Advanced Taxation
Republic of Ireland
Sample Paper 3
Questions & Suggested Solutions
1
NOTES TO USERS ABOUT SAMPLE PAPERS
Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance
to students and their teachers regarding the style and type of question, and their suggested solutions, in
our examinations. They are not intended to provide an exhaustive list of all possible questions that may
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www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics.
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should not be assumed that the approach adopted in these solutions is the only correct approach,
particularly with discursive answers. Alternative answers will be marked on their own merits.
This publication is copyright 2016 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2016.
Page 2 of 45
Sample Paper 3
INSTRUCTIONS TO CANDIDATES
This paper has been updated to reflect changes introduced by Finance Act 2015
PLEASE READ CAREFULLY
SECTION A
Answer Question 1, 2, 3 in this section. ALL QUESTIONS ARE
COMPULSORY
SECTION B
Answer any TWO of the four questions in this section
Page 3 of 45
Sample Paper 3
SECTION A
Answer Question 1, 2 and 3 in this section. All questions are compulsory.
QUESTION 1 Compulsory
(a) In the year of death how is income tax assessed on a married couple when
the assessable spouse died during the year?
3 Marks
(b) Matt Blake and his wife Sheila had been married for 20 years. They have always
been jointly assessed with Matt the assessable person. They have two children
Sinead aged 15 and Kevin aged 18. On 1st September 2016, Sheila died suddenly.
Details of their income and outgoings for 2016 are as follows:
Income
(i)
(ii)
(iii)
Sheila was employed by Jones Limited. Her salary from the 1 st January
to date of death was €24,000 (PAYE deducted €3,100).
She had the use of a company car which was first provided by her
employer in 2013. The original market value was €36,000. Sheila
travelled 18,200 km from 1st January to 31st August 2016.
Sheila’s only other income was a dividend of €360 that she received in
May 2016 from an Irish company Hill Limited.
Matt is a self-employed printer. He has been in business since 1999.
His results have been as follows:30th June 2015 ......
30th June 2016 ......
30th June 2017 ......
€
65,000
68,000
80,000
His tax written down value as at 1st January 2016 was as follows:€
Machinery ............
56,250
Van .....................
28,875
The machinery was purchased in July 2013 for €75,000. He purchased
the van in May 2014 for €38,500, emissions 165 g/km. In August
2016, he sold the van for €10,000 and purchased a replacement van
for €45,000, emissions 140 g/km.
(iv)
Matt’s only other income was rental income from a room that he let
out in his home in September 2016. The rent paid to the 31st
December 2016 was €3,000.
Page 4 of 45
Sample Paper 3
QUESTION 1 (Cont’d)
Outgoings – Matt (aged 42)
1. Full time college fees in an approved college on an approved course of
€6,000 for his son Kevin.
2. Private medical insurance of €1,450.
3. Permanent health insurance paid in 2016 of €1,000.
4. Matt started a pension fund in 2017. His first premium of €5,000 was
paid in February 2017.
Requirement
Calculate Matt’s income tax for 2016 claiming maximum reliefs.
17 marks
Total 20 Marks
Page 5 of 45
Sample Paper 3
QUESTION 2 Compulsory
Boston limited is in the retail sector. The results for the company for the year
ended 30th June 2016 are as follows: Notes
€
€
Sales
Cost of Sales
Gross Profit
Less: expenses
Directors remuneration
Directors pension contribution
Staff costs
Rent and rates
Motor expenses
Depreciation
Bad debts
Interest
Legal and professional fees
Net profit
Other income
3,510,500
2,820,450
690,050
(a)
(b)
(c)
(d)
80,000
30,000
159,500
240,000
25,220
25,000
16,100
11,710
11,000
598,530
91,520
185,850
277,370
(e)
NOTES
(a)
Motor Expenses
Van expenses .....................
Staff mileage ......................
Vans Parking fines ...............
Running costs of: Managing Director’s Car
Sales Managers Car .............
Lease rental – Managing Director’s Car
.........................................
Managing Director’s Car
Leased ......... 1st October 2015
Value ............... €30,000
Emissions ......... 165 g/km
Private use ....... 25%
Sales Director’s Car
Purchased ... 1st February 2015
Cost ................ €30,000
Emissions ......... 125 g/km
Private use ....... 20%
Page 6 of 45
Sample Paper 3
€
8,150
2,400
320
3,500
4,650
6,200
25,220
QUESTION 2 (Cont’d)
(b)
Bad Debts
Bad debts written off ...........
Increase in general provision
Increase in specific provision
Bad debts recovered ............
.........................................
