Accounting Technicians Ireland
2nd Year Examination: Summer 2015
Paper: ADVANCED TAXATION (Northern Ireland)
Thursday 14 May 2015
2.30 p.m. to 5.30 p.m.
INSTRUCTIONS TO CANDIDATES
PLEASE READ CAREFULLY
For candidates answering in accordance with the law and practice of Northern Ireland.
Candidates should answer the paper in accordance with the appropriate provisions up to and
including the Finance Act, 2014. The provisions of the Finance Act, 2015 should be ignored.
Allowances and rates of taxation, to be used by candidates, are set out in a separate booklet
supplied with the examination paper.
Answer ALL THREE QUESTIONS in Section A, and ANY TWO of the FOUR questions in
Section B. If more than TWO questions are answered in Section B, then only the first two
questions, in the order filed, will be corrected.
Candidates should allocate their time carefully.
All workings should be shown.
All figures should be labelled as appropriate e.g. £s, units, etc.
Answers should be illustrated with examples, where appropriate.
Question 1 begins on Page 2 overleaf.
The following insert is included with this paper.

Tax Reference Material (NI)
Page 1 of 11
Adv. Taxation (NI) S2015
SECTION A
Answer QUESTION 1 and QUESTION 2 and QUESTION 3 (Compulsory) in this Section
QUESTION 1 (Compulsory)
Colin aged 34 is a self-employed plumber for a number of years and has been preparing accounts to
31st December each year. Details of his income and expenses for 2014/15 were as follows:
INCOME:
Tax adjusted trading profits
Year end 31st December 2014
Year end 31st December 2015
Rental Income
Building Society Interest (amounts received)
Dividends received from UK Companies
£
48,700
42,400
8,000
4,800
6,300
PAYMENTS
Gift Aid donations to approved charities (net)
Income Tax Payments on Account
4,200
12,560
His Capital Gains Tax Liability for 2014/15 amounted to
£6,275
REQUIRED
i.
Calculate Colin’s IT and N/C Liabilities for
2014/15.
ii.
Calculate Colin’s 2014/15 outstanding
Income Tax due and N/C due, state the
date payment will be due.
2 marks
iii. Calculate Colin’s payment on account
for 2015/16 and state the date payment
will be due.
2 marks
iv. Outline the consequences of Colin not
paying the balancing payment for 2014/15
by the due date.
3 marks
9 marks
v.
The due date by which Colin should file his
tax return for 2014/15 assuming he wishes
to file for a paper return.
2 marks
vi. For how long must Colin retain his accounting
records for the accounting year in question.
TOTAL MARKS
2 marks
20 marks
Total 20 Marks
Page 2 of 11
Adv. Taxation (NI) S2015
QUESTION 2 (Compulsory)
The following multiple choice question consists of TEN parts, each of which is followed by FOUR
possible answers. There is ONLY ONE right answer in each part.
Each part carries 2 marks.
1.
Heather who is self-employed had an Income Tax liability in 2014/15 of £8,642. She had
submitted the 2014/15 Income Tax Return on 31 st August 2016 along with the payment due.
The
late
filing
penalty
payable
by
Heather
will
be:
a)
£NIL – as the payment was submitted along with the return due
b)
£100
c)
£2,120
d)
£1,432
2
An individual born on 4th July 1960 who has income from self-employment of £120,000 and
personal pension contribution (net) of £4,000 will have an Income Tax Liability in 2014/15 of:
a)
£41,627
b)
£40,627
c)
£39,627
d)
£37,627
3
Paul is registered for VAT and issues invoices for electrical services with a standard price of
£480. He offers a settlement discount to all his customers provided they settle the invoice within
10 working days. The total amount shown on the invoice to the customer is £541.44, what is the
rate of discount that has been offered, assuming the customer pays after 10 days:
a)
6%
b)
5%
c)
4%
d)
3%
4
Smart Ltd a VAT registered business bought a new company car some years ago for £24,000
plus VAT. The Company correctly reclaims the Input VAT at the time the car was purchased.
Smart Ltd has agreed the sale of the same car to a private individual. Which of the following is
true:
a)
b)
c)
d)
Output VAT should not be charged on the sale of the car as the individual is not VAT
registered.
Output VAT should be charged on the sale of the car as the Input VAT on its purchase
was reclaimed by Smart Ltd.
Output VAT should not be charged on the sale of the car because it is not a taxable
supply.
Output VAT should not be charged on the sale of the car because the standard rate VAT
has changed since the date of purchase.
Page 3 of 11
Adv. Taxation (NI) S2015
5
Frances sold a piece of equipment in October 2014 for £8,000 on which Capital allowances
have been claimed. The asset cost £3,000 and Capital allowances of £690 have been claimed.
