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ATC's ACCA Exam Tips (June 2010) F6ENG

This is the sixth exam of the new syllabus. The examiner, David Harrowven has established a consistent pattern, although the world pass rate has varied between 45% and 61%.

This exam is the first occasion in which the provisions of the Finance Act 2009 are examinable. The main changes are: (i) a continuation of the reform plant and machinery capital allowances started by the Finance Act 2008 with new rules for motor cars based on CO2 emissions rather than cost. (ii) several temporary measures intended to offset some effects of the current economic recession – namely a 40% first year allowance for purchases of plant and machinery (except motor cars and special rate pool assets) and an extension of the carryback of trading losses for both corporation tax and income tax. (iii) the exemption from UK corporation tax of foreign dividends pqid after 30 June 2009. They are now treated like a UK dividend, with double tax relief no longer relevant. (iv) several important changes in self assessment rules, including new regulations governing appeals against HMRC assessments. All the changes are summarised in an article published in September 2009 Student Accountant magazine.

Other recent articles of note in the Student Accountant are: (i) November 2009 on the new approach to calculation of adjusted trading profits or losses which must be followed in all exams; (ii) April 2010 – exam notes which sets out the information which students will find attached to the June 2010 exam paper

Exam format

• Q1 Income tax (25 or 30 marks)
• Q2 Corporation tax (25 or 30 marks)
• Q3 CGT (20 marks)
• Q4 Any topic
• Q5 Any topic

VAT (minimum of 10% and maximum of 15%) could be tested in either Q1, Q2, Q4 or Q5, So far, it has been included in Q1 and Q2 on four occasions - Q1 (Dec 07 – 10 marks); Q2 (June 08 – 14 marks),Q2 (Dec 08 – 11 marks) and Q2 (Dec 09 – 10 marks). In June 09 it was a separate question (Q4 – 15 marks)

Q2 can contain up to 10 marks on groups and foreign trading income of a company, and so far small elements have appeared in each exam; group loss relief (Dec 07 – 5 marks), foreign dividends (June 08 – 2 marks and Dec 09 – 8 marks with transfer pricing rules); associated companies (Dec 08 – 1 mark) and group capital gains (June 09 – 5 marks)

Exam Tips

Income tax topics

Q1, (also in Q4 or Q5)

A possible Q1 could feature a cessation of self-employment, probably with capital allowances, with a commencement of employment (or retirement) together with a personal income tax computation. Employment income could feature certain benefits (eg motor cars, particularly a low CO2 emission car, use of assets where annual benefit is 20% p.a.; transfers of used assets to the employee; loan interest benefit, use of accommodation). Other topics due for examination are (i) trading loss relief (in the opening years with s72, ITA 2007 relief or the normal years with the FA 2009 extended carryback relief) (ii) exempt income from Individual Savings Accounts (iii) property income rules, in particular the furnished holiday letting rules which are abolished from April 2011, and (iv) partnerships with trading loss relief

Corporation tax topics

Q2, (also in Q4 or Q5)

A possible Q2 would be a 12 month accounting period straddling 31 March, with a detailed adjustment of profit and capital allowances featuring motor cars and 40% FYA and a special rate pool. May be a capital gain, perhaps with rollover relief.

Other aspects of corporation tax due for examination are (i) long period of account rules (ii) property business income and (iii) corporate self assessment for large companies and (iv) trading loss relief in a group.

Capital gains tax topics

Q3

A capital gains tax computation for a personal or corporate taxpayer. Possible gain/ loss calculations could include any of the following: (i) a disposal of quoted shares with a rights or bonus issue; (ii) take –over with shares and cash; (iii) a sale of shares in the taxpayer’s personal trading company with the new entrepreneurs’ relief; (iv) a chattel sold at a loss; (v) damage to a non-wasting asset with restoration using insurance compensation; disposal of the remainder of an asset after an earlier part disposal, and; (vi) rollover relief.

VAT topics

This time probably included in Q1. Possible aspects could include (i) deregistration and disposal of assets of business to former owner or others, (ii) calculation of VAT liability for a tax period, may be the last one, (iii) the annual accounting scheme, and (iv) default surcharge

National insurance and tax administration

Employer’s Class 1 NIC. This would fit in nicely with employment issues, particularly benefits
Tax administration – PAYE; corporate self-assessment for large companies; penalties for non-compliance and new provisions on appeal procedures (relevant to all taxes)

By Colin Channer

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