JUNE & DECEMBER 2011– STUDY GUIDE

CERTIFIED ACCOUNTING TECHNICIAN EXAMINATION

Paper 9 (UK)
Preparing Taxation
Computations
Introduction
This booklet contains the Study Guide for the ACCA's Certified Accounting Technician Paper 9 (UK): Preparing Taxation
Computations.

The Study Guide is designed to help you plan your studies and to provide more detailed interpretation of the syllabus for
ACCA’s Certified Accounting Technician examinations. It contains both the Syllabus and the Study Sessions for the paper,
which you can follow when preparing for the examination.

The Syllabus outlines the content of the paper and how that content is examined. The Study Sessions take the syllabus and
expand it into teaching or study sessions of similar length. These sessions indicate what the examiner expects of candidates
for each part of the syllabus, and therefore gives you guidance in the skills you are expected to demonstrate in the
examinations. The time to complete each session will vary according to your individual capabilities and the time you have
available to study. Tuition providers offering face-to-face tuition are recommended to design courses with a minimum of two
hours tuition per study session. However, repeated coverage of the material is vital to ensure your understanding and recall
of the subject. Be sure to practice past examination questions to consolidate your knowledge and read your student
accountant magazine regularly.

If you have any queries concerning the study guide, please direct them to: ABOUT ACCA
ACCA is the largest and fastest-
growing international accountancy
Qualifications Department
body with 362,000 students and
ACCA 29 Lincoln's Inn Fields London WC2A 3EE United Kingdom
131,500 members in 170 countries.
tel: +44 (0)20 7059 5833 fax: +44 (0)20 7059 5968 We aim to offer first choice
e-mail: info@accaglobal.com qualifications to people of
application, ability and ambition
Additional information can be accessed on the ACCA website at: around the world who seek a
rewarding career in accountancy,
www.accaglobal.com
finance and management. ACCA
works to achieve and promote the
© The Association of Chartered Certified Accountants
highest professional, ethical and
January 2011 governance standards and advance
the public interest.

PAGE 2
 Preparing Taxation Computations (UK)

AIMS (v) hire purchase and leasing

To develop the ability to prepare computations of tax liability for (vi) industrial buildings
both individuals and businesses resident in the UK for the purposes (c) Assessments
of income tax, corporation tax, capital gains tax and value added (i) basis of assessment
tax. In addition, to develop knowledge and understanding of the (ii) sole traders and partnerships
manner in which dealings must be conducted with HM Revenue and (d) Relief for losses
Customs, including knowledge of the statutory timescales for the
submission of claims and returns and the due dates for the payment 2 National insurance contributions
of tax liabilities. (a) Class 2 and Class 4 National Insurance Contributions
for the self employed
OBJECTIVES (b) Class 1 and 1A National Insurance Contributions for
On completion of this paper, candidates should be able to: employees and employers
• prepare adjusted profit / loss computations for trades and
professions 3 Income from employment
• calculate an individual’s income from employment (a) Computing taxable earnings from employment
• prepare computations of property and investment income (i) basis of assessment
• prepare income tax computations (ii) employment or self-employment
• prepare computations of the chargeable gains arising on (b) Allowable deductions
disposals by both individuals and companies (c) Benefits
• prepare corporation tax computations (d) (i) contributions to occupational pension schemes
• complete and submit value added tax calculations using data (ii) charitable giving through the payroll
from the appropriate recording systems
• identify the due dates for submission of returns and the payment 4 Property and investment income
of tax liabilities (a) Profits / losses from property income
• conduct dealings with the HM Revenue & Customs and with (i) computation of property income profits / losses
clients in an appropriate manner. (ii) furnished holiday lettings
(iii) rent a room scheme
POSITION OF THE PAPER IN THE OVERALL SYLLABUS (iv) relief for property income losses
An understanding of the format of accounts used for sole traders, (b) Other investments
partnerships and companies is assumed from Paper 3, Maintaining (i) bank, building society and other interest
Financial Records and Paper 6, Drafting Financial Statements, but (ii) dividends
no prior knowledge of taxation is required. (iii) tax exempt investments

