limit for standard personal allowance

FOR ThE TAX yEAR 201011, ThE sTANdARd pERsONAl AllOwANCE OF 6,475 Is gRAduAlly REduCEd TO NIl whERE A pERsONs AdjusTEd NET INCOME EXCEEds 100,000.

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Studying Papers F6 or P6? performance objectives 19 and 20 are relevant to these exams

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EXAMplE 1 For the tax year 201011, Ingrid, aged 40, has a salary of 37,000, building society interest of 800 (net) and dividends of 9,000 (net). Her income tax liability is as follows: Employment income 37,000 Building society interest (800 x 100/80) 1,000 Dividends (9,000 x 100/90) 10,000 48,000 Personal allowance (6,475) Taxable income 41,525 Income tax: Tax liability 31,525 at 20% 5,875 at 10% 4,125 at 32.5% 6,305 587 1,341 8,233

EXAMplE 3 For the tax year 201011, Trevor, aged 31, has a trading profit of 132,000, building society interest of 3,200 (net) and dividends of 34,200 (net). The income tax payable by Trevor is as follows: Trading profit 132,000 Building society interest (3,200 x 100/80) 4,000 Dividends (34,200 x 100/90) 38,000 174,000 Personal allowance Nil Taxable income 174,000 Income tax: 37,400 at 20% 98,600 at 40% 14,000 at 32.5% 24,000 at 42.5% 7,480 39,440 4,550 10,200 61,670 800 3,800 (4,600) 57,070

Tax liability EXAMplE 2 For the tax year 201011, June, aged 48, has a trading profit of 184,000. Her income tax liability is as follows: Trading profit 184,000 Personal allowance Nil Taxable income 184,500 Income tax: Tax liability 37,400 at 20% 112,600 at 40% 34,000 at 50% 7,480 45,040 17,000 69,520 Tax suffered at source Building society interest (4,000 at 20%) Dividends (38,000 at 10%) Income tax payable

The 10% tax credit on dividend income is available regardless of the rate of tax payable.

No personal allowance is available as Junes adjusted net income of 184,000 exceeds 112,950.

EXAMplE 4 For the tax year 201011, May, aged 56, has a trading profit of 164,000. She made net personal pension contributions of 44,000 and a net gift aid donation of 1,600. Mays income tax liability is as follows: Trading profit 164,000 Personal allowance (2,975) Taxable income 161,025 Income tax: Tax liability 94,400 at 20% 66,625 at 40% 18,880 26,650 45,530

The gross personal pension contributions are 55,000 (44,000 x 100/80) and the gross gift aid donation is 2,000 (1,600 x 100/80). Mays adjusted net income is therefore 107,000 (164,000 55,000 2,000), so her personal allowance of 6,475 is reduced to 2,975 (6,475 - 3,500 (107,000 100,000 = 7,000/2)). The basic and higher rate tax bands are extended to 94,400 (37,400 + 55,000 + 2,000) and 207,000 (150,000 + 55,000 + 2,000) respectively.

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EXAMplE 5 For the tax year 2010 11 Ali, aged 67, has pensions of 10,800 and bank interest of 4,000 (net). Her income tax liability is as follows: Pensions 10,800 Bank interest (4,000 x 100/80) 5,000 15,800 Personal allowance (9,490) Taxable income 6,310 Income tax: Tax liability 1,310 at 20% 1,130 at 10% 3,870 at 20% 262 113 774 1,149

EXAMplE 7 For the tax year 201011, Rich, aged 78, has a trading profit of 90,000 and pensions of 18,000. His income tax liability is as follows: Trading profit 90,000 Pensions 18,000 108,000 Personal allowance (2,475) Taxable income 105,525 Income tax: 37,400 at 20% 68,125 at 40% Tax liability 7,480 27,250 34,730

Non-savings income is 1,310 (10,800 - 9,490), so 1,130 (2,440 1,310) of the savings income is taxed at the starting rate of 10%. The remainder of the savings income is taxed at the basic rate of 20%.

Richs adjusted net income exceeds 22,900 to the extent that his personal allowance of 9,490 is initially reduced to the standard personal allowance of 6,475. As the adjusted net income of 108,000 exceeds 100,000, the standard personal allowance is then reduced to 2,475 (6,475 - 4,000 (108,000 - 100,000 = 8,000/2)).

EXAMplE 6 For the tax year 201011, Lorn, aged 80, has pensions of 22,000 and building society interest of 3,200 (net). Her income tax liability is as follows: Pensions 22,000 Building society interest (3,200 x 100/80) 4,000 26,000 Personal allowance (8,090) Taxable income 17,910 Income tax: 17,910 at 20% 3,582 Tax liability 3,582 Lorns total income exceeds 22,900, so her personal allowance of 9,640 is reduced to 8,090 (9,640 - 1,550 (26,000 - 22,900 = 3,100/2)).

EMplOyMENT INCOME Company Car Benefit For the tax year 201011, the base level of CO2 emissions used to calculate company car benefits is reduced from 135 grams per kilometre to 130 grams per kilometre. The percentage used to calculate a car benefit ranges from 15% to 35%. For the tax year 201011 there are now two lower rates for company motor cars with low CO2 emissions. For a motor car with a CO2 emission rate of 75 grams per kilometre or less the percentage is 5%. For a motor car with a CO2 emission rate of between 76 and 120 grams per kilometre the percentage is 10%. These lower rates are increased to 8% (5% + 3%) and 13% (10% + 3%) respectively for diesel cars. For the tax year 201011 there is no benefit where a company car has a zero CO2 emissions figure. However, the provision of a zero emission company car is not examinable.

FOR ThE TAX yEAR 201011, ThE BAsE lEVEl OF CO2 EMIssIONs usEd TO CAlCulATE COMpANy CAR BENEFITs Is REduCEd FROM 135 gRAMs pER KIlOMETRE TO 130 gRAMs pER KIlOMETRE. ThE FuEl BENEFIT Is CAlCulATEd As A pERCENTAgE OF A BAsE FIguRE ThAT Is ANNOuNCEd EACh yEAR. FOR ThE TAX yEAR 201011 ThE BAsE FIguRE Is INCREAsEd FROM 16,900 TO 18,000.

