JUNE & DECEMBER 2010 – STUDY GUIDE

CERTIFIED ACCOUNTING TECHNICIAN EXAMINATION

Paper 9 (LSO)
Preparing Taxation
Computations
Introduction
This booklet contains the Study Guide for the ACCA's Certified Accounting Technician Paper 9 (LSO): Preparing Taxation
Computations.

The Study Guide is designed to help you plan your studies and to provide more detailed interpretation of the syllabus for
ACCA’s Certified Accounting Technician examinations. It contains both the Syllabus and the Study Sessions for the paper,
which you can follow when preparing for the examination.

The Syllabus outlines the content of the paper and how that content is examined. The Study Sessions take the syllabus and
expand it into teaching or study sessions of similar length. These sessions indicate what the examiner expects of candidates
for each part of the syllabus, and therefore gives you guidance in the skills you are expected to demonstrate in the
examinations. The time to complete each session will vary according to your individual capabilities and the time you have
available to study. Tuition providers offering face-to-face tuition are recommended to design courses with a minimum of two
hours tuition per study session. However, repeated coverage of the material is vital to ensure your understanding and recall
of the subject. Be sure to practice past examination questions to consolidate your knowledge and read your student
accountant magazine regularly.

If you have any queries concerning the study guide, please direct them to: ABOUT ACCA
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 Preparing Taxation Computations (LSO)

AIMS 2 Employment income

To develop the ability to prepare computations of tax liability for (a) Computing employment income
both individuals and businesses resident in the Lesotho for the (b) Allowable deductions against employment income
purposes of income tax, corporation tax and value added tax. In (c) Termination payments
addition, to develop knowledge and understanding of the manner in
which dealings must be conducted with the Lesotho Revenue 3 Income tax computations for individuals and businesses
Authority, including knowledge of the statutory timescales for the (a) Income from employment, business, property and other
submission of claims and returns and the due dates for the income
payment of tax liabilities. (b) Computing chargeable income
(i) Gross income
OBJECTIVES (ii) Allowable deductions
On completion of this paper, candidates should be able to: (iii) Taxation rates
• prepare chargeable income for individuals and businesses (iv) Personal tax credit
• calculate gross income (employment income, business (c) Determination of minimum chargeable income
income, property income and other income)
• prepare tax computations for individuals and businesses 4 Chargeable gain computations (business and
• prepare chargeable gains and allowable losses arising on investments)
disposal of business assets and investment assets. (a) Chargeable persons, disposals and assets
• complete and submit value added tax calculations. (b) Computing gains and losses from disposals
• conduct dealings with Lesotho Revenue Authority and with (i) basic computation
clients in an appropriate manner. (ii) indexation for effects of inflation
(c) Relief for allowable losses
POSITION OF THE PAPER IN THE OVERALL SYLLABUS
An understanding of the format of accounts used for sole traders, 5 Partnerships
partnerships and companies from Paper 3, Maintaining Financial (a) Principles of taxation of partnerships
Records is assumed. There is no substantial integration with (b) Calculations of partnership income or loss
other papers. The coverage in Paper 9 LSO will provide the (c) Taxation of partners
grounding for the study for the study of Paper F6
(LSO)Taxation. 6 Corporation tax computations for companies
(a) Basic corporation tax computations
SYLLABUS CONTENT (b) Accounting periods
1 Chargeable income for individuals and businesses (c) Business income chargeable to corporation tax
(a) Adjustment of trading profits / losses to arrive at (d) Chargeable gains/losses
chargeable income (e) Computing corporation tax liability
(b) Depreciation allowances - single asset method and the (f) Relief for losses
pooling method
(c) Treatment of assets acquired under a finance lease and 7 Withholding of tax at source
by hire purchase (a) Withholding obligations
(d) Assessments for individuals, sole traders, associations (b) General provisions relating to withholding of tax at
and clubs, partnerships and companies source
(e) Relief for losses.

