Becker f6

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2014 Edition
STUDY QUESTION BANK
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ACCA
Paper F6 | TAXATION (UNITED KINGDOM)
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ACCA
PAPER F6
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TAXATION
(UNITED KINGDOM)
STUDY QUESTION BANK
For 2014 Examinations
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STUDY QUESTION BANK TAXATION (UNITED KINGDOM) (F6)

CONTENTS
Question
Page
Answer
Marks
1001
22
1
2
2
1002
1004
1005
15
15
20
1008
20
Date worked
UK TAX SYSTEM
1
Tax status
2
3
4
Michael
Long Life
The Pike Family
PROPERTY AND INVESTMENT INCOMES

Brigid Jones
EMPLOYMENT INCOME
6
7
Endicott
LA Raider
PL
INCOME TAX COMPUTATIONS
4
5
1010
1012
15
20
6
7
9
1014
1016
1018
20
13
35
10
11
12
14
1021
1024
1027
1028
20
20
15
25
16
17
17
18
1030
1032
1033
1035
20
10
25
15
18
19
1037
1038
10
20
19
1041
10
UNINCORPORATED TRADER ASSESSMENT AND PROFITS

8
9
10
Max
Capone
Michael and Rose
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CAPITAL ALLOWANCES
11
12
13
14
Julian
Roberta
Charlie Ceasing
Richard
UNINCORPORATED TRADER TRADING LOSSES

15
16
17
18
Warren Street
Newbold
Sigmund
Alan Waters
UNINCORPORATED TRADER OTHER MATTERS

19
20
Kruger, Brand and Shepstone

Fox, Griffiths and Hall
CAPITAL GAINS BASIC PRINCIPLES

21
Abbot Ltd and James
(iii)
TAXATION (UNITED KINGDOM) (F6) STUDY QUESTION BANK

Question
Page
Answer
Marks
20
21
21
1042
1044
1045
20
15
20
22
1047
20
23
24
1050
1052
Date worked
CAPITAL GAINS CHATTELS, LAND AND BUILDINGS

22
23
24
Ian and Katrina

Pearl
Robin and Terence
25
Ma Ltd, Olive and George
CAPITAL GAINS BUSINESS ASSET RELIEFS

26
27
Nixon and Drive Ltd

Christine Philips
28
29
30
31
Springvale Ltd
Nuts and Bolts Ltd
Chinny Ltd
Ring Ltd
18
12
PL
CORPORATION TAX COMPUTATION
CAPITAL GAINS SHARES
25
26
26
27
1053
1055
1056
1058
20
15
20
18
28
28
1059
1060
15
10
29
29
30
1061
1062
1063
8
15
8
30
1064
25
31
1066
12
32
33
1067
1069
20
20
33
34
34
35
35
1071
1072
1073
1074
1074
15
7
8
8
55
CORPORATION TAX LOSS RELIEFS

32
33
Jorrocks Ltd
Flounder Ltd
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CORPORATION TAX GROUPS OF COMPANIES

34
35
36
Sand Ltd
Lemond Ltd and Subsidiaries
A Ltd and Subsidiaries
INHERITANCE TAX
37
Graham
NATIONAL INSURANCE CONTRIBUTIONS

38
Mr Forest
TAX ADMINISTRATION
39
40
Adam and Mr Brown and Challis Ltd

PAYE
VALUE ADDED TAX

41
42
43
44
45
(iv)
Mr Edwards
Barrett Ltd
Fred
Sweet
Subject survey VAT

SUPPLEMENTARY INSTRUCTIONS
The following supplementary instructions will be included in the June 2014 and December 2014 exams:
calculations and workings need only be made to the nearest ;

all apportionments should be made to the nearest month;
all workings should be shown.
TAX RATES AND ALLOWANCES

Income tax
Dividend
rates
%
10
32.5
37.5
PL
Normal
rates
%
Basic rate
1 32,010
20
Higher rate
32,011 150,000
40
45
Additional rate 150,001 and over
A starting rate of 10% applies to savings income where it falls within the first 2,790 of
taxable income.
Personal allowance
Personal allowance
Born on or after 6 April 1948
Born between 6 April 1938 and 5 April 1948
Born before 6 April 1938
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Income limit
Personal allowance
Personal allowance (born before 6 April 1948)
9,440
10,500
10,660
100,000
26,100
Residence status
Days in UK
Previously resident
Not previously resident
Less than 16
Automatically not resident
16 to 45
Resident if 4 UK ties (or more)
46 to 90
Resident if 4 UK ties
91 to 120
121 to 182
Resident if 1 UK tie (or more)
183 or more
Automatically resident
Automatically resident
Child benefit income tax charge
Where income is between 50,000 and 60,000, the charge is 1% of the amount of child
benefit received for every 100 of income over 50,000.
(v)

Car benefit percentage
The relevant base level of CO2 emissions is 95 grams per kilometre.
The percentage rates applying to petrol cars with CO2 emissions up to this level are:
75 grams per kilometre or less
76 grams to 94 grams per kilometre
95 grams per kilometre
5%
10%
11%
Car fuel benefit
Individual savings accounts (ISAs)
The base figure for calculating the car fuel benefit is 21,100.
The overall limit is 11,520, of which 5,760 can be invested in a cash ISA.
Annual allowance
PL
Pension scheme limit
50,000
The maximum contribution that can qualify for tax relief without any earnings is 3,600.
Authorised mileage allowances: cars
Up to 10,000 miles
Over 10,000 miles
45p
25p
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Capital allowances: rate of allowance
Plant and machinery

Main pool
Special rate pool
18
8
Motor cars
New cars with CO2 emissions up to 95 grams per kilometre
CO2 emissions between 96 and 130 grams per kilometre
CO2 emissions over 130 grams per kilometre
100
18
8
Annual investment allowance

First 250,000 of expenditure (since 1 January 2013)
100
Cap on income tax reliefs
Unless otherewise restricted, reliefs are capped at the higher of 50,000 or 25% of income.
(vi)

Corporation tax
Financial year
Small profits rate
Main rate
2011
20%
26%
2012
20%
24%
2013
20%
23%
Lower limit
Upper limit
Standard fraction
300,000
1,500,000
3/200
300,000
1,500,000
1/100
300,000
1,500,000
3/400
Marginal relief
Value added tax (VAT)
20%
79,000
77,000
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Standard rate
Registration limit
Deregistration limit
Standard fraction (U A) N/A
Inheritance tax: tax rates

1 325,000
Excess Death rate
Lifetime rate
Nil
40%
20%
Commentary
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Where the nil rate bands are required for previous years these will be given in the question.
Inheritance tax: taper relief
Years before death
Over 3 but less than 4 years

Percentage
reduction
20%
40%
60%
80%
Capital gains tax
Rates of tax lower rate

higher rate
Annual exempt amount
Entrepreneurs relief Lifetime limit
Rate of tax
18%
28%
10,900
10,000,000
10%
(vii)

National insurance contributions
(Not contracted out rates)
Class 1 Employee
1 to 7,755 per year

7,756 to 41,450 per year
41,451 and above per year
%
Nil
12.0
2.0
Class 1 Employer
1 to 7,696 per year

Nil
13.8
Class 2
2.70 per week

Small earnings exemption
1 to 7,755 per year
7,756 to 41,450 per year
5,725
Nil
9.0
2.0
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Class 4
13.8
Class 1A
Rates of interest (assumed)
4.0%
3.0%
0.5%
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Official rate of interest

Rate of interest on underpaid tax
Rate of interest on overpaid tax
(viii)

Question 1 TAX STATUS
(a)
An individual person is liable to UK income tax if that person is resident in the UK for tax
purposes.
Required:
Explain the tests applied by Her Majestys Revenue & Customs to determine whether a
person is resident in the UK for a tax year.
(10 marks)
A company is liable to UK corporation tax on its profits arising anywhere in the world in a
chargeable accounting period if that company is resident in the UK for tax purposes in that
same period.
(b)
Required:
(c)
PL
Explain how Her Majestys Revenue & Customs determines whether a company is
resident in the UK for a chargeable accounting period.
(8 marks)
A distinction is drawn for UK tax purposes between the terms tax avoidance and tax
evasion.
Required:
Explain the meaning of these terms.
Question 2 MICHAEL
(4 marks)
(22 marks)
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Michael informs you of the following matters so that you can prepare his income tax computation:
(1)
He received a gross salary of 108,000 from his employment as a solicitor, for the tax year
2013/14. His employer deducted 31,444 under PAYE for 2013/14.
(2)
Michael is a member of his employers approved occupational pension scheme. In 2013/14,

he made contributions into the scheme = 5% of his salary, whilst his employer contributed an
amount = 8% of his salary.
(3)
He received building society interest of 560 in the year to 5 April 2014.
(4)
He received bank deposit interest of 632 in the year to 5 April 2014.
(5)
He received dividends of 1,800 in the year to 5 April 2014.
(6)
During the year ended 5 April 2014, he paid 780 to a recognised charity under the gift aid
scheme.
Required:
Calculate the income tax payable for 2013/14.
(15 marks)

Question 3 LONG LIFE
Long Life has been trading for many years as a partner in a barrel manufacturing business. His income
and payments for 2013/14 were:
151,000
2,943
6,000
40,000
Adjusted trading profits

Dividends received
Qualifying loan interest paid
Personal pension contributions paid
Calculate the income tax liability of Long Life for 2013/14.
Required:
(15 marks)
Question 4 THE PIKE FAMILY
Mr and Mrs Pike are a married couple born in 1936 and 1943 respectively. In 2013/14 their
incomes were as follows:
Mr Pike
Mrs Pike
Pensions state and private

26,200
10,960
National savings bank interest received
100
2,500
Building Society interest received
800
Dividends received
1,620
PL
(a)
Mr Pike also paid 400 in total to several charities under the gift aid scheme.
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Tax deducted at source under PAYE from the private pensions of Mr and Mrs Pike was
respectively 2,978 and 92.
Required:
Calculate the income tax liabilities of Mr and Mrs Pike for 2013/14.
(b)
(14 marks)
Henry Pike, aged 50, who is self-employed, earned adjusted trading profits of 200,000 and
paid personal pensions contributions of 36,000 in 2013/14.
His only other income is dividends received of 2,700.
Required:
Calculate Henrys income tax payable for 2013/14.
(6 marks)
(20 marks)

