Section A-All15questions are compulsory and MUST be attempted.
Please use the space provide on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple-choice question.
Each question is worth2marks.
1.On May2014,Xi Qi’s taxable supplies during the past12months exceed￡81,000and his expected taxable supplies for the next12months exceeds is no less than￡79,000. However,He does not intend to register because he thinks his net profit is insufficient to cover the additional cost which would be incurred.What would you do as a trainee Chartered Certified Accountant when facing such a situation?
(1)Cease to act for him.
(2)Notify HM Revenue and Customs that you no longer act for Xi Qi.
(3)Inform HM Revenue and Customs about the issue.
(4)Make a report under the money laundering regulations.
A1,2and3
B1,2and4
C1,3and4
D All of them
2.Eva is employed as an accountant.In2014/15,he incurs￡8,000on home to office travel,￡3,000on home to client travel,￡700on his professional membership and ￡950on office clothes.
What amount can Eva deduct in computing his employment income?
A￡3,700
B￡4,650
C￡6,500
D￡12,650
3.Jim is an employee of Jeep Ltd.Jim receives cash earnings of￡30,000and a car benefit amounting to￡9,000in the tax year2014–15.Jim is not contracted out of the state pension scheme.
How much class1(employee)national insurance contributions(NIC)does Jim suffer in respect of the tax year2014–15?
A￡2,645
B￡2,805
C￡2,850
D￡3,860
4.Which of the following is not deductible when calculating the trading profits?
A.Legal fees in connection with court actions for not complying with certain law and legslations.
B.Legal fees to obtain loan finance for trading purposes.
C.Patent royalties paid.
D.legal fees to collect trade debts.
5.During the year ended31March2015MIX plc paid loan stock interest of￡22,500.Loan stock interest of￡3,700was accrued at31March2015,with the corresponding accrual at 1April2014being￡4,200.The loan is used for trading purposes.The company also incurred a loan interest expense of￡6,800in respect of a loan that is used for non-trading purposes.
What is the amount of loan stock interest can be deductible when calculating the trading profit?
A.￡22,000
B.￡26,200
C.￡18,300
D.￡22,500
6.On28April2014three acres of land were sold for￡100,000.Alex had originally bought eight acres of land on1May2012for￡200,000.The fair value of the unsold land on28April2014was￡150,000.
What is the chargeable gain on this disposal?
A.￡60,000
B.￡20,000
C.￡150,000
D.￡40,000
7.Which one of the following period can be the deem occupation period under the terms of Private Principle Residence relief?
A.The last18months of the ownership
B.Up to2years of absence then rent the house out
C.Period of working abroad
D.Period of working elsewhere in the UK
8.On12August2014,Eden made a gift of a house valued at￡750,000to his son Felix. This figure is after deducting all available exemptions.How much is the inheritance tax liability arising from the gift in tax year2014-15?
A.￡85,000
B.￡170,000
C.￡150,000
D.None
9.Jackie started her own small business since1January2015,in the quarter to30March 2015,her sales of standard rated goods for￡5,000and a cash discount of3%is offered to attract customer.She also took some inventory for personal use,the goods cost￡200 originally and would cost￡220to replace,and both amounts are VAT excluded.
The amount of VAT due for the quarter ended30March2015is
A￡1,040
B￡1,044
C￡1,014
D￡970
10.Rain has been a sole trader for many years making up his accounts to31July each year.He ceased to trade on31December2014.Richard’s most recent adjusted profits for tax purposes have been:
Year to31July2013￡19,000
Year to31July2014￡15,000
Five months to31December2014￡6,000
He has unused overlap profits for earlier years amounting to￡4,000.
What is Rain’s taxable trading profit figure for the tax year2014–15?
A￡17,000
B￡14,000
C￡21,000
D￡3,000
11.Which one of the following is exempt income for individual income tax?
A Interest from Saving Certificates issued by National Savings and Investment Bank
B Interest from Individual Savings Accounts
C Building society interest
D Interest from government stock
12.J ltd bought a factory in September1999for￡385,000.In December2014,wishing to move to a more convenient location,J Ltd sold the factory for￡750,000.Then J purchased and moved into a new factory in March2015.Indexation allowance from September1999to December2014is￡273,000.What is the base cost of the new factory if it was purchased for￡700,000?
A.￡50,000
B.￡658,000
C.￡42,000
D.￡700,000
13.Molten plc paid41,200for the construction of a new decorative wall around the company’s premises on31January2015.What is the amount of the capital allowance can be deductible?
A.￡41,200
B.￡3,296
C.￡7,416
D.0
14.Which one of the following assets is qualifying for roll-over relief?
