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If you’re heading to the exams next week then do you care whether this is a car or a van?

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On the way into the office this morning I was stuck in traffic next to a Peugeot 207 vehicle which was identical to the model to the left except that it was red rather than white.

If you’re heading to the ACCA UK stream tax exams on Monday then do you care if this vehicle is a car or a van?

The vehicle is certainly a nice looking Peugeot 207 and whilst most people would say it’s a car the fact that it doesn’t have side windows behind the driver and passenger doors makes it almost certain to be treated as a van by the tax authorities.

The good news is that you’re NOT going to be examined on the detailed rules of what is a car and what is a van (or lorry or truck for that matter) so should you care about the distinction between cars and vans?

The short answer is that yes, you should care!

I’m personally pretty certain that the exams on Monday will include a capital allowance computation which involves cars or commercial vehicles such as lorries or vans.

There are some new rules being examined for the first time by the ACCA this session (see chapter 5 of our F6 ExPress notes for a quick summary) so I think this has got a good chance of being examined.

In summary, vans and lorries are commercial vehicles and are therefore eligible for the AIA and FYA within capital allowances. Cars on the other hand do NOT qualify for the AIA or FYA (unless a low emission car which gets a 100% FYA).

Also, don’t forget to look out for the CO2 emission rate of the car as if it’s >160g/km then it only gets a 10% WDA as part of the special rate pool.

On the VAT side of things then VAT can be reclaimed on lorries and vans unlike with cars where it is not possible to treat the VAT as input VAT.

Being a tax tutor I’m one of those strange people that find all of this interesting and apologies to any of you that don’t share my excitement at discussing the distinction between cars and lorries…

The “little black dress” is a fashion icon but when you’re sitting your exams don’t forget to…

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The “little black dress” is an evening dress that is simple, classic and fashionable. Its origins date back to the 1920s with fashion historians claiming that the first design of the little black dress was made by the designer Coco Chanel back in the 1920s.

The design has been worn by numerous women over the years. The most famous “little black dress” was arguably the one worn by Audrey Hepburn in the film Breakfast at Tiffany’s.

This is all very interesting but what has it got to do with a blog for finance students and in particular what has it got to do with the ACCA exams that are taking place next month?

Well, if I’m honest it actually has very little to do with the exams as I can’t imagine there will be a lot of people wearing little black dresses to the exams! What should be happening though is that everyone should be attending the exams with a “little black pen”.

The June 2010 ACCA exams will for the first time see all the papers marked using scanning technology. The scripts will be completed as normal by students but instead of the scripts then being physically sent to the markers they will instead be scanned and then marked by markers “on screen”.

It is important therefore that you use a black ballpoint pen in your exams. If you use other colour pens, pencils, fountain pens or highlighter pens then these are unlikely to be picked up by the scanning technology and as a result the marker may not be able to see your answer.

Put simply, it doesn’t matter how good your answer is but if it is not picked up by the scanning technology then you may well find that you miss out on passing the exam.

In summary, forget about wearing a “little black dress” to the exam but don’t forget your “little black pen”.

Free use of an Audi A6? Not quite as don’t forget the tax on the benefit.

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I met up with a good friend of mine the other evening. He was rather excited as he was in the process of choosing a new company car. As part of his remuneration package he’s lucky enough to be given a company car and this car gets replaced every 3 years.

He’ll shortly be provided with the use of an Audi A6 TDI SE company car. He’s obviously done his homework though as when another friend who was with us said that it must be nice to be given the free use of a car he rightly pointed out that there is a tax benefit in kind on the car and had worked out that the benefit for the tax year 2009/10 was £9,506.

His top rate of tax is 40% so the actual tax he will be paying for the use of the car will be £3,802 or £317 per month. He was right therefore in pointing out that although the car was provided for his use free of charge by his employer he would be paying something for it in terms of tax.

