Question 1
a) NIC
i) (£300 - £146) @ 12% = £18.48
ii) (£300 - £144) @13.8% = £21.53
2 marks
2 marks
4
b) expenses
£60 a year
4 years – 2009-10
(If year wrong but claim for past years mentioned)
1 mark
1 mark
(½ mark)
2
£300 x 52 = £15,600
Less expenses £60 = £15,540
£15,540 less personal allowance £8,105 = £7,435
£7,435 @20% = £1,487
1 mark
1 mark
1 mark
1 mark
4
Proceeds £30,000
Allowable expenditure (£10,000 + £3,000)
Gain £30,000 - £13,000 = £17,000
Less AEA: 17,000 - 10,600 = 6,400
6,400 @ 18% = £1,152
½ mark
1 mark
½ mark
1 mark
1 mark
4
Transfer half share to wife before disposal as no
gain/no loss transfer (other more exotic schemes
may also be valid)
2 marks
2
c)Income tax
d) CGT
e) Tax planning
f) Self-employment
g) HICBC
Class 2 NIC 52 weeks x £2.65 = £137.80 1 mark
Class 4 NIC ( 57,000 – 42,475) @ 2% = £291 1 mark
(42,475 – 7,605)@ 9% = £3,138 1 mark
£3,429
1 mark for using
right profits (PA
Income Tax £57,000 less PA£ 8,105 = £48,895
is repeat of part
c.)
Basic rate band £34,370
Gift aid £10 x 12 = £120 x 100/80 = £150 1 ½ marks
Pension £240 x 12 x 100/80 = £3,600
£38,120
£38,120 @ 20% = £7,624
(£48,895 - £38,120) @ 40% = £4,310 ½ mark
£11,931
i) Elizabeth has the higher adjusted net income
ii){£20.30 +(13.40 x 2)} x 52 =£2,449
iii.)£62,000 less Gift Aid £150 less Pension £3,600
= £58,250
iv.) {(ANI – L) /X}% =( 58,250 – 50,000)/100 = 82%
HICBC = £2,449 x 82% = £2,008
v.) If taxpayer is aged over 65 – age allowance
Income over £100,000
6
1 mark
1 mark
2 marks
1 marks
1 mark
1 mark
1 mark
Total
8
30
Question 2
a) Business rates
b) VAT
c) SDLT
Marks
2
From particulars: £58,500 x 45.8p = £26,793
i.
To claim back input VAT on own expenses
Generally only beneficial if tenant is VAT
registered and can claim VAT back.
ii. £ 60,000 x ¼ @ 20% = £3,000
Zero-rating does not apply to “catering” which
includes eat-in and hot food. Not all foods are
zero-rated even if taken out – eg chocolate
iii
coated biscuits and confectionery (other
examples will also be acceptable if plausible for a
coffee shop
Annual rent is £60,000 + VAT = £72,000
2 marks
2 marks
6
2 marks
1 mark
Year 1 £72,000 / (1+0.035) = £69,565
Year 2 £72,000/ (1+1.035)2 =£67,213
Year 3 £72,000/ (1+1.035)3 =£64,940
Year 4 £72,000/ (1+1.035)4 =£62,744
Year 5 £72,000/ (1+1.035)5 =£60,622
Year 6 £72,000/ (1+1.035)6 =£58,572
Year 7 £72,000/ (1+1.035)7 =£56,591 3 marks
Year 8 £72,000/ (1+1.035)8 =£54,688
Year 9 £72,000/ (1+1.035)9 =£52,869
Year 10 £72,000/ (1+1.035)10 =£51,042
NPV = £598,846
7
HMRC calculator give £598,795 – any figure in this area is OK
£598,846 less £150,000(lower limit) = £448,849
£448,849 @1% = £4,488 (SDLT due)
d) CG
Net Proceeds £30,000 - £1,000 = £29,000
Allowable costs:
Legal fees (ex VAT) £5,000
SDLT £4,488
Conversion costs £20,000
Table %age for 10 years = 46.695 (A)
Table %age for 6 years (remaining term) =
31.195 (B)
(A-B)/A = (46.695 – 31.195)/46.965 = 0.332
disallowable
Depreciated cost - (£5,000 + £4,488 +20,000) x
(1-0.332)= £17,694
Unindexed gain = £29,000 - £17,694 = £11,306
Indexation Factor (300.0-255.2)/255.2 = 0.176
(round to 3 decimal places)
Indexation allowance: £17,694 x 0.176 = £3,114
Indexed gain: £11,306 - £3,114 = £8,192
2 marks
(principle and
correct limit)
1 mark
1 mark
½ mark
½ mark
½ mark
½ mark
½ mark
10
1 mark
1 mark
½ mark
2½ marks
1 mark
½ mark
Total
25
Question3
a) OSC
Mark
‘Ordinary share capital' means all the issued
share capital, by whatever name called, of the
company other than share capital carrying a
right to a dividend only at a fixed rate.
