Taxation UK – Mock Test 1
Full Marks: 100
Pass Marks: 50
Time Allowed: 3 Hours
Exam Summary
This exam is divided into three sections:
Section A
• 15 objective test (OT) questions, each worth 2 marks.
• 30 marks in total.
Section B
• Three OT cases, each containing a scenario which relates to five OT questions, each worth 2 marks.
• 30 marks in total.
Section C
• Three constructed response questions, each containing a scenario which relates to one or more
requirement(s).
• Each constructed response question is worth 10 or 15 marks in total.
• 40 marks in total.
All questions are compulsory.
Section A
This section of the exam contains 15 objective test (OT) questions.
Each question is worth 2 marks and is compulsory.
This exam section is worth 30 marks in total.
Important:
(1) Calculations and workings need only be made to the nearest £.
(2) All apportionments should be made to the nearest month.
Question 1
Brad and Angelina are married couples, In the tax year 2022/23 Angelina had a salary income of £ 6,000
and Brad had trading income of £50,500. They as a married couple plan to minimize their overall tax
liability as far as possible.
What is Brad’s income tax liability for the tax year 2022/23 if they have claimed all the allowances
and reliefs available to them?
A. £7,632
B. £7,380
C. £6,272
D. £6,372
Question 2
Sara is planning to leave the UK to live overseas having always previously been resident in the UK. She
will not automatically be treated as either resident or non-resident in the UK. However, she has several ties
with the UK and will need to visit the UK for at least 60 days each tax year. However, she wants to be not
resident of UK after she leaves.
For the first two tax years after leaving the UK, what is the maximum number of ties which she could
keep with the UK without being treated as resident in the UK?
A.
B.
C.
D.
1 tie
2 ties
3 ties
4 ties
Question 3
James purchased £50,000 nominal value qualifying corporate bond with coupon interest rate of 2.5% for
£53,000 on 1 July 2022. Interest is paid half yearly on 31 March and 30 September. He sold the bond on
31 January 2023 for £54,000.
How much James should include in saving income in respect of the corporate bond in the tax year
2021/22?
A.
B.
C.
D.
£625
£729
£313
£417
Question 4
Daisy’s only income is from letting out furnished residential property, none of which is qualifying furnished
holiday accommodation. For the tax year 2022/23 her taxable property income was £25,100 before
adjusting for payment of £500 to replace a damaged kitchen unit in a fitted kitchen and interest payment of
£12,030 on a loan to acquire one of the properties.
What is Daisy’s taxable payable/(receivable) for the tax year 2022/23?
A. £24,600
B. £12,570
C. £0
D. £4,920
Question 5
Ram is provided with accommodation by his employer which was purchased 20 years ago at a cost of
74,000. The accommodation has an annual value of £5,000 and had a market value of £200,000 when it
was first made available to Ram 10 years ago. Ram contributes £500 per month for the accommodation.
The accommodation is not qualifying for job-related.
What is value of assessable benefit for Ram in respect of accommodation in the tax year 2021/22?
A. £5,000
B. £6,000
C. £0
D. £7,813
Question 6
Nora has always prepared her accounts to 31 October. On 1 May 2022 she purchased a building which she
brought into use on 1 June 2022. Nora spent £700,000 on the land, £550,000 on the structure and building
and £30,000 renovating the building.
What is the maximum SBA Nora may claim for the tax year 2022/23?
Ans: £7,250
Question 7
Brooke started trading as a sole trader on 1 June 2020. His tax adjusted trading profit/(losses) for the first
two years of trading are:
Year ended 31 May 2021: (£50,000)
Year ended 31 May 2022: £5,000
He was employed until 30 May 2020 earning £20,000 per annum.
How much, if any, of the loss can be offset against Brooke’s other income in 2019/20?
Ans: £10,000
Question 8
Albert has been trading as a sole trader for many years. In the year ended 31 December 2022 he made a
trading loss of 50,000. Albert’s only other source of income is employment income of £10,000 each tax
year.
In the tax year 2022/23 Albert realized a chargeable gain of £40,000 on the sale of antique and a capital
loss of £10,000 on the sale of painting. He also has capital losses brought forward of £15,000.
What is the amount of trading loss that Albert can offset against her chargeable gain in the tax year
2022/23?