Question 5 BRIGID JONES
Brigid Jones, a widow born in 1947, owns several properties. One is her own home and the others are
residential properties which she lets. She also lets two rooms in her own home to university students
for thirty weeks a year.
Relevant details for 2013/14 are as follows:
Let
property B
580
640
800
PL
Rent:
Home weekly rental (per room) of
80
Property A (unfurnished)
Old lease monthly rental to 30 June 2013
New lease monthly rental from 1 October 2013
Property B (qualifying as furnished holiday
accommodation)
Weekly rental of
Let
property A
Home
Expenses:
Decoration and repairs July 2013
January 2014
Letting agents fees September 2013
whole year
Loan interest whole year
Bad debt written off
600
1,800
2,100
900
3,400
1,500
1,600
1,200
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During 2013/14, Property B was occupied by Brigid and members of her family for six weeks and let to
paying guests for forty weeks.
Brigid claimed capital allowances of 3,350 (adjusted for private use) in 2013/14 in respect of furniture
and fittings in Property B.
Brigid made a rent a room election in 2009/10 in relation to her home, and this is still in force.
Brigids other income for 2013/14 is:
Pensions State and private

Dividends received
Interest on a cash ISA
10,000
720
750
Required:
(a)
State the conditions that must be met to allow Brigid to treat Property B as furnished
holiday accommodation.
(3 marks)
(b)
Calculate the amounts to be included in Brigids income tax computation for 2013/14 as
property business profits or losses.
(9 marks)
(c)
Calculate Brigids income tax liability for 2013/14.
(8 marks)
(20 marks)

Question 6 ENDICOTT
Mr Endicott is employed as a salesman in Southampton and during the year ended 5 April 2014 he
earned a salary of 23,000 and paid 2,979 tax thereon under PAYE. His employers reimbursed the
following expenses incurred by Mr Endicott in 2013/14:
226 (wholly for business)
544 (wholly for business)
82 (of which private use agreed to be 50%)
Expenses at London training conference (3 nights):

Accommodation and subsistence
Laundry, newspapers, etc
380
18
398
Rail and taxi fares

Entertaining expenses
Home telephone cost
His employers also provided him with the following employment benefits:
Use of a company car originally purchased in January 2011 for 13,650, the manufacturers
list price. The company paid all the running costs of the car, excluding petrol for private
purposes. CO2 emissions were 150 grams per kilometre.
(ii)
Private medical insurance costing the company 550 in 2013/14.
(iii)
Use of a mobile telephone which cost the company 200 in 2012. Telephone charges paid by
the company for 2013/14 were 1,200, of which 85% were for business purposes.
PL
(i)
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In addition to his earned income Mr Endicott had the following other income for 2013/14:
4,329
104
UK dividends received
UK Bank deposit account interest received
Required:
Calculate the income tax payable by Mr Endicott for 2013/14.
(15 marks)

Question 7 LA RAIDER
LA Raider is an employee and shareholder of Coliseum Ltd, a small family company that prepares
annual accounts to 30 November. He owns 20,000 1 ordinary shares; the remaining 70% of the
companys shares are held by the other family members.
The companys accounts show the following information for the three years ended 30 November 2014:
The following information is provided in respect of 2013/14:
2013
30,000
3,200
9,000
2014
33,000
2,700
12,303
Annual salary to Raider (paid at the end of each month)

Bonus to Raider (paid in the following February)
Total dividend declared (paid in the following May)
2012
28,000
3,000
13,194
The senior employees have been able to use the company yacht moored on the south coast for
two weeks each year since its purchase. Raider spent his fortnight on the boat along with his
family. The yacht cost the company 42,000 in 2008 (current value 33,000) and running and
maintenance expenses amounted to 6,000 during the year.
(2)
Coliseum provides a company house for Raider and his family. The house was bought by the
company in 2005 at a cost of 150,000. It was first occupied by Raider in 2009, when its
market value was 180,000. The rateable value of the house is 1,200. During 2013/14 the
company paid the following expenses relating to the property:
PL
(1)
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Re-decoration
Gas, electric and water charges
Council tax
2,400
1,800
800
Raider contributed 120 per month towards the provision of the house.
(3)
Raider had the use of a diesel motor car. The manufacturers list price of the car was 24,100
when purchased in 2011. CO2 emissions were 210 grams per kilometre. The company paid
all the running costs of the car, including fuel for private mileage.
(4)
Raider took meals in the fully subsidised executive canteen, the cost for the year being 135.
Another subsidised canteen was available for the other staff.
(5)
Raider was paid a round sum expense allowance of 2,080 out of which he paid 800 on
entertaining customers and 550 on business travel by air or train.
(6)
He pays 3% of his basic salary into the companys occupational pension scheme.
company contributes an amount equal to 7% of his salary.
(7)
Raider is provided with a loan from his employer of 20,000 carrying an interest rate of 3%.
The loan was granted three years ago to assist with the purchase of his holiday home in
France. He repaid 5,000 on 5 January 2014. Interest paid in 2013/14 was 500.
His
Required:
Calculate Raiders income tax liability for 2013/14.
(20 marks)

Question 8 MAX
Max started trading on 1 January 2010 and ceased trading on 31 December 2013. Assuming that
accounts were prepared as follows:
To 31 December 2010 and thereafter to 31 December annually
Adjusted profits
To 31 March 2011 and thereafter to 31 March annually

Adjusted profits
(iii)
15 months to
Year ended
Year ended
9 months to
40,000
50,000
60,000
56,000
31.3.11
31.3.12
31.3.13
31.12.13
48,000
56,000
64,000
36,000
To 30 September 2010 and thereafter to 30 September annually

9 months to
Year ended
Year ended
Year ended
3 months to
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Adjusted profits
(iv)
31.12.10
31.12.11
31.12.12
31.12.13
PL
(ii)
Year ended
Year ended
Year ended
Year ended
(i)
30.9.10
30.9.11
30.9.12
30.9.13
31.12.13
33,000
42,000
54,000
46,000
10,000
30.4.11
30.4.12
30.4.13
31.12.13
54,000
60,000
70,000
40,000
To 30 April 2011 and thereafter to 30 April annually

Adjusted profits
16 months to
Year ended
Year ended
8 months to
Required:
Calculate the trading income assessments for all tax years concerned.
(20 marks)

Question 9 CAPONE
Capone commenced business as a wine merchant on 1 May 2012 preparing accounts to 30 June 2013
and annually thereafter. His profit and loss account for the period ended 30 June 2013 was as follows:
Profit and loss account
68,209
160
140
PL
2,800
750
40
6,030
375
240
770
700
Gross profit
Bank deposit interest
Dividends (net)
9,740
120
19,660
2,620
740
14,000
1,450
8,474
68,509
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Rent and business rates

Light and heat
Office salaries
Repairs to premises (1)
Motor expenses
Depreciation
Motor vans
Equipment
Loss on sale of equipment
Impairment of trade debts (2)
Professional charges (3)
Interest on bank overdraft (4)
Sundry expenses (5)
Amortisation of lease (6)
Salary
Capone
Wife, as secretary
Net profit
68,509
The following information is given:
(1)
Repairs to premises
Alterations to flooring in order to install new bottling machine

Decorations
Re-plastering walls damaged by damp
(2)
1,460
475
685
_____
2,620
_____
Bad and doubtful debts account
Trade debts written off

Loan to employee written off
Impairment allowance
for the trade debts c/f
1,300
400
4,330
6,030
6,030
6,030

(3)
Professional charges
Accountancy
Cost of court action for failing to observe HMRC regulations
Legal costs of obtaining new lease (see note (6))
Debt collection
(4)
200
110
20
45
375
Interest on bank overdraft
(5)
Sundry expenses
(6)
Lease on premises
250
50
20
300
120
30
770
PL
Fine for breach of HMRC bonding regulations

Subscription to Wine Retail Trade Association
Donation to Police Welfare Fund
Entertaining customers
Calendars bearing firms name sent to 300 customers
Miscellaneous allowable expenses
The overdraft was obtained in order to finance the purchase of trading stock.
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On 1 May 2012 Capone was granted a new twenty-one year lease on his business premises.
He paid a premium of 12,600 to the landlord, and this has been charged to a leasehold
property account and is being amortised against profits over the length of the lease.
(7)
Goods for own use, etc
During the period Capone had withdrawn goods from stock for his own consumption. The
cost of this stock was 455. The business makes a uniform gross profit of 35% on selling
price. No entry had been made in the books in respect of the goods taken.
(8)
Most mornings Capone telephoned his importing agent from home. The cost of these calls,
extracted from his private telephone bills, was 290. No entry has been made in the accounts
for this cost.
Required:
(a)
Calculate Capones adjusted trading profit for tax purposes for the period ended 30
June 2013.
(10 marks)
(b)
Calculate the trading income assessments for 2012/13 and 2013/14.
(3 marks)
Ignore capital allowances.
(13 marks)

Question 10 MICHAEL AND ROSE
(a)
Michael, born in 1937, and Rose, born in 1944, are a married couple. Their respective
incomes for 2013/14 are as follows:
Michael
Rose
State pensions
7,000
6,000
Private pension (tax of 2,868 deducted under PAYE)
18,000
Dividends received
2,700
Income from let properties
See below
See below
Michael and Rose also had two investments in joint names from which the following incomes
were received in 2013/14:
Building society account

400
National Savings and Investments account
200
PL
Michael owns a property which is rented out partly as a furnished apartment and partly as
offices. Income and expenses for the year ended 5 April 2014 are:
Apartment
Income:
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Rent receivable per month:

Apartment (let throughout the year)
500
Offices:
Old lease to 30 June 2013
New lease from 1 January 2014
Lease premium on new 7 year lease received 28 December 2013
Offices
1,200
1,000
15,000
Expenses:
Letting agency fees paid 14 January 2014

Decoration and repairs (paid 6 September 2013) including
2,000 for replacing a wooden floor with a tiled concrete floor
Insurance
120
1,000
4,300
150
Rose inherited a country cottage from her brother who died in March 2013. She decided to let
the property as furnished holiday accommodation and carried out a major refurbishment of
the property during April and May 2013. The property was advertised as being available for
holiday lets from 6 June 2013 and actually let for 30 weeks up to 5 April 2014. Details of the
income and expenditures for the period 6 June 2013 5 April 2014 are as follows:
Rent receivable
Expenses:
Advertising and letting agency fees
Bad debts written off
Refurbishment costs:
Decoration and repairs
New furnishings, kitchen and bathroom equipment
Council tax and water rates
15,000
2,000
1,000
2,000
3,900
5,900
2,100

