CTA Examination – Awareness – Module D Taxation of Individuals
Question 1
£
80,000
40,000
Salary
Dividend
36,000 x 100/90
120,000
Less: contribution to occupational pension fund (10,000)
110,000
Less: personal allowance
(w)
(5,105)
Taxable income
104,895
(w)
Gift aid donation
3,200 x 100/80 = 4,000
Personal allowance
8105 – [ ½ (110,000 – 4,000 – 100,000) ]
= 8,105 – 3,000
Question 2
Annual allowance for 2012/13 is 50,000
Unused relief from previous 3 years:
2010/11 50,000 – 35,000 = 15,000
2011/12 50,000 – 60,000 = (10,000)
5,000
:. The maximum personal pension contribution which he could pay in 2012/13 without paying an
annual allowance charge is
50,000 + 5,000 = 55,000
Question 3
1) 5,000 for the spare bedroom
With electing for rent a room relief. Max will receive a basic amount of £4,250 per tax year.
He cannot claim any other expenses in respect of this.
If he does not make the election the expenses of letting will be deducted from the rental
income. If it is furnished he can deduct 10% wear & tear allowance.
2) Furnished two bedroom house
Max can claim a 10% wear and tear allowance as his house is furnished. He can also deduct
his letting expenses from his rental income.
If he lets it for holiday letting then there are special rules for furnished holiday lets.
Question 4
Accommodation benefit
Annual value
Market value x 4% (ORI)
(6 yrs between purchasing house by employer
and Joel moving in)
115,000 x 4%
Furniture 20,000 x 20%
5,500
4,600
4,000
14,100
The new central heating system and the conservatory are capital items added to the house and
would not qualify for benefit for Joel.
Question 5
Shares
5,000
Cash
Take-over price
22,000
8,000
30,000
Base cost of shares:
18,000 x 22,000
22,000 + 8,000 = 13,200
Cash: 18,000 x 8,000
30,000 = 4,800
Shares
Disposal proceeds
Less cost: 13,200/2
(For 2,500 shares)
14,200
(6,600)
7,600
Cash
Less base cost
8,000
(4,800)
3,200
Taxable gains – shares 7,600
- Cash 3,200
10,800
Less: AE
(10,600)
200
Question 6
The EIS investment will be a tax reducer for him at 30%
i.e. 200,000 @ 30% = 60,000
:. His income tax liability of 40,000 will be reduced to nil.
He will also get capital gains tax relief.
Question 7
Pensions
Govt stock (gross)
Bank interest
800 x 100/80
Less PAA
NS
10,900
S
1,500
1,000
2,500
10,900
(10,500)
400
Tax
400 @ 20%
(2,710 – 400) @ 10%
190 @ 20%
Income tax liability
Less: bank interest tax paid at source
Income tax liabilty
2,500
80
231
38
349
(200)
149
Question 8
1) Space in company car park is an exempt benefit
2) Expenses of £3 per night are allowable for staying in a hotel within UK. Hence will be
exempt.
3) Health insurance
The total of the health insurance is a taxable benefit
:. £150 will be treated as employment income.
4) The employment income (benefit) is calculated as follows:
Higher of
- m/v when gifted
- m/v when gift made available less total use of the asset by the employee
- the higher amount will be chargeable as a benefit as part of employment income.
Question 9
Sue intends working full time overseas for a number of years when she left on 31 January 2013.
:. She will be treated as not resident not ordinarily resident from the day after her dep arture. She
will only be taxed on UK income.
Furniture in the UK
She will be taxed on her capital gains in the UK after her annual exemption of £10,600. She will then
pay capital gains tax at 18% of the basic rate band and 28% of the balance as she will only be taxed
on UK income & basic & higher rate bands will be fully available.
Question 10
(w) Unapproved scheme
Market value 5,000 x 4.80
Cost (exercise price)
5,000 x 3.00
24,000
Annual salary
Shares (w)
50,000
9,000
59,000
(8,105)
50,895
Less PA
34,370 @20% = 6,874
16,525 @ 40% = 6,610
Income tax
13,484
NI
Class 1 Primary (paid by Kai)
(7,605 – 42,475) x 12% = 4,184
(15,000)
9,000
(59,000 - 42,475) = x 2% = 331
4,515
Class 1 Secondary (paid by Red plc)
(59,000 – 7,488) x 13.8% = 9,175
Question 11
May 2001 – Feb 04
May 04 – Dec 06
(employed overseas
deemed occupied – as
occupied before &
after)
Dec 06 – June 07
June 07- March 13
March 10- March 13
(for any reason)
Occupied
3
2.5
Absent
0.5
Total
3
2.5
0.5
6
3
3
All the periods will be deemed as occupied except the period from June 07 – March 10 as although
she went to Scotland on employment she did not return to the property.
Question 12
1) Sold it for £100,000
If treated as an income distribution it will need to be grossed up
100,000 x 100/90 = 111,111
Is the amount to be charged to income tax.
2)
Disposal Proceeds
Less cost (Aug 2007)
Less: Capital b/fwd
Less: annual exemption
CGT@ 28% = 6,272
100,000
(55,000)
45,000
(12,000)
33,000
(10,600)
22,400