b) Group Structure Chart should show:
 Correct links
 %age shareholdings against connectors
 Date of joining group
c)
i. 75% in both cases
ii. B , D and F (part-year but not essential to note)
1½ marks for
definition
1½ marks for
explanation
3
½ mark
deducted for
each error
2
2 marks
3 marks less ½
mark for every
company omitted
or incorrectly
included
d)
iii. 31 December 2014
i. A principal company and all its 75% subsidiaries form a
group and, if any of those subsidiaries have 75% subsidiaries,
the group includes them and their 75% subsidiaries, and so
on, but a group does not include any company that is not
an effective 51 % subsidiary of the principal company.
(A company cannot be the principal company of a group if it
is itself a 75%subsidiary of another company.)
Section 170(3) and (4) TCGA1992
ii.
A, B, F, G
6
1 mark
2 marks less ½
mark for each
bold element
missing
2 marks less ½
5
mark for every
company omitted
or incorrectly
included
iii.
e)
Joint election for asset to be treated as disposed
of by C Ltd. The loss itself cannot be transferred
i. Profit limit is reduced proportionately by the
number of associated companies
FY2011 £600,000 x 3/12 x 26% = £ 39,000
FY2012 £600,000 x 9/12 x 24% = £108,000
ii.
£147,000
1 mark
1 mark
2 marks
(No relief for capital losses – any allowable deduction would already
have been made )
Instalments due: £147,000/4 = £36,750
Instalments paid
(£25,000)
Underpaid
£11,750
Due dates
Final payment 30/4/13
14 July 2012
9 ½ months
14 October 2012
6 ½ months
iii 14 January 2013
3 ½ months
14 April 2013
½ month
Total delay 20 months
Interest due £11,750 @ 1.5% x 20/12 = £294
9
3 marks
(1.5% because these are underpaid instalments rather than
mainstream CT. Many students will work out interest for
each instalment separately – that’s fine.)
Same as loss relief group except for F (not in
group for whole of accounting period)
iv.
Other company would only earn repayment
interest at 0.5%.
2 marks
1 mark
Total
25
Question 4
a) reliefs
Marks
Transfer of nil-rate band (IHT)
Business (Property) Relief (IHT)
Entrepreneurs Relief (CGT)
Gift Holdover Relief (CGT)
b) valuations
100%: £ 2 million/1,000 = £2,000
80%: £2,000 x (100-5)% = £1,900
40%: £2,000 x (100-60)% = £800
c) Capital Gain
i
Consideration for disposal (MV)
£800 x 400 = £320,000
Cost – create pool
Total shares – 800
Total cost - £500,000
Allowable cost £500,000 x 400/800 = 250k
½ mark each
1 mark
1 mark for principle
(100% - rate given)
1 mark for right rate
1 mark
4
1 mark
2 marks
7
(A/A+B method will also give the same figures –
either method OK in this case)
d) IHT
2
Gain 320,000 – 250,000 = 70,000
1 mark
ii Gain 70,000 – AEA of 10,600 = 59,400
59,400 @28% = £16,632
iii Due date 31 January 2014
1 mark
1 mark
1 mark
Fall in value/loss to estate principle
i Original Value 800 x £1,900 = £1,520,000
Value after gift 400 x £800= ( £ 320,000)
£1,200,000
ii 7 years
iii Tax due
Chargeable Transfer
£1,200,000
Less AE (£3,000 x 2) (£ 6,000)
1 mark
1 mark
1 mark
3
1 mark
1
Less Nil Rate Band
Chargeable
£1,194,000
£ (325,000)
£ 869,000
1 mark ( ½ mark if only
£3,000 deducted)
1 mark
4
Tax due £896,000 @ 40% = £347,600
1 mark ( ½ mark if 20%
rate used)
Taper relief £347,600 x 60% = £208,560
1 mark ( ½ mark if
principle correct)
Dates are based on end of month of date
iv Payment - 30 September 2017
Return – 31 March 2018
v £208,560 x 3% x 6/12 = £3,128
2
Total
2
25
Question 5
a) BIK
b) Class 1A NIC
c) 2012-13
List price £45,340 + Accessories £2,000=
£47,340
2012-13 £47,340 @ 32% = £15,149
£15,149 @ 50% = £7,574
2013-14 £47,340 @ 33% x 1/12 = £1,302
£1,302 @ 45% = £586
2012-13 £15,149 @ 13.8% = £2,091
2013-14 £1,302 @13.8% = £180
Due by 19 July after end of tax year (or 22
July if paid electronically)
2 Marks
1 Mark
1 Mark
1 Mark
1 Mark
6
1 Mark
1 Mark
4
2 Marks
Rentals paid (700 x 12) = £8,400 1 Mark
Plus VAT 8,400 x 20% = £1,680 1 Mark
Input VAT (50% on high CO2 car) (£840) 1 Marks
Net cost £9,240
Class 1A NIC paid £2,091 1 Mark
Total outgoings £11,331
Corporation Tax deductions- £11,331
Restrict for high CO2 £9,240 @15% =
1 Mark
(£1,386)
£9,945
£9,945 @ 24% = £2,387 1 Mark
Net Cost £11,331 - £2,387 = £8,944 1 Mark
2013-14
10
Rent £700
VAT £140 ½ mark
Less input VAT @ 50% = (70)
£770
Class 1A NIC £180 ½ mark
£950
Corporation Tax saving £950
Less £770 @ 15% = (£115) ½ mark
£835
£835 @ 23%= £192 1 mark
Net cost £950 - £192 = £758 ½ mark
d)
Capital allowances
Addition to special rate pool :£40,000 1 mark – no input VAT claimed
FY2012
£40,000 @ 8% = (£3,200) 1 mark
WDV c/f = 36,800
Sale proceeds (£20,000) 1 mark
FY2013
£16,800
WDA £16,800 x 8%= £1,344 2 marks (1 mark if
5
Total
25
balancing allowance given)
Question 6
Marks
a)
b)
i.