(c)
€
10,000
4,600
2,500
(1,000)
16,100
Interest
Interest on business bank overdraft
Interest on late payment of VAT
Interest on working capital loan
.........................................
(d)
Legal and professional fees
Audit and accountancy .........
Disposal of shop ..................
Drafting new employment contracts
for staff .............................
.........................................
(e)
Other Income
€
3,650
1,560
6,500
11,710
€
4,800
3,250
2,950
11,000
€
Dividends received from Irish resident
companies ..........................
Gain on sale of retail shop ....
Rental income ....................
.........................................
1,600
194,250
(10,000)
185,850
Disposal of retail shop
Due to a downturn in retail sales, the company sold one of its retail stores in
May 2016 for €680,000. Legal fees on disposal amounted to €3,250. The shop
was originally purchased in November 2001 for €480,000, legal fees on
acquisition were €2,500.
Rental Income
The company let some excess space during the year. Due to large repairs, a loss
of €10,000 arose.
Page 7 of 45
Sample Paper 3
QUESTION 2 (Cont’d)
(f)
Capital allowances
The opening tax written down values at 1st July 2015 were as follows:Cost
€
Sales director’s Car (note a) 30,000
Vans
130,000
Fixtures & fittings
80,000
TWDV
€
21,000
81,250
50,000
During the year ended 30th June 2016, the company acquired and disposed of the
following:Disposal
Van
Original cost
Purchased
1st May 2013
Sales proceeds
Acquisitions
Replacement Van
Computer equipment
€
35,000
19,500
Cost
50,000
Emissions 160 g/km
Cost (including Vat
@ 23%)
81,180
(g)
All figures exclude VAT unless otherwise indicated.
(h)
The year end of the company is June each year.
Requirement
(a) Calculate the company’s Case I profit (after capital allowances) for the year
ended 30th June 2016.
12 Marks
(b) Calculate the company’s corporation tax for the year ended 30th June 2016.
8 Marks
Total 20 Marks
Page 8 of 45
Sample Paper 3
QUESTION 3 Compulsory
Charles Boland, aged 60, owns a number of rental units. On 1st February 2016, he
transferred one of the rental units to his son, Andrew for €480,000. This unit had
been acquired by Charles on 1st September 2000 for €350,000. Costs of acquisition
were €5,000. It was extended in 2002 at a cost of €125,000. The market value of
this unit in February 2016 was €900,000.
Charles inherited two paintings from his uncle Harry in 2002. Details as follows:
Painting A
Painting B
Purchase date
Cost
10/08/1993
16/05/1995
€
350
3,100
Market value
2002
€
1,800
3,500
In May 2016, Charles gave painting A to his nephew, the market value in May 2016
was €2,600 and he sold painting B for €2,000.
In December 2016, Charles sold 1,500 shares in X plc for €120,000. His previous
dealings in X plc had been:
-
1/05/1997
1/02/2002
purchased 500 shares for €35,000.
purchased 2000 shares for €60,000.
Charles is single.
Requirement
(a) Calculate Charles capital gains tax for 2016, showing separately the tax to
be paid at each payment date.
16 Marks
(b) Do the Capital Gains Tax withholding tax provisions apply to any of Charles
disposals. If so, state which disposals and why the provisions apply.
4 Marks
Total 20 Marks
Page 9 of 45
Sample Paper 3
SECTION B
Answer any TWO of the four questions in this section.
QUESTION 4
Bath Ltd.
Bath Ltd. manufactures and supplies fitted bathrooms. The company’s sales
(exclusive of VAT) for the two month period July / August 2016 was €350,000. This
is broken down as follows: €
•
Sales direct to private homeowners (Note 1)
60,000
•
Sales to retailers
290,000
•
Total
350,000
Note 1
The sales to private homeowners included a labour charge for installing the
bathrooms, details as follows:•
•
•
Sales where the
of the total sum
Sales where the
of the total sum
Total
cost of the bathroom equipment accounted for 75%
charged
45,000
cost of the bathroom equipment accounted for 55%
charged
15,000
60,000
In addition, a van and a motor car were sold in this period for €10,000 and €3,000
respectively.
The VAT rate applicable to goods was 23% and the supply of services was 13½%.
Bath Ltd’s outgoings for this period were as follows. All figures are inclusive of VAT
at 23%.
€
Purchase of van
15,000
Car lease rental (car used 50% for business)
420
Diesel for van
500
Car repairs
450
Petrol for cars
250
Purchase of raw materials
25,000
To celebrate fifty years in business the company made gifts to customers of 100
calculators costing €8.50 each, and 60 TV’s costing €250 each. Bath limited
purchased these items in July 2016. No customer received more than one gift.