SYLLABUS CONTENT 5 Income tax computations

1 Adjusted profit / loss computations for trades and professions (a) Computing taxable income
(a) Adjustment of trading profits / losses for tax purposes (i) the aggregation of income
(b) Capital allowances (ii) eligible interest
(i) definition of plant (iii) the personal allowance for individuals under 65
(ii) allowances on plant and machinery (b) Computing income tax payable
(iii) private use assets (i) allocation of tax rates / bands to savings income,
(iv) short life assets non-savings income and dividend income

PAGE 3
Preparing Taxation Computations (UK)

(ii) relief for: 9 Administration of corporation tax

– charitable donations (a) Corporation tax self-assessment
– personal pension contributions (b) The payment of corporation tax (including quarterly
payments on account)
6 Chargeable gain computations (individuals and companies) (c) Dealing with HMRC and client confidentiality
(a) Chargeable persons, disposals and assets
(b) Computing gains and losses 10 Value added tax (VAT)
(i) the basic computation (a) Scope of VAT
(ii) valuing assets (b) Basic principles of VAT
(iii) indexation allowance for companies (i) types of supply
(iv) part disposals (ii) computing VAT due
(c) Share and securities (iii) accounting for VAT
(i) matching rules for individuals (iv) the time of supply
(ii) matching rules for companies (c) VAT invoices and records
(iii) FA 1985 pool (d) Registration
(iv) bonus and rights issues (e) Administration of VAT
(v) gilts and qualifying corporate bonds
(d) Other areas of capital gains tax (including reliefs) EXCLUDED TOPICS
(i) gift relief The following topics are specifically excluded from Paper 9:
(ii) rollover relief Adjusted profit computations for trades and professions:
(iii) principal private residence relief • badges of trade
(iv) chattels • successions
(v) relief for losses • change of accounting date
(vi) compensation and insurance proceeds • long life assets
(vii) entrepreneurs relief • capital allowances using the hybrid rate for periods straddling 5
(e) Computing capital gains tax payable April 2008
• capital allowances on agricultural buildings, hotels and
7 Administration of income tax and capital gains tax intangible assets
(a) Self-assessment system • The 40% first year allowance that applied to expenditure up to
(b) Payment of income tax (including payments on account) 5 Apirl 2010 (31 March 2010 for companies)
and capital gains tax • FYA for energy saving equipment
(c) Enquiries • in respect of industrial buildings allowances: enterprise zones,
(d) Dealing with the HM Revenue and Customs (HMRC) and initial allowances; the sale of industrial buildings following a
client confidentiality period of non-industrial use; disposals prior to 21 March 2007
• notional profits / losses for partnerships
8 Corporation tax computations • limited liability partnerships
(a) Company taxable total profits • personal service companies
(b) Accounting periods • the special rules for losses in the opening years of a trade (s72
(c) Computing corporation tax ITA 2007)
(d) Relief for losses (trade and non-trade) • the special rules for losses in the closing years of a trade
(terminal losses under s89 ITA 2007)

PAGE 4
 Preparing Taxation Computations (UK)

• the special rules for the use of trade losses against capital gains rate of tax
(s261B TCGA 1992). • close companies
Income from employment: • non-trading deficits on loan relationships
• detailed operation of the PAYE system (including calculations of • relief for intangible assets
code numbers) • the corporate venturing scheme
• share incentive schemes • groups and consortia
• termination payments. • foreign income and double tax relief
• investment companies and companies in receivership /
Property and investment income: liquidation
• the enterprise investment scheme and venture capital trusts • completion of forms CT61
• trust income. • non-corporate dividends.

Income tax computations: Value added tax:

