[AmandaP]

You’re welcome.

[AmandaP]

Charitable donations under the gift aid scheme attract tax relief at the taxpayer’s highest marginal rate of tax, i.e. the rate of tax that they would pay on an extra £1 of income (or, looking at it the other way round, the rate of tax they would save on £1 less of income).

A basic rate taxpayer’s marginal rate of INCOME tax is 20%, for a higher rate taxpayer it’s 40% and for an additional rate taxpayer it’s 45%.

The vast majority of taxpayers are basic rate taxpayers (BRT), so for them, paying the donation net of basic rate tax means that if they want a charity to receive £1,000, they actually pay £800 (80%) net to the charity. As charities don’t pay tax on donations, they claim the tax suffered at source back from HMRC, so HMRC gives the charity the other £200 (20%), so that the charity receives £1,000 (gross). The BRB can be extended by the the gross donation but for INCOME tax there is no point in doing so, as the taxable income falls within the existing BR band anyway, so extending it will not make any difference to the income tax liability; i.e. if your taxable income is £20,000, then it’s taxed at 20% regardless of whether your BRB is £37,700 or £38,700.

HMRC assumes that most taxpayers are basic rate taxpayers, but for a higher rate taxpayer (whose marginal rate of income tax is 40%), they deserve 40% tax relief, so 20% tax relief is given at source (as per a BRT) but they then get the extra 20% tax relief they deserve by extending the BR band by the gross donation, so that more income is taxed at 20% and less at 40%, giving an extra 20% of tax relief on the donation (i.e. reducing their income tax liability by 20% of the gross donation) so that they get 40% relief overall (20% at source and a further 20% through the calculation of income tax). The extra 20% is simply the difference between taxing an amount at 20% or taxing it at 40%.

For an additional rate taxpayer (whose marginal rate of income tax is 45%), they deserve 45% tax relief, so 20% tax relief is given at source (as per a BRT) but they then get the extra 25% tax relief they deserve by extending the BR and HR band by the gross donation, so that more income is taxed at 20% and less at 45%, giving an extra 25% of tax relief on the donation (i.e. reducing their income tax liability by 25% of the gross donation) so that they get 45% relief overall (20% at source and a further 25% through the calculation of income tax). The extra 25% is simply the difference between taxing an amount at 20% or taxing it at 45%.

Although for a BRT there is no point in extending the BR band by the gross donation for INCOME tax, if the taxpayer has taxable gains, then it is worth extending the band as that will result in them paying less CGT. So if taxable income is £(45,270 – 12,570) = £32,700 and the BRB is £(37,700 + (2,400 x 100/80) = £3,000) = £40,700, taxable income is still taxed at 20% BUT there is more BRB available for gains (£40,700 – £32,700) = £8,000 so we pay CGT at 18% on £8,000 of gains rather than on £5,000 of gains (the extra £3,000 which is the gross gift aid donation extension) giving a CGT saving of (24% – 18%) = 6% of £3,000 = £180, giving us total tax relief on the gross gift aid donation of 20% at source (IT) and 6% (CGT) = 26% (£600 IT at source (£3,000 gross – £2,400 paid net)) and £180 through the calculation of the CGT liability (£3,000 x 6% (24% – 18%)) = £600 + £180 = £780.

780/3,000 = 26%.

I hope this has clarified things for you.

[AmandaP]

Congratulations, @dangkhoa.nhhtd on passing your TX-UK exam; I’m really pleased for you!

[AmandaP]

You’re very welcome. Good luck in your studies.

[AmandaP]

Correct!

[AmandaP]

In Chapter 4, on page 42 section 2 part 2 it states:

‘Cash received and cash paid includes not only cash received from customers/paid to suppliers, but also cash received/paid on the sale/purchase of capital assets that would normally qualify as plant and machinery for capital allowances purposes….with the exception of cars.’

In Chapter 5, on page 51 section 1 it states:

‘Under the CASH BASIS, most plant and machinery will not get capital allowances as the cost of the asset will be an allowable expense when incurred, and when sold, the proceeds of sale are taxed as a trading receipt. The only exception to this is where the asset is a car, where either capital allowances (and running costs) can be claimed as trading expenses, or the fixed rate mileage allowance.’

I hope this clears things up for you.

[AmandaP]

The new zero emissions car gets a 100% FYA (which is never time apportioned) and is only for business use, so the full £12,260 is claimed.

The TWDV on the pool is £18,000 at the start of the period (which should be 1 August 2025 NOT 1 April 2025 as the question says that this is an eight month period), so the WDA is £18,000 x 18% x 8/12 = £2,160.

So total allowances are £(12,260 + 2,160) = £14,420

[AmandaP]

I think you’re looking at the old lectures (FA2023).

The up- to-date lectures, Chapter 2 Example 13 Kelly (not Kerry) is in part 4 (towards the end) and uses a DNRB of £500.

[AmandaP]

You’re welcome.

[AmandaP]

No, the nil rate bands, both for savings and dividends, are part of the tax bands; i.e. included within not in addition to.

As Billy’s total taxable income is £39,930, he is a higher rate taxpayer so that fact means that his savings income gets a NRB of £500.

As his taxable NSI is £14,930, he has £22,770 of his basic rate band remaining to apply to his savings income. As the first £500 falls within this band, it is taxed at 0% leaving £22,270 of his basic rate band available for his savings income to be taxed at 20%. As his total taxable savings income is £25,000 and we have already taxed £(500 + 22,270) = £22,720, the balance of the £25,000 (£25,000 – £22,770) = £2,230 takes us over the BRB of £37,700 and is taxed at 40%.

