Institute of Chartered Accountants in England and Wales (ICAEW) ACA Professional Level: Taxation Syllabus

What is the CGT annual exempt amount, and what are the current CGT rates for individuals?

The annual exempt amount is $\pounds 3{,}000$. For disposals, gains falling in the basic rate band are taxed at $18\%$ and gains in the higher/additional band at $24\%$ (these unified rates apply to most assets including residential property from 30 October 2024).

How is the chattels marginal relief gain calculated when a chattel is sold for more than £6,000?

If a non-wasting chattel is sold for more than $\pounds 6{,}000$, the gain is capped at $\frac{5}{3} \times (\text{gross proceeds} - \pounds 6{,}000)$. The lower of this figure and the normal computed gain is the chargeable gain.

How is a part disposal of an asset calculated for CGT?

The allowable cost attributed to the part disposed of is $\text{Cost} \times \frac{A}{A+B}$, where $A$ = gross proceeds of the part sold and $B$ = market value of the part retained. The remaining cost is carried forward for the retained part.

Explain the conditions and effect of Business Asset Disposal Relief (BADR).

BADR applies to qualifying business disposals (e.g. all or part of a trading business, or a $5\%+$ shareholding in a trading company where the individual is an officer/employee) held for at least 2 years. Qualifying gains are taxed at $14\%$ (rate from April 2025), subject to a lifetime limit of $\pounds 1{,}000{,}000$.

Describe how gift holdover relief (gift of business assets) works.

On a gift (or sale at undervalue) of qualifying business assets, the donor and donee can jointly elect to hold over the gain. The donor's gain is deducted from the donee's base cost, deferring the gain until the donee disposes of the asset. No CGT is payable by the donor at the time of the gift.

Explain rollover relief (replacement of business assets).

When a business sells a qualifying business asset and reinvests the proceeds in a new qualifying asset within one year before to three years after disposal, the gain can be rolled over by deducting it from the cost of the replacement asset, deferring the gain. Full relief requires all proceeds to be reinvested.

What is Private Residence Relief and how is any chargeable portion calculated?

A gain on an individual's only/main residence is exempt for periods of actual occupation plus the final $9$ months of ownership (deemed occupation). The chargeable gain is $\text{Total gain} \times \frac{\text{non-exempt months}}{\text{total months of ownership}}$.

Explain the share matching rules for individuals disposing of shares.

Disposals of shares are matched in this order: (1) shares acquired on the same day, (2) shares acquired in the following 30 days (the 'bed and breakfast' rule), then (3) shares in the share pool (the s.104 pool). This determines which acquisition cost is used.

What is the share 'pool' (s.104 holding) and how does it operate?

The share pool aggregates shares of the same class in the same company into a single asset, tracking the number of shares and total cost. On a disposal, the average cost is used: $\text{cost of shares sold} = \text{pool cost} \times \frac{\text{shares sold}}{\text{total shares in pool}}$.

How is a bonus issue treated in the share pool versus a rights issue?

A bonus issue adds free shares to the pool with no extra cost (only the number of shares increases). A rights issue adds shares at a cost (shares are bought, often at a discount), so both the number of shares and the total pool cost increase.

What is the proforma for computing a company's taxable total profits (TTP)?

Add together: tax-adjusted trading profits (after capital allowances), property income, non-trading loan relationship income (interest), and chargeable gains, then deduct qualifying charitable donations (paid gross). The result is the taxable total profits. Dividends received are generally exempt and excluded.

State the corporation tax rates and the profit thresholds that apply.

The main rate is $25\%$ where augmented profits exceed $\pounds 250{,}000$. The small profits rate is $19\%$ where augmented profits are $\pounds 50{,}000$ or below. Between these limits, marginal relief applies, giving a marginal (effective) rate of $26.5\%$ on profits in that band.

How is corporation tax marginal relief calculated?

$$\text{MR} = F \times (U - A) \times \frac{N}{A}$$ where $F$ is the standard fraction $\frac{3}{200}$, $U$ is the upper limit ($\pounds 250{,}000$), $A$ is augmented profits, and $N$ is taxable total profits. Tax = ($25\% \times$ TTP) minus marginal relief.

How are the corporation tax profit limits affected by associated companies?

The lower limit ($\pounds 50{,}000$) and upper limit ($\pounds 250{,}000$) are divided by the number of associated companies (including the company itself). For example, with one associate the limits halve to $\pounds 25{,}000$ and $\pounds 125{,}000$.

How can a company use a current period trading loss (CY and carry-back relief)?

A trading loss can be set against total profits of the current accounting period, and then carried back 12 months against total profits of the prior period (must claim current year first). Relief is against total profits before qualifying charitable donations, and claims are all-or-nothing (no partial).

How is a company's trading loss carried forward relieved under the post-2017 rules?