• personal allowances other than the personal allowance for • group registration
people aged under 65 • secondhand goods scheme
• tax reducers • partial exemption
• foreign income and double tax relief • special schemes for retailers
• the calculation of interest for under/overpaid or late paid tax. • the capital goods scheme
• the calculation of the additional tax charge where pension • serious misdeclaration penalty
contributions are made in excess of the annual allowance • default interest
• the anti-forestalling provisions restricting tax relief where • VAT periods where there is a change of VAT rate.
excessive pension contributions are made.
National insurance contributions:
Chargeable gains: • for Class 4: the offset of trading losses against non-trading
• calculation of the indexation allowance for individuals income
• reinvestment relief • contracted out contributions
• assets held at 31 March 1982 • classes 1(b) and 3
• negligible value claims
• substantial shareholdings KEY AREAS OF THE SYLLABUS
• wasting assets (other than chattels) and leases The key topic areas are as follows:
• connected persons and transfers between spouses • computation of adjusted profits / losses for trades and
• incorporation relief professions
• damaged assets • calculating an individual’s income from employment
• capital losses in the year of death • assessment of profits / losses from trades or professions
• disposals prior to 23 June 2010 • basic income tax computations
• entrepreneurs' relief qualifying limits that applied until 22 June • basic chargeable gains computations
2010. • computing taxable total profits.
• computing corporation tax payable
Corporation tax: • income tax and corporation tax self assessment
• a calculation involving two financial years and a change in the • basic value added tax computations.

PAGE 5
Preparing Taxation Computations (UK)

passed on or before 30th September annually, will be assessed

from June 1st of the following year to May 31st of the year after.
Please refer to the examinable documents for the paper for further
APPROACH TO EXAMINING THE SYLLABUS information.

Paper 9 is a three-hour written paper with 15 minutes reading time. Regulation issued or legislation passed in accordance with the
above dates may be examinable even if the effective date is in the
The examination will be predominantly computational and will future.
comprise of 2 parts. There will be no optional questions.

The term issued or passed relates to when regulation or legislation

Part A will comprise of 10 multi-choice questions (MCQ), each has been formally approved.
worth 2 marks. This will total 20 marks.

The term effective relates to when regulation or legislation must be

Part B will comprise of 4 long form questions. Question 1 will be applied to an entity transactions and business practices.
on income tax and be worth between 23 and 27 marks. Question 2
and 3 will be on corporation tax and capital gains tax respectively. The study guide offers more detailed guidance on the depth and
Both will be between 18 and 22 marks each. Question 4 will level at which the examinable documents will be examined. The
examine topics from any area of the syllabus not examined study guide should therefore be read in conjunction with the
elsewhere in part B, it will be worth between 13 and 18 marks. A examinable documents list.
total of 80 marks are available for this part.

Tax rates and allowance tables will be provided at the front of the
Value added tax (VAT) will not be examined as a full question but examination paper.
will be examined as a MCQ or as part of any of the questions
involving a business, either linked to the business scenario Calculations should be made to the nearest month and the nearest
contained in the remainder of the question or as a distinct and £.
seperate scenario. It will be worth a maximum of 10 marks.

Knowledge of section numbers will not be needed to understand

ADDITIONAL INFORMATION questions in this paper, nor will students be expected to use them
ACCA reserves the right to ACCA reserves the right to examine in their answers. If students wish to refer to section numbers in
anything contained within the study guide at any examination their answers, they may do so and will not be penalised if old, or
session. This includes knowledge, techniques, principles, theories, even incorrect section numbers, are used.
and concepts as specified.

The Study Sessions section provides more detailed guidance on

For the financial accounting, audit and assurance, law and tax the syllabus.
papers except where indicated otherwise, ACCA will publish
examinable documents once a year to indicate exactly what
regulations and legislation could potentially be assessed within
identified examination sessions.

For paper based examinations regulation issued or legislation

PAGE 6
 Preparing Taxation Computations (UK)

STUDY SESSIONS
RELEVANT TEXTS
1 Introduction to the UK tax system
ACCA has one Platinum Approved Learning Partner – Content
(a) Identify the main sources of UK tax legislation
(ALP-c) which is BPP Learning Media. In addition there are Gold
(b) Identify the key reference sources for UK tax legislation
ALP-c who also publish text books for ACCA examinations. BPP
(c) Describe the organisation HM Revenue & Customs and
and the Gold ALP-c base their study texts on the detailed contents
its terms of reference including the appeals system
of the study guides as published by ACCA. ACCA takes no editorial
(d) Describe the appeals process for income tax First and
responsibility for the detailed content of these study texts.
Upper Tier Tribunals
(e) Explain the system of income tax and its background
All approved study content providers will be subject to extensive
(how the legislation does not define income but defines
quality assurance by ACCA, but the highest level of approval -
taxable sources)
Platinum - will benefit from an exclusive examiner review of
content. There will be only one Platinum approved study content
2 Introduction to personal taxation
provider over a three-year period, and BPP Learning Media are
(a) Identify the fiscal year
ACCA’s inaugural Platinum study content provider.
(b) Outline the scope of income tax: chargeable persons,
chargeable income
In addition CAT and FIA examiners may also recommend other text
(c) Distinguish between income and capital profits/losses
books where appropriate, which students can refer to when
(d) Outline the key elements of a personal income tax
widening their reading beyond the approved study texts. Relevant
computation
articles will also be published in student accountant.
(i) earned income
(ii) non-savings income
ACCA’s ALP-c (Platinum) publisher:
(iii) savings income
(iv) dividend income
BPP Learning Media
(v) net income
Contact number: +44(0)20 8740 2222
(vi) taxable income
Website: www.bpp.com