Rose claimed maximum available capital allowances. She and Michael lived in the cottage
for two months during the period 6 June 2013 5 April 2014.
Michael and Rose own their own home in equal shares. In 2013/14, they let two rooms to
university students. This is the first year in which they have done this and the gross income
was 5,200 with attributable allowable expenses of 400.
Michael and Rose have not made any joint declaration regarding their shared incomes, but
will make any appropriate election regarding the taxation of the income from their own home.
Required:
(ii)
Calculate the income tax liabilities of Michael and Rose for 2013/14. (15 marks)
Calculate the property business profits of Michael and Rose for 2013/14.
(15 marks)
Michael is considering the transfer of half his interest in the property let as an apartment and
offices to Rose in 2014/15.
Required:
PL
(b)
(i)
Briefly advise Michael and Rose as to the tax consequences of Michaels proposal.
(5 marks)
Question 11 JULIAN
(35 marks)
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Julian has been trading since 6 April 2013, running a TV repair business. He makes up accounts to 5
April each year. His adjusted trading results, before capital allowances, for the first three years have
been as follows:
124,000
78,000
89,000
Year ended 5 April 2014

The following assets were purchased and sold during the three years ending 5 April 2016:
Date
Cost

6 April 2013
Heating and electrical systems
for the business premises
10 April 2013
Thermal insulation for the premises
20 April 2013
Office furnishings
21 April 2013
Equipment for workshop
26 April 2013
Delivery van
2 May 2013
Car (for use by Julian)
with CO2 emissions of 180 grams/km
10
Sale proceeds
10,000
20,000
28,000
36,000
16,000
14,000

Year ended 5 April 2015:
11 June 2014
Car (for use by office manager)
10 January 2015
Computers
31 July 2015
Sold car purchased on 2 May 2013
1 August 2015
New car (for use by Julian)
17 December 2015 Sold workshop equipment (original
cost 10,000)
13,000
20,000
12,000
22,000
5,000
It had been agreed with HMRC that private use by Julian of the two cars used by him is 40%, whilst the
office managers private use is 80%.
Required:
Calculate the capital allowances for the three years ending 5 April 2016.
(14 marks)
(b)
Calculate the final adjusted profits for the three years ending 5 April 2016.
(c)
Calculate Julians assessable trading incomes for 2013/14, 2014/15 and 2015/16. (3 marks)
PL
(a)
(3 marks)
(20 marks)
Assume 2013/14 rates and allowances apply throughout.

Question 12 ROBERTA
SA
M
Roberta commenced to trade as a dress and fabric manufacturer in London on 1 July 2013. Her first
accounts were prepared to 31 December 2013 and thereafter to 31 December annually.
She made the following purchases and sales of fixed assets for use in the business:
Date
Period ended 31 December 2013:

1 June
New machinery
1 July
Second hand weaving machine
10 July
Car (for use by employee)
30 September
Car (for use by Roberta)
Year ended 31 December 2014:
8 February
Office equipment
1 May
Van
Year ended 31 December 2015:

1 June
New weaving machinery
20 June
Sold second hand weaving machine
Cost
Sale proceeds
32,500
10,000
15,000
16,000
8,000
15,000
40,000
3,000
Roberta had elected to treat the second hand weaving machinery purchase on 1 July 2013 as a short life
asset, but no such election will be made for the replacement machinery acquired on 1 June 2015.
11

It has been agreed with HMRC that Roberta uses her car 25% for private purposes, whilst the
employees private use is 30%.
Adjusted profits have been agreed as follows:
90,000
160,000
150,000
Period to 31 December 2013

Year ended 31 December 2014
Required:
Calculate the capital allowances for the first three periods of account.
(17 marks)
(b)
Calculate Robertas trading income assessments for the first three years of assessment.
(3 marks)
(a)
PL
(20 marks)
Assume 2013/14 rates and allowances apply throughout.

Question 13 CHARLIE
Charlie Ceasing has been in the retail business since 1 May 2002, making up annual accounts to 30
April each year. Due to a sudden critical illness, Charlie was obliged to sell the business to an
unconnected person on 30 June 2014.
SA
M
Trading profits for the last three periods of account were:
120,000
186,000
18,000

Period from 1 May 2014 to 30 June 2014
The trading profit for the year ended 30 April 2013 is the tax adjusted amount after deducting capital
allowances, whereas the amounts for the other two periods are the tax adjusted profits before taking into
account capital allowances.
The tax written down values of the plant and machinery on 30 April 2013 were:
Special rate pool
Main pool
Car with CO2 emissions of 110 grams/km
(used 60% privately by Charlie)
12
18,000
6,000
16,000

Additions and disposals since 1 May 2013 were:
Date
Cost
5,400
17,000
24,000
12,000
9,000
PL
Period ended 30 June 2014:

1 May 2014
Van
30 June 2014
Sold (in all cases proceeds
did not exceed cost):
Special rate pool assets
Main pool assets
Car
14,500

30 June 2013
Powered cooling equipment
for the premises
14 October 2013 Sold office equipment
(original cost 19,000)
Sale
proceeds
No assets have been treated as short life assets.
Charlie has 27,100 of overlap profits brought forward from commencement.

Required:
Calculate the capital allowances for the last two periods of trading, assuming Charlie
makes all appropriate elections except a short life asset election;
(11 marks)
(b)
Calculate Charlies trading income assessments for 2013/14 and 2014/15.
SA
M
(a)
(4 marks)
(15 marks)
13

Question 14 RICHARD
Richard, who has carried on a small business since 2002, makes up accounts to 31 March year. The
following is his detailed profit and loss account for the year ended 31 March 2014:
Gross profit
Dividends received
299,571
250
2,000
83,281
11,236
21,912
2,026
10,350
23,855
1,216
140
130
10,626
3,000
43,000
91,049
301,821
PL
Salaries and wages

Rates and insurance
Light and heat
Repairs
Motor car expenses
Depreciation
Hire purchase interest
Impairment of trade debts
Loss on sale of car
Administration expenses
Patent royalties (gross)
Management salary Richard
Net profit
301,821
Repairs include 300 for the purchase of a new cash register on 1 April 2013.
SA
M
4,200 of the total motor expenses of 10,350 relate to the car used by Richard. It has been agreed with
HMRC that Richards private motoring represents one-fifth of the total use of the car.
The bad and doubtful debts account is as follows:
Bad and doubtful debts account
Amounts written off

Loan to former employee
Trade debts
Balance 31 March 2014
for trade debts
14
70
83
153
344
497
Balance 1 April 2013

for trade debts
357
140
497

An analysis of administration expenses revealed the following information:
6,242
Printing, stationery and telephone

Legal costs
Debt collection
Fees for obtaining mortgage on private house
Accountancy
Subscriptions
Manufacturers Trade Association
British Red Cross
Entertainment expenses (see below)
30
20
1,633
10,626
Entertainment expenses consist of the following:
48
353
2,300
1,381
252
1,633
PL
Christmas gifts to UK customers (bottles of wine at 2.80 each)
On 30 September 2013 Richard purchased premises for a total cost of 400,000. This cost included the
following capital expenditures classified as plant and machinery:
SA
M
Integral features
Factory and office machinery and equipment
20,000
60,000
80,000
As at 1 April 2013 the written down values of plant and machinery carried forward for tax purposes
were:
24,400 in the main pool;
14,000 on Richards car (CO2 emissions of 150 grams/km).
During the year ended 31 March 2014 the following other acquisitions and disposals of plant and
machinery were made:
14 April 2013
Sold plant for 4,000 which had been acquired for 8,500.
17 April 2013
Sold a lorry for 10,000 which had been acquired for 40,000;
Purchased a delivery van for 24,000.
11 October 2013 Sold Richards car for 9,000

12 October 2013 Purchased two new cars: one for 25,000 for use by Richard (CO2
emissions of 200 grams/km); the other for 12,500 for use by Richards
production manager who will use it at least 90% privately (CO2 emissions
of 90 grams/km).
28 October 2013 Bought new computer equipment for the offices and factory for 22,000.
15

Required:
(a)
Calculate the adjusted trading profit before capital allowances for the year ended 31
March 2014.
(10 marks)
(b)
Calculate the capital allowances for plant and machinery for the year ended 31 March
2014.
(12 marks)
(c)
Calculate Richards trading income assessment for 2013/14.
(3 marks)
(25 marks)
Question 15 WARREN STREET
PL
Warren Street began trading on 1 July 2002 preparing accounts 30 June annually. His recent trading
results are as follows:
Adjusted
Capital
trading
allowances
profit/(loss)
Year ended 30 June 2011

24,000
5,000
(30,000)
3,800
12,000
2,600
The adjusted trading profits are the amounts after deducting capital allowances; the adjusted trading
loss includes the capital allowances.
SA
M
The other incomes of Warren are as follows:
2011/12 2012/13 2013/14
825
1,500
1,600
400
150
210
Dividends (including tax credit)

Bank deposit interest (including tax credit)
Required:
(a)
Calculate the income tax liabilities of Mr Street for the three tax years 2011/12,
2012/2013 and 2013/14 before any relief claims in respect of the loss.
(b)
Explain the reliefs available for the relief of the trading loss.
(c)
Assuming that relief is taken for the maximum amount of the trading loss as soon as
possible calculate the taxable incomes after loss relief for the three years 2011/12 to
2013/14, clearly showing how the loss is relieved.
(d)
Analyse whether not claiming the capital allowances of the loss making accounting
period is worthwhile.
(e)
State by what dates any claims you consider appropriate should be made.
Use 2013/14 rates and allowances throughout.
16
(20 marks)

Question 16 NEWBOLD
Newbold, a single man, has the following income, gains and losses:
Adjusted trading profit (year ended 31 December 2012)

Adjusted trading loss (year ended 31 December 2013)
Bank interest (gross)
Chargeable gain after indexation
Allowable capital losses
2012/13
5,000
2013/14
(20,000)
13,000
22,500
(4,200)
9,000
Newbold has lodged a claim under section 64 ITA 2007 to relieve the 2013/14 trading loss against total
income in the current tax year and has opted to extend that against capital gains of the same tax year
under section 261 TCGA 1992.
Required:
Question 17 SIGMUND
PL
Calculate Newbolds taxable income and taxable amount of gains for 2013/14 illustrating relief
for the losses.
(10 marks)
Sigmund, a single man, began trading on 1 June 2011. He prepares accounts to 30 June annually with
results as follows:
Period ended 30 June 2012 Loss (before capital allowances)

(10,400)
Profit (before capital allowances)
28,650
SA
M
The following capital allowances on plant and machinery have been calculated:
6,720
2,520
Period ended 30 June 2012

Details of the amounts of other income for the tax years 2008/09 to 2011/12 were as follows:
2008/09
2009/10
2010/11
2011/12
Salary from
employment
9,000
10,000
11,200
3,800
Dividends received
(Gross)
3,000
3,400
3,800
600
From 2012/13 onwards the business is Sigmunds only source of income. Sigmund wishes to obtain
relief for the maximum amount of his trading loss.
Required:
(a)
Calculate the trading income assessments and trading losses for 2011/12, 2012/13 and
2013/14.
(b)
Explain, with the aid of appropriate computations, the alternative ways in which the
losses calculated (a) above may be relieved.
(c)
Explain which relief, or combination of reliefs, will be the most tax effective for
Sigmund.
(25 marks)
17

Question 18 ALAN WATERS
Alan Waters, a widower, has been in business as a sports retailer for many years and prepares accounts
to 30 September each year. Due to a sustained deterioration in trading conditions, he decided to cease
trading on 30 June 2013.
Trading income assessments for the three tax years ending with 2011/12 were:
58,500
40,000
31,200
Adjusted trading results for the last two periods of account were:
Year ended 30 September 2012
9 months to 30 June 2013
2009/10 (based on the year ended 30 September 2009)

2,400
(68,625)
Profit
Loss
Required:
(a)
(b)
(c)
PL
Overlap profits brought forward from commencement of the business are 1,600. Waters has no other
income.
Calculate the trading income assessments for 2012/13 and 2013/14.

