ACCA Study Material

One of the areas frequently examined in the Advanced Tax exam is the substantial shareholding exemption. (SSE) It is firstly important to note that this is only available to companies to encourage mergers and acquisitions. The substantial shareholding exemption does not apply to sales of shares by individuals. When a company sells shares that satisfy 3 conditions, the shares are automatically eligible for the SSE:- 1.  Must own at least 10% ordinary share capital 2.  The 10% must be owned for a continuous period of 12 months within the previous 6 years before the disposal 3.  The shares disposed of must be in a trading company There is no requirement to own 10% at the actual date of disposal. As a result of the SSE, any gain arising on the shares will be tax-free which is a tax advantage. However, if a capital loss arises, this capital loss is not available for offset against other capital gains which is a tax disadvantage. It is not possible to make an election to disapply the SSE. This means that if you are expecting a gain, you should try and retain the shares for 12 months in order to escape paying tax on the gain. Alternatively, if anticipating a capital loss, try and dispose of the shares after less than 12 months to avoid the SSE and preserve the capital loss. Capital losses must be offset against capital gains in the same period after which unused capital losses can only be carried forward against future capital gains. Capital losses cannot be carried back against previous gains.

One of the popular areas in the Advanced Tax exam is CGT (capital gains tax) groups. For CGT groups, the direct shareholding has to be 75% but the indirect shareholding only has to be 51%. Only UK resident companies can be included in the group, but the holding company can be an overseas company. It is important to remember that a company can only be in a single CGT group. There are 3 tax benefits of being in a CGT group:- 📌Assets like buildings can be transferred to group members at nil gain/nil loss. The actual sale proceeds are ignored for tax purposes. 📌Use the group election to give a capital gain / capital loss to a group company. This must be done within 2 years from the end of the accounting period in which the disposal took place. Giving a capital gain to another group company can enable higher group relief. It is also possible to give part of the gain to one group company and part of the gain to another group member. 📌Group rollover relief enables the gain on business assets to be postponed if one group company sells an asset (usually a building) and another group member reinvests the sale proceeds in a replacement business asset ( buildings or fixed plant and machinery ).

What is the only CGT deferral relief which can be claimed by both individuals and companies? The answer ( of course) is the most important relief which features in all tax exams -rollover relief. However many students confuse rollover and holdover relief. What is the key difference between rollover and holdover relief? 🎢 Rollover relief enables businesses to postpone paying tax on assets like buildings used in the trade as long as the sale proceeds are reinvested in replacement assets. The sale proceeds must be reinvested in a replacement business asset 1 year before to 3 years after the disposal of the original asset. If part of the sale proceeds are retained, a gain equal to that amount crystallises immediately. The balance of the gain can be deferred. If the replacement asset is a freehold building or goodwill, then rollover relief can be claimed. The gain deferred is postponed by deducting it from the cost of the replacement asset. The reduced cost of the replacement is called base cost which means that the gain is deferred permanently until the replacement freehold building or goodwill is sold. Alternatively, the sale proceeds can be reinvested in a qualifying depreciating asset with a life of 60 years or less (fixed plant and machinery or a leasehold building). Here, holdover relief can be claimed instead. The gain is suspended separately until the earliest of 3 events. ·      Sale of replacement ·      Replacement obsolete ·      10 years after the replacement is bought. The cost of the depreciating asset is unchanged. When the depreciating asset is sold, the capital loss cannot be claimed if capital allowances were available earlier. Holdover only offers temporary relief and allows the gain to be postponed for a maximum of 10 years. It is possible to convert a held over gain into a rolled over gain. This is called ‘hold to roll’. #atxuk #P6 #tax #acca #june2024 #neildacosta #accastudents #accaexams

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As part of my Tax Tuesday series, here's an ACCA Tax tip for all those pursuing the June 2024 ACCA TX exam. A core examinable area is income tax, within income tax there are 4 key workings that all learners must grasp to score heavily in the exam, particularly in section C: 1. Taxable benefits in kind (BIK): specifically, car and fuel BIK, accommodation BIK, loan BIK, private use of an asset, and gift of an asset, each has special rules and awareness is essential. 2. Adjutment of profit including capital allowances: in over 25 years of teaching this paper I cannot remember a single occasion where candidates haven't had to tackle this crucial working in their exams. Learn the adjustment of accounting profit computation - there are 5 key steps: essential knowledge! 3. Property income: Perhaps not as popular as the above two but it is fairly regular and learners must follow the three key steps to calculate rental income correctly - learn it! 4. Income tax computation: once you have calculated the above, it is vital that you can construct this computation to identify the taxable income, the income tax liability, and the income tax payable. I've been teaching ACCA TX for over 25 years and have successfully taught over 2500 students in the UK and the UAE on how to pass this exam! If you would like to know more, please do not hesitate to get in touch!