The chargeable gain in 2014/15 will be:
a)
b)
c)
d)
6
In February 2015 Lewis sold one sixth of his land for £42,000. He had purchased the whole plot
of land in 1975 for £9,000 and its market value on 31 st March 1982 was £28,000. In February
2015 the value of the remaining land was £190,000. The chargeable gain on sale of the land sold
will be:
a)
b)
c)
d)
7
£5,000
£690 (limited to Capital Allowances claimed)
£3,333
£NIL (as asset cost < £6,000)
£35,000
£14,000
£36,931
£35,810
Laura Allen has a twelve month accounting period ending on 30-09-2014. In January 2014 she
purchased the following:
-
A van for £18,000 (private use 20%)
A car with CO2 emissions of 125g/km for £20,000 (private use 40%)
Machines for £30,000
Assuming there were no written down values B/F from previous years, the maximum Capital
Allowances claim for the year is:
a)
b)
c)
d)
8
£46,560
£51,600
£68,000
£45,360
Tony commences business as a sole trader on 1st February 2014. He makes his first set of
Accounts up to 30th April 2015 and to 30th April each year thereafter. What is the basis period
for the tax year 2014/15
a)
b)
c)
d)
1st February 2014 to 30th April 2015
1st May 2014 to 30th April 2015
1st February 2014 to 31st January 2015
6th April 2014 to 5th April 2015
Page 4 of 11
Adv. Taxation (NI) S2015
9
If an accounting period is longer than 12 months which of the following is correct:
a)
The trading profits for the long period are adjusted for tax purposes (before capital
allowances), and the result is time-apportioned into two chargeable accounting periods.
Separate capital allowance computations are carried out for each chargeable accounting
period, and then deducted from each of the adjusted trading profits.
b) Provided the accounting period is not more than 18 months long, the whole period can form
one accounting period.
c) The capital allowances are calculated for the long accounting period and deducted from the
adjusted trading profits for the long accounting period. This is then time-apportioned into
two chargeable accounting periods.
d) The trading profits for the long accounting period are time-apportioned into two periods
before tax adjustments are carried out to each period’s profit. Capital allowances are
calculated for the long period and then time-apportioned, before being deducted from each
period’s adjusted profits.
10
Genesis Limited a company with no associate companies has the following results for the year
ended 31-03-2015:
Trading profits
Rental Income
Chargeable Gains
Dividends received
£1,340,000
£260,000
£220,000
£180,000
The company also has the following losses brought forward from the previous chargeable
accounting period:
Trade losses
Capital losses
£130,000
£50,000
Corporation Tax payable for the period will be:
a)
b)
c)
d)
£386,400
£344,400
£382,200
£354,900
Total 20 Marks
Page 5 of 11
Adv. Taxation (NI) S2015
QUESTION 3 (Compulsory)
Ivanhoe Limited
Ivanhoe Limited runs a number of hotels and guesthouses and in the Accounting Period for year
end 31-12-2014 the company has decided to dispose of a number of assets/shares in the 1 st quarter
of the year to release some capital to fund intended expansion plans. Details of the disposals in the
period include:
Date
Asset Disposed
Proceeds
£
150,000
01-01-2014
10,000 shares in
Vanguard Ltd
10-01-2014
29-01-2014
15-02-2014
Antique Dresser
Shoe Cleaning
Machines (10)
Land (part disposal)
100,000
28-03-2014
Office Building
200,000
31-03-2014
1,000 shares in
Franco Ltd
15,000
7,500
1,000
The indexation factors have been calculated as follows:
January 1988 to January 1993
January 1990 to February 2014
January 1993 to January 2014
September 1995 to March 2014
January 1996 to January 2014
June 2000 to March 2014
Cost
£
25,000 shares bought
01-01-1988 17,000 @ £5 each
01-01-1993 8,000 @ £7 each
06-01-1996 2,500
Jan 1996 5,000 (Capital Allowance had been
claimed on these
Jan 1990 80,000 Whole plot purchase (MV
of remaining £300,000)
04-09-1995 60,000
09-06-2000 40,000 extension
10-09-1995 6,000
0.335
1.127
0.832
0.692
0.682
0.489
The company has Capital losses b/f of £20,000.
REQUIRED
i.
ii.
Calculate the chargeable gain or capital loss on each disposal.