Calculate the terminal loss.
Calculate the relief for the terminal loss (s.89 ITA 2007).
SA
M
Ignore any possibility of s.64 ITA 2007 loss relief.
(15 marks)
Question 19 KRUGER, BRAND AND SHEPSTONE

Kruger, Brand and Shepstone have been trading in partnership as estate agents since 1 May 2012,
preparing accounts to 31 December annually, profits and losses being shared equally. On 1 June 2013
they decided to share profits on the following basis:
Kruger
Brand
Shepstone
Annual
salary
16,000
8,000
Interest to be
Balance
calculated at 5% per
annum on fixed capitals of
10,000
1/2
5,000
1/3
5,000
1/6
Adjusted trading profits have been agreed as follows:

Period ended 31 December 2012
72,000
64,200
Required:
(a)
18
Calculate the shares of profits attributable to each partner for the two periods of
account.

(b)
Calculate the trading income assessments for each partner for all relevant years, and the
amounts of overlap profits carried forward.
(10 marks)
Question 20 FOX, GRIFFITHS AND HALL

Messrs Fox and Griffiths commenced business as equal partners in a firm of chartered surveyors,
bearing that name, on 1 June 2008.
Hall joined the firm on 1 January 2011, with profits being shared from that date 40% (F); 40% (G);
20% (H). On 30 September 2012, Fox resigned. Thereafter Griffiths and Hall shared profits 60% (G):
40% (H) until 31 December 2013 when the firm was dissolved following its incorporation into
Pacemen Ltd.
Accounts were prepared to 30 June annually. Profits and capital allowances were:
Capital
allowances
claimed
PL
13 months to 30 June 2009

12 months ended 30 June 2010
6 months ended 31 December 2013
SA
M
Required:
Adjusted
trading profits
before capital
allowances
92,950
73,800
81,000
90,000
110,000
60,000
11,050
9,780
9,000
10,500
15,000
12,000
(a)
Show the division of profits for all periods of account.
(b)
Calculate the trading income assessments for each partner for all relevant years.
(20 marks)
Question 21 ABBOT LTD
(a)
Abbot Ltd, made the following disposals of chargeable assets in the year ended 31 December
2013, its chargeable accounting period for corporation tax purposes:
1 May 2013:
A freehold office sold for 180,000. It cost 60,000 on 8 January 1998.
15 July 2013:
Shares in another quoted company sold for 40,000. These cost 45,000
on 19 October 2004.
11 October 2013: An apartment held for rental purposes. It was sold for 70,000 having
cost 68,000 on 14 February 2009.
Abbot has unrelieved capital losses brought forward at 1 January 2013 of 10,000.
Increases in retail price index:
(January 1998 May 2013)
(February 2009 October 2013)
0.567
0.186
19

Answer 1 TAX STATUS
(a)
HMRC tests applied for residency

From 6 April 2013 the determination of residence is achieved by application of a new
statutory residence test. This test has three stages, each with a number of criteria, to establish
if an individual is automatically treated as not resident, automatically UK resident, or (if
neither automatic treatment apply), subject to a review of ties to the UK.
The automatic overseas tests, which result in the individual being treated as not UK resident,
are:
If previously UK resident (in at least one of the preceding three years), less than 16
days spent in the UK in the current tax year.
(2)
If not previously UK resident in any of the three years, less than 46 days spent in the
UK in the current tax year.
(3)
Working full-time overseas with no significant breaks, less than 91 days spent in the
UK and less than 31 working days in the UK.
PL
(1)
The automatic UK tests, which result in the individual being treated as UK resident, are:
Spending 183 days or more in the UK within the tax year.
(2)
If the individual has a UK home, spending 30 or more days present in it, unless an
overseas home is also owned and used.
(3)
Working full-time in the UK for any period of at least 365 days, with no significant
break and at least 75% of workdays being within the UK.
SA
M
(1)
For individuals where neither overseas nor UK automatic tests are conclusive, residence is
tested by considering a number of indicative ties to the UK, together with the number of
days spent in the UK. The more ties that apply, and the greater the number of days, the more
likely a person is to be UK resident. The ties to be considered are:
(1)
Family tie (UK resident spouse, partner or child under 18);
(2)
Accommodation tie (a place available to live in the UK for at least 91 days, can
include the home of a close relative, which is actually made use of);
(3)
Work tie 40 days work, or more, in the UK at any time in the tax year;
(4)
90 day tie having spent more than 90 days in the UK in either or both of the
previous two tax years;
(5)
For persons UK resident in any of the three previous years, a country tie. This is the
country in which the greatest number of days is spent (i.e. spending more days in
the UK than any other country). This tie is not tested for arrivers.
1001

(b)
HMRC UK resident company

A company may be resident in the UK if either:
(i)
(ii)
Central management and control of the company is exercised in the UK; or

The company is incorporated in the UK.
Central management and control means the highest level of control of the company
normally, but not necessarily, the board of directors.
In many circumstances both tests will establish UK residence (i.e. the company will be both
incorporated and managed in the UK).
(c)
PL
However, in other circumstances a company can potentially be resident in two countries by

being incorporated in one country but managed from another (e.g. where a UK parent
company owns a subsidiary incorporated in another country). To overcome this problem
central management and control is regarded as the primary test of residence. Thus, a foreign
incorporated subsidiary of a UK resident parent company will be resident in the UK unless it
can be established that the board of directors of the subsidiary actually exercises central
management and control over the affairs of that company at meetings not held in the UK.
Avoidance and evasion
Tax avoidance is the minimisation of tax liabilities achieved through the organisation of a
taxpayers financial affairs within the limits of tax law. In large measure, tax avoidance is the
utilisation of tax reliefs and exemptions and ensuring the lowest rate(s) of tax ultimately apply
to taxable incomes, capital gains and transfers and taxable supplies for VAT purposes.
SA
M
Although legal, if a tax avoidance arrangement become too costly for the government or is
deemed to run contrary to the intention of the law, the tax advantages of the arrangement can
be removed by changes to the tax law (i.e. anti-avoidance legislation).
Tax evasion is the illegal avoidance of tax achieved by negligence or fraud (i.e. nondisclosure of income, capital gains or transfers or other deliberate illegal actions).
Answer 2 MICHAEL
Income tax computation 2013/14
Earned income
Employment income salary
Less: Pension contributions (5% 108,000) (Note 1)
Unearned income
Building society interest (560
Bank deposit interest (632
Dividend income (1,800
100
80
100
90
100
80
Total income = Net income

Less: Personal allowance (W1)
Taxable income
1002
108,000
(5,400)
102,600
700
790
2,000
3,490
106,090
(6,883)
99,207
Analysis of taxable income

Dividends
Savings income
Other income (> 2,790)
2,000
1,490
95,717
99,207
Tax (W2)
basic rate
EBHR
higher rate
Dividends
Income tax liability

Less:
higher rate
6,402
195
40
25,093
40
596
PL
Savings income
%
20
20
Other
32,010
975
32,985
62,732
95,717
1,490
97,207
2,000
99,207
higher rate
Tax deducted at source

Deemed tax credit on dividends
Tax credits on savings income
PAYE
32.5
650
32,936
200
298
31,444
SA
M
(31,942)
Income tax payable

994
Note 1: The employers pension contributions are a benefit in kind for Michael, but they are
exempt from income tax.
WORKINGS
(1)
Personal allowance
Net income
Less: Gross amount of gift aid (780 100/80)
Adjusted net income
106,090
(975)
105,115
As adjusted net income > 100,000 but < 118,880*, full basic PA is restricted to:
9,440 (105,115 100,000) =
6,883
* 100,000 + (2 9,440) = 118,880 = adjusted net income after which all personal
allowance will be lost.
1003

(2)
Extended basic and higher rate relief (EBHR)

As adjusted net income of 105,115 (W1) is > 32,010 but < 150,000, EBHR only
applies for higher rate purposes:
Normal higher rate threshold

32,010
Add: Gross gift aid (W1)
975
Revised threshold
32,985
Answer 3 LONG LIFE

151,000
100
90
3,270
PL
Earned income
Trading profits
Unearned income
Dividends 2,943
154,270
(6,000)
148,270
(9,440)
138,830
Total income
Less: Qualifying loan interest
Net income
Taxable income
SA
M
Analysis of income:
Dividends
Other (> 2,790)
3,270
135,560
138,830
Tax (W2)
Other income
Basic rate
EBHR
Higher rate
Dividends
1004
Higher rate
32,010
50,000
82,010
53,550
135,560
3,270
138,830
%
20
20
6,402
10,000
40
21,420
32.5
1,063
38,885

WORKINGS
(1)
Personal allowance
148,270
(50,000)
Adjusted net income

98,270
As adjusted net income < 100,000, full basic personal allowance is retained.
Net income
Less: Gross personal pension contributions (40,000 100/80)
EBHR
(2)
(a)
Mr and Mrs Pike
PL
As adjusted net income of 98,270 (W1) is > 32,010 but < 150,000, EBHR only applies for
higher rate purposes:
Normal higher rate threshold

32,010
Add: Gross pension contribution (W1)
50,000
Revised higher rate threshold

82,010
Answer 4 THE PIKE FAMILY
Income tax computations 2013/14
100
1,000
SA
M
Pensions
NSB interest
Building society (800 100/80)
Dividends (1,620 100/90)
Mr Pike
26,200

Personal allowance (W1)
Taxable incomes
Analysis of income:
Dividends
Savings income
Other (Mrs P < 2,790)
Mrs Pike
10,960
2,500
1,100
27,300
(10,310)
16,990
1,100
15,890
16,990
1,800
4,300
15,260
(10,500)
4,760
1,800
2,500
460
4,760
1005

Tax
20
20
15,890
1,100
3,178
220
Mrs Pike:
Other income
Savings income
20
10
Savings income
20
Dividends
10
Income tax liabilities
Less: Tax deducted @ source

