F6.

2: Mock Paper
Instructions for students regarding mock exams Writing instructions 1. Mock answers need to be strictly handwritten. Answers that are not handwritten will not be corrected.

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2. Use only black pen when answering the mock exam. Pencil, fountain pens, gel pens and coloured pens (including highlighter pens) should be avoided. This is because ACCA marks the answers online by the scanning method and any colour other than black is not recognisable. 3. Start each question on a new page and write the question number in the section at the top of the page. Circle the question number: For example, Q.1 Performance analysis. 4. Do not write anything on the left and the right margins of each page. 5. Structure your answers in a paragraph format. Try to give headings wherever possible. 6. Number your working notes clearly. 7. Use clear and specific language. 8. Avoid spelling mistakes. 9. Write in a legible and neat handwriting. Avoid congested writing. 10. Strike out incorrect answers rather than using correction fluid. Scanning instructions 1. Write your name, paper no. and page no. at the top of each page of answer sheet i.e. <Student Name>_<Paper Name>_<Page No> 2. Scan the answer sheets in JPEG format images. 3. If possible, put all the image files into one combined PDF file. 4. Zip the image files / PDF files before attaching to the mail.

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Mock Paper: F6.3

Paper F6 TAXATION (UK)

GTG Student No _______________ Name: ___________________ Company Address: ___________________ Exam date ___________________ Received Country: ___________________ Returned Marker _______________ _______________ TOTAL SCORE _______ Detailed commentary Max score _______________ _______________ _______________

Question No. 1

Score

Performance / Comments

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IMPORTANT: DETACH THIS SHEET AND AFFIX IT TO YOUR SCRIPT YOU ARE ADVISED TO PHOTOCOPY YOUR SCRIPT BEFORE SENDING THE ORIGINAL IN FOR MARKING

F6.4: Mock Paper

The following tax rates and allowances are to be used in answering the questions: Income Tax Normal rates % 20 40 50 Dividend rates % 10 32.5 42.5

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Basic rate Higher rate Additional rate

1 37,400 37,401 - 150,000 150,001 and above

A starting rate of 10% applies to savings income where it falls within the first 2,440 of taxable income. Personal Allowance Personal allowance (Standard) Personal allowance aged 65 to 74 Personal allowance aged 75 and over Income limit for age related allowances Income limit for standard personal allowance Car Benefit Percentage The base level of CO2 emissions is 130 grams per kilometer. There are two lower rates for cars with low CO2 emissions: 5% for cars with CO2 emissions of 75 grams per kilometer or less and a rate of 10% for cars with CO2 emissions rate between 76 and 120 grams per kilometer. Car Fuel Benefit The base figure for calculating the car fuel benefit is 18,000. Pension Scheme Limits Annual allowance The maximum contribution that can qualify for tax relief without any earnings is Authorised mileage allowances: cars Up to 10,000 miles Over 10,000 miles Capital Allowances % Plant and Machinery General pool: Writing down allowance Special rate pool Motor cars CO2 emissions up to 110g/Km CO2 emissions between 111 and 160g/Km CO2 emissions over 160g/Km Annual investment allowance (for the first 100,000 of expenditure) Industrial buildings Writing down allowance 20 10 100 20 10 100 1 40p 25p 255,000 3,600 6,475 9,490 9,640 22,900 100,000

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Corporation tax Financial year Small profits rate Main rate Lower limit Upper limit Standard fraction Marginal relief Standard fraction x (U A) x N/A Value added tax Standard rate: up to 3 January 2011 from 4 January 2011 onwards Registration limit Deregistration limit Capital gains tax Rate of tax Lower rate Higher rate Annual exemption Entrepreneurs' relief: Lifetime limit Rate of tax Inheritance tax Tax rates 1 - 325,000 Excess: Death rate Lifetime rate Taper relief Years before death Over 3 but less than 4 years Over 4 but less than 5 years Over 5 but less than 6 years Over 6 but less than 7 years Over 7 years Percentage reduction (%) 20 40 60 80 100 Nil 40% 20% 18% 28% 10,100 5,000,000 10% 17.5% 20.0% 70,000 68,000 2008 21% 28% 300,000 1,500,000 7/400 2009 21% 28% 300,000 1,500,000 7/400 2010 21% 28% 300,000 1,500,000 7/400