For any F6 (UK) or P6(UK) students out there who want to check his calculations then the list price of the car is £36,560 and the CO2 emissions are 179g/km (and don’t forget the 3% extra seeing as it was a diesel!)

You’ll save paper but not VAT after 1 April.

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I’ve just come back from a short trip to the States. Whilst in most European countries VAT is taken for granted, in the US there is considerable debate over whether a VAT system should be established.

Although there is no VAT in the US at the moment, there are in fact sales taxes present in a number of states. What is interesting is that in some shops the sales tax is shown on the price of the goods on display whilst in others the sales price is not shown on the display but instead is added at the checkout. Studies have shown that in the US people are less likely to purchase a product if the sales tax is shown on the displayed price rather than added at the checkout.

However, whilst this is interesting every good student of ACCA or CIMA knows that the price shown in the UK on business to business transactions is net of VAT (i.e. VAT exclusive – excluding VAT) whilst goods for sale to the public are generally shown gross of VAT (i.e. VAT inclusive – including VAT).

On the subject of VAT in the UK, there was a recent change announced to the VAT filing system. In an attempt to reduce the level of filing of paper VAT returns, from April 2010 all businesses with an annual turnover of £100,000 or more will have to file VAT returns electronically and also pay VAT online. In addition, any  business registering for VAT on or after 1 April 2010 will also have to file and pay online.

From an environmental point of view this is good news as the amount of paper that is used for paper return completion and submission is huge.

So, is the paperless office coming closer?

All publicity is good publicity but surely it should be avoided (evaded?) in this case?

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Previous blog entries have highlighted the distinction between tax avoidance (legally minimising the tax liabilities) and tax evasion (illegal methods of avoiding tax).

HM Revenue and Customs have recently announced a new weapon in their fight against people who illegally evade tax. The tax authorities have said that people who have committed tax evasion on or after 1 April 2010 will now not only have to settle the tax owed, pay interest on tax and suffer potential penalties but they will now also face the prospect of having their names and addresses put up on the Revenue’s website for everyone to see.

This will apply to people that have deliberately evaded tax of more than £25,000.

There’s a saying that “all publicity is good publicity” but I’m not sure that being publicly exposed as a tax cheat is something that a lot of people will be looking for in terms of good publicity!

Avoiding or Evading? Do the tax authorities care…

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Taxation and football have been in the news this week in the UK.

First of all we had winding up orders threatened on Southend, Cardiff City and the Premier League team Portsmouth on Wednesday. If a winding up order happens the clubs as corporate entities will be liquidated. In simple terms this means that the football clubs cease to exist.

The courts have allowed all of them a “stay of execution” but it’s not a great deal of time. Portsmouth, for example has to prepare a “statement of affairs” by 4pm next Wednesday.

The reason for the winding up order on Portsmouth is that HMRC (the UK tax authorities) took them to court over an unpaid tax bill of over £7 million. Whilst there are lots of emotional and community issues behind winding up a football club, HMRC take the view that it is simply another business that despite repeated requests has not settled its debt.

Another tax / football story in the press this week was yesterday when Harry Redknapp, the Tottenham Hotspur manager, was charged with tax evasion. He allegedly evaded tax on a payment made to him in Monaco. The case was adjourned to April.

This leads to a point which students often get confused about. Namely, the difference between “tax evasion” and “tax avoidance”.

“Tax evasion” involves methods of illegally reducing tax liabilities. “Tax avoidance” however is legitimately minimizing tax liabilities. It should be noted though that “tax avoidance” doesn’t sound particularly legitimate (even though it is) so a number of advisers are now referring to “tax avoidance” as “tax mitigation”!

All of this could be of little interest to the supporters of Portsmouth though if they are wound up next Wednesday. We shall wait and see.

31 January or (31 January minus 7 days) deadline?

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Well it only seems like yesterday that we posted about the 31 October deadline for submitting the hard copy paper income tax returns. Today is 29 January and perhaps more importantly if you’re a UK tax payer who has yet to submit your Income Tax Return, Sunday is 31 January.