Dividends at 10%
Building society interest
PAYE
Income tax payable
3,398
460
2,330
2,790
170
2,960
1,800
4,760
92
233
34
180
539
PL
16,990
%
Mr Pike:
Other income
Savings income
180
200
2,978
(3,178)
220
92
(272)
267
SA
M
Tutorial note: As Mr Pikes taxable income is 32,010, he is only entitled to basic rate
relief on his gift aid, and consequently the payment is ignored in the income tax computation.
WORKINGS
(1)
Personal allowances
As the net income (no adjustments required) of Mrs Pike is < 26,100, she is entitled to the
full personal allowance for a person born between 6 April 1938 and 5 April 1948.
Mr Pike:
Personal allowance (born before 6 April 1938)

Net income
Less: Gross gift aid (400 100/80)
Adjusted net income
Restriction: (26,800 26,100)
1006
10,660
27,300
(500)
26,800
(350)
10,310

(b)
Henry Pike
Earned income
Trading profit
Unearned income
Dividends 2,700 100/90
200,000
3,000
203,000
0
203,000
Taxable income (= dividends 3,000 and other 200,000)
Basic rate
EBHR
Higher rate
EBHR
Additional rate
Additional rate
SA
M
Dividends
32,010
45,000
77,010
72,990
150,000
45,000
195,000
5,000
200,000
3,000
203,000
___________
%
20
20
6,402
9,000
PL
Tax (W2)
Other income
Total = Net income


Less: Tax deducted at source:
Dividend credits (3,000 10%)
Income tax payable
40
29,196
40
18,000
45
2,250
37.5
1,125
65,973
(300)
65,673
WORKINGS
(1)
Personal allowance
Net income
Less: Gross personal pension contributions
(36,000 100/80)
Adjusted net income
203,000
(45,000)
158,000
As adjusted net income > 118,880, the basic personal allowance is entirely lost.
1007

(2)
EBHR
As adjusted net income of 158,000 (W1) is > 32,010 and > 150,000, EBHR applies for both
higher and additional rate purposes:
Higher rate Additional rate
Normal higher and additional rate thresholds

32,010
150,000
Add: Gross personal pension (W1)
45,000
45,000
77,010
195,000
Tutorial note: As total pension input of 45,000 is < 50,000, the pension annual allowance
is not exceeded and no special tax charge arises.
Answer 5 BRIGID JONES
Conditions for furnished holiday accommodation (FHA) status
PL
(a)
The following conditions must all be met for the income from Property B to be treated as
FHA for tax purposes:
the property must be available for letting on a commercial basis as FHA for 210
days in a 12 month period; and
(2)
the property must be actually let as FHA for 105 days in a period of 12 month; and
(3)
long-term lettings must not exceed 155 days in a period of 12 months, where a longterm letting is a letting to the same person exceeding 31 consecutive days.
Letting profits and losses year ended 5 April 2014
SA
M
(b)
(1)
(i)
Rent a room in own home
4,800
(600)
4,200
550
Gross rent receivable (80 2 30)

Less: Allowable expenses
Net profit
Election basis (4,800 4,250)
Election basis is more beneficial and election should continue in force for 2013/14.
(ii)
Property A
Gross rent receivable:

Decorating and repairs
Letting agents fees
Loan interest
Net loss
1008
Old lease: (3 580)

New lease: (6 640)
1,800
900
3,400
1,740
3,840
5,580
(6,100)
(520)

(iii)
Property B
Gross rent receivable (40 800)

Less: Allowable expenses:
Decorating and repairs
Loan interest
Business proportion (46/52)
2,100
1,600
3,700
(9,323)
22,677
PL
Earned income
Pensions
FHA property business profit
Unearned income
ISA interest exempt
Property business profit rent a room
Less: property business loss property A
SA
M
Dividends (720 100/90)
3,273
1,500
1,200
3,350
Net profit
(c)
32,000
Letting agents fees

Bad debt
Capital allowances
10,000
22,677
550
(520)
30
800

Taxable income
Analysis:
Dividends
Savings income
Other income
Tax
Other income
Dividends
830
33,507
(9,440)
24,067
800
23,267
24,067
23,267
800
24,067
%
20
10
4,653
80
4,733
1009

WORKING
(1)
Personal allowances
As the net income (no adjustments required) of 33,507 < 100,000, the full personal allowance
entitlement is initially available, but because 33,507 is > 26,100, the full amount is restricted as
follows:
PA (born 1947)
10,500
Restriction: (33,507 26,100)
(3,703)
6,797
Minimum PA given (see tutorial note)

9,440
Answer 6 ENDICOTT
PL
Tutorial note: If adjusted net income for the purpose of calculating higher-aged PA is 28,220* or
more, then the minimum basic PA will always apply and there is no need to calculate the higher
personal allowance less the income restriction. * [(10,500 9,440) 2) + 26,100 = 28,220]
Income tax computations 2013/14

Rail and taxi
Entertaining
Home telephone 50%
Conference accommodation (Note)
Benefits
Car 13,650 22% (W)
Fuel (none as no private fuel)
Private medical insurance
Mobile telephone exempt
Unearned income
Bank interest (104
Dividends (4,329
100
80 )
100 )
90
226
544
82
398
1,250
(226)
(544)
(41)
(380)
(1,191)
3,003
550
1010
59
3,553
26,612
130
4,810

Less: Personal allowance (NI < 100,000)
Taxable income
23,000
Rail and taxi

Entertaining
Home telephone
Conference
SA
M
Earned income
Employment income:
Salary
Reimbursed expenses
4,940
31,552
(9,440)
22,112

Analysis of income
Dividends
Savings income
Other (> 2,790)
4,810
130
17,172
22,112
Tax
Tax credit on dividends

Tax credit on savings income
PAYE
Income tax payable

WORKING:
SA
M
Car benefit
95 grams
(150 95) 5
481
26
2,979
3,434
26
481
3,941
PL
Less:
%
20
20
10
17,172
130
4,810
22,112
Other income
Savings income
Dividends
(3,486)
455
%
11
11
22
Tutorial note: Reimbursed laundry and newspaper would be exempt if less than 15 (5 per
night).
1011

Answer 7 LA RAIDER
Earned income
Salary (receipts) (8/12 30,000) + (4/12 33,000)
Less: 3% superannuation contributions by employee
554
7,760
8,435
7,385
200
24,334
2,080
(550)
1,530
PL
Expense allowance
Less: Allowable expenses (Note 1)
Unearned income
Dividends paid May 2013 (30% 13,194 100/90)
4,398
63,532
(9,440)
54,092
4,398
49,694
54,092

Less:
Personal allowance (NI < 100,000)
Taxable income
SA
M
Analysis of income
Dividends
Other
30,070
3,200
Bonus (received February 2014)

Benefits:
Use of yacht (W1)
Use of house (W2)
Use of company car (W3)
Fuel charge (W4)
Loan (W5)
31,000
(930)
Tax
Other income
Dividends
32,010
17,684
49,694
4,398
54,092
%
20
40
6,402
7,074
32.5
1,429
14,905
Note 1
No relief is given to Raider for the entertaining expenses paid out of a round sum allowance
because the employee, not the employer, has borne the cost.
Note 2
Use of canteen and employers pension contributions are tax exempt benefits.
1012

WORKINGS
(1)
Use of yacht
Running expenses
(2)
= 20% market value when first made available

= 20% 42,000 522
= 6,000
2
52
Use of home
Annual value higher of
(i) gross rateable value
(ii) rent paid by employer
231
554
1,200
0
Company car
25,000 35%
SA
M
CO2 %:
95 grams
(210 95) 5
Diesel supplement
Restricted to
(4)
1,200
3,000
2,400
1,800
800
Less: Contributions (120 12)
(3)
PL
Additional charge (4% (150,000 75,000))

Ancillary expenses
Redecoration
Gas, etc
Council tax
323
Annual value
Fuel
21,100 35% (as for car benefit)
5,000
9,200
(1,440)
7,760
8,750
%
11
23
3
37
35
7,385
1013

(5)
Home loan
(a) Average outstanding loan basis:
(20,000 + 15,000) 4%
700
(b) Day to day basis:

20,000 9/12 4%
15,000 3/12 4%
700
600
150
___
750
___
(500)
200
Less: Interest paid
PL
Answer 8 MAX
Tutorial note: Starts in 2009/10; ceases in 2013/14 in all cases.
(i)
31 December
2009/10:
2010/11:
(Note:
CYB year ended 31.12.11

Last year basis
year ended 31.12.13
Less: Overlap profit relief
56,000
(10,000)
Total assessments = total profits of the accounting periods
(ii)
10,000
40,000
50,000
60,000
SA
M
2011/12:
2012/13:
2013/14:
Actual: 1.1.10 5.4.10

3
/12 40,000
Overlap profits c/f: 1.1.10 5.4.10 = 10,000)
46,000
206,000
31 March
2009/10:
Actual: 1.1.10 5.4.10 ( 153 48,000)
2010/11:
12 months to accounting date:

Year ended 31.3.11 ( 12
48,000)
15
9,600
38,400
(Note: Overlap profits: Nil as 31 March year end (assumed to be 5 April)

2011/12:
2012/13:
2013/14:
CYB Year ended 31.3.12

Last year basis: 1.4.13 31.12.13
9 months to 31.12.13
56,000
64,000
36,000
1014
204,000

(iii)
30 September
2009/10:
2010/11:
Actual: 1.1.10 5.4.10 ( 93 33,000)

1st 12 months: 1.1.10 31.12.10
9 months to 30.9.10
+ 123 42,000
11,000
33,000
10,500
43,500
(Note: Overlap profits c/f: 1.1.10 5.4.10 = 11,000)

Last year basis: 1.10.12 31.12.13
Year ended 30.9.13
54,000
46,000
10,000
56,000
(21,500)
PL
2012/13:
2013/14:
42,000
2011/12:
(Note: Overlap profits c/f: 1.10.10 31.12.10
3
42,000 = 10,500)
12
Less: Overlap profit b/f (11,000 + 10,500)

(iv)
30 April
34,500
185,000
Actual: 1.1.10 5.4.10 ( 163 54,000)
10,125
2010/11:
Actual: 6.4.10 5.4.11 ( 12

54,000)
16
40,500
2011/12
12 months to accounting date:

Year ended 30.4.11 ( 12
54,000)
16
40,500
SA
M
2009/10:
(Note: Overlap profits: 1.5.10 5.4.11 =
2012/13:
2013/14:
11
16
54,000 = 37,125)

Last year basis: 1.5.12 31.12.13
Year ended 30.4.13
Less: Overlap profits b/f
60,000
70,000
40,000
110,000
(37,125)
72,875
224,000
1015