A. £50,000
B. £40,000
C. £15,000
D. £10,000
Question 9
Hari has made the following gross contributions to her personal pension scheme over the past three tax
years:
2019/20: £42,000
2020/21: £37,000
2021/22: £28,000
Hari’s adjusted income did not exceed £240,000 in any tax year.
What is the maximum gross contribution which Hari can make to her personal pension scheme for
the tax year 2022/23 without incurring an annual allowance charge?
A. £40,000
B. £52,000
C. £53,000
D. £55,000
Question 10
Sophie’s income tax liability and class 4 NIC for the tax year 2022/23 are £3,000 and £1,840 respectively.
Her income tax liability and class 4 NIC for the tax year 2021/22 were £4,200 and £2,160 respectively.
What is the lowest amount to which Sophie could make a claim to reduce each of her payments on
account for the tax year 2022/23 without being charged to interest?
A.
B.
C.
D.
£2,420
£4,200
£4,840
£3,000
Question 11
Anna is in employment earning an annual salary of 55,000. Her only other income is bank interest of 3,000.
She received child benefit of 1,820 during the tax year 2020/21.
Select Anna’s child benefit tax charge and method of collection of tax for the tax year 2020/21.
A. £1,456 by Self-assessment
B. £1,456 by PAYE
C. £910 by Self-assessment
D. £910 by PAYE
Question 12
Which of the following is the correct definition of an extra-statutory concession?
A. A provision for the relaxation of the strict application of the law where it would lead to anomalies
or cause hardship
B. Supplementary information providing additional details in relation to the general principles set out
in legislation
C. HMRC’s interpretation of tax legislation
D. Guidance provided to HMRC’s staff in interpreting and applying tax legislation
Question 13
Three unconnected companies have the following results for tax purposes
Company Current
accounting
period
A Ltd
y/e 31 March 2023
B Ltd
4m/e 31 December 2022
C Ltd
y/e 30 November 2022
Number of 51%
group companies
3
0
0
Taxable
total
profit (TTP)
700,000
600,000
1,600,000
TTP for previous
12 months period
600,000
1,600,000
1,400,000
All the companies have had the same number of 51% group companies for many years. None of the
companies have received any dividends.
Which of the three companies will not have to pay corporation tax by quarterly installments for the
current accounting period?
A.
B.
C.
D.
A Ltd only
B Ltd only
C Ltd only
B Ltd and C Ltd only
Question 14
You are a trainee ACCA and your firm has a client who has refused to disclose a chargeable gain to HMRC.
From an ethical viewpoint, which TWO of the following actions could be expected of your firm?
A.
B.
C.
D.
Reporting under the money laundering regulations
Advising the client to make disclosure
Informing HMRC of the non-disclosure
Warning the client that you firm will be reporting the non-disclosure
Question 15
Rosy ceased trading on 31 January 2023. Her recent trading profit were as follows:
y/e 30 June 2021: £18,400
y/e 30 June 2022: £11,200
7 m/e 31 January 2023: £7,300
She has unused overlap profits of £2,600
What amount of trading profit will Rosy be assessed on for the tax year 2022/23?
Ans: 15,900
Section B
This section of the exam contains three OT cases.
Each OT case contains a scenario which relates to five OT questions.
Each question is worth 2 marks and is compulsory.
This exam section is worth 30 marks in total.
Important:
(1) Calculations and workings need only be made to the nearest £.
(2) All apportionments should be made to the nearest month.
Mixture Ltd
The following scenario relates to Questions 16 to 20
(5*2marks = 10 Marks)
Mixture Ltd prepares accounts for the year ended 31 March 2023 and has taxable total profits of £171,705,
resulting in a corporation tax liability of £32,624.
Mixture ltd has previously always submitted its corporation tax returns on time and had a corporation tax
liability for the year to 31 March 2022 of £22,000.
The company is in dispute with HMRC in relation to its corporation tax return for the year ended 31 March
2022 and has been offered an internal review of the case.
The case is likely to be allocated to either the complex track or the standard track if its instead chooses to
go to formal appeal.
16. What is the date by which Mixture Ltd self-assessment corporation tax return for the year ended 31
March 2023 should be submitted?