Page 10 of 45
Sample Paper 3
QUESTION 4 (Cont’d)
Requirement:
(a)
Compute the VAT payable by Bath Ltd. for the period July / August 2016.
13 Marks
(b)
State the latest date by which this return must be filed and the VAT paid to
the Revenue.
2 Marks
Explain the VAT treatment of
(i)
Composite supplies
3 marks
(ii)
Multiple supplies
2 marks
Total 20 Marks
(c)
Page 11 of 45
Sample Paper 3
QUESTION 5
(a)
James Madden owns several properties which he lets. Details of his income
from these properties and the letting terms are as follows:Property A: Residential
Let on a 21 year lease expiring on the 31st October 2017, at an annual rent
of €12,000. The tenants had only paid rent of €10,000 to 31st December
2016.
Property B: Residential
Acquired on the 30th of April 2016, and let for the first time on the 1st of
November 2016, on a 10 year lease at a full annual rent of €21,000. A bank
loan was raised to help purchase the property and interest of €8,000 was
paid to 31st December 2016.
Both property A and B were correctly registered with the Private Residential
Tenancies Board.
Property C: Commercial
Let at a full annual rent of €6,000 under a 7 year lease which expired on the
30th April 2016. The property was vacant until the 1st of October 2016 when
it was let again on a 21 year lease at a full rent of €12,000 per annum and a
premium of €25,000.
During the year ended 31st of December 2016, the following expenses were
incurred:Property B
31st May
30th September
31st December
Dry rot repairs
Widow broken by vandals
Storm damage
€
650
80
235
Property C
20th April
31st July
20th September
Blocked drains
Painting
Advertising for tenant
90
700
130
Page 12 of 45
Sample Paper 3
QUESTION 5 (Cont’d)
Requirement:
Compute James’ Schedule D, Case V income for 2016.
10 Marks
(b)
Green Limited is a small distribution company. It has prepared an 18 month
accounting period to the 30th June 2016. Details of the companies income is
as follows:€
Case I adjusted before capital allowances
360,000
Case V
72,000
Fixed assets
The company purchased six vans for €30,000 each on the 1st July 2015,
emissions 145g/km. All other assets are leased.
Requirement:
Compute the corporation tax liabilities of Green Limited for all of the periods
covered by the companies 18 month accounting period to 30 th June 2016.
10 Marks
Total 20 Marks
Page 13 of 45
Sample Paper 3
QUESTION 6
The following multiple choice question consist of TEN parts, each of which is
followed by four possible answers. There is only one correct answer.
Requirement
Indicate the correct answer to each of the following TEN parts.
1
2
Michelle and Max are married. Michelle stays at home to look after her two
children Owen and Lily. She works part time three mornings a week. Her
salary is €6,000. What is the carer’s credit available for 2016?
(a)
Nil as Michelle has income.
(b)
Nil as her income exceeds the limit of €5,080.
(c)
€350.
(d)
Full credit as her income is below €6,700.
Peter Jones is self employed. He purchased a car for business use in May
2013, cost €26,000 (emissions 145 g/km). He sold the car in August 2016
for €15,000. Peter’s year end is the 30th June each year. Peter’s balancing
position for this car is:
(a)
Balancing allowance in 2016 of €4,154.
(b)
Balancing allowance in 2016 of €3,000.
(c)
Balancing allowance in 2016 of €1,154.
(d)
Balancing charge in 2016 of €6,000.
Page 14 of 45
Sample Paper 3
QUESTION 6 (Cont’d)
3
4
Noble Limited is owned equally by two brothers, Gary and Ken Noble. In
2015 Gary and Ken lent the company €20,000 each to be used by the
company for trade purposes. The company paid 8% interest on the loan.
The issued share capital of the company is 20,000 €1 ordinary shares. What
is the interest allowed as an expense in the accounts of Noble Limited for
the year ended 31st December 2016?
(a)
None
(b)
€3,200
(c)
€2,600
(d)
€
600
Lorraine Kelly sold all her shares in Ormonde Limited in July 2016 for €6 a
share. The following outlines the shares she held in the company:
 1/1/1999 She purchased 1,500 shares for €3,750
 1/10/2001 She purchased 3,000 shares for €11,550
In May 2003 she sold 1,600 shares for €4.10 a share.
What is Lorraine’s capital gains tax for 2016?
5
(a)
€1,737
(b)
€1,318
(c)
€1,198
(d)
€1,579
Hainsworth Limited’s year end is 31st December each year. On the 24th May
2016 they paid out a dividend to their shareholders. When must the
company pay the Dividend withholding tax to the Revenue?
