– Consortium relief
– Overseas aspects: CFCs
– Anti-avoidance: pre entry capital losses and trading losses
– Patent box
– Reliefs: rollover, gift, disincorporation
– Deed of variation
– New IHT rate for charitable legacies
– Lifetime gifts computation
– Income tax comps at marginal rates
– Benefits: car
– Share incentive plans
– Overseas aspects
Personal financial planning
– VCT / seed EIS
– Description and income tax aspects
– Pre-registration input VAT
– Employed vs. self-employed
– Sole trader vs. company
– Lease vs. buy assets: net cost
– IHT vs CGT for gifts
Stamp duty and SDLT
-Groups of companies involving overseas aspects
-Unincorporated business particularly loss relief or involving a partnership
-Capital gains tax versus inheritance tax
-Overseas aspects particularly the new rules on residence
-Company purchase of own shares
-Enterprise investment schemes/ venture capital trusts
-Change in accounting date
-VAT partial exemption
-Transfer of trade versus sale of subsidiary
-Patent box, research and development expenditure
– IHT with the death estate including BPR, APR and gifts into a trust.
– Changing the will after a person is dead, using a deed of variation to apply the reduced rate of IHT when a charitable legacy is made.
– Company selling shares and the substantial share exemption or a company selling its trade/assets.
– Research and development expenditure for large companies.
– Controlled foreign companies.
– Badges of trade, partnership with a partner joining/leaving with opening year rules, choice of accounting date, conditions to change the accounting date.
– Trading losses at the beginning or middle of the trading cycle, maybe in a partnership.
– Personal pension schemes.
– Errors on the VAT return – prompted/unprompted disclosure.
– Capital gains tax including entrepreneurs’ relief, PPR relief/letting relief and shares matching rules.
– The capital goods scheme.
– Overseas aspects of VAT including exports and imports.
– Ethics and the duties of a senior accounting officer.
Question 1 will be for 35 marks and contain 4 professional marks awarded for
structuring the answer in the proper format and dealing professionally with the
issues raised. In either of these first 2 questions (question 2 will carry 25
marks), we are also likely to find 5 marks dealing with ethical issues such as
confidentiality, conflict of interest or non disclosure. Professional issues, such as information required from a new client are also well tested areas.
Here are 9 marks therefore that are little to do with technical competence in
taxation in which candidates at this level should and must score highly!
A rightly well examined area of the examining team deals with groups of companies, often where losses, both trading and maybe non trading loan relationship losses as well as capital have been experienced along with other chargeable gains arising and these need to be managed efficiently. This may involve group relief and consortium relief and the use of the matching election or group rollover relief within a gains group.
In preparing the Corporation Tax computation the new areas of applying the R&D tax credit for large companies and the lower rate of tax applicable to profits within the patent box are issues that could be tested or be discussion issues on the tax incentives for companies to invest in innovation and new products. This may also look in more detail at the purchase and disposal of other intangibles acquired post 1 April 2002
A number of areas where the candidate is asked to advise on both actual and
planned transactions would also be involved. A major issue here is dealing with
changes in group structures such as a proposed disposal of a subsidiary business
where either the parent company may sell the shares in the subsidiary company or
the subsidiary disposes of its assets and trade.
The decision will be based on which exit route achieves the highest net cash
receipt on sale.
The sale of the shares would test knowledge of the substantial shareholding
exemption and degrouping charges, while the sale of assets and trade would
involve computing chargeable gains or trading profits/losses arising on the sale of
each asset and calculating either the Corporation Tax payable for the final trading period or possibly the tax repayable as a result of a terminal loss relief claim.
The question may also/instead have an international aspect to it with advice being
required on whether to set up an overseas business as a subsidiary or branch.
If investing in a country with a lower tax rate than in the UK then the application of the new CFC legislation may be relevant along with whether to make the exemption election in respect of overseas branches.
Important points in the owner managed business life cycle lend themselves well
to practical real life scenarios involving multiple taxes. Advice on a start up
of a new business would involve the choice between unincorporated and incorporated along with the use of losses and the new rule of capping loss reliefs set against total income of earlier years, where employment income issues may be tested and termination payments on cessation of that employment. This would also test VAT registration and pre-registration input VAT along with NIC’s.
A tax efficient exit strategy for the owner manager is also where the client would need well structured professional advice. Should the client sell shares in their company accepting, as well as cash, shares and loan stock from the buyer, maybe a plc and possibly then lose their right to entrepreneurs’ relief in the future, or should the company sell its assets and trade and then distribute the net cash to the owner as either a capital or income distribution.
Disincorporation is not an area that has been previously tested but the new disincorporation relief may attract the examiners eye.
Another favoured area of the examining team has been the overseas aspects of
personal tax where we may have to advise on the implications for all the personal taxes of say a UK resident accepting a contract of employment overseas and determining whether their overseas income would be chargeable to UK tax and
if so, the application of DTR. The new statutory tests of residence would be examined here along with the rules on splitting the tax year between periods of residence and non residence.
With many candidates now coming through to P6 having passed F6 with IHT in that
syllabus we may see a move away from standard computational exercises on the
death of the taxpayer. Advice may be needed on when planned gifts should be
made, in lifetime or on death and therefore in relation to lifetime gifts the
taxpayer’s CGT position will need to be considered. This brings into consideration the CGT and IHT reliefs which are consistently examined as students consistently get them wrong! Candidates must know the conditions for reliefs to apply and must
not confuse CGT and IHT reliefs – note particularly gift relief and entrepreneurs’ relief in CGT and BPR in IHT.
If a death estate is required it is likely that there would be significant
bequests to charity bringing in the new 36% reduced rate. Planning after death
may then involve the use of a deed of variation by the beneficiaries to increase
the charitable legacy to meet the 10% required level, as the resultant saving of
IHT on the death estate is greater than the increased gift to charity.
In terms of advising on tax efficient investments then, though high risk, the
savings under the EIS or the new Seed EIS are high and may be tested.
Candidates must ensure that they have worked through all the technical articles written by the exam team relevant to FA 2013 and thought about how the technical issues may be applied in real life practical scenarios.
– Make sure you know your basics – the F6 syllabus is assumed knowledge.
– Read the requirements within the main body of the question as the requirements are embedded in the question.
– Think before you start writing.
– What is the ‘story’? – it is easier to plan an answer when you fully understand the scenario given.
– Answer the question set and do not go off on a tangent.
– State the obvious – the marker is not a mind reader- if you do not write it down you will not get the mark.
– Think about the order you answer the questions- you could attempt part B first as the questions are smaller.
– Watch you timing – you must attempt four questions – remember 1.8 minutes per mark (excluding the 15 minutes of reading time). Good luck.