Mock Paper: F6.5

National insurance contributions (Not contracted out rates) Class 1 Employee 1 5,715 per year 5,716 43,875 per year 43,876 and above per year 1 5,715 per year 5,716 and above per year 240 per week 1 5,715 per year 5,716 43,875 per year 43,876 and above per year % Nil 110 1.0 Nil 128 128 Nil 80 10

Class 1 Employer Class 1A Class 2 Class 4

Rates of interest (assumed) Official rate of interest Rate of interest on underpaid tax Rate of interest on overpaid tax 4.0% 3.0% 0.5%

F6.6: Mock Paper

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1. Forrest Gump is a self-employed trader. His income statement for the year ended 5 April 2011 is as follows: Gross profit Expenses Depreciation Motor expenses (note 1) Professional fees (note 2) Repairs and renewals (note 3) Entertainment expenses (note 4) Wages and salaries (note 5) Other expenses (note 6) Net profit The following information is relevant: (i) Motor expenses During the year, Forrest drove a total of 20,000 miles of which 40% was for private travel. (ii) Professional fees include the following: 1,330 for accountancy 1,350 for personal financial planning advice 750 for debt collection (iii) Repairs and renewals This is made up of 855 for repairing the fence, and 3,750 for making a general provision for repairs. (iv) Entertainment This is made up of 1,920 for entertaining suppliers and 2,010 for entertaining employees. (v) Wages and salaries This includes a salary of 20,000 paid to Forrests wife. She works in the shop as a sales assistant. Other sales assistants doing the same job are paid an annual salary of 15,000. (vi) Other expenses These include 325 for a wedding present to an employee, 845 for Forrests health club subscription, 85 as a donation to a political party and 2,000 for a trade subscription. (vii)Private house Forrest uses one of the six rooms in his house as an office. The total running costs of the house for the year were 12,900. This cost is not included in the income statement. (viii) Private telephone The total cost of Forrests home telephone for the year was 2,225, 40% of this related to business telephone calls. The cost of the home telephone is not included in the income statement. 1,620 5,850 4,120 4,605 3,930 71,230 58,730 (150,085) 60,780 210,865

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(ix) Goods for own use

Mock Paper: F6.7

During the year ended 5 April 2011, Forrest took goods out of the shop for his personal use without paying for them, and no entry has been made in the accounts to record this. The goods cost 850, and have a selling price of 1,250. (x) Other information Forrest has a part-time job as a business consultant. During 2010-11, he received a monthly salary of 1,800. Income tax deducted under PAYE from this income during the year is 4,300. Forrest took out a loan on 6 April 2010 to purchase equipment for use in his part-time employment. Interest paid (gross) on this loan during 2010-11 is 240. During 2010-11, Forrest received building society interest of 2,800 and dividends of 4,320. These were the actual cash amounts received. Forrest sold some investments during 2010-11 which resulted in a capital gain of 12,500. Forrest contributed 200 per month (gross amount) into a personal pension scheme. Forrests payment on account of income tax in respect of 2010-11 totalled 25,314. Required: (a) Calculate Forrest Gumps tax adjusted trading income for the year ended 5 April 2011. (9 marks) (b) Calculate Forrest Gumps income tax and capital gain tax liability for 2010-11. (11 marks) (c) Calculate total NIC due from Forrest in respect of his trade for 2010-11. There is no need to calculate NIC in respect of part-time employment. (3 marks) (d) Calculate Forrests balancing payment for 2010-11 and his payments on account for 2011-12 along with the relevant due dates. Also advise Forrest on the consequences of not making the balancing payment for 2010-11 until 31 August 2012. (7 marks) (30 marks) 2. Snapshot Ltd is a manufacturer of digital cameras. The following information is available for the year ended 31 March 2011: Trading loss The trading loss is 8,500. This figure is before accounting for capital allowances. Plant and machinery The tax written down value of plant and machinery on 1 April 2010 was 30,000. Snapshot Ltd has purchased the following assets during the accounting period: 25,800 18,900 9,800 19,300 15,200 275,000 54,000 7,550

