ACCA F6 FA09 Study Text 2010

Practice questions

Required

(a) Calculate the tax payable under self assessment for 2009/10 and state the due

dates for payment.

(b) State how interest would be calculated assuming Candice made the following

payments:

Amount

Paid in

£

1

st

POA 7,000

14 February 2010

2

nd

POA 7,000

18 August 2010

Balancing payment 2,880

28 January 2011

46 Registration

Deborah started to trade as a coach operator on 1 September 2008.

In her first year of trading she made sales of £3,500 per month. Her more recent

sales are as follows:

2009 £

September 7,300

October 9,600

November 10,900

December 12,500

2010

January 12,600

February 12,700

Required

(a) State when it is compulsory for Deborah to register for VAT, when she must

notify HMRC and from which date she should charge VAT on her invoices.

(b) Explain whether Deborah will be able to recover any pre-registration input tax

suffered.

47 WX Ltd

WX Ltd has prepared the following draft accounts for the quarter to 31 March 2010.

£ £

Standard rated sales 201,230

Zero rated sales 20,295

Exem

p

t sales

13,750

–––––––––––––––––––––––––––––––––––

235,275

Purchases (standard rated) 41,525

Distribution ex

p

enses (standard rated)

10,000

Em

p

lo

y

ment costs 47,150

Bad debt written off 1,650

Entertainin

g

715

Other ex

p

enses (standard rated)

16,825

–

––––––––––––––––––––––––––––––––––

(117,865)

–––––––––––––––––––––––––––––––––––

Profit 117,410

–––––––––––––––––––––––––––––––––––

Paper F6 (UK): Taxation FA2009

456 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP

The bad debt was written off in February 2010 and relates to a debt which was due

for payment on 31 December 2009.

WX Ltd purchased a car for £18,000 on 3 January 2010 and some plant and

machinery for £35,000 on 13 March 2010.

All figures include VAT.

Required

Calculate the VAT payable for the quarter ended 31 March 2010 and state the due

date for payment.

Paper F6 (UK)

Taxation FA2009

Q&A

Answers to practice

questions

Contents

Page

Introduction to income tax

1 Angela 460

2 Brian 460

Income from property

3 Paul 461

Employment income

4 Flash plc 462

5 Richard 463

Unincorporated businesses

6 Colin 464

7 Ashley and Cheryl 465

8 Daniel 466

9 Industrial building 468

10 Hannah 468

11 Ian 469

12 Trading loss 470

13 Loss relief in the opening years 471

14 Terminal loss relief 472

Paper F6 (UK): Taxation FA2009

458 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP

Partnerships

15 Partnership profit 473

16 Change in partnership 474

17 Partnership loss 475

Pension contributions and national insurance

18 Stephen Honiton 476

19 Pension contributions 478

20 Class 1 NICs 478

21 Class 4 NICs 479

Capital gains tax

22 Val 479

23 Anthony 480

24 Barry 481

Corporation tax

Introduction to corporation tax and PCTCT

25 AB Ltd 483

26 EF Ltd 484

27 GH Ltd 484

28 Change of accounting date 485

29 Trading income statement 487

30 Adjustment of profit and PCTCT 488

Capital allowances

31 OP Ltd 490

32 RS plc 490

Chargeable gains

33 Net chargeable gain 492

34 Replacement office building 493

35 Bonus issue and share disposal 494

36 Rights issue and share disposal 495

37 Takeover and share disposal 496

Answers to practice questions

Trading losses

38 FG Ltd: loss relief 497

39 HI Ltd: loss relief 498

Overseas aspects

40 DTR 498

41 Overseas branch or non-UK resident

company

499

Groups

42 UK group 500

43 PQ group 502

Self assessment and PAYE

44 Payment of tax 503

45 Candice 504

Value Added Tax

46 Registration 505

47 WX Ltd 505

Paper F6 (UK): Taxation FA2009

460 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP

1 Angela

Angela income tax computation: 2009/10

Total

income

Other

income

Savings

income

Dividend

income

£ £ £ £

Earned income

Employment income 35,000 35,000

Savings income (gross)

Building society interest

(£2,400 × 100/80)

3,000

UK dividends received

(£9,000 × 100/90)

10,000

–––––––––––––––––––––––––––––––––––

Total Income 48,000 35,000 3,000 10,000

PA (6,475) (6,475)

–––––––––––––––––––––––––––––––––––

Taxable income 41,525 28,525 3,000 10,000

–––––––––––––––––––––––––––––––––––

Income tax liability

Income Tax rate Tax

Basic rate band Other income 28,525 × 20% 5,705

Savings 3,000 × 20% 600

Dividends 5,875 × 10% 588

37,400

Higher rate band Dividends 4,125 × 32.5% 1,341

41,525

Income tax liability

8,234

Note: Premium bond prizes are exempt from income tax.