(a)
21st November 2016
(b)
21st June 2016
(c)
14th June 2016
(d)
14th January 2017
Page 15 of 45
Sample Paper 3
QUESTION 6 (Cont’d)
6
7
8
Ross Callanan is self-employed. He has been in business for many years.
Due to the downturn he made a loss in his accounts for the year ended 31 st
March 2016. He wishes to reduce his total income in his income tax
computation for 2016 under Section 381. What is the taxpayer’s time limit
for election under this section?
(a)
31st October 2017
(b)
31st December 2018
(c)
31st October 2016
(d)
31st March 2018
Deirdre Breslin commenced to trade on the 1 st July 2015. Her year end is
30th June each year. She wishes to elect for her taxpayer’s option under
Section 66 to have her tax adjusted profits for third year of assessment
reduced based on a year 2 revision. What is her time limit, if any, for
election?
(a)
None
(b)
31st October 2018
(c)
31st October 2017
(d)
31st December 2016
Maguire Limited has a year ended the 31st October each year. In the year
ended 31st October 2016 they have made a trade loss. Under Section 396
(A) they want to carry this loss back to the year ended 31st October 2015
and reduce trading income liable at the standard rate. What, if any, is the
company’s time limit to elect under this section?
(a)
31st October 2017
(b)
21st July 2017
(c)
21st September 2016
(d)
31st October 2018
Page 16 of 45
Sample Paper 3
9
Peter Jones received the following benefits from his employer during 2016.
1. His employer paid his golf subscription of €1,200.
2. He had the private use of a company van with an original market value
of €30,000. He travelled 34,000 business km in 2016.
3. His employer lent him €50,000 on the 1st of July 2016 at 3% interest
rate. Peter used this money to improve his main residence.
What is Peter Jones BIK for 2016?
(a) €2,950
(b) €6,850
(c) €7,100
(d) €3,300
10
What is the rate of VAT to be applied to non-oral drugs:(a) Exempt
(b) 23%
(c) Zero
(d) 13.5%
Total 20 Marks
Page 17 of 45
Sample Paper 3
QUESTION 7
(a)
Carmen Lopez is Spanish. She came to Ireland in March 2016. What income
is she liable to Irish taxation on in 2016? Please explain your answer fully.
5 Marks
(b)
Anna Moraczewska is Polish. She came to Ireland in May 2010. What income
is she liable to Irish taxation on in 2016? Please explain your answer fully.
5 Marks
(c)
Peter Masterson is Irish. He left Ireland in November 2015 to work in
Canada. What income is he liable to Irish taxation on in 2016. Please explain
your answer fully.
5 Marks
(d)
Joseph Morris is Irish. He has been working in Spain for the last five years.
In May 2016 he returned to work in Ireland. What income is he liable to
Irish taxation on in 2016? Please explain your answer fully.
5 Marks
Total
20 Marks
Page 18 of 45
Sample Paper 3
Advanced Taxation (Republic of Ireland)
Sample Paper 3 – Suggested Solutions
Page 19 of 45
Sample Paper 3
Solution 1
(a)
(b)
When the assessable spouse dies, there will be two tax computations to deal with the year of death.
1.
Joint assessment from 1st January to the date of death to include the income of both spouses
from 1st January to date of death.
The full married credit and lower rate band will be allowed in this joint assessment.
2.
The surviving spouse will be assessed for the period from the date of death to 31 st December.
The surviving spouse is entitled to the full widowed credit, which in year of death is equal to
the amount of the married credit. Also, the widowed person will be entitled to the full single
bands. There will be no tax relief for children until the tax year after death.
As the non-assessable spouse has died, there is only one tax computation for the year of death.
There will be a joint assessment computation for the year of death taking in the assessable
spouse’s full income and the deceased spouse’s income to the date of death. The full married rate
bands and credits are granted in the year of death.