Calculate tax for the Capital year end 31-12-2014
18 marks
2 marks
Total 20 Marks
Page 6 of 11
Adv. Taxation (NI) S2015
SECTION B
Answer ANY TWO of the FOUR questions in Section B
QUESTION 4
Taxperts Limited
a)
You have been employed by Taxperts Ltd for some time now and have met a new client who
has asked you to respond to a few VAT queries they have. They have only recently been
registered for VAT and have asked you to answer the following:
i. A customer has been billed on the 27th July for goods totaling £98 plus VAT. The terms of the
invoice however, state that a 10% discount will be applied if the customer settles within 10
days. The customer pays the bill on 12th August. Can you confirm how much VAT should
be charged and how much the total invoice will be?
ii. On 16th July 2015 the company received a payment on account of £5,500 (inc VAT) in respect
of an ongoing contract that will be completed in October 2015. The total value of the
contract will be £22,500 (inc VAT). The company are unsure how we should deal with
these monies received as the contact is not yet complete.
iii. The company’s sales manager Catherine is provided with a company car. The car is a Peugeot
308 Hdi (diesel) with CO2 emissions 176 g/km. Although Catherine uses the car mainly for
work, it is estimated that of the £620 diesel paid this quarter for Catherine, 20% of this
would constitute private use. How should the company deal with this in the VAT return?
iv. In preparation for the Christmas market the company have been preparing a book and toy
‘bundle’ as a single gift. They understand that the book is a zero rated item for VAT
purposes but the toy will be standard rate. The cost of these items will be:
Book £7
Toy £12
It is intended to sell together at a selling price of £25 excluding VAT. Can you advise how
much output VAT should be charged on the product?
v. Stock with a selling price of £240 (exc VAT) has been given as a gift to a customer last
month. The company has a mark up on such goods of 25%. The company are unsure how
much, if any, output VAT should be accounted for on such goods.
vi.
On 1st July the company has for the first time decided to let out part of it’s warehousing
facilities as office accommodation. The managing director has advised that it is to be let out
on a 5 year lease at an annual of £30,000 pa. An interested tenant has made enquires but we
are unsure if VAT is chargeable or not. Can you please advise?
vii. Trade continues to develop whereby we are selling goods and services within the EU. Can you
please advise what VAT, if any, should be charged:
i) if the buyers in the other EU state is registered for VAT in that state.
ii) if the buyers in the other EU state is not registered for VAT.
10 marks
Page 7 of 11
Adv. Taxation (NI) S2015
b)
Hilary is preparing to complete her VAT return for Q/E 31-03-2015. Figures for outputs and
inputs net of VAT where applicable are as follows:
OUTPUTS
Sales/services taxable at the Standard Rate
Sales/services taxable at Zero Rate
Sales/services exempt from VAT
£120,640
£76,210
£38,942
INPUTS
Purchases/expenses relating directly to Standard
Rate supplies
Purchases/expenses relating to Zero Rate supplies
Purchases/expenses relating to exempt supplies
Purchases/expenses not yet related to either
£77,880
£36,384
£1,290
£4,310
REQUIRED
Calculate the total VAT payable/repayable in the quarters stated if Hilary passes the de minimis limit
tests (original or simplified) for the quarter.
10 Marks
Total 20 Marks
QUESTION 5
a)
Topsy has been trading for many years, making up accounts to 30 April each year. His recent
adjusted profits have been:
Y/E
30th April 2013
30th April 2014
30th April 2015
£
22,400
27,520
29,485
Required
What profits will be assessed to tax in the 2014/15 year? Explain your answer
4 marks
b)
Turvy who has been trading for many years making up accounts to 31 st January ceased to trade
on 31st October 2014, overlap profits on commencement of the business forward have been
£8,642. His recent results have been as follows:
Y/E
31st January 2013
31st January 2014
31st October 2014
£
18,102
16,492
12,370
Required
What will be the assessment to tax in respect of this income trade in the final years of
assessment?
4 marks
Page 8 of 11
Adv. Taxation (NI) S2015
c)
Tim commenced self-employment on 1st March 2013 making up 1st accounts to 31st December
2013 and annually thereafter. His results have been as follows:
p/e 31st December 2013
y/e 31st December 2014
y/e 31st December 2015
8,490
17,246
19,540
7 marks
Required
Identify the dates and amounts of Overlap profits and outline when Tim will be able to claim
relief for any such profits
d)
Tom commenced trading on 01-02-2012 and prepared his first accounts to 30 th June 2013 and
annually thereafter. His adjusted profits were as follows:
p/e 30th June 2013
y/e 30th June 2014
y/e 30th June 2015
48,500
42,000
44,750
Required
Calculate Tom’s assessable trading profits for all relevant
tax years and identify if relevant dates and amounts of
any profit overlap.
5marks
Total 20 Marks
QUESTION 6
Miranda Dirk
Miranda Dirk is a sales director employed by Outdoor Play Limited (OPL) a UK registered company
who supply and install a wide range of outdoor play toys in Northern Ireland. Miranda has been ‘head
hunted’ from a major retailer in London and OPL have persuaded her to take up a position with them in
January 2014 in Northern Ireland.
Bills paid by the company for relocation expenses amounted to £10,175. Miranda has been provided
with accommodation since her arrival in a flat purchased by OPL for £125,000, and has an annual
value of £6,300. It is not considered that this accommodation could be described as “job related”.
The employer also bought furniture for the flat costing £5,800.