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EXAMplE 8 During the tax year 201011, Fashionable plc provided the following employees with company motor cars: Amanda was provided with a new diesel-powered company car on 6 August 2010. The motor car has a list price of 13,500 and an official CO2 emission rate of 122 grams per kilometre. Betty was provided with a new petrol-powered company car throughout the tax year 201011. The motor car has a list price of 16,400 and an official CO2 emission rate of 188 grams per kilometre. Charles was provided with a new petrol-powered company car throughout the tax year 201011. The motor car has a list price of 22,600 and an official CO2 emission rate of 249 grams per kilometre. Charles paid Fashionable plc 1,200 during the tax year 201011 for the use of the motor car. Diana was provided with a new petrol-powered company car throughout the tax year 201011. The motor car has a list price of 12,400 and an official CO2 emission rate of 70 grams per kilometre. Amanda The CO2 emissions are below the base level figure of 130 grams per kilometre (but more than 120 grams per kilometre), so the relevant percentage is 18% (15% plus a 3% charge for a diesel car). The motor car was only available for eight months of the tax year 201011, so the benefit is 1,620 (13,500 x 18% x 8/12). Betty The CO2 emissions are above the base level figure of 130 grams per kilometre. The CO2 emissions figure of 188 is rounded down to 185 so that it is divisible by five. The minimum percentage of 15% is increased in 1% steps for each five grams per kilometre above the base level, so the relevant percentage is 26% (15% + 11% (185 - 130 = 55/5)). The motor car was available throughout the tax year 201011 so the benefit is 4,264 (16,400 x 26%). Charles The CO2 emissions are above the base level figure of 130 grams per kilometre. The relevant percentage is 38% (15% + 23% (245 - 130 = 115/5)), but this is restricted to the maximum of 35%. The motor car was available throughout the tax year 2010 11 so the benefit is 6,710 (22,600 x 35% = 7,910 - 1,200). The contributions by Charles towards the use of the motor car reduce the benefit. diana The CO2 emissions are below 75 grams per kilometre, so the lower rate of 5% applies. The motor car was available throughout the tax year 201011, so the benefit is 620 (12,400 x 5%).

Company Car Fuel Benefit The fuel benefit is calculated as a percentage of a base figure that is announced each year. For the tax year 201011 the base figure is increased from 16,900 to 18,000. The percentage used in the calculation is exactly the same as that used for calculating the related company car benefit.

EXAMplE 9 Continuing with Example 8 Amanda was provided with fuel for private use between 6 August 2010 and 5 April 2011. Betty was provided with fuel for private use between 6 April 2010 and 31 December 2010. Charles was provided with fuel for private use between 6 April 2010 and 5 April 2011. He paid Fashionable plc 600 during the tax year 201011 towards the cost of private fuel, although the actual cost of this fuel was 1,000. Diana was not provided with fuel for private use. Amanda The motor car was only available for eight months of the tax year 201011, so the fuel benefit is 2,160 (18,000 x 18% x 8/12). Betty Fuel was only available for nine months of the tax year 201011, so the fuel benefit is 3,510 (18,000 x 26% x 9/12). Charles The motor car was available throughout the tax year 201011 so the benefit is 6,300 (18,000 x 35%). There is no reduction for the contributions made since the cost of private fuel was not fully reimbursed. diana Fuel was not provided for private use so there is no fuel benefit. Company Van Fuel Benefit The fuel benefit is based on a scale charge. For the tax year 201011 the scale charge is increased from 500 to 550. Official Rate of Interest The official rate of interest is used when calculating the taxable benefit arising from a beneficial loan or from the provision of living accommodation costing in excess of 75,000. For the June and December 2011 exam se the actual official rate of interest of 4.00% for the tax year 201011 will be used.

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INTERNATIONAl ACCOuNTINg sTANdARd TERMINOlOgy From the June 2011 paper onwards, international accounting standard terminology will be used when presenting accounting information contained within an exam question. The most important change is that the term profit and loss account will no longer be used. Instead, the term income statement will be used, with income statements being presented in the international accounting standard format. The following terminology will also change: Previous terminology Sales Fixed assets Stock Debentures New terminology Sales revenue Non-current assets Inventory Loan notes

is shorter or longer than 12 months. For example, the annual investment allowance would be 75,000 (100,000 x 9/12) for a nine-month period of account. Where a period of account spans 6 April 2010 (1 April 2010 for limited companies) then apportionment will be necessary in order to determine the amount of annual investment allowance. A question will not be set involving apportionment as regards the amount of annual investment allowance. The capital allowances information that will be given in the tax rates and allowances section of the examination paper for the June and December 2011 sittings is as follows: Rates of allowance Plant and machinery Main pool Special rate pool % 20 10

The new international accounting standard terminology will also be used when presenting accounting information for sole traders and partnerships. As an example, the first part of Question 2 from the December 2007 paper would now be presented as follows: Sofa Ltd is a manufacturer of furniture. The companys summarised income statement for the year ended 31 March 2007 is as follows: Gross profit Other income Profit on disposal of shares Bank interest Expenses Depreciation Professional fees Repairs and renewals Other expenses Finance costs Interest payable Loss before taxation 87,100 19,900 22,800 364,000 (493,800) (31,200) (240,000) 272,300 4,300 8,400

Motor cars (purchases since 6 April 2009 (1 April 2009 for limited companies)) CO2 emissions up to 110 grams per kilometre 100 CO2 emissions between 111 and 160 grams per kilometre 20 CO2 emissions over 160 grams per kilometre 10 Annual investment allowance First 100,000 of expenditure 100

Unless there is private use, motor cars qualifying for writing down allowances at the rate of 20% are included in the general pool, while motor cars qualifying for writing down allowances at the rate of 10% are included in the special rate pool. Motor cars with private use (by a sole trader or partner) are not pooled, but are kept separate so that the private use adjustment can be calculated. Motor cars already owned at 6 April 2009 (1 April 2009 for limited companies) that cost more than 12,000 or those with private use continue to be kept separately, and qualify for writing down allowances at the rate of 20% restricted to a maximum of 3,000. This is regardless of the motor cars CO2 emissions.