A.Private used Motor car
B.Boat
C.Restoration of damaged factory
D.Inventory
15.Webb made a gift of￡800,000to a trust on25September2014.Webb paid the inheritance tax arising from the gift.How much is the inheritance tax Webb paid in tax year 2014-15?
A.￡95,000
B.￡118,750
C.￡94,400
D.￡117,250
Section B-All SIX questions are compulsory and MUST be attempted.
1.Flick Pick(TX06/12Q1)
On6April2014Flick Pick,born in1990,commenced employment with3D Ltd as a film critic.On1January2015,she commenced in partnership with Art Reel running a small cinema,preparing accounts to30April.The following information is available for the tax year2014/15:
Employment
(1)During the tax year2014/15Flick was paid a gross annual salary of￡25,665.
(2)Throughout the tax year2014/153D Ltd provided Flick with living accommodation.The company had purchased the property in2005for￡89,000,and it was valued at￡144,000 on6April2014.The annual value of the property is￡4,600.The property was furnished by 3D Ltd during March2014at a cost of￡9,400.
Partnership
(1)The partnership’s tax adjusted trading profit for the four-month period ended30April 2015is￡29,700.This figure is before taking account of capital allowances.
(2)The only item of plant and machinery owned by the partnership is a motor car that cost ￡18,750on1February2015.The motor car has a CO2emission rate of190grams per kilometer.It is used by Art,and40%of the mileage is for private journeys.
(3)Profits are shared40%to Flick and60%to Art.This is after paying an annual salary of ￡6,000to Art.
Property income
(1)Flick owns a freehold house which is let out furnished.The property was let throughout the tax year2014/15at a monthly rent of￡660.
(2)During the tax year2014/15Flick paid council tax of￡1,320in respect of the property, and also spent￡2,560on replacing damaged furniture.
Flick claims the wear and tear allowance.
Required
(a)Calculate Flick Pick’s taxable income for the tax year2014/15.(12marks)
(b)State what classes of national insurance contribution will be paid in respect of Flick Pick’s income for the tax year2014/15,and in each case who is responsible for paying them.
Note:
You are not required to calculate the actual national insurance contributions.
(3marks)
(15marks)
2.Neung Ltd(12/10)
Neung Ltd is a UK resident company that runs a business providing financial services. The company’s summarized profit and loss account for the year ended31March2015is as follows:
Note￡Operating profit1622,536 Income from investments
Loan interest237,800 Dividends354,000 Profit before taxation714,336
Note1–Operating profit
Depreciation of￡11,830and amortisation of leasehold property of￡7,000have been deducted in arriving at the operating profit of￡622,536.
Note2–Loan interest receivable
The loan was made for non-trading purposes on1July2014.Loan interest of￡25,200 was received on31December2014,and interest of￡12,600was accrued at31March 2015.
Note3–Dividends received
Neung Ltd holds shares in four UK resident companies as follows:
Shareholding percentage Status
Second Ltd25%Trading
Third Ltd60%Trading
Fourth Ltd100%Dormant
Fifth Ltd100%Trading
During the year ended31March2015Neung Ltd received a dividend of￡37,800from Second Ltd,and dividend of￡16,200from Third Ltd.These figures were the actual cash amounts received.
Additional information
Leasehold property
On1April2014Neung Ltd acquired a leasehold office building,paying a premium of ￡140,000for the grant of a20-year lease.The office building was used for business purposes by Neung Ltd throughout the year ended31March2015.
Plant and machinery
On1April2014the tax written down values of Neung Ltd’s plant and machinery were as follows:
￡
Main pool4,800
Special rate pool12,700
The company purchased the following assets during the year ended31March2015:
￡
19July2014Motor car[1]15,400
12December2014Motor car[2]28,600
20December2014Ventilation system270,000
Motor car[1]purchased on19July2014has a CO emission rate of212grams per kilometre.Motor car[2]purchased on12December2014has a CO2emission rate of118 grams per kilometre.
The ventilation system purchased on20December2014for￡270,000is integral to the freehold office building in which it was installed.
Required:
(a)State,giving reasons,which companies will be treated as being associated with Neung Ltd for corporation tax purposes;(2marks)
(b)Calculate Neung Ltd’s corporation tax liability for the year ended31March2015; Note:you should assume that the whole of the annual investment allowance is available to Neung Ltd,and that the company wishes to maximise its capital allowances claim.(13marks)
(15marks)
3.Tom(TX06/09)
(1)On20July2014Tom made a gift of10,000￡1ordinary shares in Kapook plc to his daughter.On that date the shares were quoted on the Stock Exchange at￡3.70–￡3.90, with recorded bargains of￡3.60,￡3.75and￡3.80.Tom has made the following purchases of shares in Kapook plc:
19February20048,000shares for￡16,200
6June20096,000shares for￡14,600
24July20142,000shares for￡5,800
Tom’s total shareholding was less than5%of Kapook plc,and so holdover relief is not available.
