10 - Ethics, personal financial management and self-assessment.

Before taking on a new client a ACCA member must assess:

assess risk to the integrity of the practice on accepting work. | Risk of money laundering. | Whether the firm has adequate skills and competence.

Information to be obtained before accepting new COMPANY client by ACCA member:

PROOF OF INCORPORATION, primary business address and registered office. | STRUCTURE, directors and shareholders of the company. | IDENTITIES of persons instructing the firm on behalf of the company and persons authorised to do so.

Information to be obtained before accepting new INDIVIDUAL client by ACCA member:

DETAILS OF NATURE AND STRUCTURE of any unincorporated business interests. | Residential address. | IDs | PERSONS AUTHORISED to act on behalf of the business (for example partners in a partnership).

On accepting new work, ACCA member must ask for...

for permission from the client to contact old advisers to request information. | If client refuses, should consider not acting for them. | If not, issue a LETTER OF ENGAGEMENT setting out terms and conditions.

ACCA member and examples of conflict of interest:

Acting for both parties in in a DIVORCE. | Where ADVISER MAY BENEFIT from the transaction. | Asked to act for another party in a TRANSACTION with an existing client. | Acting for the EMPLOYER ant their Employees. |

ACCA member may act for both parties if safeguards put in place:

Consent should be obtained to act for them. | Accurate firm CONFIDENTIALITY guidelines. | Reveal the potential conflict to all relevant parties.| Teams different for each client.

Fundamental ethical principles:

Professional behaviour. | Integrity. | Competence and due care. | Confidentiality. | Objectivity.

Threats that a professional accountant:

Intimidation. | Familiarity. | Advocacy. | Self-reviewing. | Self-interest.

Consequences of unethical behaviour:

Professional reputation loss. | Criminal conviction. | Court order (compensation). | Director disqualification order. | Disciplinary action by professional body (including expulsion).

If accountant becomes aware of a client's tax irregularity, he must...

discuss it with client | and ensure proper disclosure to HMRC.

Accountant's conduct if client made a tax error:

Decide if genuine or deliberate act. | Explain to client the need to notify HMRC. | Prompt disclosure taken into account when deciding penalties.

Accountant's conduct if client made a tax error and refuses to disclose it:

Must explain potential consequences in writing. | If material, consider whether to continue to act for client. | If he still refuses: should cease to act and write to HMRC stating that the firm no longer act for the client but not stating reason why.

All businesses within regulated sectors must appoint a Money Laundering Reporting Officer within the firm. MLRO decides...

Decides whether to report a transaction to National Crime Agency (NCA).| If a report is made, client should not be informed as this is an offence ('tipping off').

If a member is an employee and becomes aware of irregularities, first of all he should:

Raise a concerns with an appropriate person.| If appropriate action not taken, seek advice from ACCA

If a member is an employee and becomes aware of irregularities, second of all he should consider:

Need to report to Money Laundering Reporting Officer (MLRO). | Resigning from employment. | Need to disclose under Public Interest Disclosure Act.

Tax evasion consequences for client and advisor:

Client is subject to criminal prosecution. | Adviser is subject to sanctions of criminal law.

Tax avoidance characteristics:

Use of the taxation system to legitimately reduce tax. | Also used to describe tax schemes devised to utilise loopholes in the tax legislation.

To counteract tax avoidance HMRC introduced:

Disclosure obligations regarding specific tax avoidance scheme.| General anti-abuse rule (GAAR) to counter artificial, abusive schemes to avoid tax.

Serial tax avoidance. Those who persistently engage in tax avoidance schemes defeated by HMRC are subject to...

to a regime of increasing penalties | and may have their details published by HMRC.

Serious tax offender criteria:

Those who incur a penalty | for deliberate evasion in respect of tax of £5,000.

Monitoring of serious tax offenders. They will be required to:

To submit returns for up to the following 5 years. | Showing more detailed business accounts information | and detailing the nature and value of any BALANCING ADJUSTMENTS within the accounts.