15 May 2010 20 August 2010 12 September 2010 10 November 2010 25 December 2010 6 January 2011 22 January 2011 24 January 2011

Office Furniture Motor Car (1) with CO2 emission rate of 192g/km Motor Car (2) with CO2 emission rate of 148g/km Motor Car (3) with CO2 emission rate of 105g/km Equipment Freehold office building Machinery Building alterations necessary for the installation of the machinery

F6.8: Mock Paper

Snapshot Ltd makes a short life asset election for the equipment purchased on 25 December 2010.

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In March 2011, Snapshot Ltd sold equipment for 5,800 from the general pool. The original cost of that equipment was 11,200. The cost of the new freehold office building purchased on 6 January 2011 was made up as follows: 245,800 8,200 5,600 15,400

Office building Electrical and lighting systems Fire alarm system Escalators Property Income

Snapshot Ltd let out a leasehold warehouse, acquired on 1 July 2010, which was not required for business. Snapshot Ltd paid a premium of 120,000 to obtain a twenty- year lease. The property was immediately sub-let to a tenant, with Snapshot Ltd receiving a premium of 45,000 for granting a five-year lease and the annual rent of 17,500 which was payable in advance. Loan interest received Received on 30/9/2010 Accrued till 31/03/2011 9,800 4,500

The loan was made for non-trading purposes. Dividends received During the year ended 31 March 2011, Snapshot Ltd received dividend amounting to 27,000 from Pixell Ltd, an unconnected UK company and 18,000 from Photo Smart Ltd, a 100% UK subsidiary company of Snapshot Ltd. Both the figures indicate the actual amount of cash received. Chargeable Gains Snapshot Ltd sold 30,000 shares in Picquick Ltd for 250,000 on 25 April 2010 (RPI 222.8). It had originally purchased 50,000 shares in Picquick Ltd on 20 June 1991 (RPI 134.1) for 40,000. On 15 October 2006 (RPI 200.4), Picquick Ltd made a bonus of 1 share for every 4 shares held. Snapshot Ltd had unused capital losses of 5,000 as on 1 April 2010. Other information Snapshot Ltd has two associated companies. Required: (a) Calculate Snapshot Ltds tax adjusted trading loss for the year ended 31 March 2011. 10 marks (b) Assuming that Snapshot Ltd claims relief for its trading loss against total profits under s.37 CTA 2010, calculate the companys corporation tax liability for the year ended 31 March 2011. 15 marks (25 marks)

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Mock Paper: F6.9

3. Carol Gracious, aged 72, has been in business as a sole trader since 1 April 1990. On 31 March 2011, she transferred the business to her daughter Lilly, at which time the following assets were sold to Lilly: (i) A freehold shop with a market value of 450,000. The shop had been purchased on 1 July 2006 for 225,000, and has always been used by Carol for business purposes. Lilly paid Carol 285,000 for the shop. (ii) A freehold warehouse with a market value of 375,000. The warehouse had been purchased on 1 April 1991 for 135,000 and has never been used by Carol for business purposes. Lilly paid Carol 300,000 for the warehouse. Where possible, Carol and Lilly have elected to hold over any gains arising. (iii) Carol had also entered into the following transactions relating to the sale and purchase of shares of Dallas Ltd, an unquoted trading company: 5 June 2000 25 April 2008 20 May 2008 20 February 2011 Purchased 4,000 shares for 12,000 Purchased 2,000 shares for 15,000 Purchased 1,000 shares for 8,000 Sold 5,000 shares for 45,000