Matt Blake
Joint Assessment Income Tax Computation - 2016
Notes
Schedule D – Case I
Schedule D – Case V
Schedule E
1
2
3
53,812
29,760
Schedule F 360/80 x 100
Retirement annuity
Statutory Income
PHI
450
84,022
(5,000)
79,022
(1,000)
78,022
4
Page 20 of 45
Sample Paper 3
€
Solution 1 (Cont’d)
€
67,600 @ 20%
=
10,422@ 40%
=
78,022
Less:
Married credit
Earned Income Credit
PAYE credit
College fee
€6,000 - €3,000 @ 20%
Tax liability
PAYE deducted
DWT €450 @ 20%
Tax due
€
13,520
4,168
17,688
(3,300)
( 550)
(1,650)
(600)
11,888
(3,100)
(90)
8,698
*As Sheila’s income of €29,760 was greater than €24,800, Matt can avail of a standard
rate of €42,800 + €24,800 = €67,600
Notes
2016 basis period 30th June 2016 €68,000
Capital allowances
Basis period : 1/7/15 to 30/06/16
The addition/disposal of the van is not relevant as they do not take place during the
basis period for 2016 (1 July 2015-30 June 2016)
2016: Capital Allowances
TWDV – 1/1/2016
Wear & Tear
TWDV – 31/12/2016
Machinery
€
56,250
9,375 (W1)
46,875
Page 21 of 45
Sample Paper 3
Van
€
28,875
4,813 (W2)
24,062
Solution 1 (Cont’d)
Workings
1. Machinery
Cost
€75,000
Wear & Tear @ 12 ½ % =
€9,375
2. Van
Cost
€38,500
Wear & Tear @ 12 ½ % =
€4,813
Summary
Machinery
Van
€9,375
€4,813
€14,188
1.
Matt : Schedule D – Case I 2016
€68,000
Less: capital allowances
€14,188
€53,812
2.
Schedule D – Case V
The rental income is exempt due to the rent a room relief.
3.
Schedule E
Annual km
18,200 x 12 = 27,300 km per annum
8
The percentage reduction for 27,300 km is 24%.
Page 22 of 45
Sample Paper 3
Solution 1 (Cont’d)
€36,000 x 24% x 8 = €5,760
12
Schedule E – 2016
Salary €24,000
B.I.K € 5,760
€29,760
4.
Retirement annuity
Matt is entitled to tax relief in 2016 as the premium was paid before 31st
October 2017.
Relevant earnings
Schedule D – Case I €53,812
Maximum relief @ 25%
€53,812 x 25% =
€13,453
Limited to the premium paid of €5,000
5.
Tax relief for the private medical insurance is received at source.
Page 23 of 45
Sample Paper 3
Solution 2
(a)
Boston Limited
Case I Computation
Year ended 30th June 2016
Net profit per accounts
Addbacks
Depreciation
Motor expenses
Bad debts
Interest on late payment of VAT
Legal fees on disposal of shop
Deductions
Capital allowances
Case I
Notes
(1)
(2)
(3)
Page 24 of 45
Sample Paper 3
€
25,000
4,040
4,600
1,560
3,250
€
91,520
38,450
129,970
41,750
88,220
Solution 2 (Cont’d)
(b)
Boston Limited
Corporation Tax Computation
Year ended 30th June 2016
Notes
Case I
Case V
Income
Gain
Profits
€88,220 @ 12 ½ %
€401,998 @ 12 ½ %
(4)
(5)
=
=
11,028
50,250
61,278
Page 25 of 45
Sample Paper 3
€
€
88,220
Nil
88,220
401,998
490,218
Solution 2 (Cont’d)
Workings
1. Motor expenses
Fines
Lease rental
€
320
3,720
4,040
Lease rental
Managing Director’s Car-Category D/E
Disallow:
€6,200 x
= €3,720
2. Bad debts
Increase in general provision is an addback
Page 26 of 45
Sample Paper 3
Solution 2 (Cont’d)
3. Capital allowances
Car
TWDV – 1/7/2015
Additions
Disposal
Wear & Tear
TWDV – 30/06/2016
Fixtures &
Fittings
€
€
€
21,000
81,250
50,000
50,000
66,000 (a)
nil
(21,875)(b)
nil
21,000
109,375
116,000
(3,000) (c) (18,125) (d)(18,250) (e)
18,000
91,250
97,750
(a) Addition – Fixtures and Fittings
81,180 x 100 = €66,000
123
(b) Disposal – Van
Original Cost
Wear & Tear – 30/06/13
TWDV – 30/06/13
Wear & Tear – 30/06/14
TWDV – 30/06/14
Wear & Tear – 30/06/2015
TWDV – 30/06/2015
€
35,000
(4,375)
30,625
(4,375)
26,250
(4,375)
21,875
Page 27 of 45
Sample Paper 3
Vans
Solution 2 (Cont’d)
(c) Car – Wear & Tear
Cost
Limit
Wear & Tear
(d) Vans – Wear and Tear
€30,000
€24,000
€3,000
Opening cost
Less: Cost of disposal
Add: Cost of addition
€
130,000
(35,000)
50,000
145,000
Wear & Tear 12 ½ %
18,125
(e) Fixtures – Wear & Tear
Opening cost
Add: Cost of additions
Wear & Tear 12 ½ %
€
80,000
66,000
146,000
18,250
(f) Balancing position on sale of van
€
Sales proceeds
19,500
TWDV
21,875
Balancing allowance
2,375
Page 28 of 45
Sample Paper 3
Solution 2 (Cont’d)
Summary
Wear & Tear
€
Car
3,000
Van
18,125
Fixtures & Fittings 18,250
Balancing allowance
39,375
2,375
41,750
4. The Case V loss can only reduce Case V income. The company can carry it
back to a previous period of corresponding length to reduce Case V income
only. If there is any remaining, it will be carried forward to reduce Case V
income of a future period.