3 Income from savings and investments

ACCA’s ALP-c (Gold) publishers:
(a) Identify investments taxed at source
(b) Identify tax-free investments
Kaplan Publishing
(c) Identify the source documents used to complete the tax
Contact number: +44(0)118 989 0629
return
Website: www.kaplanpublishing.co.uk
(d) Prepare schedules of savings income to accompany the
tax return
Get Through Guides
Contact number: +44 (0)845 257 5729
4 Income tax – assessments
Website: www.GetThroughGuides.com
(a) Explain the entitlement to and the amount of the personal
allowance
(b) Identify and explain the use of eligible interest

PAGE 7
Preparing Taxation Computations (UK)

(c) Illustrate the allocation of tax bands and tax rates 6 Income tax – employment income 2
against taxable income (a) Define and distinguish between excluded and non-
(i) non-savings excluded employees
(ii) savings (b) Identify the information required on a P11D and a P9D
(iii) dividends
(d) Explain and illustrate the difference between tax liability (c) Identify and calculate benefits
and tax payable for: (i) assessable on all employees
(i) deduction of tax credits from savings and dividend (ii) assessable on excluded employees
income (iii) assessable on non-excluded employees
(ii) deduction of PAYE (d) Identify the circumstances when a general business
(e) Explain and illustrate charitable payments expenses dispensation may be available, how it works
(i) payroll giving and its implications on the employer and employee
(ii) gift aid and the extension of basic rate band
(f) Prepare examples of income tax computations 7 Income tax – employment income 3
(i) standard layout (a) Compute aggregate income
(ii) net income (i) all income
(iii) use of rates and bands (ii) benefits
(iv) basic rate band extension (iii) expenses
(v) tax liability and tax payable (b) Identify source documents required to complete tax
returns
5 Income tax – employment income I (i) interest statements
(a) Explain the difference between employment and self- (ii) receipts for expenses
employment (iii) Forms P11D or P9D
(b) Identify assessable income (iv) Form P60
(i) salaries (c) Compute basic Class 1 National Insurance
(ii) commissions Contributions
(iii) bonuses (i) employees
(iv) benefits (ii) employers (including class 1A)
(c) Define and illustrate the basis of assessment for: (iii) weekly/monthly computations
(i) directors
(ii) others 8 Income tax – income from trade and professions 1
(d) Identify the principal categories of deductions and (a) Explain the principles of deductible and non-deductible
illustrate their scope (no detail on pension contributions expenditure
at this point) (b) Prepare adjusted profit computations (pre capital
(i) payroll giving allowances)
(ii) subscriptions
(iii) travelling expenses 9 Income tax – income from trade and professions 2
(iv) expenses incurred wholly, exclusively and (a) Explain the basis of assessment for a continuing sole
necessarily in the performance of duties trader’s business

PAGE 8
 Preparing Taxation Computations (UK)