2 Brian

Brian income tax computation: 2009/10

Total

income

Other

income

Savings

income

Dividend

income

£ £ £ £

Earned income

Trading income

20,000 20,000

Employment income

25,660 25,660

Savings income (gross)

Bank deposit interest (£4,100 × 100/80)

5,125

UK dividends received (£1,890 × 100/90)

2,100

–

–––––

–

––––––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––––––

––––––

–

––––––––––––––––––––––––––

–

52,885 45,660 5,125 2,100

Minus: Allowable interest

(200) (200)

–

–––––

–

––––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––––––

––––––

–

––––––––––––––––––––––––––

–

Net income 52,685 45,460 5,125 2,100

PA

(6,475) (6,475)

–

–––––

–

––––––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––––––

––––––

–

––––––––––––––––––––––––––

–

Taxable income 46,210 38,985 5,125 2,100

–

–––––

–

––––––––––––––––––––––––––

–

–––––

–

––––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––––––

––––––

–

––––––––––––––––––––––––––

–

Answers to practice questions

Income tax liability Income Tax rate Tax

£ £ £

Basic rate band Other income 38,000 × 20% 7,600

–

–––––

–

––––––––––––––––––––––––––

–

Extended basic rate band (W1) 38,000

Higher rate band Other income 985 × 40% 394

Savings 5,125 × 40% 2,050

Dividends 2,100 × 32.5% 682

–

–––––

–

––––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––––

–

46,210

Income tax liability

10,726

Minus Tax credits/deducted at source

Dividend income: (£2,100 × 10%)

(210)

Savings income: (£5,125 × 20%)

(1,025)

PAYE

(8,287)

–––––––––––––––––––––––––––––––––

–

Income tax payable

1,204

–––––––––––––––––––––––––––––––––

–

Notes

(1) Gift Aid donations are paid by an individual net of 20% income tax. The basic

rate band is extended by the gross amount of the Gift Aid donation.

(2) National lottery winnings and income from ISAs are exempt from income tax.

Working: Extension of basic rate band

£

Basic rate band limit 37,400

Gift Aid donation: (£480 × 100/80) 600

Extended basic rate band 38,000

3 Paul

(a)

Rent receivable (accruals basis):

£

April–December – 9/12 × £8,000

6,000

January–March – 3/12 × £8,800

2,200 8,200

–––––––––––––––––––––––––––––––––––

Expenditure:

Council tax 960

Water rates 380

Agent’s fees 780

Decoration 1,250

Interest

2,500

Wear and tear

(£8,200 - £960 – £380) × 10%

686 (6,556)

–

–––––

–

––––––––––––––––––––––––––

–

–––––––––––––––––––––––––––––––––––

Assessable amount 1,644

–––––––––––––––––––––––––––––––––––

The new central heating system is capital expenditure and therefore not

deductible.

Paper F6 (UK): Taxation FA2009

462 Go to www.emilewoolfpublishing.com for Q/As, Notes & Study Guides © EWP

(b) To be treated as FHL all of the following conditions must be satisfied:

 the property is situated in the European Economic Area, and

 is furnished, and

 is let on a commercial basis with a view to making profits, and

 is available for letting as holiday accommodation for at least 140 days in

the tax year, and

 is actually let for at least 70 days in the tax year, and

 is not normally occupied for periods of longer-term occupation (i.e.

more than 31 consecutive days to the same person).

As Paul’s property appears to be let on an annual basis to the same tenant, it

does not currently qualify as a furnished holiday letting.