5. Gain
Sales proceeds
Less: legal fees on disposal
2001 Cost
Legal fees
€
680,000
(3,250)
480,000
2,500
482,500 x 1.087
Gain as adjusted
(524,478)
152,272
152,272 x 33/12.5 = €401,998
6. The dividends received from other Irish companies is franked investment
income and exempt.
Page 29 of 45
Sample Paper 3
Solution 3
(a) Rental unit
Sales proceeds
=
market value €900,000
00/01 €350,000 + €5,000 = €355,000
€355,000 x 1.144
2002 €125,000 x 1.049
Gain
€406,120
€131,125
€362,755
Painting A
Sales proceeds = market value
2002 €1,800 x 1.049
Gain
€
€
€
Tax @ 33%
2,600
1,888
712
€235
Marginal relief
½ (€2,600 - €2,540) =
€30
Painting B
Deemed sales proceeds
Cost 2002
Loss
€2,540
€3,500
€ 960
Page 30 of 45
Sample Paper 3
Solution 3 (Cont’d)
Shares in X plc
1/05/1997
1/02/2002
Number
500
2000
Cost €
35,000
60,000
Holding 1 (500 shares)
Sales proceeds
€120,000 x 500/1500
97/98 €35,000 x 1.232
Loss
€40,000
€43,120
(€3,120)
Actual position
Sales proceeds
Cost 97/98
Gain
€40,000
€35,000
€ 5,000
Therefore a no gain/no loss- NGNL
Holding 2 (1,000 shares)
Sales proceeds
€120,000 x 1000/1500
Cost 2002
€60,000 x 1000/2000 =
€30,000 x 1.049
€80,000
€31,470
€48,530
Page 31 of 45
Sample Paper 3
Solution 3 (Cont’d)
Disposals – 1/01/16 to 30/11/16- Initial Period
Rental unit
€362,755
Less:
Loss on painting B
Annual exemption
(€960)
( €1,270)
€360,525
Tax at 33%
Plus: Tax on painting A
€118,973
€
30
€119,003
Tax due on 15th December 2016
Disposals – 1/12/16 to 31/12/16- Later Period
Shares
€48,530
Tax at 33% =
€16,015
Tax due on 31st January 2017
(b) The withholding tax applies to all disposals of specified assets where the
proceeds exceed €500,000.
In Charles’ case, the withholding tax provisions apply to the rental unit as it is a
building in Ireland and the market value exceeds €500,000.
Page 32 of 45
Sample Paper 3
Solution 4
(a)
Bath Ltd.
Computation of VAT Payable
July / August 2016
Notes
Output VAT
Direct sales to private homeowners
Sales to retailers
Sale of van
Sale of car
Self supply
T1
Less Input VAT
Purchase of van
Car lease rental
Diesel for van
Car repairs
Petrol for car
Raw materials
Calculator’s
TV’s
T2
T3 VAT payable
1
2
3
4
5
12,375
66,700
2,300
2,805
6
7
8
9
10
11
12
13
(2,805)
( 93)
( 42)
(4,675)
( 159)
(2,805)
(10,579)
73,601
Page 33 of 45
Sample Paper 3
€
84,180
Solution 4 (Cont’d)
Notes
1. €45,000 at 23%*
€15,000 at 13.5%
2.
€
10,350
2,025
12,375
* As the cost of materials exceed 66.67% of the total charged to the customer,
it is deemed to be a supply of goods (⅔rds rule).
€
290,000 x 23%
=
66,700
3.
€10,000 x 23%
4.
No input credit entitlement – no output VAT.
5.
As the VAT exclusive cost of each TV exceeds €20 Bath Ltd must account for
VAT. Note cost of €250 is inclusive of VAT at 23%.
60 TVs x €250
=
€15,000 Gross
VAT €15,000 x 23
=
€ 2,805
123
6.
7.
=
=
=
2,300
No VAT liability arises on the gift of the calculators as their individual cost is
less than €20 VAT exclusive.
€
€15,000 x 23
=
2,805
123
Not entitled to an input credit for the VAT element of car leasing, as the car is
not used 60% for business.