Other household expenses met by the company in respect of Miranda’s new flat were as follows:
Electricity
Redecoration
Monthly maintenance
TOTAL
£485
£870
£420
£1,775
Miranda enjoys a generous package that includes the following:
a)
Her gross salary for the year was £56,000 (PAYE £8,065). She paid 5% of her salary into a
company pension scheme and her employer contributed 9% into the same scheme.
b)
During the year Miranda had use of a company car, a Mercedes C320cdi that cost the
company £29,600 although the list price was £32,600. The car is a diesel with CO2
emission of 220g/km and the company paid for all running costs of the car including fuel of
£1,850, insurance of £485 and repairs of £2,140.
Page 9 of 11
Adv. Taxation (NI) S2015
c)
Miranda is also provided with a new computer to use at home for the whole tax year. This cost
the employer £650 (inc. printer and other accessories) and remains the property of the
company. The computer was valued at the end of the tax year at £300.
d)
As a bonus Christmas 2014, Miranda was given vouchers to spend in a Belfast department
store. The retail value of the vouchers was £1,000 and these cost Outdoor Play Limited
£850.
e)
On 6th September 2013 Miranda was provided with a company loan of £24,000 on which she
pays interest at 3% per annum. On 6th January 2015 Miranda repaid £4,000
Miranda’s other income and expenses in 2014/15 were as follows:Pension from previous employers
(PAYE deducted £3,850)
Interest received from deposit a/c in NatSouth Bank
Dividends received from UK companies
Payment of £1,360 to charities under the Gift Aid scheme.
£19,250
£780
£4,950
REQUIRED
i.
Calculate the total Income from employment package chargeable on Miranda for 2014/15.
ii.
Calculate Miranda’s outstanding Income Tax Liability for 2014/15.
10 marks
10 marks
Total 20 Marks
QUESTION 7
a)
Parsley Limited makes up its accounts for the 18 months ended 31 st December 2015. The
Company’s trading results for that period are as follows:
£
Trade profits (before capital allowance)
140,000
Chargeable Gains (disposal 11th Nov 2015)
16,750
Property Income received (accruing at £675pm)
11,475
Qualifying Charitable Donations (paid 4th Sept 2015)
9,700
REQUIRED
What are the profits chargeable to Corporation Tax?
b)
5 marks
Ages Ltd a UK registered company with no associates has prepared accounts for the 9 months
ended 31st December 2014 showing adjusted trade profits (before Capital Allowance) of
£1,200,000.
REQUIRED
Calculate the Corporation Tax payable for these profits.
c)
2 marks
Rosemary Ltd has a 12 month Chargeable Accounting Period ending 31 st Jan 2015. Adjusted
Trading Profits for the period amounted to £1,200,000 and received Dividends from the
companies of £108,000 (net).
Page 10 of 11
Adv. Taxation (NI) S2015
REQUIRED
Calculate the Corporation Tax payable on these profits.
8 marks
Thyme Ltd has one associated company. Taxable total profits for the year ended 31 st March
2015 amount to £625,000 and Dividends received (net) amount to £49,500.
d)
REQUIRED
i.
Calculate the Corporation Tax payable on these profits.
ii.
State the due date of payments.
4 marks
1 mark
Total 20 Marks

Page 11 of 11
Adv. Taxation (NI) S2015
Adv. Taxation NI
May 2015
2nd Year Paper
Advanced Taxation
Northern Ireland
2nd Year Examination
May 2015
Exam Paper, Solutions & Examiner’s Comments
Page 1 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
NOTES TO USERS ABOUT THESE SOLUTIONS
The solutions in this document are published by Accounting Technicians Ireland. They are intended to
provide guidance to students and their teachers regarding possible answers to questions in our
examinations.
Although they are published by us, we do not necessarily endorse these solutions or agree with the
views expressed by their authors.
There are often many possible approaches to the solution of questions in professional examinations. It
should not be assumed that the approach adopted in these solutions is the ideal or the one preferred by
us. Alternative answers will be marked on their own merits.
This publication is intended to serve as an educational aid. For this reason, the published solutions will
often be significantly longer than would be expected of a candidate in an examination. This will be
particularly the case where discursive answers are involved.
This publication is copyright 2015 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2015.
Page 2 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
2nd Year Examination: May 2015
Advanced Taxation NI
Suggested Solutions
and
Examiner’s Comments
Students please note: These are suggested solutions only; alternative answers may also be deemed to
be correct and will be marked on their own merits.
Statistical Analysis – By Question
Question No.
7
Average Mark (%)
1
60%
2
55%
3
50%
4
50%
5
55%
6
65%
40%
Nos. Attempting
154
154
151
68
61
120
55
Statistical Analysis - Overall
69%
Pass Rate
54%
Average Mark
Range of Marks
Nos. of Students
0-39
28
40-49
19
50-59
50
60-69
25
70 and over
32
Total No. Sitting Exam
154
24
Total Absent
15
Total Approved Absent
193
Total No. Applied for Exam
General Comments:
It is very pleasing to note that this year there has been an increase in both the Pass rate in the
Examination 69% (2014 65%) and also in the Average mark attained in the paper 54% (2014 52%).