CApITAl AllOwANCEs plant and Machinery A first-year allowance of 40% applied to expenditure during the period from 6 April 2009 to 5 April 2010 (1 April 2009 to 31 March 2010 for limited companies). From the June 2011 sitting onwards questions will not be set that involve the 40% first-year allowance. From 6 April 2010 (1 April 2010 for limited companies) the annual investment allowance (AIA) limit has been increased to 100,000. The annual investment allowance provides a first-year allowance of 100% for the first 100,000 of expenditure on plant and machinery. Any expenditure in excess of the 100,000 limit qualifies for writing-down allowances (WDA) as normal. The annual investment allowance applies to all expenditure on plant and machinery with the exception of motor cars. The 100,000 limit is proportionally reduced or increased where a period of account

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EXAMplE 10 Ming prepares accounts to 5 April. On 6 April 2010 the tax written down values of her plant and machinery were as follows: Main pool 16,700 Motor car (1) 18,800 Motor car (2) 15,600 The following transactions took place during the year ended 5 April 2011: 12 May 2010 2 August 2010 19 October 2010 4 November 2010 2 April 2011 Purchased equipment Purchased motor car (3) Purchased motor car (4) Purchased motor car (5) Sold motor car (5) Cost/(Proceeds) 111,400 28,300 16,800 10,100 (8,300)

Motor car (1) was purchased on 14 May 2008 and has CO2 emissions of 180 grams per kilometre. Motor car (2) was purchased on 8 June 2009 and has CO2 emissions of 140 grams per kilometre. This motor car is used by Ming, and 15% of the mileage is for private journeys. Motor car (3) purchased on 2 August 2010 has CO2 emissions of 155 grams per kilometre. Motor car (4) purchased on 19 October 2010 has CO2 emissions of 105 grams per kilometre. Motor car (5) purchased on 4 November 2010 and sold on 2 April 2011 has CO2 emissions of 185 grams per kilometre. Mings capital allowance claim for the year ended 5 April 2011 is as follows: Motor Motor Special Pool car (1) car (2) rate pool Allowances WDV brought forward 16,700 18,800 15,600 Addition qualifying for AIA Equipment 111,400 AIA 100% (100,000) 100,000 11,400 Other additions Motor car (3) 28,300 Motor car (5) 10,100 Proceeds Motor car (5) 28,300 (8,300) 56,400 1,800 WDA 20% (11,280) 11,280 WDA restricted (3,000) 3,000 WDA 20% (3,120) x 85% 2,652 WDA 10% (180) 180 8,300 45,120 Addition qualifying for FYA Motor car (4) 16,800 FYA 100% (16,800) 16,800 28,300 28,300 28,300 28,300 WDV carried forward 45,120 15,800 12,480 1,620 28,300 Total allowances 133,912 Motor car (1) was already owned at 6 April 2009 and is therefore kept separately. The writing down allowance is restricted to the maximum 3,000. Motor car (2) was purchased after 6 April 2009 but is kept separately because there is private use by Ming. This motor car has CO2 emissions between 111 and 160 grams per kilometre, and therefore qualifies for writing down allowances at the rate of 20%. Motor car (3) has CO2 emissions between 111 and 160 grams per kilometre, and therefore qualifies for writing down allowances at the rate of 20%. Motor car (4) has CO2 emissions of less than 110 grams per kilometre and therefore qualifies for the 100% first year allowance. Motor car (5) had CO2 emissions over 160 grams per kilometre and therefore qualifies for writing down allowances at the rate of 10%. There is no balancing allowance on the disposal of this motor car because the expenditure is included in a pool.

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INdusTRIAl BuIldINgs AllOwANCEs Capital allowances for industrial buildings are being phased out. This is being achieved by an annual 25% reduction in the amount of allowance available. For the tax year 201011 (the financial year 2010 for limited companies) the writing-down allowance is therefore reduced from 2% to 1% where a new industrial building is acquired or where an existing industrial building continues to be owned. This is the final year in which industrial buildings allowances will be available. Where a limited companys chargeable period falls into two financial years then apportionment will be necessary in order to determine the rate of writing-down allowance applicable. A question will not be set involving apportionment. EXAMplE 11 Scuba Ltd makes up its accounts to 31 March. The company purchased a new factory from a builder on 1 July 2010 for 240,000 (excluding the cost of land), and this was immediately brought into use. For the year ended 31 March 2011 Scuba Ltd can claim a writing-down allowance of 2,400 (240,000 at 1%). lOss RElIEF Additional loss relief applied for the tax year 200910. From the June 2011 sitting onwards questions will not be set that involve additional loss relief. FuRNIshEd hOlIdAy lETTINgs The special tax treatment of furnished holiday lettings was due to cease from 6 April 2010, but this change was subsequently withdrawn. The treatment of furnished holiday lettings for 201011 therefore remains unchanged. INdIVIduAl sAVINgs ACCOuNTs (IsAs) For the tax year 201011 a person can invest up to 5,100 in a cash ISA, and up to 10,200 in a stocks and shares ISA. This is subject to an overall investment limit of 10,200. Therefore if 5,100 is invested in a cash ISA only 5,100 can be invested in a stocks and shares ISA. The income from ISAs is exempt from income tax, while a capital gain made within a stocks and shares ISA is exempt from capital gains tax.