Dishonest conduct of tax agents - amount of maximum penalty and other consequences:

HMRC may publish details of the penalised tax agent | and access the working papers of a dishonest agent with agreement of the Tax tribunal. | Offender incurs a civil penalty up to £50,000.

Tax offenders. HMRC have the power to The names and details of... who...

of individuals and companies | who are penalised for deliberate defaults leading to a tax loss of more than £25,000.

Tax offenders. HMRC will NOT publish those who...

make a full unprompted disclosure | or a full promped disclosure within the required time.

Consideration for accountants when giving advice to clients:

Know the Professional Code of Ethics. | Know your client - fact find. | Best advice - must be suitable. | Best execution - obtain best price. | Avoid unnecessary transactions. | Explain why given course of action is recommended.

Giving advice to clients - factors relating to client to consider:

Risk acceptable. | Objectives of client. | Liquidity. | Age. | Dependants. | Current position. | Efficiency of tax.

Personal financial management. Individuals must balance the need for income on an on-going basis with investing for capital growth to be used to fund retirement. Factors consider when making investment.

Risk attitude.| Need to ensure some investments are readily realisable to fund immediate unforeseen demands.| Likelihood of receiving an inheritance.

Examples of highly liquid investments products:

Premium bonds. | Individual saving accounts. | Gilts.

Examples low-risk investment products:

Gilts. | VCT scheme. | Building society accounts.

Examples of very high-risk investment products:

Cryptocurrencies. | Unquoted shares.

Examples of income tax-free and CGT-free investment products:

Pension schemes. | ISAa. | NSI saving certificates

Examples of INCOME growth investment products:

Gilts. | NSI saving certificates.

VCT - Qualifying individuals:

Subscribers (newly issues shares).

EIS, SEIS - Qualifying individual shareholding limit:

no more than 30% of ordinary share capital in qualifying company.

EIS - Qualifying individual subscriber requirements:

Not employee or director. | Independent of company prior to first issue.

SEIS - Qualifying individual subscriber requirements:

Not current employee | (can be director | or previous employee).

EIS, SEIS, VCT - Maximum investment limits:

1 milion per annum. | £100,000 per annum. | £200,000 per annum.

EIS, SEIS - retention period for I.T. relief:

3 years (I.T. relief withdrawn if sold within 3 years).

VCT - retention period for I.T. relief:

5 years (I.T. relief withdrawn if sold within 5 years).

EIS - I.T. relief rate:

30% of amount subscribed

SEIS - I.T. relief rate:

50% of amount subscribed

VCT - I.T. relief rate:

30% of amount subscribed.

EIS, SEIS, VCT - Carryback amount to previous year:

Any amount invested, but cannot get relief on more than 1 milion in any one tax year. | Any amount invested, but cannot get relief on more than £100,000 in any one tax year. | No carryback.

EIS, SEIS - Capital gain tax operating:

Gain exempt if shareholding held more than 3 years. | Loss is allowable (can be converted into IT loss).

VCT - Capital gain tax operating:

No gain or loss whenever sold.

EIS - reinvestment relief crystallises when:

when EIS shares disposed of | or investor/spouse emigrates (become non-resident) within 3 years.

SEIS - reinvestment relief rate of exemption:

After 3 years of holding up to 50% of gain on any chargeable asset can be exempt.

EIS, SEIS, VCT - Dividend taxation:

taxable | taxable | tax-free on investment within annual limit of £200,000...

IHT-BPR availability for EIS, SEIS and VCT.

100% if owned at least 2 years. | 100% if owned at least 2 years. | No BPR.

Personal sources of finance:

Mortgage. | Unsecured loan.* | Credit cards (the most expensive). | Hire purchase.* | Overdraft. | Secured loan.

Business sources of finance:

Short-term debt | Long-tern debt | Equity

Income tax return due dates:

3 months after issue of the notice to file a return. | 31 October (paper return).| 31 January (electronic return).