Answer 9 CAPONE
(a)
Adjustment of profits for 14 months ended 30 June 2013
SA
M
PL
Net profit
Rent and rates
Light and heat
Office salaries
Repairs alterations to flooring
other items
Motor expenses
Depreciation of vans and equipment
Impairment of trade debts non-trade debt written off
other items
Professional charges court action
new lease
other items
Bank overdraft interest
Sundry expenses
fine
donation
entertaining customers
other items
Amortisation of lease
Annual deduction for lease premium (W1)
Salary Capone
wife
Dividends
100
Goods for own use 455
65
Business phone calls from home
8,474
0
0
0
1,460
0
0
3,550
40
400
0
110
20
0
0
250
20
300
0
700
Adjusted profit
420
14,000
0
160
140
700
290
1,010
30,024
(1,010)
29,014
Tutorial note: The following notes set out the reasons for making the adjustments. These
need not be given in the examination answer unless requested by the examiner.
1016

(1)
Expenditure charged but not allowable
Repairs to premises
Floor alterations
1,460
Depreciation vans and
equipment
3,550
Amortisation of lease
700
40
Bad and doubtful debts
Loan to employee written off 400
Reason
Capital cost
Provision
Provision
Capital loss
Not wholly and exclusively incurred
Professional charges
Costs of court action
Costs of new lease
(2)
250
20
300
14,000
SA
M
160
140
420
290
Reason
Statutory relief
Wholly and exclusively incurred
Income not credited but assessable
Goods withdrawn for own

use from business
(b)
Reason
Investment income
Investment income
Expenditure not charged but allowable
(i) Annual deduction for

cost of lease premium
(ii) Business use of home
(4)

Statutory prohibition
Appropriation
Income credited but not assessable as trading income

Dividends (net)
(3)

Capital
PL
Sundry expenses
Fine
Donation
Entertaining
Salary Capone
110
20
Tutorial note: Increases (or decreases) in the impairment allowance for trade debts shown
in the accounts are acceptable for tax purposes and no adjustment is required.
700
Reason
Appropriation
Trading income assessments
2012/13 (1.5.12 5.4.13)

11
(29,014 14
)
22,797
2013/14 (12 months to 30.6.13)

(29,014 12
14 )
There are overlap profits from 1.7.12 5.4.13 of
9
14
24,869
29,014 = 18,652.
1017

WORKINGS
(1)
Lease premium
12,600
(5,040)
7,560
Gross premium
Less: Capital element 2% (211)
Income element
Trading expense:
7,560
21
= 360 per annum
For 14 months to 30.6.13 =
14
12
360 =
420
Answer 10 MICHAEL AND ROSE

Property business profits, 2013/14
Michael
PL
(a)(i)
Expenses accrued:
Letting agency fees
Less: capital cost
Offices
Total
6,000
3,600
3,000
15,000
(1,800)
SA
M
Rent accrued:
500 12
Old lease: 1,200 3
New lease: 1,000 3
Lease premium received:
Gross amount
Less: 2% 15,000 (7 1)
Apartment
13,200
19,800
(1,000)
4,300
(2,000)
Insurance
Wear and tear allowance: 10% 6,000
Net profits
Rent-a-room:
Gross rent
Less: Expenses
Net profit
Election basis: (5,200 4,250)
(120)
(600)
5,280
(2,300)
(150)
16,350
21,630
5,200
(400)
4,800
2,400
475
475
Rent-a-room election should be made

by Michael and Rose by 5 April 2016
22,105
1018

Rose
Total
Furnished holiday accommodation:
Business use proportion (since 6.6.2012)

Net profit (= Earned income)
15,000
(2,000)
(1,000)
2,000
3,900
2,100
8,000 8/10 (6,400)
5,600
(ii)
5,600
475
PL
Rent-a-room:
As for Michael; election basis applies (= Unearned income)
Rent accrued:
Expenses accrued:
Advertising and letting agency fees
Bad debts
Capital allowances: AIA 100% 3,900
Council tax and water rates
Income tax computations, 2013/14
Michael
SA
M
Earned incomes
State pensions
Private pensions
Property business profit FHA
Unearned incomes
Dividends received 2,700 100/90
BS interest received
400 100/80 = 500 (50:50)
250
NS&I interest
200 (50:50)
100
Property business profit
22,105
Net income
Less: Personal allowance
M basic (as net income too large)
R higher (as net income < 26,100)
Rose
7,000
18,000
6,000
5,600
11,600
25,000
3,000
250
22,455
47,455
100
475
3,825
15,425
(9,440)
Taxable incomes
38,015
Analysis:
Dividends
Savings income
Other income (> 2,790)
(< 2,790)
0
350
37,665
38,015
(10,500)
4,925
3,000
350
1,575
4,925
1019
32,010
5,655
37,665
350
38,015
Savings income
20%
40%
6,402
2,262
40%
140
Tax Rose:
Other income
Savings income
Dividends
(b)
8,804
1,575
350
3,000
4,925
20%
10%
10%
315
35
300
650
PL
Tax Michael:
Other income
Advice
The transfer of half interest in the let property 10,815 ( 21,630) will eliminate
Michaels higher rate tax liability, but because his net income will still be substantially above
25,400 he will still not benefit from any higher aged personal allowance.
SA
M
Roses increased income will be taxed as other income at 20%, but because her higher level
of other income will now exceed 2,790 she will lose the 10% rate on her savings income.
Also, as her net income will now exceed 26,100, she will lose some of her higher aged
personal allowance.
The overall effect for income tax is:
2,402
962
3,364
(2,163)
(35)
(14)
1,152
Michael: 40% (350 + 5,655)

20% (10,815 6,005)
Rose:
20% 10,815
10% 350
20% 70 (W)
Tax saving
The transfer will not attract any capital gains tax as an inter-spouse transfer of any chargeable
asset is a no gain: no loss disposal.
WORKING
Net income: 15,425 + 10,815 = 26,240

Loss of PA: (26,240 26,100) = 140 = 70
1020

Answer 11 JULIAN
(a)
Capital allowances
8%
pool
18%
pool
Cars
Allowances
1
2
(40% private)
30,000
(30,000)
30,000
High CO2 car
14,000
18% pool
With AIA
Less: AIA
PL
80,000
(80,000)
WDA: 8%
WDV c/f
Allowances
SA
M

Additions
18% pool
With AIA
Less: AIA
20,000
(20,000)
Additions with FYA:

Very low CO2 car (W1) 13,000
Less: 100% FYA
(13,000)
(1,120)
12,880
( 60%)
WDA: 8%
WDV c/f
Allowances
Additions (W1)
8% pool
With AIA
Less: AIA
80,000
672
110,672
20,000
(1,030)
0

0
11,850
( 60%)
618
13,000
33,618
1021

18%
pool
WDV b/f
Cars
1
2
(40% private)
11,850
Additions (W1)
18% pool:
Low CO2 car (No AIA)
Allowances (charge)
WORKING
150
SA
M
Analysis of additions
Year ended 5.4.14
Heating system, etc.
Thermal insulation
Office furnishings
Workshop equipment
Van
Car (High CO2)
Year ended 5.4.15

Car (Very low CO2)
Computers
Year ended 5.4.16

Car (Low CO2)
1022
(150)
( 60%)
(5,000)
(90)
PL
WDV c/f
(12,000)
(5,000)
(5,000)
5,000
Balancing charge
Balancing charge
18%
22,000
Disposals:
Car (proceeds)
Equipment (proceeds)
WDA:
Allowances
Total
8% pool
10,000
20,000
28,000
36,000
16,000
14,000
124,000
10,000
20,000
14,000
44,000
(3,960) (60%) 2,376
18,040
(2,714)
18% pool
28,000
36,000
16,000
(Private use)
80,000
13,000
20,000
33,000
13,000
20,000
33,000
(100% FYA)
22,000
22,000
Private use

Taxable trading profits of accounting periods
Year ended 5 April
Adjusted profits before capital allowances
Less: Capital allowances (part(a))
(ii)
2014
124,000
(110,672)
13,328
2015
78,000
(33,618)
44,382
2016
89,000
2,714
91,714

Trade started 6.4.13 in 2013/14
13,328
44,382
91,714
SA
M
PL
2013/14 Actual (6.4.13 5.4.14)

2014/15 CY = actual (year ended 5.4.15)
2015/16 CY = actual (year ended 5.4.16)
(b)(i)
1023

Answer 12 ROBERTA
(a)
Capital allowances
18% pool
SLA
Claim
6 months to 31 December 2013
SLA with AIA

Less: AIA (Note 2)
PL
WDV c/f
Allowances
10,000
15,000
15,000
(3,150)
18% 6/12 (Note 3)
Addition with 100% FYA:

Very low CO2 car
Less 100% FYA (Note 3)
10,000
(10,000)
Low CO2 car (no AIA or FYA)

WDA:
32,500
Additions (W1)
18% pool:
With AIA machinery (Note 1) 32,500
Less: AIA (Note 2)
(Max 125,000 Note 3)
(32,500)
16,000
(16,000)
11,850
3,150
(75%) 12,000
57,650
SA
M

Additions (W1)
18% pool
With AIA Van
Office equipment
Less: AIA
WDA 18%
WDV c/f
Allowances
1024
15,000
8,000
23,000
(23,000)
23,000
0
11,850
(2,133)
9,717
2,133
25,133
WDV b/f
18% pool
9,717
SLA
Claim
40,000
(40,000)
40,000
0
9,717
Disposal SLA (proceeds)

Balancing charge
(3,000)
3,000
Allowances
Notes:
(1,749)
7,968
(3,000)
1,749
PL
WDA: 18%
WDV c/f
Additions (W1)
18% pool
With AIA
Less: AIA
38,749
The machinery purchased before the start of trading is deemed acquired on the first
day of trading (1 July 2013)
(2)
Short life assets, which are excluded from the 18% pool by election, attract AIA. It
is usually more beneficial to allocate the AIA first to the pool additions as the SLA
will qualify for a balancing allowance on disposal. In this case as AIA is available
against the full cost the SLA election is of no benefit and actually results in a
balancing charge on disposal in 2015.
SA
M
(1)
(3)
As the period of account is less than 12 months, AIA and WDA (but not FYA) are
scaled down.
1025

WORKING
Total
Non-pool
18% pool
32,500
10,000
15,000
16,000
73,500
Year ended 31.12.15

Weaving equipment
(b)
(SLA)
15,000
16,000
26,000
(100% FYA)
47,500
8,000
15,000
23,000
8,000
15,000
23,000
40,000
40,000
PL
Year ended 31.12.14

Office equipment
Van
32,500
10,000
New machinery
Weaving equipment
Car (low CO2 car)
Car (very low CO2 car)
Trade started 1.7.13 in 2013/14
SA
M
2013/14 Actual (1.7.13 5.4.14)