Trading losses arising from 1 April 2017 can be carried forward and set against total profits of future periods (not just trading profits), via a claim. Use is subject to the $\pounds 5{,}000{,}000$ deductions allowance plus $50\%$ of profits above that (the loss restriction) for large companies.

What is group relief and which companies qualify as a 75% group?

Group relief allows current-period losses to be surrendered between group companies. A $75\%$ group exists where one company owns at least $75\%$ of the ordinary share capital of another (directly or indirectly), and is entitled to $\geq 75\%$ of distributable profits and assets on winding up.

What is a chargeable gains group, and what is the ownership test?

A chargeable gains group requires a $75\%$ direct holding at each level and an effective $50\%+$ holding by the principal company. Assets can be transferred between group members on a no gain/no loss basis, and a joint election can reallocate gains/losses within the group.

Define a close company.

A close company is a UK resident company controlled by five or fewer participators, or by any number of participators who are directors. 'Control' generally means owning more than $50\%$ of share capital, voting power, or rights to assets/income.

What are the tax consequences of a loan made by a close company to a participator?

The company must pay a notional tax charge (s.455 tax) of $33.75\%$ of the loan to HMRC, due 9 months and 1 day after the period end. The tax is repaid to the company when the loan is repaid or written off. If written off, the participator is taxed as if receiving a dividend.

How are associated companies counted for the close/associated company rules, and why does it matter?

Companies are associated if one controls the other, or both are under common control. Associated companies share the corporation tax profit limits and the small profits/marginal relief thresholds, and affect quarterly instalment payment thresholds. Dormant companies are generally excluded.

When is corporation tax normally due for a company that is not 'large'?

For a company that is not large, corporation tax is due 9 months and 1 day after the end of the accounting period (e.g. for a year ended 31 March, tax is due 1 January).

Explain the quarterly instalment payment (QIP) regime for large companies.

A 'large' company (augmented profits over $\pounds 1{,}500{,}000$, divided by associates) pays corporation tax in four quarterly instalments, due in months 7, 10, 13 and 16 from the start of a 12-month accounting period. 'Very large' companies (profits over $\pounds 20{,}000{,}000$) pay in months 3, 6, 9 and 12.

What is the VAT compulsory registration threshold, and what are the two tests?

The threshold is $\pounds 90{,}000$. Historic test: taxable turnover in any rolling 12-month period exceeds $\pounds 90{,}000$ (notify within 30 days of month end, registered from the first of the following month). Future test: turnover expected to exceed $\pounds 90{,}000$ in the next 30 days alone (register immediately).

Distinguish between standard-rated, zero-rated and exempt supplies for VAT.

Standard-rated supplies are charged at $20\%$ (or $5\%$ reduced rate) with full input VAT recovery. Zero-rated supplies are charged at $0\%$ but are taxable, so input VAT is recoverable. Exempt supplies carry no output VAT and do not allow recovery of related input VAT.

State the general rules on when input VAT cannot be recovered.

Input VAT is generally non-recoverable on: business entertaining (except staff/overseas customers), the purchase of cars not used wholly for business, and supplies relating to exempt outputs (subject to partial exemption de minimis). Valid VAT invoices are required for recovery.

What is the VAT default surcharge/penalty regime for late returns and payments?

Under the points-based system, a penalty point is given for each late VAT return; once the threshold is reached a $\pounds 200$ penalty applies (plus $\pounds 200$ for each further default). Late payment incurs a first penalty (e.g. $2\%$ then $4\%$) and second penalty interest accruing daily based on how long the tax is overdue.

State the stamp duty / stamp duty reserve tax rate on share transfers, and the SDLT position.

Stamp duty (on paper share transfers) and SDRT (on electronic/paperless transfers) are charged at $0.5\%$ of the consideration, rounded up to the nearest $\pounds 5$ for stamp duty. SDLT is a separate tax charged on land and buildings transactions in England and Northern Ireland on a slice/banded basis.

What are the self assessment filing deadlines and key penalties for individuals?

Online returns are due by 31 January following the tax year (paper by 31 October). A missed deadline gives an immediate $\pounds 100$ penalty, then $\pounds 10$/day after 3 months (max $\pounds 900$), with further $5\%$ (or $\pounds 300$) penalties at 6 and 12 months. Records must be kept for the required period.

How are penalties for errors in returns determined, and what are HMRC's information/inspection powers?

Error penalties depend on behaviour: careless ($0$–$30\%$ of potential lost revenue), deliberate ($20$–$70\%$), deliberate and concealed ($30$–$100\%$), reduced for unprompted disclosure. HMRC has powers to issue information notices, inspect business premises, and open compliance checks/enquiries within statutory time limits. Under the ICAEW Code, a member must advise the client to disclose errors and, if the client refuses, consider ceasing to act and the rules on money laundering reporting.