The deadline for submitting your UK tax return electronically is 31 January following the tax year in question. So for example, the deadline for submitting your tax return electronically for tax year 2008/09 (6 April 2008 to 5 April 2009) is 31 January 2010 – i.e. this Sunday! If you haven’t submitted your tax return yet then you’ve probably got a busy weekend ahead of you.

If you’re in the UK then there really is no excuse for forgetting the deadline. Moira Stewart, who worked for the BBC for over 30 years, has been fronting a campaign by HMRC to remind tax payers about the deadline. TV, radio and press adverts have been bombarding us in the UK for the last month or so.

What surprises a lot of people though is that when a tax payer registers for the online service they are sent details of their user name and password through the post. HMRC take up to 7 working days to register site users so if you were planning on spending this weekend doing your electronic tax return but have yet to register on the HMRC site then unfortunately you will receive the £100 fine for late submission as you won’t be registered before the 31 January deadline and hence won’t be able to submit the return before the deadline.

What is also important to remember is that 31 January 2010 is also the deadline for paying any outstanding amounts of tax for 2008/09. Payment of any outstanding tax after this date will be liable to interest.

We’ve just passed 31 December. So what?

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As we start the new year people who are not students of UK tax maybe mistakenly assume that we have just finished a fiscal year on 31 December and have started a new fiscal year on 1 January.

As good tax students we know however that this is not true! The fiscal year (tax year) for individuals in the UK ends on 5 April and starts on 6 April. For companies the financial year start on 1 April and end on 31 March although remember that companies are free to choose their accounting period end.

Other countries have an assortment of fiscal year ends. Individuals in Japan and UAE for example have a fiscal year ending on 31 December. In the US the fiscal year ends on 30 September and in Australia it’s 30 June. This is all very interesting but don’t worry it won’t be examined.

However, what is important with regard to the start of the year is that all of us here at ExP would like to wish you all a very Happy New Year and all the very best in your exams, professional and personal lives for 2010.

Changes to NIC. In 2011…..

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Hopefully you’re taking a well deserved break after the ACCA F6 exam last Monday. That is of course unless you’ve got another exam coming up next week!

However, even though you can relax a bit now when it comes to learning tax rules for the December 2009 exam, tax is in the headlines in the “non exam world”. On Wednesday, Alistair Darling, the UK Chancellor delivered his pre-Budget report.

The press in the UK has been full of stories recently about the high bonuses that a number of banks were planning on paying some of their staff. This was causing uproar amongst the majority of the public given that the public had bailed out the banks earlier this year. The Chancellor announced in his pre-Budget report that banks will have to pay a 50% tax on bonuses in excess of £25,000 that are paid between now and April next year.

However, probably of more interest to the “tax people” amongst us is that he announced that all rates of National Insurance (for employer, employee and self-employed) will increase by an additional 0.5% from April 2011 (this is in addition to the 0.5% increase announced in his pre-Budget report last year.

This change alone is expected to raise in the region of £4bn in the financial year 2011/12.

Whilst this is interesting to know make sure that you refer to the latest set of our ExPress notes to find out what rates of National Insurance are actually examinable in the exam you’re sitting!

Tax free but it won’t be examined.

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Last Thursday a small picturesque toll bridge across the River Thames about 65miles (100km) away from London was sold for more that £1m.

Cars pay 5p to cross the bridge whilst lorries pay up to 50p to cross. This may not seem like a lot of money but it mounts up and gross annual revenue is reported to be in the region of £200,000.

What is unusual about the bridge though is that the owner is exempt from paying income tax, CGT, inheritance tax or VAT on it due to an ancient law passed in the 1700s which only applies to this particular bridge. “Grossing up” the income to take account of the fact that it is tax free suddenly results in quite a nice rate of return!

You can rest assured though that this will NOT be examined in the F6 paper. Make sure however that  you’re aware of other exempt income such as Individual Savings Accounts (ISAs) which could easily be examined.