A. 31 December 2023
B. 31 January 2024
C. 31 March 2024
D. 31 July 2024
17. What is the total amount of late filing penalties that will be charged on Mixture Ltd if it submits its
return for the year ended 31 March 2023 and pays the corporation tax due eight months late?
A. £3,262
B. £3,462
C. £6,525
D. £6,725
18. How should Mixture Ltd’s corporation tax liability for the year ended 31 March 2023 be paid?
A. £32,624 on 1 January 2024
B. £11,000 on 31 January 2023 and 31 July 2023, £10,624 on 31 January 2024
C. £8,156 on 14 October 2022, 14 January 2023, 14 April 2023 and 14 July 2023
D. £5,500 on 14 October 2022, 14 January 2023 and 14 April 2023, £16,124 on 14 July 2023
19. Which TWO of the following statements are correct about the internal review procedures?
A. An internal review is a less costly and mere effective way to resolve disputes informally than a formal
appeal.
B. The review is a carried out by the HMRC officer who has previously dealt with the case.
C. HMRC must annually carry out the review within 45 days
D. After the review conclusion is notified, the company cannot make a further appeal.
20. Identify which of the following statements is true or false:
A.
B.
C.
D.
Tax evasion is illegal
Both tax evasion and tax avoidance are illegal
Tax avoidance is legal but may fail if challenged in the courts by HMRC
Tax evasion always involves providing HMRC with false information
A – True, B – False, C – True, D - False
Edward
The following scenario relates to Questions 21 to 25.
(5*2marks = 10 Marks)
Edward started business as a sole trader on 1 February 2007. He prepared accounts to 30 September each
year and had overlap profits on commencement of £1,800.
On 31 December 2022, Edward sold his business to Richard. His results to the date of cessation after capital
allowances were as follows:
Year ended 30 September 2021:
£48,000
Year ended 30 September 2022:
£36,000
Period ended 31 December 2022:
£6,000
Edward had a main pool for capital allowances with a tax written-down value of £8,600 at 1 October 2022.
His purchased a car with emissions of 35g/km on 15 October 2022 at a cost of £900.
Edward sold the following assets of his business to Richard on 31 December 2022:
Goodwill
P&M in main pool
Freehold shop
Proceeds (£)
15,000
7,800
50,000
Cost (£)
0
13,690
43,000
Edward had no other chargeable assets and had property business income in addition to his trading income
such that he was a higher rate taxpayer in 2022/23.
Richard commended trading on 1 January 2023 and will prepare accounts to 30 June each year, the first
accounts being prepared for the 18-month period to 30 June 2024.
Richard anticipates that he will have a trading loss for the tax year 2023/24.
He was previously employed with employment income of at least £50,000 each tax year since 2014/15.
21. What is the amount of trading income assessable on Edward for the tax year 2022/23?
Ans: £40,200
22. What balancing allowance was deducted from Edward’s trading profits for the period ended 31
December 2022?
A. £655
B. £1,700
C. £764
D. £1,624
23. What is Edward’s capital gain tax liability for the tax year 2022/23?
A. £1,940
B. £381
C. £970
D. £2,200
24. Complete the following sentence about Richard’s basis period for the tax year 2023/24:
“Richard’s basis of period for the tax year 2023/24 will starts on…………. and ends
on…………………….
Ans: 6 April 2023 and 5 April 2024
25. Which two of the following are possible uses by Richard of his trading loss for the tax year 2023/24?
A. Early years loss relief against general (other) income in 2020/21, 2021/22 and 2022/23 in that order.
B. Carry forward against general (other) income in 2024/25
C. Early years loss relief against general (other) income in 2022/23, 2021/22 and 2020/21 in that order
D. Against general (other) income in 2022/23 and/or 2023/24
Failure Ltd
The following scenario relates to Questions 26 to 30.
(5 *2 marks = 10 marks)
Failure Ltd’s recent results, together with a forecast for the year ended 31 March 2022 are:
y/e
30.06.17
£
Trading profit/(loss)
15,800
Property Income
5,200
Qualifying charitable donation 1,300
y/e
30.06.18
£
10,600
1,200
1,400
y/e
30.6.19
£
15,700
6,600
800
9 months
ended
31.03.20
£
24,300
8,100
1,200
y/e
31.03.21
£
(78,300)
5,600
1,100
y/e
31.03.22
£
60,000
3,000
1,300
The future prospect of Failure Ltd is currently uncertain and it does not own shares in any other country
26. Which of the following factors are relevant to Failure Ltd’s decision when choosing which
loss relief claims to make?