Students in the most part seemed to be well prepared for the examination and had clearly spent time
wisely on the study of the core text, past and sample papers which have paid dividends!
Page 3 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Examiner’s Comments on Question One
This question was generally answered well and key elements of requirements to Extend the BR Band
were handled competently. Areas where students could improve their result is in the calculation of
Payments on Account which at best was guessed in a large number of cases with no attempt to calculate
what those POA should be. They should not for example include the CGT liability. Students should also
be specific on the penalties for late payment for 3 marks.
Question One Colin
i)
Colin – Income Tax Computation 2014/2015
N/S
S
DIV
TOTAL
Total
Marks
Allocated
Income from
Self Employment
48,700
48,700
1
Rental Income
8,000
8,000
0.5
6,000
1
7,000
7,000
1
6,000
7,000
69,700
6,000
7,000
B.S.I. (4,800/0.80)
6,000
Dividends received
(6,300/0.90)
Total Income
56,700
Less Personal All
-10,000
Taxable Income
46,700
Basic Rate Band
-10,000
0.5
59,700
31,865
Add Gross Gift Aid
(4,200/0.80)
5,250
37,115
Taxed: N/S 37,115 x 20% =
7,423.00
2
N/S 9,585 x 40% =
3,834.00
1
S 6,000 x 40% =
2,400.00
1
Page 4 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
Div 7,000 x 32.5% =
Income Tax Liability 2014/15 =
2nd Year Paper
May 2015
2,275.00
1
15,932.00
9
i) Outstanding Income Tax Due:
£
Income Tax Liability
15,932.00
Less Tax Credit
Dividends (7,000 x 10%)
-700
0.5
Tax deducted at source
BSI (6,000 x 20%)
-1200
14,032.00
Less POA
-12,000.00
Class iv NIC
(41,865-7,956) = 33,909 x 9%
3,051.81
0.5
(48,700-41,865) = 6,385 x 2%
136.7
0.5
5,220.51
Due for payment 31st January
2016
1
3
iii) Payment on Account 2015/16
50% x 2014/15 = (50% x 19,120.51) = 9560.26
3
iv) If payments are late, Interest will be due at a rate of 3.25% pa.
Penalties for late payment as follows:
30 days-6 months 5% of tax due
 6 months a further 5% penalty will arise
 12 months a further 5% penalty will arise
3
v) If Colin wishes to submit a paper return for 2014/15 he must
do so by 31st October 2015.
vi)
1
Accounting Records for the relevant accounts y/e
31st December 2014 should be retained for 5 years
after the normal filing date. Normal filing date here
would be 31st January 2016 plus 5 years would mean
records should be retained until 31st January 2021.
1
20
Page 5 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
May 2015
2nd Year Paper
Examiner’s Comments on Question Two
This was the first time in a long time that a MC question was put on as a compulsory question in the
paper and proved successful. Once again it is a source of amazement where you find answers left blank
by some students. Incredibly one student left 3 questions unanswered here!
Question Two Multiple Choice
2.1
Answer d) £1,432
Initial penalty
>3 months £10 per day. Max
>6 months higher of £300 or 5%
£100
£900
£432
£1,432
2.2
Answer c) £39,627
Income
Less Personal Allowance
£10,000- [(£120,000-£5,000
-£100,000) x 50%] =
£120,000
Taxed
£31,865 x 20% =
EBR £5,000 x 20% =
£80,635 x 40% =
£117,500
2.3
Answer a) 6% ie. £480 x 0.94 =
VAT @20%
2.4
Answer b)
Output VAT should be charged
on the sale of the car as the
Imput VAT on the purchase was
reclaimed by SMART Ltd.
2.5
Answer c)
Proceeds
Less costs
Chargeable gain
£3,333
Limited to 5/3 x (£8,000-£6,000)
Page 6 of 20
(£2,500.00)
£117,500
£6,373
£1,000
£7,373
£32,254
£39,627
£451.20
£90.24
£541.44
£8,000
(£3,000)
£5,000
Adv.Taxation NI S2015
Adv. Taxation NI
2.6
May 2015
Answer c)
Proceeds £42,000
Less costs £28,000 x £42,000
(£42,000 + £190,000)
Chargeable Gain
Limited to 5/3 x (£8,000-£6,000)
2.7
Answer a)
£46,560 AIA =
+(£180,000 x 0.80)
Car (£20,000 x 18% x 0.6)
2.8
Answer d)
2.9
2.10
Answer a)
Answer b)
2nd Year Paper
(£5,069)
£36,931
£3,333
£30,000
£14,400
£44,400
£2,160
£46,560
6 April 2014 to 5 April 2015
Trade Profits
(£1,350,000-£130,000)
Rental Income
Chargeable Gains
(£220,000-£50,000)
PCTCT
Chargeable @ 21%
£1,640,000 x 0.21 =
Page 7 of 20
£1,220,000
£250,000
£170,000
£1,640,000
£344,400
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Examiner’s Comments on Question Three
Once again students must ensure that they know the rules for disposals of company shares by a company
where these have been bought over a period time and require to be indexed as further acquisitions take
place.