[AmandaP]

The notes and lectures will be available over the next few days/weeks.

[AmandaP]

Also could you please confirm if my understanding related to this table is correct
Goods Services
Export B2B/B2C B2B – no output VAT
Output VAT cannot be charged B2C – Output VAT Charged
Input VAT related to the export can be claimed Input can be claimed

Import Output VAT charged Output VAT charged
Input VAT claimed (Reverse Charge) Input VAT claimed (Reverse Charge)

This isn’t a table so I don’t quite understand what you’re trying to say.

Goods – exports = zero rated
Goods – imports = PVA

Services:
UK business to overseas non-business customer (B2C) = UK VAT charged as normal
UK business to overseas business customer (B2B) = zero rated
Overseas business to UK business = reverse charge

[AmandaP]

Outside the scope means that they do not feature in the VAT system at all.

For example, If a person is VAT registered because they run a business and they are also employed part-time, they would not charge VAT on their wages as wages/employment income is outside the scope of VAT. The same goes for dividends – that person would receive dividends (a form of income) but dividends are outside the scope of VAT.

VAT is charged on the taxable supply of goods and services IN THE UK by a taxable person IN THE COURSE OF THEIR BUSINESS.

IN THE UK = VAT can be quite complicated but this is why overseas transactions have special rules. Generally exports are treated as zero rated and so there is no output VAT charged but input VAT can be reclaimed. The exception to this is where services are supplied by a UK business to an overseas non-business customer (e.g. a member of the public) where UK VAT would be charged as normal. For imports, for goods postponed VAT accounting (PVA) applies and for services the reverse charge applies. For both PVA and the reverse charge, the UK business importing the goods/incurring the service from an overseas supplier is effectively treated as selling those goods/supplying those services to itself and must account for both output VAT and input VAT. This is generally just an admin issue.

IN THE COURSE OF THEIR BUSINESS = goods you sell as part of a hobby are not in the course of business.

Donations to charity (up to certain limits) are not treated as supplies for VAT but the input VAT can be reclaimed. This is to encourage businesses to donate surplus stock etc to charitable causes.

Transfer of a going concern (TOGC) is outside the scope of VAT which means that no output VAT is charged by the seller and no input VAT can be reclaimed by the buyer.

Where a VAT group is in operation, the group is treated as a single entity for VAT (i.e. as if it were one business), therefore there is no VAT on intragroup supplies.

[AmandaP]

Try the ACCA website, but beware as the past papers are not updated for the current Finance Act:

https://www.accaglobal.com/uk/en.html

It is recommended that you buy an up to date revision kit where everything is updated.

[AmandaP]

Furnished Holiday Lettings (FHLs) have been removed from the syllabus, so ignore any reference to them in the property income section and as relevant earnings for pensions.

Changes to the rates of NIC including the employment allowance.

Changes to the rates of CGT (including BADR and Investors’ relief) and there is no longer a distinction between the treatment of residential property and other gains.

Changes to the VAT penalty for late payment.

So use the FA2024 materials at your peril! Bear in mind the changes to the rates above.

[AmandaP]

The notes have been updated and will be available shortly.

The lectures will follow in a few weeks.

[AmandaP]

You’re welcome.

[AmandaP]

The line: ‘In February 2021, both Anna and Alex made lifetime gifts to their children that fully utilised their respective inheritance tax nil rate bands of £325,000’ is just telling you that there’s no NRB available on the death estate.

You cannot (and are not expected to) calculate the value of the gifts as you are not given the amounts of the gifts, just that they used up the NRB.

[AmandaP]

You’re welcome.

[AmandaP]

Practise makes perfect!

Let the mark allocation be your guide as to how much to write, make sure you address the main points using key words and any figures given in the question.

[AmandaP]

Cash basis – treated as a sale at cost price to the trader, so if no adjustment has been made, add in the cost price.

Accruals basis – treated as a sale at selling price to the trader, so if no adjustment has been made, add in the selling price. If an adjustment has been made at cost price, add in the profit.

[AmandaP]

There is no maximum amount on how much can be put into a pension scheme, but there is a maximum amount on which tax relief is given.

From the information that you’ve provided, the maximum amount on which tax relief can be given in 2024/25 is the £44,000 that you’ve calculated.

[AmandaP]

You can increase the basic rate band, but if they’re already a basic rate income tax payer then it won’t make any difference to the calculation of the INCOME TAX as their level of taxable income is already within the basic rate band.

The only time that extending the basic rate band for a basic rate income tax payer would be if they also had taxable gains.

[AmandaP]

£(24,600 + 12,300 – 20,500) = £16,400

£24,600 represents the cost for 6 months, so £4,100 per month.

The cost for a four month period therefore would be £4,100 x 4 = £16,400 which is correct.

If interests is paid six monthly, the amount accrued at 1/12/23 = 5 months, so £20,500.

The amount accrued at 31/3/24 = £3 months, so £12,300.

The amount paid during the four month period was £24,600, so the amount on the accruals basis is

£24,600 less the amount relating to y/e 30 /11/23 of £20,500 + the amount owed at 31/3/24 but not yet paid £12,300 = £16,400

[AmandaP]

You’re welcome.

[Author]

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