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Preparing Taxation Computations (LSO)

8 Administration of tax Chargeable gains of companies

(a) Return of income and self assessment system • Reinvestment relief
(b) Assessments • Negligible value claims
(c) Objections and appeals • Wasting assets and leases
(d) Recovery and refunds of tax • Incorporation relief
(e) Payment of income tax including dates of payment
(f) Payment of corporation tax including advance Partnerships
corporation tax (ACT) quarterly instalments • Formation, reconstitution or Dissolution of a partnership
(g) Dealing with Lesotho Revenue Authority • Determination of adjusted cost base of partner's interest

9 Value added tax (VAT) Corporation tax of companies

(a) Scope of VAT • Anti-avoidance
(b) Basic principles of VAT • Mergers and acquisitions
(i) types, place, time of supply and imports • Incorporation and liquidation roll over
(ii) calculting VAT payable • Reconstructions
(c) VAT invoices and records, and accounting for VAT • Change in control of companies
(d) Registration and cancellation of vendors • foreign tax credit
(e) Administration of VAT • Double taxation agreements and treaties

EXCLUDED TOPICS Value added tax:

The following topics are specifically excluded from Paper T9 • Group registration
(LSO): • Default interest.
Chargeable income for individuals and businesses
• Badges of trade KEY AREAS OF THE SYLLABUS
• Successions • Calculating an individual's employment chargeable income
• Change of accounting date • Computation of business chargeable income
• Long life assets • Basic income tax computations of individuals and businesses
• Depreciation allowances on hotels and intangible assets • Basic corporation tax computations of companies
• Limited liability partnerships • Basic chargeable gains and allowable losses
• Personal service companies • Basic value added tax computations.

Employment income APPROACH TO EXAMINING THE SYLLABUS

• Detailed operation of the PAYE system
• Share incentive schemes Paper 9(LSO) is a three-hour written paper with 15 minutes reading
time.
Income tax computations
• Foreign income of partnerships and companies The examination will be predominantly computational and will
• Double tax relief comprise of 2 parts. There will be no optional parts.

Part A will comprise of 10 multi-choice questions (MCQ) each

worth 2 marks. This will total 20 marks.

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 Preparing Taxation Computations (LSO)

Part B will comprise of 4 long questions. Question 1 will be on any
area of income tax and be worth between 23 and 27 marks.
Question 2 will be on company tax or partnership tax and will be
worth 18 to 22 marks. Question 3 will be on any area of the
syllabus not examined elsewhere and will be worth between 18 to
22 marks. Question 4 will be on Value Added Tax (VAT) and will be
worth 13 to 18 marks.
Chargeable gains, fringe benefits tax may be examined either as a
separate question or as part of an income tax or corporation tax
scenario.
Calculations should be made to the nearest month and the nearest
M.
Knowledge of section numbers will not be needed to understand
questions in this paper, nor will students be expected to use them
in their answers. If students wish to refer to section numbers in
their answers, they may do so and will not be penalised if old, or
even incorrect section numbers, are used.
The Study Sessions section provides more detailed guidance on
the syllabus.

ADDITIONAL INFORMATION RELEVANT TEXTS

ACCA reserves the right to examine anything contained within the There are a number of sources from which you can obtain a
study guide at any examination session. This includes knowledge, series of materials written for the ACCA CAT examinations. These
techniques, principles, theories, and concepts as specified. are listed below:

For the financial accounting, audit and assurance, law and tax Lesotho Income Tax Act 1993 (as amended)
papers except where indicated otherwise, ACCA will publish Lesotho Income Tax Act Explanatory Memorandum
examinable documents once a year to indicate exactly what Lesotho Value Added Act 2001 (as amended)
regulations and legislation could potentially be assessed within Lesotho Income Tax Regulations 1994 (as amended)
identified examination sessions. Lesotho VAT regulations 2001
Customs Duty Act 1982
For paper based examinations regulation issued or legislation
passed on or before 30th September annually, will be assessed
from June 1st of the following year to May 31st of the year after.
Please refer to examninable documents for the paper for further
information.

Regulation issued or legislation passed in accordance with the

above dates may be examinable even if the effective date is in
the future.

The term issued or passed relates to when regulation or legislation

has been formally approved.

The term effective relates to when regulation or legislation must be

applied to an entity transactions and business practices. Tax
rates and allowance tables will be provided at the front of the
examination paper.

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Preparing Taxation Computations (LSO)

STUDY SESSIONS 5 Income tax – income tax from individuals and businesses
1 Introduction to the Lesotho tax system (a) Explain the principles of deductible and non
(a) Identify the main sources of Lesotho tax legislation deductible expenditure
(b) Describe the organisation of the Lesotho Revenue (b) Prepare chargeable income computations
Authority and its terms of reference including the appeals (c) Explain and apply relief for losses.
system
(c) Describe the objections and appeals process. 6 Depreciation allowances
(a) Explain the principles relating to depreciation
2 Introduction to personal taxation allowances and ensure that assets are correctly
(a) Explain the scope of income tax with regard to grouped/classified
chargeable income for individuals and businesses. (b) Prepare depreciation allowance computations
(b) Distinguish between income and gains/losses on using both the pooling method and the single
disposal of business and investments assets. asset method
(c) Outline the key elements of a personal income tax (c) Illustrate the difference between the pooling method
computation including gross income and exempt and the single asset method
income.