(b) Explain and demonstrate the calculations of the basis of (c) Calculate National Insurance Contributions for the self-
assessment for commencement and cessation of employed and contrast with employees
businesses (i) class 2
(c) Calculate overlap relief, explain and demonstrate how it (ii) class 4
can be used on cessation
13 Income from trade and professions 4
10 Capital allowances 1 (a) Explain the alternative loss reliefs availabe to a sole
(a) Explain the principles relating to capital allowances on trader
plant and machinery (i) s.64 current and prior years
(i) definition of plant (ii) s.83 carried forward
(ii) cars (b) Demonstrate the best use of a loss relief claim
(iii) private use assets (i) save the highest amount of tax
(iv) short life assets (ii) timing
(v) hire purchase and leasing (iii) protection of personal allowances
(vi) special rate pool
(b) Prepare capital allowance computations for plant and 14 Partnerships
machinery (a) Explain how the trading profit rules are adapted for
(i) writing down allowance partnerships
(ii) annual investment allowance (b) Explain and show the effect of capital allowances on
(iii) restrictions partnerships
(c) Demonstrate the effect of changes in partnerships
11 Capital allowances 2 (i) change in profit sharing ratios
(a) Explain the principles relating to capital allowances on (ii) new partners
industrial buildings (iii) departing partners
(i) qualifying trades (d) Illustrate the loss relief claims available to individual
(ii) qualifying expenditure partners (not in 2010)
(iii) qualifying industrial use
(b) Explain non–industrial use and notional allowances 15 Income from property – individuals
(c) Prepare capital allowance calculations for industrial (a) Identify property income assessable
buildings (i) furnished and unfurnished property
(i) new buildings (ii) premiums from short leases
(ii) second-hand buildings (b) Outline the deductions allowable
(iii) disposals after 21 March 2007 (i) revenue expenses
(ii) capital allowances
12 Income from trade and professions 3 (iii) wear and tear allowance
(a) Prepare adjusted profit calculations (including capital (iv) repairs and renewals
allowances) (v) restriction for private use
(b) Illustrate the use of capital allowances at the (c) Rent a room relief
commencement and cession of businesses (d) Furnished holiday lettings
(e) Use of losses

PAGE 9
Preparing Taxation Computations (UK)

16 Pension contributions (b) Outline the administrative framework for capital gains tax
(a) Identify the schemes available (i) individuals
(i) occupational pension schemes (iii) payment
(ii) private pension plans (c) Outline the basic calculation including the deduction of
(b) Define net relevant earnings expenses of purchase and sale
(c) Explain the maximum contributions allowed for tax relief (d) Explain the entitlement to the annual exemption
(i) occupational schemes 19 Capital gains tax – basic computations
(ii) personal pension plans (a) Explain the circumstances when market value may be
(iii) stakeholder plans used for the transfer value
(iv) employee, employer and self employed (i) bargains not at arms length
(d) Show how the relief is given (ii) gifts
(i) deductions from salary
(ii) basic rate tax withheld at source (b) Demonstrate the calculation of market value for quoted
(iii) higher rate tax relief given via basic rate band shares and securities
extension (c) Calculate indexation allowance up to the date of sale for
(e) Show the tax effects of employer contributions companies
(i) on the employer (d) Calculate disposals of post 31 March 1982 assets
(ii) on the employee (i) including enhancement expenditure
(f) Excess charges for exceeding annual and lifetime (e) Explain the use of capital losses
allowances (i) current year
17 Income tax administration (ii) brought forward
(a) Self assessment forms
(i) requirement 20 Capital gains tax – shares and securities I
(ii) completion dates (a) Outline the matching rules for individuals
(b) Pay As You Earn (PAYE) forms and deadlines for submission (i) same day
(i) P11D (ii) next 30 days
(ii) P9D (iii) FA 85 Pool
(iii) P14 (b) Compute gains and losses on disposals by individuals
(iv) P60 (c) Outline the matching rules for companies
(v) P35 (i) same day
(vi) P45 (ii) last 9 days
(c) Payment dates (iii) FA 1985 pool (construction of a basic pool,
(i) employees including the calculation of indexation allowance
(ii) self employed up to the date of sale will be required)
(d) Compute gains and losses on disposals by companies
18 Capital gains tax – basic principles
(a) Define chargeable persons, chargeable disposals and 21 Capital gains tax – shares and securities 2
chargeable assets (a) Illustrate the impact of bonus and rights issues on
(i) individuals and companies shareholdings
(ii) exempt disposals (b) Sale of rights – awareness of basic treatment (partial
(iii) exempt assets vs.small disposal) only

PAGE 10
 Preparing Taxation Computations (UK)