Timing of relief
Extent to which losses will be wasted
Extent to which QCD relief will be wasted
Relevant
Yes
Yes
Yes
Not
Relevant
27. Assuming that Failure Ltd decided to carry the trading loss forward and offset it in the future
period as efficiently as possible, what would be the amount of unrelieved loss as at 31 March
2022?
A.
B.
C.
D.
£18,300
£16,600
£15,300
£11,000
28. Assuming that Failure Ltd elects to offset the loss as soon as possible what would be the
amount of unrelieved loss at 31 March 2021?
Ans: £34,725
29. Assuming that Failure Ltd wishes to make a current year loss relief claim in respect of the
trading loss, select whether the following statements are true or false.
TRUE
FALSE
The amount of loss used in the current year can be restricted to
avoid wasting QCD relief
The claim must be made by 31 March 2023
Yes
Yes
30. Assuming that Failure Ltd had creased trading on 31 March 2021 and claimed terminal loss
relief in respect of its trading loss, what would be the amount of unrelieved loss at 31 March
2021?
A. £950
B. £5,775
C. £6,200
D. £23,750
Section C
This section of the exam contains three constructed response questions.
Each question contains a scenario which relates to one or more requirement(s) which may be split over
multiple question screens.
Each question is worth 10 or 15 marks and is compulsory.
This exam section is worth 40 marks in total.
Important:
(1) Calculations and workings need only be made to the nearest £.
(2) All apportionments should be made to the nearest month.
Question 31:
Ginger is employed by Opal plc and she is also a member of a partnership. The following information is
available:
Employment
(1) During the tax year 2022/23, Ginger was paid a gross annual salary of £65,000 in respect of her
employment with Opal plc.
(2) During the period from 1 August 2022 to 5 April 2023, Opal plc provided Ginger with a diesel car
which has a list price of £ 21,800. The car cost Opal plc £20,600, and its has an official Co2
emission rate of 70 gm/km. The car does not meet the real driving emission standard. Ginger was
not provided with any fuel for private use.
(3) Throughout the tax year 2022/23, Opal plc provided Ginger with two mobile telephones. The
telephones had each cost £480 when purchased by the company in March 2022.
(4) All of the taxable benefits provided by Opal plc to Ginger are pay rolled.
Partnership
(1) Ginger has been in partnership with Rose and Teasel since 6 April 2013, but Teasle resigned as a
partner on 6 July 2022. The partners have always shared profit equally.
(2) For the year ended 5 April 2023, the partnership had a tax adjusted trading loss of £19,500. This
figure is before taking account of capital allowances.
(3) The only item of plant and machinery owned by the partnership is a car with a Coz emission of
90gm/km. The car was used by Ginger and 70% of the mileage was for private journeys. The
written down value of the car as at 6 April 2022 was £8,400. The car was sold on 31 July 2022 for
£5,400 and was not replaced.
Gilts
On 1 January 2023, Ginger purchased, for £50,000, gilts with a nominal value of £40,000. The gilts paid
interest at the rate of 3%, with interest paid half-yearly on 30 June and 31 December based on the nominal
value. Ginger sold the gilts on 31 March 2023 for £50,300 (including accrued interest).
Balancing payment for tax year 2021/22
Ginger filed her self-assessment tax return for the tax year 2021/22 by the filing date, but did not make the
balancing payment of £2,600 until 31 August 2023. She was not required to make any payment on account.
Required
(a) Assuming that Ginger claims loss relief against her total income for the tax year 2022/23, calculate
her taxable income for this tax year.
(10 marks)
(b) Explain how Ginger’s income tax liability in respect of her taxable benefits for the tax year 2022/23
will have been collected, and if any forms containing details of these benefits will have been
reported to HMRC.