(2)On13August2014Tom transferred his entire shareholding of5,000￡1ordinary shares in Jooba Ltd,an unquoted company,to his wife.On that date the shares were valued at￡28,200.Tom’s shareholding had been purchased on11January2010for ￡16,000.
(3)On26November2014Tom sold an antique table for￡8,700.The antique table had been purchased for￡5,200.
(4)On2April2015Tom sold UK Government securities(Gilts)for￡12,400.The securities had been purchased for￡10,100.
Tom has unused capital losses of￡15,900brought forward from the tax year2013/14. Tom has taxable income of￡10,000in tax year2014/15.
Required
Compute Tom’s capital gains tax liabilities,if any,for the tax year2014/15.The amount of unused capital losses carried forward to future tax years,if any,should be clearly identified.(10marks)
4.Nicola died on12March201
5.She has made the following gifts during her lifetime: (1)On20June2007,Nicola made a cash gift of￡280,000to a trust.The trust paid the
inheritance tax.
(2)On5October2013,Nicola made a cash gift of￡255,000to her children.
Nicola left the following assets when she died.
(1)A property valued at￡850,000.The property is no longer occupied by Nicola,and if it were disposed of during the tax year2014–15the disposal would result in a chargeable gain of￡160,000.
(2)Building society deposits of￡460,000.
(4)A life assurance policy on her own life.The policy has an open market value of ￡250,000,and proceeds of￡275,000will be received following Nicola’s death.
The cost of Nicola’s funeral will be￡18,000.
Under the terms of her will,Nicola has left her entire estate to her children.
70%of Nicola’s husband’s nil rate band was utilised when he died on16April2006
The nil rate band for the tax year2006–07,2007-08,and2013–14is￡285,000,￡300,000 and￡325,000,respectively.
Calculate the inheritance tax liability.(10marks)
5.Wind Ltd is registered for value added tax(VAT),but currently does not use any of
the special VAT schemes.The company has annual standard sales of￡1,250,000 and annual standard rated expenses of￡500,000.Both these figures are exclusive of VAT and are likely to remain the same for the foreseeable future.Wind Ltd is up to date with all of its tax returns,including those for corporation tax,PAYE and VAT.It is also up to date with its corporation tax,VAT and PAYE payments.However,the company often incurs considerable overtime costs due to its employees working late in order to meet tax return filling deadlines.
Wind Ltd pays its expense on a cash basis,but allows customers one month credit when paying for sales;the company does not have any impairment losses.
Wind is planning to purchase some new equipment at a cost of￡40,000which is exclusive of VAT.The equipment can either be purchased from an overseas supplier situated outside the European Union,or from a VAT registered supplier situated within the EU.Wind Ltd.is not a regular importer and so is unsure of the VAT treatment for this purchase.
Required:
(a)Explain why Wind Ltd is entitled to use both the VAT cash accounting scheme
and the VAT annual accounting scheme,and why it will be beneficial for the company to use both schemes;(5marks) (b)Explain when and how Wind will have to account for VAT in respect of the new
equipment if it purchased from(1)supplier situated outside the EU(2)a VAT registered supplier situated within the EU.(5marks)
(10marks)
6.Sophie Shape has been a self-employed sculptor since1996,preparing her accounts to5April.Sophie’s tax liabilities for the tax years2013-14and2014-15are as follows:
2012-132014-15
￡￡
Income tax liability5,2406,100
Class2national insurance contribution143143
Class4national insurance contribution1,2401,480
Capital gains tax liability04,880
No income tax has been deducted at source.
Required:
(a)Prepare a schedule showing the payments on account and balancing payment which Sophie Shape will have made,or will have to make,during the period from1April2015to31March2016.
Note:Your answer should clearly identify the relevant due date of each payment.(4marks)
(b)State the implication if Sophie Shape had made a claim to reduce her payments on account for the tax year2014-15to nil without any justification for doing so.(2marks)
(c)Advise Sophie Shape of the latest date by which she can file a paper self-assessment tax return for the tax year2014-15.(1mark)
(d)State the period during which HM Revenue and Customs(HMRC)will have to notify Sophie Shape if they intend to carry out a compliance check in respect of her self-assessment tax return for the tax year2014-15,and the possible reasons why such a check would be made.
Note:You should assume that Sophie will file her tax return by the filing date.(3marks)
(10marks)