(c) Identify exempt disposals (i) chargeable entities

(i) gilts (ii) chargeable income
(ii) qualifying corporate bonds (individuals only) (b) Identify chargeable accounting periods
(c) Identify the basis of assessment for all sources of income
22 Capital gains tax – chattels, part disposals, compensation (i) Trading income
and insurance (ii) Profits from loan relationships and interest
(a) Define chattels (iii) Property business income
(i) non-wasting (iv) capital gains
(ii) wasting (d) Compute taxable total profits
(b) Explain and demonstrate the calculation of gains on
chattel disposals 25 Corporation tax – computation of tax liability
(i) exemptions (a) Identify the financial year(s) relevant to a chargeable
(ii) marginal relief accounting period
(iii) deemed proceeds for losses (b) Identify the rates of corporation tax to be applied
(iv) awareness of the interaction with capital allowances (i) small profits rate
(c) Calculate gains on part disposals (ii) marginal rate
(d) Compensation and insurance proceeds (iii) main rate
(c) Calculate the corporation tax liability
23 Capital gains tax – further reliefs (d) Calculate and offset any income tax on payments and
(a) Outline the rules governing principal private residence receipts
(PPR) (e) Identify associate companies and show their effect on tax
(i) exemption calculations
(ii) relief for absences
(iii) letting relief 26 Corporation tax – other aspects
(b) Gift Relief (a) Calculate the corporation tax payable for periods longer
(i) outline availability and shorter than 12 months
(ii) explain and calculate the relief (b) Explain the loss reliefs available for both trade and non
(iii) calculate the restriction as a result of a sale at trade losses
undervalue (c) Illustrate the use of the loss reliefs in a basic calculation
(c) Roll-over relief (no extended carryback rules will be examined in 2010)
(i) outline availability (i) trade losses
(ii) explain and calculate the relief – s393A (1) current period
(iii) calculate the relief available on the partial – s393A (1) carry back (including cessation)
reinvestment of sale proceeds and/or partial – s393 (1) carry forward
business use of an asset (ii) non trade losses
(iv) explain the consequences of reinvestment in – Property business loss relief
depreciating or non-depreciating assets – capital losses
(d) Entrepreneur's relief – explain the impact of cessation of trade on
trade and non trade losses
24 Corporation tax – compute the profits liable to corporation tax (d) Compute corporation tax repayable following a loss
(a) Identify the scope of corporation tax relief claim

PAGE 11
Preparing Taxation Computations (UK)

30 Revision of income tax

27 Corporation tax – administration
(a) Outline the corporation tax self assessment rules
31 Revision of capital gains tax
(i) return and filing date
(ii) amendments and enquiries
32 Revision of corporation tax
(b) Illustrate and calculate methods of payment of tax
(i) small and medium size companies
33 Revision of VA
(ii) large companies

28 Value Added Tax 1 (VAT)

Summary of changes to previous study guide
(a) Explain the scope of VAT
(b) Illustrate the need for registration
Syllabus content 8(a) terminology changed to taxable total profits.
(i) compulsory
(ii) voluntary
Excluded topics:
(iii) exemption
Loss relief questions are reinstated
(iv) deregistration
Capital allowances on low emission cars no longer excluded
(c) Explain and contrast the types of supply
The 40% first year allowance that applied to expenditure up to 5
(i) standard
April 2010 (31 March 2010 for companies).
(ii) zero rated
Chargeable gains - disposals prior to 23 June 2010 and
(iii) exempt
entrepreneurs' relief qualifying limits that applied until 22 June
(d) Compute VAT liability
2010 are new excluded items
(i) input tax
(ii) output tax
Key areas of the syllabus - terminolgy changed from profits
(iii) bad debts
chargeable to corportation tax to taxable total profits.
(iv) discounts
(v) irrecoverable VAT
Study session 13 reinstated and remaining study sessions
renumbered.
29 Value Added Tax 2 (VAT)
(a) Account for VAT
Study sessions 24 and 25 - terminology changed.
(i) return periods
(ii) tax point
(iii) VAT return
(b) Explain the detail required on VAT invoices
(c) Detail the basic VAT administration requirements
(i) records
(ii) late registration penalties
(d) Explain the treatment of overseas transactions (EU and
non EU)
(e) Describe the following schemes
(i) annual accounting scheme
(ii) cash accounting scheme
(iii) flat rate scheme

PAGE 12