pENsION sChEMEs Annual Allowance The annual allowance for the tax year 201011 has been increased to 255,000. Although tax relief is available on pension contributions up to the amount of earnings for a particular tax year, the annual allowance acts as an effective annual limit. Where tax relieved contributions are paid in excess of the limit there will be an additional tax charge for the tax year in which the contributions are paid. The introduction of the additional income tax rate of 50%, together with the restriction of the personal allowance, has made calculations involving the annual allowance quite complex. Therefore, although you should be still be aware of the purpose of the annual allowance, from the June 2011 sitting onwards you will not be expected to calculate an additional tax charge. lIFETIME AllOwANCE The lifetime allowance for the tax year 201011 has been increased to 1,800,000. The lifetime allowance applies to the total funds that can be built up within a persons pension schemes. Where the limit is exceeded there will be an additional tax charge when that person subsequently withdraws the funds in the form of a pension. ANTI-FOREsTAllINg pROVIsIONs The government has announced that from 6 April 2011 the amount of pension contributions qualifying for tax relief will be reduced. To prevent people making excessive pension contributions prior to the change coming into effect, anti-forestalling provisions have been introduced. These provisions restrict tax relief where excessive pension contributions are made by high-income individuals. The anti-forestalling provisions are not examinable, and you should therefore assume in any exam question involving pension contributions that the contributions are not excessive. CORpORATION TAX Corporation Tax Act 2010 The government has been rewriting tax law into plain English. As far as Paper F6 (UK) is concerned, the rewrite process has now been completed by the publication of the Corporation Tax Act 2010. This covers those aspects of corporation tax that were not included in the Corporation Tax Act 2009. The rewritten tax legislation does not change the existing legislation. However, some terminology has changed as follows: Taxable total profits is now used instead of profits chargeable to corporation tax. As regards a question involving loss relief, the term total profits will be used to describe profits before the deduction of gift aid donations. Augmented profits (total profits plus franked investment income) is now used instead of profits. Small profits rate is now used instead of small companies rate. Main rate is now used instead of full rate.

CApITAl AllOwANCEs FOR INdusTRIAl BuIldINgs ARE BEINg phAsEd OuT. ThIs Is BEINg AChIEVEd By AN ANNuAl 25% REduCTION IN ThE AMOuNT OF AllOwANCE AVAIlABlE.

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The terminology used in the marginal relief formula has also changed. The formula will now be shown as: Standard fraction x (U - A) x N/A U = Upper limit A = Augmented profits N = Taxable total profits From the June 2011 sitting onwards, only the new plain English terminology will be used. Although you are encouraged to use the new plain English terminology when answering exam questions, for the time being you will not be penalised if you correctly use the old terms such as profits chargeable to corporation tax and profits. As a result of incorporating the rules for corporation tax losses into the Corporation Tax Act 2010, the various loss relief section numbers have changed. The changes are as follows: Previous section number s.393A ICTA 1988 s.393A ICTA 1988 New section number s.37 CTA 2010 s.39 CTA 2010

EXAMplE 12 For the year ended 31 March 2011, Easy Ltd has taxable total profits of 40,000 and FII of 10,000. For the year ended 31 March 2011, Difficult Ltd has taxable total profits of 600,000 and FII of 50,000. Easy ltd Corporation tax is 8,400 (40,000 at 21%) as the augmented profits of 50,000 (40,000 + 10,000) are less than 300,000. difficult ltd Marginal relief applies as the augmented profits of 650,000 (600,000 + 50,000) are between 300,000 and 1,500,000. The companys corporation tax liability is as follows: 600,000 at 28% Marginal relief 7/400 (1,500,000 650,000) x 600,000/650,000 Liability 168,000 (13,731) 154,269

Against total profits Terminal loss relief Carry forward against future trading profits

s.393(1) ICTA 1988 s.45 CTA 2010 loss Relief Extended loss relief applied in respect of loss-making accounting periods ending between 24 November 2008 and 23 November 2010. From the June 2011 sitting onwards questions will not be set that involve extended loss relief. CApITAl gAINs TAX Annual Exemption limit The annual exemption limit for the tax year 201011 is unchanged at 10,100. Rates of Capital gains Tax For the tax year 201011, a higher rate of capital gains tax of 28% has been introduced, with rates linked to the level of a persons taxable income. Capital gains are now taxed at the lower rate of 18% where they fall within the basic rate tax band of 37,400, and at the higher rate of 28% where they exceed this threshold. The basic rate band is extended if a person pays personal pension contributions or makes a gift aid donation. Limited companies are not affected by this change, and they continue to pay corporation tax on their chargeable gains.

However, you are reminded that knowledge of section numbers is not needed to understand questions, nor are you expected to use them in your answers. If you wish to refer to section numbers you may do so and will not be penalised if old, or even incorrect, section numbers are used. RATEs OF CORpORATION TAX The small profits rate of corporation tax and the main rate of corporation tax for the financial year 2010 are unchanged at 21% and 28%, as are the lower and upper limits. The corporation tax rates for the financial year 2010 can therefore be summarised as follows: Level of profits Up to 300,000 300,001 to 1,500,000 Over 1,500,000 Effective rate 21% 29.75% 28%

The corporation tax information that will be given in the tax rates and allowances section of the exam paper for the June and December 2011 sessions is as follows: Financial year Small profits rate Main rate Lower limit Upper limit Standard fraction 2008 21% 28% 300,000 1,500,000 7/400 2009 21% 28% 300,000 1,500,000 7/400 2010 21% 28% 300,000 1,500,000 7/400

FOR ThE TAX yEAR 201011, A hIghER RATE OF CApITAl gAINs TAX OF 28% hAs BEEN INTROduCEd, wITh RATEs lINKEd TO ThE lEVEl OF A pERsONs TAXABlE INCOME.

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EXAMplE 13 For the tax year 201011, Adam has a salary of 39,475, and during the year he made net personal pension contributions of 4,400. On 15 August 2010, Adam sold an antique table and this resulted in a capital gain of 17,400. For the tax year 201011, Bee has a trading profit of 56,475. On 20 August 2010, she sold an antique vase and this resulted in a capital gain of 18,100. For the tax year 201011, Chester has a salary of 36,475. On 25 August 2010, he sold an antique clock and this resulted in a capital gain of 23,800. Adam Adams taxable income is 33,000 (39,475 less the personal allowance of 6,475). His basic rate tax band is extended to 42,900 (37,400 + 5,500 (4,400 x 100/80)), of which 9,900 (42,900 - 33,000) is unused. Adams taxable gain of 7,300 (17,400 less the annual exemption of 10,100) is fully within the unused basic rate tax band, so his capital gains tax liability is therefore 1,314 (7,300 at 18%). Bee Bees taxable income is 50,000 (56,475 - 6,475), so all of her basic rate tax band has been used. The capital gains tax liability on her taxable gain of 8,000 (18,100 - 10,100) is therefore 2,240 (8,000 at 28%). Chester Chesters taxable income is 30,000 (36,475 - 6,475), so 7,400 (37,400 - 30,000) of his basic rate tax band is unused. The capital gains tax liability on Chesters taxable gain of 13,700 (23,800 - 10,100) is therefore calculated as follows: 7,400 at 18% 1,332 6,300 at 28% 1,764 Tax liability 3,096 In each case, the capital gains tax liability will be due on 31 January 2012. ENTREpRENEuRs RElIEF Entrepreneurs relief can be claimed when an individual disposes of a business or a part of a business. For the tax year 201011, the lifetime qualifying limit has been increased to 5 million. Because there are now two rates of capital gains tax, the way in which entrepreneurs relief is given has been changed. Previously, qualifying capital gains were reduced by a factor of 4/9ths to give an effective tax rate of 10%. Qualifying gains are now simply taxed at a rate of 10% regardless of the level of a persons taxable income.