Notification of gain chargeability to HMRC due date:

Within 6 months of the END OF TAX YEAR in which the liability arises - 5 October.

Income tax amendments due dates:

HMRC can amend return within 9 months of the actual filing date. | Taxpayer can amend it within 12 months of the 31 January filing date.

Determination of tax due if no return is filed can be issued by HMRC at any time within...

3 years of the filing date.

Characteristics of Determination of tax by HMRC.

The determination is treated as a self-assessment by the taxpayer. | Determination can only be replaced by the actual self- assessment when it is submitted by the taxpayer. | There is no appeal against a determination.

A business must keep records of:

All receipts and expenses. | All goods purchased and sold. | All supporting documents relating to the transaction of the business such as accounts, books, contracts, vouchers.

How long the self-employed taxpayers must retain all their records (not just business records)?

5 years after the 31 January filing date.

How long the Individual taxpayers must normally retain the evidence of income received?

12 months after the 31 January filing date.

Self-assestment - IT payments dates for 2020/21:

31 January 2021. | 31 July 2021. | 31 January 2022.

Calculation of POA for income tax:

Half previous years' tax payable by self-assessment and class 4 NIC

Taxpayer do not pay POAs if:

If relevant amount for previous year does not exceed £1,000 | or more than 80% of the assessed tax* of the previous year was collected at source.

Standard penalties applies in two circumstances:

Submission of incorrect returns (all taxes). | Failure to notify liability to tax (I.T., CGT, VAT, NIC, C.T.).

Penalties for late filing or self-assessment tax return by an individual up to 12 months:

£100. | Additional daily penalties of £10 per day (maximum 90 days). | Additional 5% of tax due (minimum £300).

Additional penalties for late filling or self-assessment tax return by an individual over 1 year:

Additional 5% of tax due (minimum £300). | 70% of tax due (minimum £300). | 100% of tax due (minimum £300).

Late payment of tax penalties up to year for self-employed in relation to Balancing Payment:

5% of tax due | additional 5% | additional 5%.

Penalty for fraud or negligence on claiming reduced POAs formula:

POAs if claim not made − POAs actually paid

HMRC can raise a Discovery Assessment if they discover an inaccuracy in the return within:

Basically: 4 years. | Careless error: 6 years. | Deliberate error: 20 years.

HMRC requires to third parties for information about taxpayer must normally:

be agreed by the taxpayer | or approved by the first-tier tribunal.

New inspection power of HMRC:

Enter and inspect a taxpayer's business premises | in order to inspect business records | and assets.

Taxpayer can appeal against a decision made by HMRC within...

within 30 days of the disputed decision. It must be in writing.

When making an appeal against HMRC decision, taxpayer can proceeds in one of two ways:

Request a review by another HMRC officer. | Or refer case to an independent Tax Tribunal.

The First-tier Tribunal deals with:

Default paper cases. | Basic cases. | Standard cases.| Complex cases.*

Upper Tribunal deal with complex cases requiring:

Specialist knowledge. | A formal hearing.

Appeal against a decision of the Upper Tribunal:

to the Court of Appeal | but only on grounds of a point of law.

Which tax is payable in respect of favourable exercise disadvantaged share option plan?

IT.

What is crucial factor when deciding whether buy and later sold shares by individual personally or by his parent company:

SSE availability vs BADR availability

Does dividend nil rate band reduce basic and higher rate bands?

Only when determining the rate of tax on the remaining dividend income.

Change of accounting date. Business has 16 months period of account with £94,000 profit and overlap for 5-month period of £15,000. Calculate taxable trading profit of the year with a accounting date changed.

£82,000.

Change of accounting date. Business has year end on 31 October 2020 and change it to 31 April. Profit for the year is £54,000. Stipulate timespan of new AP and change in overlap profits.

30 April 2020 - 30 April 2021 | Overlap profits increased by £27,000 (6 months).