Review questions for test 2 (excluding VAT)
Question 1
Angela is in business as a sole trader. In the year ended 31 December 2022 she has the following
transactions:
15 May 2022 Purchased new office furniture for £24,800
1 June 2022 Sold Ford car for £9,400 (used by Angela 30% for private purposes)
2 June 2022 Purchased a new Toyota car (CO2 emissions 108 g/km) for £10,000 which Angela will
use 20% of the time for private purposes
10 June 2022 Bought new plant for £9,000
1 July 2022 Sold office equipment for £10,000 (original cost £18,000)
As at 1 January 2022 the tax written down value on the main pool was £10,800 and on the Ford car
was £14,500.
Calculate Angela’s capital allowances for the year ended 31 December 2022.
Question 2
Roy, Nigel and Clive are trading as partners sharing profits in the ratio 3:2:1 and they prepare
accounts to 31st December. With effect from 1st April 2022 they agree that Clive should receive
a salary of £20,000 per annum, that partners should be entitled to 4% pa interest on capital and
that the remaining profits should be shared in the ratio of 5:3:2.
The adjusted trading profit of the partnership for the year ended 31st December 2022 is
£130,000 before capital allowances. Capital allowances for the year were agreed with HMRC as
£20,000.
Fixed capitals are:
Roy
£50,000
Nigel
£60,000
Clive
£80,000
Required:
(a)
Compute each partner’s trading income.
(b)
Calculate NIC for Clive only.
(c)
Advise the partners of the latest date by which their self-assessment tax returns for the
tax year 2022/23 should be submitted, and the implications if they are submitted four
months late.
Question 3
On 5th July 2022 Dee Zyne resigned as an employee of Trendy Wear plc. The company had employed
her as a fashion designer since 2015. On 6th July 2022 Dee commenced self-employment running her
own clothing business, preparing accounts to 5 April. The following information is available for
2022/23.
Employment
1. During the period 6 April 2022 to 5th July 2022 Dee’s total gross salary was £26,000. Income
tax of £8,530 was deducted from this figure under PAYE.
2. During the period 6th April 2022 to 5th July 2022 Trendy Wear plc provided Dee with a RDE
compliant company car with a list price of £17,500. The official CO2 emission rate for the car
was 128 grams per km. The employer also provided Dee with fuel for private motoring. Dee
paid £100 per month to Trendy Wear plc towards the cost of the fuel used for private
motoring, and she also made a capital contribution of £1,500 towards the cost of the motor
car when it was first provided to her. The car was not available to Dee after 5th July 2022.
3. During the period 5th April 2022 to 5th July 2022 Dee was provided with free meals in the staff
canteen. The total cost of the meals to the company was £350.
4. Dee contributed 5% of her salary to Trendy Wear occupational pension scheme.
Self-employment
1. Dee’s tax adjusted trading loss for the period from 6th July 2022 to 5th April 2023 was £13,400
and is after charging depreciation of £1,000. This figure is before taking account of the
information in note (2) and capital allowances.
2. During the period 6th July 2022 to 5th April 2023 Dee used her home as an office and estimates
that £25 per month of her household costs relate to the business.
3. Dee purchased the following assets during the nine month period ended 5th April 2023:
10 July 2022
computer
£525
16 August 2022
office furniture
£2,175
13 November 2022
Motor car 1
£10,400
21 January 2023
Motor car 2
£17,800
Motor car 1 has CO2 emissions of 41g/km and is used by an employee. 15% of the mileage is
for private motoring. Motor car 2 has emissions of 147g/km and is used by Dee. 20% of the
mileage is for private motoring.
Other information
1. During the period 6th April 2022 to 5th July 2022 Dee paid interest of £110 (gross) on a personal
loan taken out on 1 August 2021 to purchase a computer for use in her employment.
2. Dee’s total income for each of the years 2019/20 to 2021/22 was £80,000.
Required:
a) Calculate Dee’s tax adjusted trading loss for 2022/23.
b) Assuming that Dee claims loss relief against her total income for 2022/23 calculate the
income tax repayable to her for 2022/23.
c) Describe the alternative ways in which Dee could have relieved her trading loss for 2022/23
against total income and explain why these claims would have been more beneficial than
the actual claim made in b) above.
Question 4
Simon is employed at an annual salary of £145,000, His employer operates an occupational pension
scheme into which Simon pays 5% of his salary and the company contributes 7% of his salary.
Simon also made a payment of £20,000 into a personal pension scheme in the year 2022/23.
What is Simon’s income tax liability for 2022/23?
How is the employer’s contribution into the occupational pension scheme treated?
Question 5
Ewa has a choice of being either employed or self-employed. If employed Ewa’s gross annual salary
for 2022/23 will be £56,000. If self-employed Ewa’s trading profit for the year will also be £56,000.
How much more National insurance contributions will Ewa suffer if she chooses to be employed
rather than self-employed?
Question 6
Barry and Harry are partners in a motor repair business preparing accounts to
30 September.
The adjusted tax profit for the year to 30 September 2022 was £180,000.
They share profits equally after charging salaries of £48,000 per annum each and interest on
capital of 5% per annum.
They each contributed capital to the business as follows:
Barry £240,000
Harry £120,000
You are required to:
a. Calculate the amount of each partner’s share of profit earned in the year to
30 September 2022.
b. Calculate the national insurance payable by Barry only for 2022/23.