Page 34 of 45
Sample Paper 3
Solution 4 (Cont’d)
8.
€500 x 23
123
9.
€450 x 23
123
= €84 x 50%
=
93
=
42
10. Not entitled to an input credit for the VAT element of petrol.
11. €25,000 x 23
123
=
4,675
12. Calculators 100 x €8.50 = €850
€850 x 23
123
=
159
13. TV’s 60 x €250 = €15,000
€15,000 x 23
123
=
2,805
(b) The return must be filed and the VAT paid by the 23rd of September 2016.
(c) (i) In the case of composite supply, i.e. where there is a principal element to
which the other elements are ancillary, the VAT rate applying for the composite
supply will be the VAT rate applying to the principal element.
Page 35 of 45
Sample Paper 3
Solution 4 (Cont’d)
The following are some examples of a composite supply: Note exam question did not
ask for examples so the following is for information only.
The supply of a mobile phone (23% VAT) with an instruction booklet (Zero rate of
VAT). The instruction booklet is clearly for the better enjoyment of the mobile
phone and is clearly ancillary to it. The rate applicable to the principal supply is 23%
and this rate applies to the entire supply including the instruction booklet.
The purchase or lease of computer programmes to perform a specific function
coupled with specific training on how to operate and access the system as an
integral part of the overall deal. The leasing of the equipment (23% VAT) is the
principal supply and the provision of training (Exempt from VAT) is ancillary,
accordingly the 23% rate will apply to the overall transaction.
(ii) In the case of multiple supplies i.e. where a number of individual supplies are
made together for a single overall consideration, and each of the supplies are
physicially and economically dissociated from each other, the consideration should
be apportioned between the various supplies involved, and each supply will be
taxed at the appropriate rate of VAT.
The following are examples of a multiple supply: Note exam question did not ask for
examples so the following is for information only.
The sale of food hampers which contain goods which if sold separately would be
taxable at the zero, 9 and 23 per cent rate. Under the new rules each of the
differently rated elements is taxed as an individual supply at the rate appropriate to
it. The consideration must be apportioned so as to reflect the taxable amount
applicable to each VAT rate.
A meal made up of food together with a soft drink or wine is sold for a single price.
The food is liable to VAT at the rate of 9% whereas the soft drink or wine is liable at
the 23% rate. Under the new rules such a meal is taxed as a multiple supply as each
of the parts of the meal are physically and economically dissociable from one
Page 36 of 45
Sample Paper 3
another. Accordingly, the total consideration payable should be apportioned so that
the food element is taxed at the 9% rate and the drink at the 23% rate.
A car repair service is provided at the same time as the fitting of a set of tires for a
single consideration. As the supply of car tires does not normally form part of the
repair service and the supply of tires would be regarded as a multiple supply. Both
supplies are physically and economically dissociable from each other. In these
circumstances the consideration should be apportioned so that the service is taxed
at the 13.5% rate and the tires at the 23% rate.
Page 37 of 45
Sample Paper 3
Solution 5
(a) Property A
Rent
€12,000
Property B
Rent €21,000 x 2/12 =
Less: Expenses
Interest €8,000 x 2/8 x 75%
Repairs
€3,500
€1,500
€235
€1,765
Pre letting expenses are not allowed
Property C
Rent €6,000 x 4/12 =
€12,000 x 3/12
Premium
€25,000 – (€25,000 x 21-1) =
50
Less: expenses
Repairs €90 + €700
Advertising
€2,000
€3,000
€5,000
€15,000
€20,000
€790
€130
€19,080
Between letting expenses are allowed.
Page 38 of 45
Sample Paper 3
Solution 5 (Cont’d)
James Madden
Case V Income – 2016
€
12,000
1,765
19,080
32,845
Property A
Property B
Property C
(b)
As the company has prepared its accounts for 18 months the period
will be divided into two accounting periods for corporation tax
purposes, the first of which is for the first12 months duration:
Notes
Case I
Less: Capital allowances
1
2
Case V
3
Corporation tax:
Year ended 31st December 2015
€217,500 at 12½%
€ 48,000 at 25%
=
=
27,188
12,000
39,188
Period ended 30th June 2016
€108,750 at 12½%
€ 24,000 at 25%
=
=
13,594
6,000
19,594
Page 39 of 45
Sample Paper 3
Year ended Period ended
31st December
30th June
2015
2016
€
€
240,000
120,000
22,500
11,250
217,500
108,750
48,000
24,000
265,500
132,750
€
Solution 5 (Cont’d)
Notes:
1.