(2 marks)
(c) Advise Ginger of the interest and penalties that will be charged by HMRC as a consequence of her
not making the balancing payment for the tax year 2021/22 until 3 August 2023. (3 marks)
(Total = 15 marks)
Solution:
(a) Ginger’s taxable income for TY 2022/23
Gross salary
Car benefit
Mobile phone
(21,800 * (19% + 4%) * 8/12)
(480 * 20%)
Saving income
(40,000 *3% *3/12)
Loss relief
Personal allowance
Taxable income
(W1)
£
65,000
3,343
96
68,439
300
68,739
(9,350)
(12,570)
46,891
Notes:
1. One mobile phone is exempt but second mobile phone is taxable
2. As the capital gain on gilts is exempt form CGT the interest received from gilts needs to be
included in saving income in accruals basis although interest has not been received.
Workings
W1: Trading Loss
Trading loss
Balancing allowance
Revised trading loss
Share of loss
6 April 2022 to 5 July 2022
6 Jul 2022 to 5 April 2023
Total loss for TY 2022/23
((8,400 – 5,400) * 30%
20,400 * 3/12 * 1/3
20,400 * 9/12 * ½
19,500
900
20,400
1,700
7,650
9,350
(b) Because Ginger’s benefits are payrolled, the related income tax liability will have been collected
under PAYE along with the tax on her salary.
Payrolled benefits do not have to be reported to HMRC on P11D form or otherwise.
(c) Interest will be charged for the period 31 January 2023 to 31 August 2023, so the charge will be £ 49
(2,600 *3.25% *7/12).
Two penalties of £ 130 (2,600 @ 5%) will be charged on the balancing payment, one when it is one
month late and the other when it is six months late.
Question 32:
You should assume that today’s date is 1 March 2022.
Sophie is currently self-employed. If she continues to trade on a self-employed basis, her total income tax
liability and national insurance contributions (NIC) for the tax year 2022/23 will be £11,379.
However, Sophie is considering incorporating her business on 6 April 2022. The forecast taxable total
profits of the new limited company for the year ended 5 April 2023 will be £50,000 (before taking account
of any director’s remuneration). Sophie will pay herself gross director’s remuneration of £30,000 and
dividends of £10,000. The balance of profits will remain undrawn within the new company.
Requirement:
(a) Determine whether or not there will be an overall saving of tax and national insurance
contributions (NIC) for the year ended 5 April 2023 if Sophie incorporates her business on 6 April
2021.
Notes:
1. The new limited company will not be entitled to the NIC annual employment allowance.
2. You should assume that the rates of corporation tax remain unchanged. (8 marks)
(b) Advise Sophie as to why her proposed basis of extracting profits from the new limited company
is not optimum for tax purposes, and suggest how the mix of director's remuneration and dividends
could therefore be improved.
Note: You are not expected to calculate any revised tax or NIC figures. (2 marks)
(Total 10 marks)
(a)
The total tax and NIC cost if Sophie incorporate her business:
Income tax
Employee class 1 NIC
Employer class 1 NIC
Corporation tax
Total tax
Less: tax as sole trader
Excesss if incorporated
W1
W2
W2
W3
4,186
2,309
3,145
3,202
12,843
-11,379
1,464
Therefore, if Sophie incorporated her business there would be an overall increase in
tax and NIC of £1,324 compared to continuing on a self-employed basis.
Workings
(W1) Sophie’s income tax payable
£
Director’s remuneration
Dividends
30,000
10,000
40,000
-12,570
27,430
Less: Personal Allowance
Taxable income
Income tax
£
NSI:BRB
DI:NR
DI: BRB
(W2)
£
17,430
2,000
8,000
27,430
20%
0%
8.75%
3,486
700
4,186
National Insurance contribution
£
Employee class 1: (£30,000 - £12,570) *13.25%
Employer’s class 1: (£30,000 - £9,100) *15.05%
(W3)
2,309
3,145
Corporation tax liability
Trading profit
Director’s remuneration
Employer’s class 1 NIC
Taxable Total profit
Corporation tax at 19%
50,000
-30,000
-3,145
16,855
3,202
(b)
1)
2)
The relatively high tax cost of Sarah incorporating her business arises because of her
salary attracting both employee and employer NICs.
Restricting the salary to around £8,800, and taking a correspondingly higher amount of
dividends, would significantly reduce her overall tax cost.