EXAMplE 14 On 25 January 2011, Michael sold a 30% shareholding in Green Ltd, an unquoted trading company. The disposal resulted in a capital gain of 800,000. Michael had owned the shares since 1 March 2004, and was an employee of the company from that date until the date of disposal. He has taxable income of 8,000 for the tax year 201011. Michaels capital gains tax liability is as follows: Shareholding in Green Ltd Annual exemption Capital gains tax: 789,900 at 10% 800,000 (10,100) 789,900 78,990

Although capital gains that qualify for entrepreneurs relief are always taxed at a rate of 10%, they must be taken into account when establishing which rate applies to other capital gains. Capital gains qualifying for entrepreneurs relief therefore reduce the amount of any unused basic rate tax band. The annual exemption and any capital losses should be initially deducted from those capital gains that do not qualify for entrepreneurs relief. This approach will save capital gains tax at either 18% or 28%, compared to just 10% if used against capital gains that do qualify for relief. There are several ways of presenting computations involving such a mix of capital gains, but the simplest approach is to keep capital gains qualifying for entrepreneurs relief and other capital gains separate.

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EXAMplE 15 30 September 2010, Mika sold a business that she had run as a sole trader since 1 January 2004. The sale resulted in the following capital gains: Goodwill 260,000 Freehold office building 370,000 Freehold warehouse 170,000 800,000 The assets were all owned for more than one year prior to the date of disposal. The warehouse had never been used by Mika for business purposes. Mika has taxable income of 4,000 for the tax year 201011. She has unused capital losses of 28,000 brought forward from the tax year 200910. Mikas capital gains tax liability is as follows: Capital gains qualifying for entrepreneurs relief Goodwill 260,000 Freehold office building 370,000 630,000 Other capital gains Freehold warehouse Capital losses brought forward Annual exemption Capital gains tax: 630,000 at 10% 131,900 at 28% Tax liability 170,000 (28,000) 142,000 (10,100) 131,900 63,000 36,932 99,932

The capital gains tax changes only apply to disposals made on or after 23 June 2010, but a question will not be set where an individual makes a disposal before 23 June 2010. A question will not be set involving the entrepreneurs relief qualifying limits that applied up to 22 June 2010. INhERITANCE TAX From the June 2011 sitting onwards, a basic understanding of inheritance tax has been added to the Paper F6 (UK) syllabus. You should refer to the separate inheritance tax article, which covers those aspects of inheritance tax that you will need to know. The inheritance tax information that will be given in the tax rates and allowances section of the exam paper for the June and December 2011 sittings is as follows: Inheritance tax: tax rates 1 325,000 Excess Death rate Lifetime rate Inheritance tax: taper relief Years before death Over Over Over Over 3 4 5 6 but but but but less less less less than than than than 4 5 6 7 years years years years Nil 40% 20% Percentage reduction % 20 40 60 80

Where nil rate bands are required for previous years then these will be given to you within the question. NATIONAl INsuRANCE CONTRIBuTIONs Class 1 and Class 1A National Insurance Contributions For the tax year 201011, the rates of employee Class 1 NIC are unchanged at 11% and 1%. The rate of 11% is paid on earnings between 5,716 per year and 43,875 per year, and the rate of 1% is paid on all earnings over 43,875 per year. The rate of employers Class 1 NIC is unchanged at 12.8%, and is paid on all earnings over 5,715 per year. The rate of Class 1A NIC that employers pay on taxable benefits provided to employees is also unchanged at 12.8%. The Class 1 and Class 1A NIC information that will be given in the tax rates and allowances section of the exam paper for the June and December 2011 sittings is as follows: % Class 1 Employee 1 to 5,715 per year Nil 5,716 to 43,875 per year 11.0 43,876 and above per year 1.0 Class 1 Employer 1 to 5,715 per year Nil 5,716 and above per year 12.8 Class 1A 12.8

The capital losses and the annual exemption are set against the capital gain on the sale of the freehold warehouse as this does not qualify for entrepreneurs relief. 33,400 (37,400 - 4,000) of Mikas basic rate tax band is unused, but this is set against the gains qualifying for entrepreneurs relief of 630,000 even though this has no affect on the 10% tax rate. The capital gains tax information that will be given in the tax rates and allowances section of the exam paper for the June and December 2011 sittings is as follows: Capital gains tax Rates of tax Lower rate Higher rate 18% 28% 10,100 5,000,000 10%

Annual exemption Entrepreneurs relief Lifetime limit Rate of tax

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under the VAT heading in the tax rates and allowances section of the examination paper for the June and December 2011 sittings: Standard rate Up to 3 January 2011 From 4 January 2011 onwards 17.5% 20.0%

