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ICAEW ACA Tax Compliance: Key Concepts and Definitions, Exams of Social Sciences

United States International UniversitySocial Sciences

A concise overview of key tax compliance concepts relevant to the icaew aca qualification. It covers topics such as transfer of value, chargeable property and persons, inheritance tax exemptions, and calculations for lifetime tax and death tax. The document also includes information on employment income, travel expenses, and taxable benefits, offering a structured approach to understanding tax compliance principles and regulations. It is useful for students preparing for tax compliance exams and professionals seeking a quick reference guide. Well-organized and provides clear answers to specific questions, making it a valuable resource for exam preparation and quick reference.

Typology: Exams

2025/2026

Available from 11/19/2025

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ICAEW ACA: TAX COMPLIANCE 2025
Transfer of Value - Answer -Gift of any asset which reduces donors estate
Chargeable property - Answer -All proper which donor is beneficially entitled
Chargeable person - Answer -UK domiciled - chargeable on worldwide assets
Not UK domiciled - chargeable on UK only assets
Valuing a transfer - Answer -The diminution in value principle - market value of asset at
time of transfer
Annual lifetime transfer value tax free limit - Answer -£250 per recipient (can't be part of
a bigger gift)
Relief on gift for parent to child getting married - Answer -£5000
Relief on gift to grandparent or ancestor to recipient getting married - Answer -£2500
Relief on gift to party to the marriage or civil partnership (you to your partner) to the
recipient getting married - Answer -£2500
Relief on gift to anyone else to recipient getting married - Answer -£1000
What makes a lifetime gift exempt - Answer -Regular payment (school fees by
grandparents)
Made from donors income
Doesn't effect donors standard of living
Annual exempt amount (AE) - Answer -£3000
Unused can be carried forward one year but current year AE is offset first.
General inheritance tax exemptions - Answer -To spouse or civil partner
To charity
To qualifying political parties (two MPs or one MO with 150k votes)
Finding chargeable amount for IHT - Answer -Amount to transfer
LESS:
Exemptions (marriage, small gift, spouse etc)
LESS:
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ICAEW ACA: TAX COMPLIANCE 2025

Transfer of Value - Answer - Gift of any asset which reduces donors estate Chargeable property - Answer - All proper which donor is beneficially entitled Chargeable person - Answer - UK domiciled - chargeable on worldwide assets Not UK domiciled - chargeable on UK only assets Valuing a transfer - Answer - The diminution in value principle - market value of asset at time of transfer Annual lifetime transfer value tax free limit - Answer - £250 per recipient (can't be part of a bigger gift) Relief on gift for parent to child getting married - Answer - £ Relief on gift to grandparent or ancestor to recipient getting married - Answer - £ Relief on gift to party to the marriage or civil partnership (you to your partner) to the recipient getting married - Answer - £ Relief on gift to anyone else to recipient getting married - Answer - £ What makes a lifetime gift exempt - Answer - Regular payment (school fees by grandparents) Made from donors income Doesn't effect donors standard of living Annual exempt amount (AE) - Answer - £ Unused can be carried forward one year but current year AE is offset first. General inheritance tax exemptions - Answer - To spouse or civil partner To charity To qualifying political parties (two MPs or one MO with 150k votes) Finding chargeable amount for IHT - Answer - Amount to transfer LESS: Exemptions (marriage, small gift, spouse etc) LESS:

Annual Exemption (AE) for current year and previous year What is a chargeable lifetime transfer and when is IHT chargeable on it? - Answer -- Creation or transfer to a trust

  • Creation of a non-qualifying interest trust IHT hits when:
  • at the time the gift was made
  • at time of death if CLT was made in seven years prior When is IHT chargeable on a potentially exempt transfer (PET)? - Answer - If the PET is made in the seven years prior to death IHT percentage on transfers covered by the nil rate band in the seven year period? - Answer - 0% After NRB is applied: Trustees pay 20% Donor pays 25% Calculating lifetime tax (CLT's only) - Answer - Chargeable amount (after AE's) LESS Nil rate band available LESS Lifetime tax (20/25)% EQUALS Gross chargeable transfer Gross chargeable transfers carried forward for non qualifying interest in possession trust (IIP) - Answer - Chargeable transfer of CLT LESS NRB Tax at 20%/25% Add tax and chargeable amount to get GCT The effect on NRB if a CLT happened within seven years prior - Answer - Take the CGT away from the NRB before deducting GCT if trustee pays - Answer - Gross of tax so GCT is just chargeable amount GCT if donor pays - Answer - Net of tax so GCT is chargeable amount plus lifetime tax Effect on NRB when calculating death tax - Answer - Reduced by the GCT value of any PETs or CLTs
  • within 7 years prior to transfer
  • chargeable to IHT (lifetime or death for CLTs, death for PETs)

Death Estate - Answer - 1. Assets and liabilities held at time of donor's death and chargeable to death tax.

  1. No exempt assets.
  2. Proceeds from life insurance policy included.
  3. Legal debts deducted from death estate.
  4. Repayment but not endowment mortgages are deductible.
  5. Funeral expenses are deductible.
  6. Annual exemption not available.
  7. Remaining NRB transferred to partner What's the starting value for the RNRB - Answer - The lower of the residence value or the RNRB for 22/23 of 175, Threshold value to start tapering off RNRB by £1 for every £2 above - Answer - £2,000,000, the excess is deducted from the RNRB Quick Succession Relief (QSR) - Answer - Reduces IHT if:
  • Property had been acquired by the deceased five years before death
  • A charge to IHT on the initial transfer
  • Taken away from death estate Charitable legacies - Answer - Use 36% for IHT if more than 10% of net chargeable estate is left to charity (Taxable estate + RNRB + exemptions)/ Employment income pro forma - Answer - Salary Bonus Taxable benefits Expenses Cash vouchers LESS: Allowable deductions Expenses incurred purely for work Contributions to pension Subscriptions to professional bodies Charitable donations (payroll deduction scheme) Travel expenses Mileage allowance Point that earnings are deemed as received - Answer - Earlier of:
  • Actual payment date
  • Date on which the individual became entitled to the payment DIRECTORS ALSO INCLUDE:
  • date when earnings are credited on company accounts
  • last day of the period of account if earnings after before end of period
  • date on which the earnings are determined if they are determined after accounting period Travel expenses - Answer - Anything outside of normal commute is allowable, normal commute is allowable if place of work is for less than 24 months. Entertaining expenses - Answer - General allowance - anything spent from general entertaining allowance is allowable Specific entertaining - deductible (Golf club membership not deductible, but a meal at the club would be) Car/Van/Bike Taxable Benefit / Deductible Expense - Answer - Amount Reimbursed Less: Statutory Deductible Expense Add: Passenger reimburse Less: Statutory deductible passenger expense If POSITIVE: Taxable benefit if NEGATIVE: Deductible expense Calculating taxable benefit of employee loans - Answer - Average method:
  • Uses average of loan at start and end of year
  • If the loan was taken out during tax year then that balance is used instead. Strict method:
  • Calculated by finding monthly benefit outstanding at the end of each month
  • Used if stated explicitly to do so