Question 33: This scenario relates to three requirements. (15 Marks)
Lucky Ltd's results for the previous two periods of trading are:
Trading profit
Property business income
Chargeable gains/(capital losses)
QCDs
Year ended 31 December Three-month ended 31 March
2021
2022
35,900
12,300
12,100
4,200
(3,300)
(2,100)
(1,200)
(1,600)
The following information is available in respect of the year ended 31 March 2023:
Trading loss
The tax-adjusted trading loss based on the daft statement of profit or loss for the year ended 31
March 2023 is £151,300. This figure is before making any adjustments required for:
(1) A premium which was paid to acquire a leasehold office building on an eight-year lease
(2) Capital allowances
Premium paid to acquire leasehold office building
On 1April 2022, Lucky Ltd acquired a leasehold office building, paying a premium of £20,000 for the grant
of an eight-year lease. The office building was used for business purposes by Lucky Ltd throughout the
year ended 31 March 2023.
Plant and machinery
The tax written down value of the port and machinery main pools as at 1 April 2022 was £0. During the
year ended 31 March 2023, Lucky Ltd sold equipment for £4,300. The equipment was originally purchased
during the year ended 31 March 2017 for £22,400, with this expenditure qualifying for the 100% annual
investment allowance.
Property business Income
Lucky Ltd lets out a warehouse which surplus to requirements. The building was empty from 1 April to 31
July 2022, but was let from 1 August 2022 onwards. The following income and expenditure was received
or incurred during the year ended 31 March 2023:
Date received/paid
1 April 2022:
Insurance or the year ended 31 March 2023 –
(920)
1 August 2022:
Rent for the six months ended 31 January 2023-
7,800
1 August 2022:
Security deposit equal to two months’ rent-
2600
1 March 2023:
Rent for the six months ended 31 July 2023:
7800
Disposal of shareholdings in Micky plc
On 12 December 2022, Lucky Ltd sold 6,500 £1 ordinary shares in Micky plc for £31,200. Lucky Ltd had
originally purchased 20,000 shares (less than 1% shareholding) in Micky plc on 18 June 2006 for £ 27,000
and purchased a further 1,000 shares on 8 December 2022 for £4,600. Indexation factor from June 2006 to
December 2017 is 0.401
Required
(a) Calculate Lucky Ltd’s revised tax-adjusted trading loss for the year ended 31 March 2023.
(3 Marks)
(b) On the basis that Lucky Ltd claims reliefs for its trading loss against its total profits for the
year ended 31 March 2023, prepare a corporation tax computation for this year showing
taxable total profits.
(8 marks)
(c) On the basis that Lucky Ltd claims reliefs for the remainder of its trading loss as early as
possible, calculate the company’s taxable total profits for the year ended 31 December 2021
and the three-month period ended 31 March 2022.
(4 marks)
(Total = 15 marks)
Solution:
(a) Lucky Ltd – Trading loss for the year ended 31 March 2023
Trading loss
Less: Deduction for lease premium (20,000 * (51-8)/50) / 8)
Add: Balancing charge
Adjusted Trading loss
(151,300)
(2,150)
4,300
(149,150)
(b) Lucky Ltd – Corporation tax computation for the y/e 31 March 2023
Property business income (W1)
9,480
Net Chargeable gains (16,198 (W2) – 3,300 – 2,100)
10,798
Total profits
20,278
Less: Trading loss
(20,278)
Taxable total profits
Nil
Workings:
W1: Property business income
Rent receivable (7,800 + (7,800 *2/6))
10,400
Security deposit
0
Insurance
(920)
Property business income
9,480
W2: Chargeable gains
Disposal Proceeds
31,200
Less: Cost:
Purchase on 8 Dec 2022 (1,000 units)
(4,600)
Share pool (5,500 units) (27,000 *5,500/20,000)
(7,425)
Unindexed gain
19,175
Less: indexation allowance (7,425 *0.401)
(2,977)
Chargeable gain
16,198
(c) Lucky Ltd – Taxable total profits for the period ended 31 December 2021 and 31 March 2022
Trading profit
Property business income
Chargeable gain
Total profits
Less: Trading loss relief
Less: QCD
Taxable total profits
(48,000 *9/12)
Y/e 31 Dec
2021
35,900
12,100
0
48,000
(36,000)
(1,200)
10,800
3 m/e 31
March 2022
12,300
4,200
0
16,500
(16,500)
Wasted
0