A question will not be set involving a VAT period where there is a change of VAT rate. EXAMplE 16 Simone Ltd has one employee who is paid 50,000 per year, and was provided with the following taxable benefits during the tax year 201011: Company motor car 6,300 Car fuel 5,400 Living accommodation 1,800 The Class 1 and Class 1A NIC liabilities are as follows: Employee Class 1 NIC 43,875 - 5,715 = 38,160 at 11% 50,000 - 43,875 = 6,125 at 1% Employers Class 1 NIC 50,000 - 5,715 = 44,285 at 12.8% Employers Class 1A NIC 13,500 (6,300 + 5,400 + 1,800) at 12.8% 4,198 61 4,259 5,668 1,728 EXAMplE 18 Gwen is in the process of completing her VAT return for the quarter ended 30 April 2011. The following information is available: Sales invoices totaling 128,000 were issued in respect of standard-rated sales. Standard-rated materials amounted to 32,400. Standard-rated expenses amounted to 24,800. On 15 February 2011, Gwen purchased machinery at a cost of 24,150. This figure is inclusive of VAT. Unless stated otherwise all of the above figures are exclusive of VAT. VAT Return Quarter ended 30 April 2011 Output VAT Sales (128,000 x 20%) Input VAT Materials (32,400 x 20%) Expenses (24,800 x 20%) Machinery (24,150 x 20/120) VAT payable 6,480 4,960 4,025 25,600

Class 2 and Class 4 National Insurance Contributions For the tax year 201011, the rate of Class 2 NIC is unchanged at 2.40 per week. The rates of Class 4 NIC are unchanged at 8% and 1%. The rate of 8% is paid on profits between 5,716 and 43,875, and the rate of 1% is paid on all profits over 43,875. The Class 4 NIC information that will be given in the tax rates and allowances section of the exam paper for the June and December 2011 sessions is as follows: % Class 4 1 to 5,715 per year Nil 5,716 to 43,875 per year 8.0 43,876 and above per year 1.0 EXAMplE 17 Jimmy is a self-employed builder and Jenny is a self-employed consultant. Their trading profits for the tax year 201011 are respectively 25,000 and 50,000. The Class 4 NIC liabilities are as follows: Jimmy 25,000 - 5,715 = 19,285 at 8% 1,543 Jenny 43,875 - 5,715 = 38,160 at 8% 3,053 50,000 - 43,875 = 6,125 at 1% 61 3,114 VALUE ADDED TAX (VAT) Registration and Deregistration Limits The limit of annual turnover above which VAT registration is compulsory has been increased from 68,000 to 70,000, and the deregistration limit has been increased from 66,000 to 68,000. Standard Rate of VAT From 4 January 2011 the standard rate of VAT is to increase from 17.5% to 20%. The following additional information will be given

(15,465) 10,135

Online Filing All newly registered businesses now have to file their VAT returns online and pay any VAT that is due electronically. The deadlines for doing this are extended by seven days. For example, for the quarter ended 31 March 2011 a business will have until 7 May 2011 to file an online VAT return and pay any VAT that is due. Flat Rate scheme Under the flat-rate scheme, a business calculates its VAT liability by applying a flat-rate percentage to total income. A business can join the flat-rate scheme if its expected taxable turnover (excluding VAT) for the next 12 months does not exceed 150,000. Previously, a business had to leave the scheme once its total turnover (including VAT) for the previous 12 months exceeded 225,000. This limit has now been increased to 230,000. The change only applies from 4 January 2011, but a question will not be set requiring knowledge of the old limit. group VAT Registration From the June 2011 sitting onwards, group VAT registration has been added to the Paper F6 (UK) syllabus. Two or more companies can register as a group for VAT purposes if they are under common control (such as a parent company and its subsidiary companies) and each of them is resident in the UK. A VAT group is treated for VAT purposes as if it was a single company registered for VAT on its own. Group VAT registration is made in the name of a representative member, and this company is then responsible for completing and submitting a single VAT Return and paying VAT on behalf of the group. However, all the companies in the VAT group remain jointly and severally liable for any VAT liabilities.

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The advantages of group VAT registration are that: there is no need to account for VAT on goods and services supplied between group members. Such supplies are simply ignored for VAT purposes it is only necessary to complete one VAT return for the whole group, so there should be a saving in administrative costs. However, various limits, such as those for the cash and annual accounting schemes, will apply to the VAT group as a whole rather than on an individual company basis. Imports, Exports and Trading within the European union From the June 2011 sitting onwards, imports, exports and trading within the European Union have been added to the Paper F6 (UK) syllabus. Imports When a UK VAT registered business imports goods into the UK from outside the European Union, then VAT has to be paid at the time of importation. This VAT can then be reclaimed as input VAT on the VAT return for the period during which the goods were imported. Therefore goods imported into the UK from outside the European Union are effectively treated the same as goods that are purchased within the UK. For example, if a UK VAT registered business purchases goods for 1,000 during March 2011 from a UK supplier, then it will pay the supplier 1,200 (1,000 plus VAT of 200 (1,000 x 20%)), and then reclaim the input VAT of 200. If the goods are instead purchased from a supplier situated outside the European Union, then the business will pay 1,000 to the supplier, 200 to HM Revenue & Customs, and then again reclaim the input VAT of 200. In each case the business has paid 1,200 and reclaimed 200. Regular importers can defer the payment of VAT on importation by setting up an account with HM Revenue & Customs. It is necessary to provide a bank guarantee, but VAT is then accounted for on a monthly basis. The same treatment generally applies when a UK VAT registered business is supplied with services from outside the European Union. Exports When a UK VAT registered business exports goods outside of the European Union then the supply is zero-rated. Supplies of services outside of the European Union are outside the scope of VAT. Trading within the European union When a UK VAT registered business acquires goods from within the European Union, then VAT has to be accounted for according to the date of acquisition. The date of acquisition is the earlier of the date that a VAT invoice is issued or the 15th day of the month following the month in which the goods come into the UK. This VAT charge is declared on the VAT return as output VAT, but can be reclaimed as input VAT on the same VAT return. Therefore for most businesses there is no VAT cost as the VAT charge and the corresponding input VAT contra out. The only time that there is a VAT cost is if a business makes exempt supplies, since an exempt business cannot reclaim any input VAT. Although the end result is the same as with an import from outside the European Union, with a European Union acquisition there is no need to actually pay the VAT subsequent to its recovery as input VAT.

