Into The World of Accounting (Part 2) – Recommended Reads

With A-Level results, GCSE results and ACCA results all being released over the past few weeks, we at Finnies believe that there are people out there wanting to become an accountant. As a result, we thought we should provide you with some recommended reading for anyone who is looking into the world of accounting. You can also click out on each title for a link to buy the text.

Introductory texts

Accounting: an Introduction

Praised for it’s clear, accessible and uncluttered style, this book provides you with a comprehensive introduction into the main areas associated with accounting, such as financial accounting, management accounting and the core areas of financial management. The book also has a strong practical emphasis and has a big focus on how accounting information can be used alongside decision making for managers.

The great thing about this text is the online support available. The book can be supported with MyAccountingLab, an online homework and tutorial system. The site can be used by students for self-directed study or be fully integrated into an instructor’s course.

The Oxford Dictionary of Accounting

This is the best-selling dictionary and includes more than 3,700 entries. The book covers multiple aspects about accounting including financial accounting, financial reporting, management accounting, direct taxation, indirect taxation, auditing, corporate finance, and accounting bodies and institutions. A further 250 new entries have been added to this edition to include new developments such as UK tax changes.

This dictionary is great not only for students and professionals in the accounting world but also as a reference source for anyone seeking a definition of something in the often-confusing world of accounting.

Qualification Texts

AAT Accounting texts

There have been several tutorial books published for various aspects of the AAT accounting qualifications. These books closely follow the syllabus and contain case studies, key terms, activities and also answers.

ACCA Study Materials

ACCA is the most common qualification for the world of accounting and there are multiple resources available to aid in your study of this.

Kaplan Publishing offers ACCA-approved materials as well as the official ACCA past exams papers and answers. You can also buy texts to help you with theory, exam kits to follow up and pocket notes for the final revision phase. They also offer online resources in the form of tutor recordings.

These are just some of the many texts available for you to buy. Whether you’re looking to become an accountant and want to get a head start on learning, or just simply want some light reading on a particular interest.

The Budget 2014 Debugged (Part 2) - The Many Faces of Tax

There are various incarnations of tax in the money world, and it can be hard to understand them and figure out what form of relates to your work. We at Finnies are here to debug some of the mysteries about tax and help you understand the various types of tax.

Taxes paid by the individual

Income tax

This is a tax on your income. You are only taxed on ‘taxable income’ if you earn over a certain amount of money. Taxable income includes:

·      Earnings from employment (including self employment),

·      Most pensions income (including State, company and personal pensions)

·      Interest on most savings

·      Rental income

On the opposite hand, there are certain sorts of income that you never pay tax on. These include certain benefits, income from tax exempt accounts, Working Tax Credit (WTC) and premium bond wins. These income sources are ignored altogether when working out how much Income Tax you may need to pay.

For a full breakdown of income tax, including thresholds, see this link here.

Capital gains tax

This relates to assets you own, such as shares or properties. This is a tax on the gain of profit you make when you sell, give away or otherwise dispose of something.

Disposing of an asset usually happens when you cease to own it, for example if you sell it, give it away, transfer it to someone else or exchange of it for something else.

The main thing to note is that the amount taxed is the gain you make, not that amount of money you receive for the asset.

See this link for more information.

Value added tax (VAT)

VAT is a tax charged on most business transactions in the UK. Businesses add VAT to the price they charge when they provide goods and services to:

·      Business customers - for example a clothing manufacturer adds VAT to the prices they charge a clothes shop

·      Non-business customers - members of the public or 'consumers' - for example a hairdressing salon includes VAT in the prices they charge members of the public

If you're a VAT-registered business, in most cases you charge VAT on the goods and services you provide or reclaim the VAT you pay when you buy goods and services for your business.

If you're not VAT-registered then you can't reclaim the VAT you pay when you purchase goods and services. When VAT-registered businesses buy goods or services they can generally reclaim the VAT they've paid.

There are three rates of VAT, depending on the goods or services the business provides. The rates are:

·      Standard - 20 per cent

·      Reduced - 5 per cent

·      Zero - 0 per cent

We also published our own separate article on Inheritance tax, and you can view that here.

Taxes paid by companies

Corporation Tax

Corporation Tax is a tax on the taxable profits of limited companies and some organisations including clubs, societies, associations, co-operatives, charities and other unincorporated bodies.

Taxable profits for Corporation Tax include:

·      Profits from taxable income such as trading profits and investment profits (except dividend income which is taxed differently)

·      Capital gains - known as 'chargeable gains' for Corporation Tax purposes

If your company or organisation is based in the UK, you'll have to pay Corporation Tax on all your taxable profits - wherever in the world those profits come from.

If your company isn't based in the UK but operates in the UK - for example through an office or branch (known to HMRC as a 'permanent establishment') - you'll only have to pay Corporation Tax on any taxable profits arising from your UK activities.

We hope you've found this article useful and that we've hopefully helped provide some insight into the many tax variants. Should you have any questions, please feel free to email us or tweet to us @FinniesAccount.