Indeed in general the rules relating to Indexation Allowance were not known in a lot of cases or where
known incorrectly applied to either cost or improvement expenditure
Question Three Ivanhoe Limited
Chargeable Gains
Total
Marks
Allocated
i.
Calculate the chargeable gain or
capital loss on each disposal.
Disposal of Shares in Vanguard Ltd
Proceeds
£
150,000
0.5
Less Cost
-56,400
0.5
Indexation (see below)
-67,791
5
Chargeable Gain
25,809
Shares
Cost
Indexed
Cost
01-01-1988 purchased
17,000
£
£
85,000
85,000
Indexed to Jan 1993
85,000 x 0.335
28,475
113,475
01-01-1993 purchased
8,000
56,000
56,000
169,475
Indexed to Jan 2014
169,475 x 0.832
141,003
25,000
141,000
310,478
Less disposal
-10,000
*(56,400)
**(124,191)
*10,000/25,000 x 141,000
15,000
84,600
186,287
10,000/
**
25,000
x 310,478
Page 8 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
ii.
2nd Year Paper
May 2015
Antique Dresser
Proceeds
£
7,500
0.5
Less Cost
-2,500
0.5
(2,500 x 0.682)
-1,705
1
Chargeable Gain
3,295
Restricted to 5/3 (7,50-6,000)
2,500
Indexation allowance
iii.
1
Shoe Cleaning Machines
The shoe cleaning machines are sold
at a loss and are therefore dealt with
through the Capital Allowances
computation.
2
iv.
£
100,000
Land: Part Disposal
Proceeds
Less Cost
0.5
80,000 x (100,000/100,000+300,000)
-20,000
2
v.
Less Indexation (20,000 x 1.127)
-22,540
Chargeable Gain
574,600
Office Building
Proceeds
£
200,000
0.5
Less Cost
-60,000
0.5
Improvement Expenditure
-40,000
0.5
-41,520
0.5
40,000 x 0.489
-19,560
0.5
Chargeable Gain
38,920
Less Indexation on cost
60,000 x 0.692
On improvement
Page 9 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
vi.
b)
2nd Year Paper
May 2015
Shares in Franco Ltd
Proceeds
£
15,000
0.5
Less Cost
-6,000
0.5
Indexation (6,000 x 0.692)
-4,152
0.5
Chargeable Gain
4,848
18
Chargeable Gain to be included in
PCTCT
Shares in Vanguard Ltd
£
25,809
Dresser
2,500
Land and Part Disposal
57,460
Office Building
38,920
Shares in Franco Ltd
4,848
129,537
Less Capital Loss b/f -20000
Chargeable Gain to be included
109,537
2
20
Page 10 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Examiner’s Comments on Question Four
There were some good answers to this VAT question which examined a number of key elements of VAT
principles and part (a) in this was answered particularly well.
Where improvement could be made is in the completion of part (b) to the question and the rules and
application of the Partial Exemption provisions for VAT. Some students made no attempt at this which
significantly affected the Average mark attained.
Question Four TAXPERTS LTD VAT
4(a)
Marks
1. VAT at 20% should be charged on the discounted price of the goods regardless of whether
or not the discount is take up. The VAT charged should be @ 20% on the discounted
price of:
98 x 0.90 =
VAT @ 20%
£88.20
£17.64
Since payment has not been received within the discount terms the invoice payable will be:
Goods (full price)
VAT (as above)
£98.00
£17.64
£115.64
Marks Allocated
2 Marks
2. An advance payment or deposit is a proportion of the total selling price that a customer
pays before a business supplies the goods or services. A business should include the VAT
on the advance payment or deposit on the VAT return for the period in which the
payment is received e. Account for Output VAT of £5,500 x 1/6 = £916.67.
Marks Allocated
1 Mark
3. This can be dealt with by either declaring Output VAT as a scale charge on the value of
Co2 emissions 176 g/km. In this case it would be £391 (VAT £65.17) and reclaim in full
the £620 (VAT £103.33) on the diesel bought in the quarter.
Alternatively the company could reclaim the diesel used for business use only @ 80% ie.