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Different type of Depreciation Calculation Method important for FR, SBR or any other account paper

ACCA March 2024 exam tips at your fingertips Now is not the time to panic! Check out all our March ACCA exam tips in the latest PQ magazine, out now.   Here are some highlights of just some of the tips we are providing:   PM If you are sitting ACCA PM exams this time around never be tempted to spend longer than 5 minutes on any section A question, according to BPP’s top team of tutors. Good time management is key here – you don’t want to get caught up in a tough calculation. Remember, they are only ever worth 2 marks! It doesn’t pay either to neglect the written elements in section C as they are normally worth 60% of the marks. And, make sure you always fully explain your ideas.   FR As ACCA clarified that a consolidated financial statements preparation question could include two subsidies and one associate you must be prepared for such a question, say the experts. This gives the examiner scope to examine the disposal of a subsidiary, including a discontinued operation. As the ACCA has also clarified the syllabus wording emphasising the importance of cash flows in interpreting financial statements you have to be prepared for a question on this too! Don’t be knocked off course too this March by a question or two in section A on no-core areas such as sustainability!   AA Those sitting AA this Spring should know tutors expect questions in section A to focus on syllabus areas A and E. The majority of marks in section B in each question will test syllabus areas B, C and/or D. The AA exam often provides a table for you to complete your answer. For example, audit risk questions will have a table with two columns, one for 'Audit risk' and one for 'Auditor's response' with each properly explained point being worth one mark. Using this tabular approach should help you to answer both parts of the question, therefore maximising your marks! Well, that is the theory anyway.   FM The commonly examined areas of FM’s section B are working capital management, business or security valuations, and financial risk management, say our tipsters. Meanwhile the two questions in section C will focus mainly on syllabus sections C, D and E. Remember that whichever of these topics does not appear in section C is most likely to appear in section B. Finally, questions in section A will often test your understanding of financial management and objectives as well as the economic environment and financial institutions topics. Remember you can subscribe to your own free copy of PQ magazine at www.pqmagazine.com PQ magazine – a free resource for all accountancy students.  

🚨ACCA ATX UK EXAM March 2024🚨 One important area for Advanced Tax is where the company buys back the shares from the shareholder. The buyback is either treated as a dividend or a capital gain.   The important aspect to appreciate here is the taxpayer does not have the option of making an election. If certain conditions are satisfied (unquoted trading company, shares owned for 5 years (if inherited only 3 years) , taxpayer is UK resident, buyback is for the purpose of company’s trade ( purchase due to retirement, death , illness or a director dispute) , there is a substantial reduction in shareholding -at least 25% and finally after the buyback the shareholder does not own more than 30% share capital) then the buyback is automatically treated as a capital gain. The benefit here is as the shareholder is employed by the company and owns at least 5% OSC for 2 years, business asset disposal relief is available and the gain up to £1M is taxed at a low rate of just 10%. If the conditions are not satisfied, the buyback is automatically treated a dividend. This means that the first £2,000 will be taxed at 0%. Thereafter, dividends in the higher rate band are taxed at 33.75% while dividends in the additional rate band will be taxed at 39.35%. 💡Example:- Marcia is an additional rate taxpayer and has owned her shares for 5 years. Due to a director dispute, the company has decided to buyback her all her 35% shareholding. As all the conditions are satisfied, this is automatically treated as a gain for Marcia. (Assume the gain is £1M). The capital gains tax payable will be (£1M -£12,300) x 10% = £98,770 If Marcia only owned the shares for 4 years, then the conditions would not be satisfied and the £1M would be treated as a dividend. The income tax payable will be (£1M- £2,000) x 39.35% = £392,713. The dividend route results in an extra tax liability of (£392,713 - £98,770) = £293,943. By ensuring that all the relevant conditions are satisfied, a substantial tax saving can be achieved. #acca #tax #ATX #atxuk #March2024 #professionallevelpaper #P6