For example, if a UK VAT registered business purchases goods for 1,000 during March 2011 from a supplier situated in the European Union, then the business will pay 1,000 to the supplier. Then on its VAT return the business will show output VAT of 200 and input VAT of 200. When a UK VAT registered business supplies goods to another VAT registered business within the European Union then the supply is zero-rated. The same treatment generally applies where a UK VAT registered business is supplied with services from within the European Union, and where a UK VAT registered business supplies services to another VAT registered European Union business. TAX MANAgEMENT penalties for late Filing of Returns and late payment of Tax The government is continuing to introduce its single penalty regime. My articles have previously covered the following aspects of the new regime: Finance Act 2008 article Penalties for incorrect returns. Finance Act 2009 article Penalties for failure to notify a new taxable activity. The new penalties for late filing of returns and for late payment of tax are being introduced over a number of years. As far as Paper F6 is concerned, the only changes for 201011 concern self assessment for individuals. The new penalty regime is as follows: late Filing of Returns There will be an initial 100 penalty if a self-assessment tax return is filed after the due date. If a return is more than three months late then there will be a daily penalty of 10 per day (for a maximum of 90 days). If a return is more than six months late a penalty of 5% of the tax due will be charged (subject to a minimum of 300). If a return is more than 12 months late a further penalty of 5% of the tax due can be charged, although a higher percentage will be charged if the failure to submit is deliberate. late payment of Tax Where tax is paid more than one month late then there will be a penalty of 5% of the amount due. Further penalties of 5% will be charged where tax is unpaid after six months, and again after 12 months. The penalties only apply to the balancing payment, and not to payments on account. They therefore cover any income tax, Class 4 NIC and capital gains tax paid late. Previously, a surcharge of 5% was payable where tax was paid more than 28 days late, with a further surcharge of 10% if tax was paid more than six months late. Interest on underpaid and Overpaid Tax The assumed rates of interest on underpaid and overpaid income tax, Class 4 NIC, capital gains tax and corporation tax are based on the actual rates in force (for income tax purposes) at 6 April 2010. For the June and December 2011 sessions, the assumed rate of interest on underpaid tax will therefore be 3.0%, and the assumed rate of interest on overpaid tax will be 0.5%. David Harrowven is examiner for Paper F6 (UK)

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appendix one
RElEVANT TO pApER p6 (uK)
This article should be read by students sitting Paper P6 (UK) at either the June or December 2011 exam session. If you are sitting the exam in December 2010, you will be examined on the Finance Act 2009, which is the legislation as it relates to the tax year 200910. This article is not relevant to you, and you should refer to the Finance Act 2009 article published on the ACCA website at www.accaglobal.com/FA09. All changes relating to Paper F6 (UK) set out on pages 1 to 12 are relevant to Paper P6 (UK). In addition, all of the exclusions set out in the Paper F6 (UK) article apply equally to Paper P6 (UK) unless they are referred to below. This article summarises the additional changes introduced by the Finance Act 2010 (No1 and No 2) and other recent legislation that have an effect on the Paper P6 (UK) syllabus. INCOME TAX property and investment income As a result of the above change, for the tax year 201011, income received by a beneficiary of a discretionary trust will be grossed up at 100/50 (as opposed to 100/60). The gross income will be treated as non-savings income in the hands of the beneficiary and there will then be a 50% (previously 40%) tax credit. CORpORATION TAX Corporate venturing scheme CVs The corporate venturing scheme, which provided tax relief for companies that invested in small unquoted trading companies, came to an end on 31 March 2010. Accordingly, it will not be examined from June 2011 onwards. VAluE AddEd TAX (VAT) partial exemption Partially exempt businesses are able to recover all of the input tax in a VAT return period where the amount of input tax that would otherwise be irrecoverable is below the de minimis limits. You need to be aware of two changes to partial exemption that affect VAT return periods commencing on or after 1 April 2010. The first change relates to a simplification of the de minimis tests. A business will now be regarded as de minimis for a VAT return period if it satisfies any one of the following three tests. i Its total input tax is no more than 625 per month (on average) and the value of its exempt supplies is no more than 50% of the value of all of its supplies. ii Its total input tax less input tax directly attributable to taxable supplies is no more than 625 per month (on average) and the value of its exempt supplies is no more than 50% of the value of all of its supplies. iii Its input tax relating to exempt supplies is no more than 625 per month (on average) and no more than 50% of its total input tax. Tests 1 and 2 have been introduced in order to enable businesses to confirm their de minimis status using information that is more easily available to them. Test 3 is the test that you may be familiar with as it applied prior to the introduction of these changes. At the end of the year, a business must review its status for the year as a whole and make its annual adjustment in the normal way. It need only satisfy one of the tests in order to be regarded as de minimis for the whole year such that it can recover all of its input tax. The second change, known as the annual test, enables a business to provisionally reclaim all of its input tax in the current year if it was de minimis in its previous year. At the end of the year the business must review its status for the year as a whole and make a repayment if it is unable to satisfy any one of the de minimis tests. This change removes the need to carry out detailed partial exemption calculations for each VAT return period but does not affect the final VAT position of the business. This annual test is only available to businesses that anticipate incurring no more than 1million of input tax in the current year. INhERITANCE TAX The nil-rate band The nil-rate band for the tax year 201011 is unchanged at 325,000. In previous Paper P6 exams it has been assumed that the current nil-rate band also applied in earlier years. From the June 2011 exam, this will no longer be the case. The nil-rate bands for earlier years will be provided in questions as and when they are required. sTAMp duTy ANd sTAMp duTy lANd TAX (sdlT) The rates and limits for the tax year 2010 11 are the same as those for 200910. The temporary exemption for residential properties worth up to 175,000 ended on 31 December 2009. An exemption for first-time buyers of residential properties costing no more than 250,000 has been introduced from 25 March 2010 until 24 March 2012. This information will be provided in the tax tables in the exam. FuRThER REAdINg The changes introduced by the Finance Act 2010 (No 1 and No 2) will be incorporated into the following articles published on the ACCA website: Corporation tax Corporation tax and groups parts 1 and 2 Capital gains tax and inheritance tax International travellers Trusts and tax Rory Fish is examiner for Paper P6 (UK)

Furnished holiday lettings The letting of furnished holiday accommodation is treated as a trade such that various advantages in respect of the use of any losses arising, the ability to make pension contributions in respect of the income, and certain capital gains reliefs arise. It was intended that these rules would be withdrawn from 6 April 2010 but this withdrawal has not taken place. Instead, the intention now is to make changes to the tax treatment of such properties from April 2011 following public consultation. Accordingly, the rules that applied in the tax year 200910 will continue to apply for the tax year 201011. This includes the change introduced by the Finance Act 2009 such that the rules now cover properties in the European Economic Area and not just those in the UK. Any question in the exam would make it clear whether or not a property was situated in the European Economic Area. Rate of tax for trustees For the tax year 201011, the trust rate of income tax payable by the trustees of a discretionary trust has been increased from 40% to 50%. Although you are not required to be able to calculate the income tax payable by trustees you need to be aware of this change as it affects the tax payable by beneficiaries who receive income from discretionary trusts.