4 Flash plc

Benefits assessed in 2009/10

Company cars

Arthur Benny

Charlotte

Arthur Benny Charlotte

% % %

CO

2

emissions (rounded

down to nearest 5 g/km)

135 200

260

Base level

(135) (135)

(135)

–

–––––

–

–––––––––––––––

–

–––––

–

–––––

–

–––––––––

–

–––––

–

–––––––––––––––

Nil 65

125 Nil 13 25

–

–––––

–

–––––––––––––––

–

–––––

–

–––––––––––––––

–

–––––

–

–––––––––––––––

Minimum percentages

18 15 15

–

––––

–

–––––––––––––––

–––––––––––––––––––––

Appropriate percentages (restricted to maximum 35%)

18 28 35

–

––––

–

–––––––––––––––

–––––––––––––––––––––

Number of months car is available in 2009/10 8 12 12

Arthur’s benefits

£

Car benefit

Manufacturer’s list price 13,500 × 18% × 8/12 1,620

Fuel benefit 16,900 × 18% × 8/12 2,028

Total assessable benefits for Arthur

3,648

Benny’s benefits

£

Car benefit

Manufacturer’s list price 20,800

Minus: Capital contributions

(not restricted, since below maximum of £5,000)

(4,400)

–

–––––

–

––––––––––––––––––––––––––

–

16,400 × 28% 4,592

Fuel benefit 16,900 × 28% 4,732

–––––––––––––––––––––––––––––––––

–

Total assessable benefits for Benny

9,324

–––––––––––––––––––––––––––––––––

–

Answers to practice questions

Charlotte’s benefits

£

Car benefit

Manufacturer’s list price

22,600 × 35% 7,910

Minus: Contribution towards use of car

(1,200)

–––––––––––––––––––––––––––––––––

–

6,710

Fuel benefit

16,900 × 35% 5,915

–––––––––––––––––––––––––––––––––

–

Total assessable benefits for Charlotte

12,625

–––––––––––––––––––––––––––––––––

–

Note

Contributions towards private fuel costs are not an allowable deduction.

Daphne’s benefits

£ £

Mileage allowance received 12,000 × 30p

3,600

Statutory mileage allowance

10,000 × 40p 4,000

2,000 × 25p 500

–––––––––––––––––––––––

(4,500)

–––––––––––––––––––––––––––––––––

–

(900)

–––––––––––––––––––––––––––––––––

–

Daphne does not have an assessable benefit. Instead, due to the shortfall of

allowance received, Daphne can deduct £900 from her employment income.

Ernest’s benefit:

Company van: £3,000 × 11/12 = £2,750.

Fuel: £500 x 11/12 = £458.

5 Richard

Richard: Employment income 2009/10 £

Salary

56,000

Bonus (paid 31 May 2009) 22,000

Assessable benefits

Overnight expense allowance

60

Annual staff party (exempt, because below £150 per head)

Nil

Beneficial loan (see working)

722

––––––––––––––––––––––––––––––

78,782

Allowable deductions:

Subscription to professional body

(150)

Donation under payroll giving scheme

(100)

––––––––––––––––––––––––––––––

Employment income 78,532

––––––––––––––––––––––––––––––

Paper F6 (UK): Taxation FA2009

Note

The full amount of the overnight expense allowance is taxable as it exceeds £5 a

night.

Working: beneficial loan

(1) Average method

£

Average amount = (£30,000 + £25,000)/2 =

27,500

–––––––––––––––––––––––––––––

Interest at the official rate: £27,500 × 4.75% 1,306

Interest paid

(525)

–––––––––––––––––––––––––––––

Assessable benefit, average method 781

–––––––––––

–

–––––––––––––––––

(2) Strict method

£

Interest at the official rate:

From 6 April 2009 to 6 July 2009 (3 months): £30,000 × 4.75% × 3/12 356

From 6 July 2009 to 5 April 2010 (9 months): £25,000 × 4.75% × 9/12

891

–––––––––––––––––––––––––––––

1,247

Interest paid

(525)

–––––––––––––––––––––––––––––

Assessable benefit 722

–––––––––––––––––––––––––––––

Note

Richard should insist on the strict method being used, because this gives a lower

taxable benefit.

6 Colin

Colin: computation of adjusted profits

Seven months ending 31 January 2010

£

Net profit 67,750

Add Depreciation 26,000

Owner’s personal income tax and NICs 6,400

Hire charge (W1) 840

Write off of loan to customer 2,250

Car expenses (W2) 340

Goods taken out for own use (see note) 120

Adjusted profit 103,700

Notes

The full market value of goods taken out of the business by the owner must be

added to profit, as no entry at all has been made in the accounts of the business.

The sales manager’s expenses are fully allowable for the business. Private use by an

employee is not relevant. The sales manager will be assessed on the private use of

his company car in his income tax computation.

W1: Hire of car with CO

2

emissions over 160 g/km £

Disallowable element of hire charge £5,600 × 15%

840

ACCA F6 FA09 Study Text 2010

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