Case I income is apportioned over the two periods on a time
basis:
€360,000 x 12/18 = €240,000
€360,000 x 6/18 = €120,000
2. Capital allowances
Ap 12 months to 31st December 2015
Additions:
Vans €30,000 x 6
Wear and tear €180,000 x 12½%
= €180,000
= € 22,500
Ap 6 months to 30th June 2016
€180,000 x 12½% = €22,500 x 6/12 = € 11,250
3.
The Case V income is apportioned over the two periods on
a time basis.
€72,000 x 12/18 = €48,000
€72,000 x 6/18 = €24,000
Page 40 of 45
Sample Paper 3
Solution 6
1. (c)
½ (6,000 – 5,080) = €460
€810 - €460 = €350
2. May 2013 – 30th June 2013 – 2013
August 2015 – 30th June 2016 – 2016
2013
Addition
Tax Cost
Wear & Tear
TWDV – 31/12/2013
SL- 12 ½ %
€
26,000
24,000
(3,000)
21,000
2014
Wear & tear
TWDV – 31/12/2014
(3,000)
18,000
2015
Wear & Tear
TWDV – 31/12/2015
(3,000)
15,000
2016
Disposal
15,000
Balancing position 2016
Sales proceeds 15,000 x 24,000/26,000 = €13,846
TWDV
€15,000
Balancing allowance
€1,154
(c) Balancing allowance in 2016 of €1,154
Page 41 of 45
Sample Paper 3
Solution 6 (Cont’d)
3. Allowed as a tax deduction is the lower of:(i)
(ii)
(c)
13 % of €40,000 = €5,200
or
13% of €20,000 = €2,600
€2,600
4.
Number
1/1/99
1/10/2001
1,500
3,000
Cost
€
3,750
11,550
Shares remaining after the disposal in May 2003
1/10/2001
2,900
Sales proceeds 2,900 x €6
2001 €11,165 x 1.087
Less: annual exemption
Tax @ 33%
11,165
17,400
12,136
5,264
1,270
3,994
1,318
(b) €1,318
5. (c)
14th June 2016
6. (b)
31st December 2018
7. (b)
31st October 2018
8. (d)
31st October 2018
Page 42 of 45
Sample Paper 3
Solution 6 (Cont’d)
9. (i)
(ii)
(iii)
Golf subscription
Van €30,000 x 5%
€50,000 x (4% - 3%) x 6/12
(a) €2,950
10. (b)
23%
Page 43 of 45
Sample Paper 3
€1,200
€1,500
€ 250
€2,950
Solution 7
(a) Resident:
Carmen is resident in Ireland for 2016 as she
spent 183 days in Ireland in 2016.
Ordinarily resident:
Carmen is not ordinarily resident in Ireland for
2016 as she has not spent three complete tax
years in Ireland.
Domicile:
Carmen has a Spanish domicile.
For 2016 Carmen is resident, not ordinarily resident and not domiciled in Ireland,
She will be liable to Irish income tax on her Irish income and foreign income
remitted to Ireland.
(b) Resident:
Anna is resident in Ireland for 2016 as she spent
at least 183 days in Ireland in 2016.
Ordinarily resident:
Anna is ordinarily resident in Ireland in 2016 as
she has three complete tax years in Ireland.
Domicile:
Anna has a Polish domicile.
For 2016 Anna is resident, ordinarily resident and not domiciled. She will be
liable to Irish income tax on her Irish income and foreign income remitted to
Ireland.
(c) Resident:
Peter is not resident in Ireland in 2016 as he
spends no days here.
Ordinarily resident:
Peter is ordinarily resident in Ireland in 2016. He
remains ordinarily resident for three tax years
after he leaves.
Domicile:
Peter has an Irish domicile.
Page 44 of 45
Sample Paper 3
Solution 7 (Cont’d)
For 2016 Peter is not resident, ordinarily resident and domiciled. He is liable on his
worldwide income with three exceptions:(i)
(ii)
(iii)
Employment income from an employment all of the duties of which
are carried on outside Ireland.
Trading or professional income from a trade or a profession, no part
of which is carried on in the State.
Foreign investment income which does not exceed €3,810.
(d) Resident:
Joseph is resident in Ireland for 2016 as he spent
183 days in Ireland for this year.
Ordinarily resident:
Joseph is not ordinarily resident in Ireland for
2016 as he has not yet spent three complete tax
years here.
Domicile:
Joseph has an Irish domicile.
For 2016 Joseph is resident and domiciled but not ordinarily resident in Ireland. His
liability to Irish tax for 2016 is on his Irish and worldwide income.
Page 45 of 45
Sample Paper 3