Into the world of Accounting (Part I) – ACCA Exam Results (June 2014)

Last week the ACCA (Association of Chartered Certified Accountants) published the exam results for the June 2014 exams. The period saw a record number of students sitting exams, with 190,000 candidates sitting 330,000 papers round the world and a further 53,000 sitting computer based exams.

Results saw over 8,000 students complete the exam component of their professional qualification, which enables them to take the next step to ACCA membership; students also need to complete practical experience and ethics requirements to become ACCA members.

The pass rates of multiple exams also rose this year. With the skills exams, the pass rate rose 43%. Paper P1, Governance, Risk and Ethics, also saw a pass rise to 52%. As a result of completing their Fundamentals level, 8,744 students are now eligible for ACCA’s Advanced Diploma in Accounting and Business on completion of their Professional Ethics module, one of the requirements for ACCA membership. The Advanced Diploma celebrates students’ achievement of the Fundamentals level before they move on to the Professional level and awards a professional certification equivalent in level to a bachelor honours degree.

Alan Hatfield, ACCA director - learning, spoke highly of the results, saying 'We would like to congratulate all students who have passed their examinations this session, particularly the record number of students who have passed their final level exams and are well on their way to becoming ACCA members. He added 'We are delighted that 76% of employers agree that the ACCA Qualification helps them to grow business by providing accountants with the skills and capabilities they need. We continually respond to employer feedback and this year is an exciting year for changes to some of our exams as we act on further feedback.

For a full breakdown of the exam scores, you can visit the ACCA website by clicking here.

On behalf of all staff at Finnies we’d like to congratulate all students who sat exams and wish good luck to any of those starting them soon.

The Budget 2014 Debugged (Part 1) – Inheritance Tax

It was recently revealed that the UK charges the highest proportion of inheritance or estate tax compared to a many other world economies, with the government taking three times as much of an individual’s estate as the global average. So we’re here to debug some of the myths and mysteries surrounding inheritance tax.

What is Inheritance Tax?

“Inheritance Tax is usually paid on an estate when somebody dies. It's also sometimes payable on trusts or gifts made during someone's lifetime. Most estates don't have to pay Inheritance Tax because they're valued at less than the threshold (£325,000 in 2014 to 15). The tax is payable at 40% on the amount over this threshold or 36% if the estate qualifies for a reduced rate as a result of a charitable donation.” – Source: HRMC

The Inheritance Tax threshold (or 'nil rate band') is the amount up to which an estate will have no Inheritance Tax to pay. If the estate - including any assets held in trust and gifts made within seven years of death - is more than the threshold, Inheritance Tax will be due at 40 per cent on the amount over the nil rate band. From 6 April 2012 people who leave 10 per cent or more of their net estate to charity can choose to pay a reduced rate of Inheritance Tax of 36 per cent. You can find out more about the thresholds here.

Inheritance Tax Comparisons

Recent research revealed that the average UK tax take from inheritance tax (IHT) is 25.8% from an individual’s estate, compared with the world average of 7.67%.

This tax is charged at a flat rate of 40% in the UK, unlike countries such as France where inheritance tax can be levied at 60%. Another difference is that whereas in the UK the estate as a whole is taxed, in France each beneficiary is taxed on the share which they receive.  As such, the French system is a true inheritance tax (the heir is taxed) whereas the UK system is an estate tax (the estate pays).

So whereas in the UK there is a nil-rate band for the estate (of £325,000 until 2014/2015) and then everything over this is taxed at 40%, in France the nil-rate (or tax free allowances) and the rate of taxation vary depending on the relationship between the deceased and the beneficiary.  The tax free allowances are revised annually in France for each calendar year; those below are for 2012.  The nil-rate band is set in advance for future tax years in the UK.

Some countries do not even have inheritance tax. In a 2014 survey, AGN Europe found that Austria, Cyprus, Estonia, Isle of Man, Liechtenstein, Slovakia and Sweden do not have inheritance tax; The Czech Republic has no formal gift or inheritance tax but does have a form of these taxes incorporated into their income tax regime.

The Impact of Inheritance Tax

The high tax bill associated with IHT can be extremely off putting to people looking to create wealth to pass on to their relatives. Some have argued that it was important for individuals to consider tax planning for the long term as early as possible, for example by making use of the seven-year rule for making gifts of assets.

Simon Browning, tax partner at UHY Hacker Young in Nottingham, said: ‘Previously, making pension contributions has always been tax efficient but the inflexible nature of the drawdown of pension funds has generally put people off pensions. This will no longer be the case, if the proposed changes come into force as planned in 2015. People will be able to draw down funds much more freely and with increased flexibility, which will be hugely beneficial in terms of tax planning,’

What are your thoughts on the Inheritance Tax system? We’d like to hear your views on the subject. If you require any help with tax systems, you can get in touch with us at Finnies at enquires@finnies.org.uk or 01482 861919; we’d be very happy to help.