Business Taxation (IBTX)

Syllabus overview 

This syllabus introduces CIMA students to a wide range of taxation concepts and legislation. It recognises that Chartered Management Accountants will not be expected to become experts in taxation, but rather that they will recognise the important role that taxation can play in the decision-making process in businesses.

At the very least, the Chartered Management Accountant should be able to raise relevant issues with their tax advisers from an informed point of view. While they will not be expected to produce, say, a detailed tax planning report, they should be able to prepare notes or a memorandum on taxation issues to be discussed at a forthcoming meeting.

It is felt that there continues to be a need to cover a number of basic computational aspects of taxation as well as to require students to deal with the planning issues within the subject.

Aims

This syllabus aims to test the student’s ability to:

  • identify the rules imposed upon employers in relation to employee taxation;

  • explain and apply the system of corporation tax self-assessment, capital gains tax and VAT;

  • identify and evaluate the impact of international aspects on a company’s taxation;
  • identify and evaluate the impact of different tax planning scenarios.

Assessment 

There will be a written paper of three hours. The paper will be in three sections as follows:

  • Section A will consist of objective testing up to 25 marks on knowledge-based areas in syllabus sections (i), (ii), (v) and (vi)

  • Section B will comprise a compulsory scenario which could include aspects of any section of the syllabus. It will include planning and compliance elements. The format of any report etc. will be specified.
  • Section C will require two technical questions worth 20 marks each (out of a choice of four) taken from sections (ii), (iii), (iv) and (v) of the syllabus. The questions could contain a minor planning element.

Note: While it is unlikely that a full question would be set on tax administration, any of the elements could be examined within the context of another area of the syllabus.

Learning outcomes and syllabus content

5(i) Tax administration – 5% 

Learning outcomes 

On completion of their studies students should be able to:

  • describe the system of corporation tax self-assessment (CTSA);

  • identify the key dates for submission of returns;

  • describe the Inland Revenue’s powers of enquiry;

  • identify the various penalties and interest charges in CTSA;
  • identify the minimum record-keeping requirements;
  • identify the compliance requirements imposed on employers in relation to employee taxation;
  • identify the VAT registration/deregistration requirements and the rules and penalties in relation to VAT returns.

Syllabus content

  • Corporation tax self-assessment – all compliance aspects: returns; interest and penalties.

  • Returns required by employers in connection with employees’ tax and NICs.

  • VAT administration.

5(ii) Employees’ taxation – 10%

Learning outcomes

On completion of their studies students should be able to:

  • apply knowledge of the benefits-in-kind (BIK) system for employees;

  • identify the rules for different types of employees;

  • calculate the total assessable benefits of an employee and explain the effect on code numbers;

  • evaluate the relative tax efficiency of different methods of rewarding employees.

Syllabus content

  • All aspects of the system of benefits in kind.

  • Contrast salary with dividends.

  • Efficient methods of rewarding employees.

5(iii) Corporation tax – 25% 

Learning outcomes

On completion of their studies students should be able to:

  • calculate the schedule D I profit for taxation purposes, showing knowledge of case law and statute;

  • calculate the total profits of a company for CT purposes;

  • calculate the capital allowances entitlement of a company;
  • calculate the CT liability of a company (including that of small and intermediate companies);
  • prepare a schedule of CT payments of a large company covering a two-year period under the new quarterly payment system;
  • identify the effect of all forms of loss relief on a company’s, group’s or consortium’s CT liability;
  • explain the effect of the loan relationships rules on a company’s CT liability;
  • explain the operation of Shadow ACT.

Syllabus content

  • Adjustment of trading profits for taxation purposes. Underlying principles and legislation.
  • Computation of total income and CT liability.
  • Quarterly payment rules.
  • All forms of relief for losses, including groups, consortia and joint ventures.
  • Capital allowances.
  • Loan relationships.
  • Shadow ACT.

5(iv) International aspects – 20% 

Learning outcomes

On completion of their studies students should be able to:

  • evaluate the taxation implications of alternative methods of running an overseas operation;

  • identify the significance of company residences for tax purposes;
  • calculate the CT liability of a UK company which has overseas income, using the rules of double tax relief (but excluding knowledge of treaties);
  • identify transfer pricing problems, calculating any adjustment required, and state how this will be reported in its CTSA return;
  • identify a controlled foreign company (CFC);

  • calculate the CT liability arising as a result of the presence of a CFC.

Syllabus content

  • Foreign operations – subsidiary v. branch.

  • Company residence.

  • Double taxation relief.
  • Transfer pricing.
  • Controlled foreign companies
  • International trading.

5(v) Capital gains (for companies only) – 10% 

Learning outcomes 

On completion of their studies students should be able to:

  • identify chargeable assets for taxation as capital gains;

  • apply rollover and holdover reliefs for business assets;
  • identify the CGT reliefs available in a group situation and the anti-avoidance rules relating to pre-entry assets;

  • calculate the gain arising on the disposal of quoted securities using the pooling system.

Syllabus content

  • Scope.
  • Reliefs for business assets.
  • Groups of companies.
  • Shares and securities.

5(vi) Value Added Tax – 10%

Learning outcomes

On completion of their studies students should be able to:

  • identify the significance of standard rate, zero rate and exempt supplies and those supplies outside the scope of VAT;

  • identify the correct tax point of a supply and understand its significance;
  • identify the significance of EU and non-EU countries when dealing with VAT;

  • discuss the problems and opportunities inherent in a VAT group registration.

Syllabus content

  • Scope.

  • Zero rating; exempt; partial exemption.
  • Tax point; payment and refunds.
  • The concept of a group registration and the consequent VAT regulations.
  • Transactions with foreign companies.

  • Groups of companies.

5(vii) Tax Planning – 20%

Learning outcomes

Students are reminded that ‘tax planning’ is not a discrete area of taxation. It is the application of the knowledge students gain while studying each section of the syllabus. Students should try to grasp the planning opportunities when studying each section. 

On completion of their studies students should be able to:

  • calculate the form of loss relief which will minimise the CT liability in either a single company or in a group or consortium;

  • evaluate the tax efficiency of alternative methods of acquiring other businesses;
  • identify methods of minimising employer’s National Insurance Contributions (NIC);
  • contrast the tax implications of financing a company by debt or equity;
  • demonstrate the planning aspects of maximising the use of surplus ACT existing at 6 April 1999 for a company;
  • demonstrate the most efficient method of disposing of assets to third parties by a group of companies;
  • discuss the most efficient method of arranging VAT registrations for groups of companies.

Syllabus content

  • Optimum use of trading losses.
  • Company acquisitions – assets or shares?
  • National Insurance Contributions planning.
  • Alternative methods of financing a company.
  • Shadow ACT.
  • Sales of group assets.
  • VAT – groups.

The planning aspects could be within a scenario or in the technical questions.