Carol was working as a manager in Dallas Ltd and also held 65% of the shares of the company. (iv) On 1 May 1981, Carol had purchased a residential property in Wick for 28,000. She occupied this house until 30 June 1987. On 1 July 1987, she left to start a new job in the USA. She was in the USA for 2 years and 7 months before coming back to Wick on 31 January 1990 to start her own business. After coming back from the USA, she started using her house for both domestic as well as business purposes. 25% of the property was used for business purposes. On 1 October 2010, she sold her house in Wick for 58,000. The taxable income of Carol for the tax year 2010-11 is 28,750. She made no other capital disposals in the tax year 2010-11. She had losses brought forward of 18,550. Required: Calculate Carols capital gains tax liability for the tax year 2010-11 and state when the tax is due. (15 marks) 4. Tom and Dick started a business, as a partnership, on 1 May 2007, preparing accounts up to 31 December annually. They decided to share the profits and losses equally. On 1 June 2009, Harry joined the partnership and they decided to share profits on the following basis: Salary p.a. 6,300 4,800 Interest p.a. 1,400 2,200 2,400 Balance profit 2/5 2/5 1/5

Tom Dick Harry

The firms adjusted trading profits are as follows: Period ended 31/12/2007 Year ended 31/12/2008 Year ended 31/12/2009 Year ended 31/12/2010 25,000 40,000 51,000 70,000

F6.10: Mock Paper

Required: (a) Show the allocation of the trading profits between the partners.

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(6 marks) (b) Show the trading income assessment for each partner for all relevant years (6 marks) (c) Show the amount of overlap profits for each of the partners. (3 marks) (15 marks) 5. (a) Wonderful Ltd is registered for VAT, and is in the process of completing its VAT return for the quarter ended 31 December 2010. The company issued the following sales invoices: i. ii. Sales invoices issued to VAT registered dealers for standard rated sales 58,000. Sales invoices issued to customers not registered for VAT: for standard rated sales 21,600 for zero rated sales 6,320 Standard rated sales to customers not registered for VAT are inclusive of VAT. iii. On 15 December 2010, the company purchased equipment for 8,200. The purchase was partly financed by a bank loan of 6,500. This purchase is standard rated. Required: (i) (ii) Calculate the amount of VAT payable by Wonderful Ltd for the quarter ended 31 December 2010. (3 marks) Explain the VAT implications if Wonderful Ltd offers a 3% discount for prompt payment to VAT-registered dealers. (2 marks) (iii) State the circumstances in which Wonderful Ltd is and is not required to issue a VAT invoice, and the period during which such an invoice should be issued. (3 marks) (b) Sunrise Ltd deals in spare parts for machinery. The company started business on 1 May 2010. In the month of December 2010, the companys turnover exceeded 70,000. The company was registered for VAT in January 2011. A list of the companys purchases of spare parts for resale since formation is as follows: Month May 2010 June 2010 July 2010 August 2010 September 2010 October 2010 November 2010 December 2010 3,260 4,200 6,820 6,740 8,200 13,300 13,600 13,950

At the time of registration, the company had inventory of 24,500 in hand. Required: (i) State the amount of input VAT the company can claim after it becomes registered for VAT, explaining your reasons in your answer. (3 marks)

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(ii)

Mock Paper: F6.11

(c) Hopes Ltd commenced trading on 1 July 2010. Its forecast sales are as follows: 2010 July August September October November December 2011 January February March 3,200 4,600 5,300 19,300 13,200 23,200 14,300 13,700 15,200

The company's sales are all standard rated, and the above figures are exclusive of VAT. Required: Explain when Hopes Ltd will be required to compulsorily register for VAT, and when the registration will be effective from. (4 marks) (15 marks)

F6.12: Mock Paper

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