32,350 (W) + (3/12 134,867 (W))
2014/15 CY (Year ended 31.12.14)
(Note: Overlap profits c/f: 3/12 134,867 = 33,171)
2015/16 CY (Year ended 31.12.15)
66,067
134,867
111,251
WORKING
Taxable trading profits of accounting periods

Less: Capital allowances
1026
6 months to
31.12.13
90,000
(57,650)
32,350
Year ended
31.12.14
160,000
(25,133)
134,867
Year ended
31.12.15
150,000
(38,749)
111,251

Answer 13 CHARLIE CEASING
(a)
Capital allowances
8% pool 18% pool Car

Claim
(60% private)
Year ended 30 April 2014 (Note 1)

18,000
14,500
(14,500)
14,500
(5,400)
600
(1,440)
(600)
PL
8%
Residue (election)
18%
WDV c/f
Allowances
16,000
Disposal:
Office equipment proceeds
WDA:
6,000
WDV b/f
Additions
8% pool
Less: AIA
16,560
(2,880)
13,120
1,440
600
1,152 (@40%)
17,692
2 months to 30 June 2014 (Note 2)
SA
M
Additions
18% pool
Disposals on cessation of trade:
Proceeds
Balancing charge
Balancing allowance
Balancing allowance
17,000
(24,000) (12,000) (9,000)

(7,440)
5,000
4,120

Net balancing charge
(7,440)
5,000
1,648 (@40%)
(792)
Notes:
(b)
(1)
The car held on 1 May 2013 is kept separate from the main (18%) pool because it is
used privately by Charlie, the proprietor.
(2)
No other allowances (AIA, FYA or WDA) are given in the final period of account
ending with cessation.
Trade ceased 30 June 2014 in 2014/15

2013/14 CY (Year ended 30.4.13)
2014/15 Last year basis (W):
Year ended 30.4.14
+ 2 months to 30.6.14
120,000
168,308
18,792
187,100
(27,100)
160,000
1027

WORKING
Taxable trading profits of accounting periods:
Year ended
30.4.14
186,000
(17,692)

Less: Capital allowances
Add: Net balancing charge
2 months to
30.6.14
18,000
792
18,792
Answer 14 RICHARD
(a)
Adjustment of profit Year ended 31 March 2014
168,308
SA
M
PL
Net profit
Dividends received
Salaries and wages
Rates and insurance
Light and heat
Repairs new cash register
other
Motor car Richard (20% 4,200)
other
Depreciation
HP interest
Impairment of trade debts
Loan to former employee
Other
Loss on sale of car
Administration expenses
Legal fees re mortgage
Subscription to Red Cross
Gifts of alcoholic drinks
Other
Patent royalties
Management salary
91,049
Adjusted profit before capital allowances
1028
250
2,000
0
0
0
300
0
840
0
23,855
0
70
0
130
2,250
353
20
1,381
252
0
0
43,000
161,250
(2,250)
159,000

Plant and machinery capital allowances Year ended 31 March 2014
Car (no AIA)

18% pool
With AIA
Less:
AIA
20,000
(20,000)
106,000
(106,000)
20,000
0
106,000
24,400
(9,000)
5,000

10,400
(1,872)
SA
M
WDA 18%
8%
12,500
(12,500)
0

0
8,528

Allowances
(c)
(14,000)
Balancing allowance
WDV c/f
Claim
25,000
Disposals:
Plant + lorry
Car
Additions with 100% FYA (W)

Very low CO2 car
Less: 100% FYA
Cars with
18% 20% private use
pool
1
2
24,400 14,000
PL
WDV b/f
Additions (W1)
8% pool
With AIA
Less: AIA
8%
pool
(b)
(80%)
4,000
(2,000) (80%)
1,872
1,600
23,000
12,500
145,972
__________
Trading income assessment 2013/14
Year ended 31 March 2014
Adjusted profit before capital allowances

Less: Plant and machinery capital allowances
Assessable in 2013/14 (CY basis)
159,000
(145,972)
13,028
1029

WORKING
Integral features
Factory/ office plant
Van
Car (High CO2)
Car (Very low CO2)
Computers
Total
8%
18%
20,000 20,000
60,000
60,000
24,000
24,000
25,000 25,000
12,500
12,500
22,000
22,000

163,500 45,000 118,500

Answer 15 WARREN STREET

Income tax computations (before loss relief)
Trading income
Dividends
Interest
Total = Net income
SA
M
Taxable income
PL
(a)
Analysis of income
Dividends
Savings income
Other income
Income tax liabilities (W1)

(b)
(100 FYA)
(1)
2011/12
24,000
825
400
25,225
(9,440)
15,785
2012/13
0
1,500
150
1,650
(9,440)
2013/14
12,000
1,600
210
13,810
(9,440)
4,370
825
400
14,560
15,785
3,074
1,600
210
2,560
4,370
693
Loss reliefs
The loss of 2012/13 (= loss of the year ended 30 June 2012 under CY rules), either inclusive
of the capital allowances (30,000) or without the capital allowances (26,200) may be
relieved under:
1030
(i)
s.64 against total income of 2011/12 and/or 2012/13. Where both years used,
relief may be taken in chronological or reverse order. Relief is limited in each year
to the lower of total income or the loss.
(ii)
s.83 against first available trading profits of the same trade (i.e. those of 2013/14
and thereafter). This relief can be used for the whole loss or the loss remaining
unrelieved after s.64 claims.

(c)
Relief of the maximum amount of loss

Maximum and earliest relief is consistent with claim(s) under s.64 followed by s.83 relief
Trading profit
Less: s.83 relief (W2)
Total income
Less: s.64 relief (W2)
(d)
PL
Net income
Taxable income
2012/13
0
1,500
150
1,650
1,650
(9,440)
2013/14
12,000
(4,775)
7,225
1,600
210
9,035
9,035
(9,440)
Dividends (gross)
Interest (gross)
2011/12
24,000
24,000
825
400
25,225
(25,225)
0
(9,440)
Not claiming capital allowances for the year ended 30 June 2012
SA
M
The solution in (c) above, based on claiming the maximum amount of loss, shows unused
amounts of personal allowance for each of the three years. Reducing the capital allowance
claim for the year ended 30 June 2012 would not change this situation for 2011/12 (as the loss
could only be reduced to 26,200, still more than total income) nor 2012/13 where no loss
relief is being claimed.
However the situation for 2013/14 is different: if the capital allowance claim is restricted to
3,395 (i.e. reduced by 405, being the wasted PA of 9,440 9,035), then the s.83 loss
relief will be 4,370, taxable income will still be nil, but future capital allowances will be
increased by 405.
(e)
Time limits for claims
The time limit for making claims under s.64 is 31 January following the first anniversary of
the end of the tax year of loss (2012/13) i.e. by 31 January 2015.
The time limit for establishing a loss for relief under s.83 relief is four years after the end of
the tax year of loss (i.e. 5 April 2017).
1031

WORKINGS
2011/12: Other
Savings
Dividends
2013/14: Other (<2,790)

Savings
Dividends
(2)
14,560
400
825
15,785
%
20
20
10
2,912
80
82
3,074
2,560
210
1,600
4,370
20
10
10
512
21
160
693
Loss
(30,000)
Loss relief
(1)
PL
Trading loss 2012/13

Relief:
(1)
2012/13 (s.64) pointless as total income
< personal allowance
(30,000)
2011/12 (s.64) total income

relief
SA
M
(2)
(3)
2013/14 (s.83)
25,225
(25,225)
trading income
relief
12,000
(4,775)
7,225
25,225
(4,775)
4,775
Answer 16 NEWBOLD
Earned income
Trading income (Year ended 31 December 2013)
Unearned income
Bank interest (gross)
Total income
Loss of 2013/14 (Year ended 31 December 2013)
Less: s.64 relief against total income of current year (Note)
Relevant amount for s.261 relief
Taxable income (personal allowance wasted)
1032
13,000
13,000
(20,000)
13,000
(7,000)
(13,000)

Computation of capital gains 2013/14
22,500
(4,200)
18,300
Less:
s.261 relief (< net gains of 18,300)
(7,000)
11,300
Less:
Annual exemption
(10,900)
Taxable amount
400
Tutorial note: s.64 relief must be claimed if s.261 relief is to be used, even if the s.64 claim results in
the wastage of personal allowance.
Gain current year

Less:
Capital loss current year
(a)
Adjusted loss and profit
PL
Answer 17 SIGMUND
Loss/profit before capital allowances

Capital allowances
Adjusted loss (maximum)/profit
13 months
to 30.6.12
(10,400)
(6,720)
(17,120)
Year ended
30.6.13
28,650
(2,520)
26,130
Loss
(13,169)
Assessment
SA
M
Trading income assessments and tax losses

2011/12 Actual (1.6.11 5.4.12) (17,120)
10
13
2012/13 12 months to account date (1.7.11 30.6.12)

(17,120) 12
13
(15,803)
Less: Included in 2011/12 loss

(1.7.11 5.4.12) (17,120
11,852
9
13
(3,951)
2013/14 CY (Year ended 30.6.13)

Adjusted profits
(b)
0
26,130
Alternative means of relieving the tax losses

The tax losses of 2011/12 and 2012/13 may be relieved as follows
(1)
s.72 against total income earned before unearned of the three preceding tax
years to the year of the loss, on a FIFO basis, with relief limited to the lower of total
income and the loss in each year i.e.:
2011/12 loss relief in 2008/09, 2009/10 and 2010/11
2012/13 loss relief in 2009/10, 2010/11 and 2011/12
1033
Total income
Less s.72 relief
2011/12 loss
2012/13 loss
2010/11
2011/12
9,000
10,000
11,200
0
3,800
3,000
12,000
3,400
13,400
3,800
15,000
600
4,400
(12,000)
(1,169)
(3,951)
8,280
15,000
4,400
Net income
s.64 against total income of the tax year of the loss and/or preceding tax year. If
both years used, relief can be in either order. Again, relief against earned before
unearned. Relief limited to the lower of the loss and total income i.e.:
PL
(2)
2009/10
Earned income
Trading income
Employment income
Unearned income
Dividends (gross)
2008/09
2011/12 loss relief in 2010/11 and/ or 2011/12

2012/13 loss relief in 2011/12 and/ or 2012/13
Earned income
Trading income
Employment income
SA
M
Unearned income
Dividends (gross)
Total income
Less: s.64 relief

2011/12 loss in 2010/11
2012/13 loss in 2011/12
(earliest relief in both cases)
Net income (before PA)
(3)
2010/11
2011/12
2012/13
11,200
0
3,800
3,800
15,000
600
4,400
(13,169)
(3,951)
1,831
449
s.83 against future trading profits from the same trade. Full relief in 2013/14, as
trading profits (26,130) exceed the loss (17,120) before s.64/s.72 claims.
If s.64/s.72 reliefs are taken up reductions or repayments of tax will be made for the tax years
of each loss (i.e. 2011/12 and 2012/13).
1034

(c)
Best relief
Generally, loss relief should aim to save the greatest amount of tax as early as possible s.72
before s.64 before s.83 reliefs but without unnecessarily wasting personal allowances. In
this case, s.72 relief in 2008/09 for the 2011/12 loss wastes more personal allowance than a
claim under s.64 in 2010/11. Conversely, s.72 relief in 2009/10 for the 2012/13 loss does not
waste personal allowance, whilst s.64 relief, in 2011/12, wastes most of the personal
allowance. From a tax planning perspective, since all the alternative reliefs only save tax at
20%, a combination of reliefs (s.64 for the 2011/12 loss and s.72 for the 2012/13 loss) is the
most tax efficient, and is permissible since each loss is a separate claim.
12,000
(3,951)
9,449
2010/11
15,000
(13,169)
2011/12
4,400
1,831
4,400
2009/10
13,400
PL
Total income
s.64: 2011/12 loss
s.72: 2012/13 loss
2008/09
12,000
The waste of personal allowance can be further reduced by restricting the capital allowance
claim in the loss-making period.
Answer 18 ALAN WATERS
Terminal loss relief assuming no other claims are made.