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appendix two
RElEVANT TO CAT pApER 9 (uK)
This article should be read by students sitting CAT Paper 9 (UK) at either the June or December 2011 exam session. If you are sitting the exam in December 2010, you will be examined on the Finance Act 2009, which is the legislation as it relates to the tax year 200910. This article is not relevant to you, and you should refer to the Finance Act 2009 article published on the ACCA website at www.accaglobal.com/ FA09. The sub headings in this appendix refer to the headings in the main article on pages 1 to 12. INCOME TAX Rates of Income Tax The revised thresholds and the rates of tax shown, including the new higher rates for income above 150,000, will also be used in Paper 9 (UK). The extension of both the basic-rate band and the higher-rate band for gift aid or personal pension contributions will also be examinable. The use of the 10% rate for savings income is examinable. personal Allowance Only the personal allowance for taxpayers under 65 is examinable in Paper 9 (UK). Information on the higher allowances and the restriction limit will not be given on the Paper 9 (UK) rates and allowances sheet. The withdrawal of the allowances for high earners and the effect of personal pension plan contributions and gift aid on the higher-rate band will also be examinable. Employment Income Company Car Benefit Paper 9 (UK) will examine the same detail as shown for Paper F6 (UK). Company Car and Van Fuel Benefit The new base figures of 18,000 and 550 will be used in the 2011 exams. Official Rate of Interest The new rate of 4% will be used in the 2011 exams. International Accounting standard Terminology The same new terminology that is to be used in Paper F6 (UK) will be used in Paper 9 (UK). CApITAl AllOwANCEs The new rules for capital allowances for cars will be examinable with rates being given in the rates and allowances sheet. A cars CO2 emission rate will always be given in the exam. The restriction of writing down allowance (WDA) to 3,000 for expensive cars purchased prior to 6 April 2009 remains examinable. The 40% first year allowance (FYA) will not be examined in the 2011 exams, but the increased annual investment allowance (AIA) will be. No questions will be set involving the apportioning of AIA for periods straddling 6 April 2010. Industrial Buildings Allowance (IBA) Paper 9 (UK) will follow the same treatment for IBA as Paper F6 (UK) and therefore the WDA for both exams in 2011 will be 1%. loss Relief Due to the transitional extended carry back rules for trade losses, questions were not set on the use of these losses in the 2010 exams. However, as these only applied to 200809 and 200910, sole trader loss relief questions are examinable in 2011. Furnished holiday lettings The treatment of furnished holiday lettings for 201011 will also remain unchanged in Paper 9 (UK). Individual savings Accounts (IsAs) Detailed knowledge of these remains outside the syllabus but knowledge of income from ISAs being non-taxable is examinable. pension schemes Awareness of the annual allowance and lifetime allowance limits is required but the additional tax charge for excess contributions and for exceeding the lifetime allowance will not be examinable. The method of obtaining tax relief for contributions to both occupational and personal schemes remains examinable. Antiforestalling provisions will not be examined. CORpORATION TAX Terminology The same new terminology shown for Paper F6 (UK) will be used in Paper 9 (UK). Rates of Corporation Tax The rates of tax and the upper and lower limits will be given in the rates and allowances sheet in the same way as Paper F6 (UK) and will remain examinable. loss Relief The transitional rule for losses occurring in periods ending between 24 November 2008 and 23 November 2010 will not be examinable. CApITAl gAINs TAX Individual Exemption limit The unchanged limit of 10,100 for 2010 11 will also be used in Paper 9 (UK). Rate of Capital gains Tax The 18% rate will continue to be applied in Paper 9 (UK). The higher rate of 28% for those individuals with higher earnings will also be examined. No questions involving disposals occurring before 23 June 2010 will be set. Entrepreneurs Relief Paper 9 (UK) will examine entrepreneurs relief in a basic manner. Associated disposals will not be examined. No questions will be set which involve some assets which qualify for entrepreneurs relief and some which do not. Candidates will be expected to know the 10% rate for those assets, which qualify for entrepreneurs relief. Understanding of the conditions which need to be satisfied for an asset to qualify for entrepreneurs relief are also expected knowledge. INhERITANCE TAX This remains outside of the Paper 9 (UK) syllabus. NATIONAl INsuRANCE CONTRIBuTIONs (NIC) Class 1 and Class 1A NIC The unchanged rates and thresholds will also be used in both 2011 exams for Paper 9 (UK). Where NIC is required to be calculated on a weekly or monthly basis, the thresholds should be divided by 52 or 12 respectively. Class 2 and Class 4 NIC The same detail will be used in both of the 2011 Paper 9 (UK) exams. VAluE AddEd TAX (VAT) standard rate of VAT The same information will be provided in the 2011 exams as in Paper F6 (UK), including the different standard rates. A question will not be set involving a VAT period where there is a change in the VAT rate. Registration and deregistration limits The new registration and deregistration limits will also be used in both of the 2011 exams. Online Filing The new rules for online filing for newly registered businesses will also be examinable in Paper 9 (UK). Flat-rate scheme The changes to the flat-rate scheme will also be examinable in Paper 9 (UK). Imports, Exports and Trading within the European union This remains part of the Paper 9 (UK) syllabus. TAX MANAgEMENT All the detail included under this heading in the Paper F6 (UK) article is also examinable in the Paper 9 (UK) exams. The calculation of interest however remains outside the syllabus. Keith Molson is examiner for Paper 9 (UK)