7 Finance leases and hire purchase contracts

3 Income tax- basic computation (a) The implications of acquiring assets under a
(a) Explain the entitlement to and the amount of the personal finance lease or a hire purchase contract
tax credit (b) Define a finance lease for tax purposes
(b) Property income (c) Compute the allowable interest and depreciation
(i) Identify the categories of property income allowances for assets acquired under both
(ii) Calculate taxable income from dividends, finance leases and hire purchase contracts
interest, rent and royalties
(c) Prepare examples of income tax computations 8 Partnerships
using standard layout (a) Explain the principles of taxation for partnerships
(d) Explain and illustrate the treatment of gains/losses (b) Determine partnerships residence
on the disposal of assets (c) Calculate partnership income/loss
(e) Explain and illustrate the differences between total (d) Calculate the individual partners' tax
tax liabilities (e) Demonstrate the effect of changes in partnerships
(f) Explain and calculate minimum chargeable income

9 Superannuation contributions
4 Income tax – income from employment (a) Explain and calculate the relief available for
(a) Explain the difference between employment and contributions to an employer's superannuation
self employment and its implications fund for both employer and the employee
(b) Identify the principal categories of deductions and (b) Explain and calculate the relief available for
illustrate their scope contributions to a self-provided superannuation
(c) Calculate termination payments fund
(c) Explain and caculate the relief available for
contributions to a non-resident superannuation
fund

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 Preparing Taxation Computations (LSO)

(c) Withholding tax certificates

(d) Describe the treatment of a complying
superannuation fund
14 Administration of tax
(a) Describe the administrative procedures relating to returns
10 Chargeable gains/allowable losses
of income and the corporation tax assessment rules,
(a) Identify chargeable persons, chargeable assets
including the filing of returns and filing dates, and cases
and chargeable disposals
where returns are not required
(b) Explain the circumstances in which market value
(b) Descrive the administrative procedures relating to
will be used as either the transfer value or the
assessments including deemed assessments, default and
base cost
special assessments and amended assessments and
(c) Explain and calculate exemptions and reliefs
enquiries
(d) Calculate gain/loss on disposal on business
(c) Outline the process for the collection and refund of tax
and investments assets
(d) Identify the due dates for the payment of income tax
(e) Explain and illustrate how relief for losses is given
and corporation tax
(e) Explain the processes for the payment of tax, including
11 Corporation tax - compute chargeable income
tax by instalments, advance corporation tax and the
(a) Explain the scope of corporation tax including the
quarterly payments system
concepts of residence and source
(f) Calculate instalments due
(b) Accounting periods
(g) Explain how a repayment of overpaid tax can be
(c) Identify the different classes of income
obtained
(d) Explain and illustrate the treatment of gains/losses
on the disposal of business assets
15 Fringe benefits tax (FBT)
(e) Compute chargeable income for Lesotho resident
(a) Identify and calculate the taxable value and taxable
companies
amount of fringe benefits
(b) Calculate the fringe benefits tax liability
12 Corporation tax - computation of tax liability
(a) Explain the rates of corporation tax to be applied
16 Value added tax (VAT)
(b) Calculate the corporation tax liability for Lesotho
(a) Explain the scope of value added tax
resident companies
(b) Illustrate the need for registration - compulsory,
(c) Calculate corporation tax payable for periods
voluntary, exemption and deregistration
longer and shorter than 12 months
(c) Explain and contrast the types of supply - standard,
(d) Explain and apply relief for losses
zero rated and exempt
(d) Compute VAT liability - input tax, output tax, bad
13 Withholding tax
debts, discounts and irrecoverable debts
(a) Withholding tax obligations
(e) Explain the time of supply/tax point for inputs and
(i) Withholding of tax by employers
outputs
(ii) Payments to residents contractors
(f) Outline the process for accounting for VAT
(iii) Payments of interest
(g) Explain the detail required on VAT invoices
(iv) Payments to superannuation
(h) Explain the treatment of imports and exports
(v) International payments
(i) Detail the basic VAT adminsitration requirements
(b) General provisions relating to withholding of tax at
- returns and assessments
source

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Preparing Taxation Computations (LSO)

- objections and appeals

- collection and recovery
- refund of value added tax
- additional tax and offences

17 Revision of income tax

18 Revision of taxation of chargeable gains

19 Revision of corporation tax

20 Revision of VAT

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