(a)
SA
M
2012/13 CY (Year ended 30.9.12)

2013/14 Last year basis (1.10.12 30.6.13)
9 months to 30.6.13 Loss
Add: overlap profits b/f
(b)
(68,625)
(1,600)
(70,225)
2,400
Calculation of terminal loss
The last twelve months of trading are split between the relevant tax years (i.e. 1 July 2012 to 5
April 2013 and 6 April 2013 to 30 June 2013):
6.4.13 30.6.13 (three months of 2013/14) 3/9 (68,625)

(22,875)
1.7.125.4.13 (nine months of 2012/13):
6
/9 (68,625)
(45,750)
3
/12 2,400
600
(45,150)
(68,025)
Add: overlap profits b/f
(1,600)
(69,625)
1035

(c)
Relief for the terminal loss

The terminal loss is relieved on a LIFO basis against the trading profits only of the same
business for the tax year of cessation and the three tax years preceding that year.
2010/11
Tutorial notes:
2012/13
2013/14
31,200
2,400
0
(2,400)
(31,200)
PL
Trading profits:
Per question
40,000
2012/13 per (a)
2013/14 per (a)
Less: TLR (LIFO basis)
2013/14
0
2012/13
2,400
2011/12
31,200
2010/11
36,025 (36,025)

69,625
3,975
2011/12
(1)
The income after TLR for 2010/11 will be reduced to nil by the personal allowance. Refunds
of tax attributable to the earlier tax years will be given as an adjustment to the 2013/14 selfassessment.
(2)
Interaction of s.64 and s.89 reliefs
SA
M
The unrelieved loss of 2013/14 (70,225 69,625 = 600) is eligible for s.64 relief in 2013/14
and/ or 2012/13, but as total income for 2013/14 is nil, relief can only be taken in 2012/13. If
claimed, s.64 relief must be taken before TLR, and the effect would be as follows:
Loss of 2013/14
Less: s.64 relief in 2012/13 lower of the loss
and total income
Unrelieved loss (= reduced terminal loss)
Less: TLR in 2013/14
2012/13 (after s.64 relief)
2011/12
2010/11
1036
70,225
(2,400)
67,825
0
0
31,200
36,625
(67,825)

Answer 19 KRUGER, BRAND AND SHEPSTONE
Allocation of profits of periods of account
Total
8 months to 31.12.12: (1:1:1) 72,000
Year ended 31.12.13 64,200
1.1.13 31.5.13 (5m)

Profit 5/12 64,200
Old PSA (1: 1: 1)
26,750
24,000
24,000
8,917
8,917
8,916
4,667
9,333
PL
(b)
1.6.13 31.12.13 (7m)

Profit 7/12 64,200
New PSA
Salaries (7/12)
14,000
Interest on capital
(7/12)
584
Balance (3:2:1)
22,866
37,450
64,200
Assessments
24,000
(a)
292
11,433
146
7,622
146
3,811
29,975
21,352
12,873
SA
M
Each partner is a separate taxable person who commenced business on 1.5.12 (in 2012/13)
2012/13: Actual 1.5.12 5.4.13

K: 24,000 + ( 123 29,975)
B:
S:
24,000 + ( 123
24,000 + ( 123
31,494
21,352)
29,338
12,873)
2013/14: CY Year ended 31.12.13
27,218
29,975
21,352
12,873
Overlap profits c/f: (1.1.13 5.4.13)

K: 123 29,975 = 7,494
B:
S:
3
12
3
12
21,352 = 5,338
12,873 = 3,218
Tutorial note: The assessment for 2013/14 is CY rather than first 12 months as the first, short
accounting period ends in the first (as opposed to the second) year of assessment
1037

Answer 20 FOX, GRIFFITHS AND HALL
Division of profits
Total
(i)
(ii)
PSA:
1.6.08 31.12.10
1.1.11 30.9.12
1.10.12 31.12.13
F
50%
40%
G
50%
40%
60%
H
20%
40%
Allocation:
13 months to 30.6.09 (50:50)

(92,950 11,050)
81,900
Year ended 30.6.10 (50:50)

(73,800 9,780)
64,020
Year ended 30.6.11

To 31.12.10 (50:50)
(81,000 9,000) 6/12
36,000
40,950
32,010
PL
32,010
40,950
(a)
From 1.1.11 (40:40:20)

(81,000 9,000) 6/12
36,000
72,000
Year ended 30.6.12 (40:40:20)

(90,000 10,500)
79,500
Year ended 30.6.13

To 30.9.12 (40:40:20)
(110,000 15,000) 3/12
23,750
14,400
32,400
14,400
32,400
7,200
7,200
15,900
9,500
9,500
4,750
71,250
95,000
9,500
42,750
52,250
28,500
33,250
6 months to 31.12.13 (60:40)

(60,000 12,000)
48,000
28,800
19,200
SA
M
31,800
Assessments
Relevant years:
1038
18,000
31,800
From 1.10.12 (60:40)

(110,000 15,000) 9/12
(b)
18,000
2008/09
(Starts 1.6.08)
2008/09
(Starts 1.6.08)
2010/11
(Starts 1.1.11)
2012/13
(Resigned 30.9.12)
2013/14
(Ceased trading 31.12.13)
2013/14
(Ceased trading 31.12.13)

Fox
2008/09 2009/10 2010/11 2011/12 2012/13
37,800
32,010
32,400
31,800
9,500
41,300
2008/09: Actual 1.6.08 5.4.09

10
/13 40,950
31,500
2009/10: CY year ended 30.6.09
12
/13 40,950
2010/11: CY year ended 30.6.10
2011/12: CY year ended 30.6.11
2012/13: Last year basis 1.7.11 30.9.12:
Year ended 30.6.12
3 months to 30.9.12
1.7.08 5.4.09
9
/13 40,950
PL
Griffiths
(28,350)
12,950
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
31,500
37,800
SA
M
2008/09: Actual 1.6.08 5.4.09

10
/13 40,950
2009/10: CY year ended 30.6.09
12
/13 40,950
2010/11: CY year ended 30.6.10
2011/12: CY year ended 30.6.11
2012/13: CY year ended 30.6.12
2013/14: Last year basis
1.7.12 31.12.13:
Year ended 30.6.13
Less: Overlap profits
/13 40,950
32,010
32,400
31,800
52,250
28,800
81,050
(28,350)
52,700
1039

Hall
2010/11 2011/12 2012/13 2013/14
3,600
15,150
15,900
33,250
19,200
52,450
2010/11: Actual 1.1.11 5.4.11

3/6 7,200 =
2011/12: First 12 months 1.1.11 31.12.11
7,200 + (6/12 15,900)
2012/13: CY Year ended 30.6.12
2013/14: Last year basis
1.7.12 31.12.13:
Year ended 30.6.13
Less:
Overlap profits
1.1.11 5.4.11
1.7.11 31.12.11
(6/12 15,900)
(7,950)
40,900
SA
M
PL
(3,600)
1040
E
PL
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STUDY QUESTION BANK

Paper F6 | TAXATION (UNITED KINGDOM)

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STUDY QUESTION BANK

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STUDY QUESTION BANK TAXATION (UNITED KINGDOM) (F6)

PROPERTY AND INVESTMENT INCOMES

INCOME TAX COMPUTATIONS

UNINCORPORATED TRADER ASSESSMENT AND PROFITS

UNINCORPORATED TRADER TRADING LOSSES

UNINCORPORATED TRADER OTHER MATTERS

Kruger, Brand and Shepstone

CAPITAL GAINS BASIC PRINCIPLES

Abbot Ltd and James

TAXATION (UNITED KINGDOM) (F6) STUDY QUESTION BANK

CAPITAL GAINS CHATTELS, LAND AND BUILDINGS

Ian and Katrina

Ma Ltd, Olive and George

CAPITAL GAINS BUSINESS ASSET RELIEFS

Nixon and Drive Ltd

CORPORATION TAX COMPUTATION

CAPITAL GAINS SHARES

CORPORATION TAX LOSS RELIEFS

CORPORATION TAX GROUPS OF COMPANIES

NATIONAL INSURANCE CONTRIBUTIONS

Adam and Mr Brown and Challis Ltd

VALUE ADDED TAX

STUDY QUESTION BANK TAXATION (UNITED KINGDOM) (F6)

calculations and workings need only be made to the nearest ;

TAX RATES AND ALLOWANCES

Not previously resident

Automatically not resident

Automatically not resident

Resident if 4 UK ties (or more)

Automatically not resident

Resident if 3 UK ties (or more)

Resident if 2 UK ties (or more)

Resident if 3 UK ties (or more)

Resident if 1 UK tie (or more)

Resident if 2 UK ties (or more)

Child benefit income tax charge

TAXATION (UNITED KINGDOM) (F6) STUDY QUESTION BANK

Car fuel benefit

Individual savings accounts (ISAs)

Pension scheme limit

Capital allowances: rate of allowance

Plant and machinery

Annual investment allowance

Cap on income tax reliefs

STUDY QUESTION BANK TAXATION (UNITED KINGDOM) (F6)

Value added tax (VAT)

Standard fraction (U A) N/A

Inheritance tax: tax rates

Inheritance tax: taper relief

Years before death

Over 3 but less than 4 years

Capital gains tax

Rates of tax lower rate