Evasion – illegal
Avoidance – legal but not necessarily what
was intended by the authorities
Tax planning – within spirit of
legislation/behaviour is what was
encouraged or expected.
There will be many valid examples
(Other interpretations may be valid but
assumptions would need to be explained)
1 mark each
6
1 mark each
Taking details provided at face value,
penalty would be based on:
Category 1 table for incorrect return;
Prompted Disclosure;
Deliberate and Concealed.
= 50% to 100% of PLR
(Bloomsbury, page 13. Category 3 only
applies only to liabilities for 2011-12
onwards )
Up to 5
marks
No more
than 8
marks for
i) and ii)
combined
Potential Lost Revenue of £50,000 x 28% =
£14,000
14
ii.
iii.
Penalty range: £14,000 to £28,000
Full co-operation with HMRC enquiries.
“Telling” “Helping” and “Giving” and
explanations
Weak answers will only consider mitigating
penalty, for example:
Why the false name?
Why did you miss it off your return?
Stronger answers will seek to reduce or
eliminate the tax charge:, for example:
Did you live in the property? (PPR relief)
Did you use if for business? (Entrepreneurs
Relief/Roll-over relief)
Did you live/work in Iraq? (non-Residence)
Any Iraqi tax paid? (DTR)
Up to 6
marks
4 marks
Question 7
a)
b)
c)
Marks
NIC
PAYE
SSP/SMP
Minimum wage
Employment rights
VAT only on franchise fee not total
turnover
No right of substitution
Sick/holiday pay
Other duties or management functions
performed
Fixed hours
Pensions scheme
No right to decline a venue or obligation to
attend one
(Obligation to wear uniform is not a
reason)
Employyee responsible for own Income Tax
i. No PAYE obligations
No NIC
Head Waiter will be troncmaster
ii. Has to operate PAYE
Income tax deducted but no NIC
Employer must operate PAYE and account
for NIC
iii. VAT due on service charge if compulsory;
no VAT if voluntary. (It does not matter
how much is passed onto employees.)
2 marks each up to
total of 6 marks
6
Not all issues need to
be included. Up to 1 ½
for each feature
described.
6
2 marks
3 marks
8
3 marks
Question 8
a)
b)
Marks
Premium is only paid on the grant of the
lease. It is not a payment made to acquire
1 mark
an existing lease.
Premium is a capital payment
Lease must be for 50 years or less
Part will be taxed on landlord as income
Calculated in accordance with formula
ii.
5 marks
Tenant can claim revenue portion as
expense spread evenly over term of lease.
Right to deduction passes to new tenant on
transfer of lease
A strong answer will directly compare the
rates of WDA in the legislation with the
actual accounting policies. Weaker answers
will discuss in more general terms.
i.
6
Plant & Equipment: WDA generally 18%
reducing balance, compared with 20%-33%
straight line depreciation.
10
Fixtures and fittings: will include integral
features (water and electrical systems,
etc.) allocated to special rate pool, WDA
8%. Straight line depreciation (14 -25%).
c)
Transfer pricing adjustments
Capital expenditure – lease amortisations,
legal fees, SDLT on property acquisitions;
leasehold improvements written-off;
property repairs treated as integral
features.
Less likely – fines, high CO2 car leases,
bribery . (There may be other valid
answers.)
1 mark
1 mark each (up to
maximum of 3 marks)
½ mark for any items
which would require
adjustment but not
likely to be significant.
Total
4
20