620 x 0.80 = £496 (VAT £82.67)
Marks Allocated
1 Mark
4. VAT must be charged on the selling price of the item as part of the item contains a
standard rate item. In such cases we ‘apportion’ the selling price between the two items
and will charge as follows:
Page 11 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Toy element – charge VAT @ 20%
Book element – charge VAT @ 0%
Toy apportioned selling price 25 x 12/19 = £15.79
VAT inclusive selling price £15.79 x 1.20 = £18.95
Book apportioned selling price 25 x 7/19 = £9.21
VAT 0 %
Total selling price £18.95 + £9.21 = £28.16
Marks Allocated
2 Marks
5. Gifts to customers should be accounted for as a deemed supply based on the replacement
cost of the gift. ie. 240/1.25 = £192 net VAT @ 20% = £38.40.
Marks Allocated
1 Mark
6. The lease of commercial buildings is normally exempt from VAT. The landlord however,
may make an election to charge or often referred to as an ‘option to tax’. Should you as
landlord elect to waive the VAT exemption VAT will be chargeable at a standard rate of
20% ie. 30,000 x 20% = £6,000.
Marks Allocated
1 Mark
7.
If the buyer in the other EU state is registered for VAT in that state the UK supplier can
usually zero rate the VAT charged, so long as VAT registration number of the buyer
(including the two letter country code) is shown.
Marks Allocated
1 Mark
If the buyers in the other EU state is not registered for VAT in that state, the UK supplier
must charge VAT at the normal UK rate for the goods/services supplied.
Marks Allocated
1 Mark
Total Marks Allocated
10 Marks
Page 12 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Hilary VAT payable/repayable Q/E 31-032015
4 (b)
Output VAT
Total
Marks
Allocated
£
Sales/Services at Standard Rate
24,128
VAT relating to exempt supplies
Not yet related 862 x 17% =
147
Exempt 1,290 x 0.20
258
405*
Input VAT reclaimable
2
23,973
*The non-refundable VAT £405 is less than
2
£625 pm and is less than 50% of total input
10
VAT (original test ) therefore all Input VAT
is now reclaimable.
Sales/Services at Zero Rate
-
Sales/Services exempt
24,128
Input VAT
Purchases/expenses relating to taxable
supplies
Standard Rate
77,880
Zero Rate
36,384
114,264 x 0.20 =
Unattributable
120,640 + 76,210 =
3
22,853
1
196,850= 83%
120,640 + 76,210+38,942 =
235,792
Purchases/expenses not yet related to either =
4,310 x 0.20 = 862 x 83%
715
2
Page 13 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Examiner’s Comments on Question Five
This question was answered by 40% of the students and proved to be a strong question for a lot of them.
What did affect the average mark attained was where students knew the rules for continuing businesses
and the CYB of assessment and indeed businesses ceasing they were sometimes at best “guessing” the
rules for commencement in parts (c) and (d). These rules continue to be an important element of
knowledge at Advanced Taxation level and are covered well in the manual.
Question Five
a)
Total
Marks
Allocated
Topsy
Profits from trade are taxed on what is referred to as a ‘Current
Year Basis’ ie. we assess the profits of 12m ending in the
current year of assessment. Here therefore in 2014/15 running
from 06-04-2014 to 05-04-2015 we will assess profits for 12m
ending in the current year of assessment ie. y/e 30-04-2014 =
£27,520.
b)
c)
4
Turvy
Last 2014/15 (01-02-2014-31-10-2014)
Less overlap
£
12,370
-8,642
3,728
Penultimate 2013/14 cyb y/e 31-01-2014
16,492
Penultimate 2012/13 cyb y/e 31-01-2013
18,102
Tim
4
£
1st 2012/13 01-03-2013 to 05-04-2013
1/10 x 8,490
10 months to 31.12.13
2nd 2013/14
2/12 x 17,246
3rd 2014/15
CYB y/e 31-12-2014
849
1
11,364
2
19,540
2
8
,490
2
,874
Overlap profits will be relieved on the earlier of
i) Change of Accounting date or
ii) In the final year of Assessment
Page 14 of 20
2
7
Adv.Taxation NI S2015
Adv. Taxation NI
d)
May 2015
2nd Year Paper
Tom
i) 2011/12 01-02-2012-05-04-2012
2/17 x 48,500 =
5,706
ii) 2012/13 No AP
Actual Basis
06-04-2012 to 05-04-2013
12/17 x 48,500 =
iii) 2013/14 12m to A/C date
01-07-2012 to 30-06-2013
12/17 x 48,500 =
34,235
iv) 2014/15 cyb y/e 30-06-2014 =
42,000
Overlap 01-07-2012 to 05-04-2013
9/17 x 48,500 =
25,676
34,235
Page 15 of 20
Adv.Taxation NI S2015
5
20
Adv. Taxation NI
2nd Year Paper
May 2015
Examiner’s Comments on Question Six
This proved to be an extremely popular optional question and covered the key elements of Income Tax
and the calculation of Benefits in Kind for an individual. It is very encouraging to see that students are
well prepared for this type of question and answer all elements competently. Students should note
however that the Car Benefit levied on individuals INCLUDES the charge for both Insurance and Repairs
and should not be added to the Benefit calculated.
Question Six
Miranda
Total Marks
Allocated
i) Income from Employment 2014/15
Salary
£
£
56,000
Less occupational pension
-2,800
53,200
2
1,675
1
10,860
2
11,410
1
7,595
1
Use of computer (650 x 0.20)
130
1
Vouchers (cost to employer)
850
1
55
1
85,775
10
Benefits in kind
Relocation expenses (10,175-8,500)
Accommodation
Annual Value
6,300
Additional Benefit
(125,000-75,000) x 3.25%
1,625
Use of furniture
5,800 x 0.20
1,160
Expenses paid
1,775
Car Benefit
32,600 x 35%
Fuel Benefit
21,700 x 35%
Loan (24,000 + 20,000) x 0.0325
2
=
715- 660
Page 16 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Total
Marks
Allocated
ii) Income Tax Liability 2014/15
N/S
Income from
Employment
Pension
S
85,775
19,250
19,250
975
Dividend Income
(4950
/0.90)
Total Income
105,025
Less PA (W1)
Taxable Income
-5,100
99,925
Basic Rate Band
31,865
Add Gift Aid (1360/0.80)
1,700
Extended Basic Rate
33,565
TOTAL
85,775
NatSouth Int (780/0.80)
Taxed:
DIV
975
975
5,500
5,500
5,500
111,500
-5,100
975
N/S 33,565 X
20% =
N/S 66,360 x 40%
=
S 975 x 40% =
Div 5,500 x 32½
=
5,500
106,400
6,713.00
26,544.00
390
1,787.50
35,434.50
-8,065.00
-3,850.00
-195
-550
22,774.50
Workings
Personal allowance
10,00
0
Less Income 111,500
Less Gift Aid (1,700)
½
(109,800 – 100,000)(4,900)
5,100
10
TOTAL MARKS
20
Page 17 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
Examiner’s Comments on Question Seven
This Corporation Tax question was not answered by many students as an optional question and
indeed for those that did answer it there are a number of key aspects to note. Students must
know the rules for companies relating to (1) Long Accounting periods, (2) Where AP fall
between 2 FY (3) Application of rules for Marginal Relief and finally (4) How the limits are
affected where a company has Associates. This must be a key area of study for students
presenting at Advanced level.
Question Seven
1) PARSLEY Limited
There are 2 Chargeable Accounting Periods:
i)
Y/E 30 June 2015 and
ii)
6 M/E 31 December 2015
Chargeable Accounting Periods:
Total
Marks
Allocated
Y/E 30 June
2015
Adjusted Profits (12/18, 6/18)
Chargeable Gains
Property Income (@ £675 pm)
Less Charges on Income
PCTCT
6 M/E 31
Dec 2015
£
93,333
£
46,667
2
-
16,750
1
8,100
4,050
1
101,433
67,467
-
-9,700
1
101,433
57,767
5
1) SAGE Limited
As the Accounting period is only 9 months long and the AP falls fully
in FY 2014 the Corporation Tax rate limits will be adjusted as follows:Lower limit 300,000 * 9/12 = 225,000
0.5
Upper limit 1,500,000 * 9/12 = 1,125,000
0.5
As the profits fall above the upper limit of £1,125,000 CT will be
payable at the full rate of 21%
Page 18 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
1,200,000 * 21% = £252,000
1
2
3)
Rosemary Limited
FY 2013
FY 2014
PCTCT
£
200,000
£
1,000,000
1
FII (108,000/0.90)
20,000
100,000
1
PROFITS
220,000
1,100,000
Lower Limit
50,000
250,000
1
250,000
1,250,000
1
Upper Limit
Marginal Relief Applies
£
FY 2013 CT 200,000 @ 23% =
46,000
1
-205
1
Less MR
3/400*(250,000 – 220,000)* 200/220
45,795
FY 2014 CT 1,100,000 @
21% =
Less MR
1
210,000
1/400*(1,250,000 – 1,100,000)* 1,000/1,100 -341
1
209,659
Total CT Payable
8
£
FY 2013
45,795
FY 2014
209,659
255,454
4)
Thyme Limited
Lower limit 300,000/2 = 150,000
Upper limit 1,500,000/2 = 750,000
Page 19 of 20
Adv.Taxation NI S2015
Adv. Taxation NI
2nd Year Paper
May 2015
CT 625,000 @ 21%
131,250
1
Less MR
1/400 * (750,000 – 680,000)* 625/680
-161
Corporation Tax Payable
2
131,089
Payment will be due 9months and 1 day after the y/e ie on 1-1-2016
2
5
20
Page 20 of 20
Adv.Taxation NI S2015