NVQ/SVQ Level 4 in Accounting Preparing Personal Taxation ......NVQ/SVQ Level 4 in Accounting Preparing Personal Taxation Computations (FA 2003) (PTC) Friday 18 June 2004 (morning)

TASK 1.1 TASK 1.2 TASK 1.3 TASK 1.4 TASK 1.5 TASK 1.6

TASK 2.1 TASK 2.2 TASK 2.3 TASK 2.4 TASK 2.5

NVQ/SVQ Level 4 in AccountingPreparing Personal TaxationComputations (FA 2003) (PTC)

Friday 18 June 2004 (morning)

EXAMINATION

Time allowed — 3 hours plus 15 minutes’ reading time

Please complete the following information in BLOCK CAPITALS. You must give your registration number below. If you do not, your paper may not be marked.

AAT Registration Number

Approved Assessment Centre Code

Approved Assessment Centre Name.........................................................................................................................

154 Clerkenwell Road, London EC1R 5AD, UK Tel: +44 (0)20 7837 8600 Fax: +44 (0)20 7837 6970

© AAT

Do NOT open this paper until instructed to do so by the Supervisor.

Important:

This examination paper is in two sections. You must show competence in both sections, soyou should attempt and aim to complete every task in each section.

We recommend that you use the 15 minutes’ reading time to study the examination paperfully and carefully so that you understand what to do for each task. However, you maybegin to write your answers within the reading time, if you wish.

You may not use programmable calculators or dictionaries in the examination.

For Assessor’s use only

SECTION 1

SECTION 2TOTAL

TOTAL

PTC

Desk number ..............................

Date ................................................

2

You may use this page for your workings.

3

This page is perforated. You may remove it for easy reference. TAXATION TABLES Tax rates and bands: % £ Starting rate 10 first 1,960 Basic rate 22 next 28,540 Higher rate 40 over 30,500 Savings income is taxed at 10%, 20% and 40%. Dividends are taxed at 10% and 32.5%. Personal allowances: £ Personal allowance 4,615 Car benefit percentage: The base level is 155g/km. The base figure for petrol is £14,400. Inland revenue official rate: 5% Capital gains tax: Annual exemption £7,900 Indexation factors: July 1984 to April 1998 0.824 October 1985 to April 1998 0.701 Tapering relief for non-business assets: Number of years held after 5 April 1998 % of gain 2 or less 100 3 95 4 90 5 85 6 80 7 75 8 70

4

This page is perforated. You may remove it for easy reference. This examination paper is in TWO sections. You must show competence in BOTH sections. You should therefore attempt and aim to complete EVERY task in EACH section. You should spend about 90 minutes on Section 1 and 90 minutes on Section 2. Blank space for workings is available on pages 2, 9, 19, 22 and 23, but all essential calculations should be included within your answers, where appropriate. SECTION 1 DATA You work in the tax department of a firm of Chartered Accountants. Your client, Averil Green, has given you the following information relating to the tax year 2003/04. She is employed by Emerald Ltd. 1. Her annual salary is £25,000, from which PAYE of £4,250 had been deducted. 2. Averil has the use of an apartment, which has an annual value of £5,500, and which

cost Emerald Ltd £90,000. She makes no contribution towards the use of the apartment. She pays all the running costs of the apartment, which amounted to £3,200 for 2003/04. She does not have to live there to perform her job.

3. On 1 October 2003, Emerald Ltd provided Averil with a digital camera for her private

use. It cost £500. 4. She received cheques for dividends of £720. 5. She received building society interest of £368. 6. She bought a house on 1 June 2003 for £84,000. She then bought furniture for £3,000

and let the house furnished for £5,000 per annum from 1 July 2003. The rent was paid quarterly in arrears. She also paid insurance of £450 for the period 1 June 2003 to 5 April 2004. She claimed the 10% wear and tear allowance for the furniture.

5

Task 1.1 Calculate the Schedule A income for 2003/04. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

________________________________________________________________ ________________________________________________________________ Task 1.2 Calculate the total employment income, including benefits, for 2003/04. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

6

Task 1.3 Prepare a computation of taxable income for 2003/04, clearly showing the distinction between the different types of income. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

7

Task 1.4 Calculate the net income tax payable for 2003/04, after PAYE. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

8

Task 1.5 Averil tells you that Emerald Ltd is thinking of providing her with a company car. It may pay for either all the petrol, or the petrol that relates to the business mileage only. She does not know what the tax implications of these benefits would be. Explain to Averil:

• How the benefit on company cars is calculated

• How the benefit for fuel provided by Emerald Ltd is calculated

• How any contribution she makes to Emerald Ltd for these benefits affects the taxable amounts.

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

9


10

DATA You received the following e-mail from Averil Green. From: [email protected] To: [email protected] Sent: 10 June 2004 12.57 Subject: Help I was wondering if you could give me some tax advice. My father has high Schedule A income, and he has received a notification from the Inland Revenue that shows how much tax he needs to pay. He agreed with the Inland Revenue that his tax liability for 2002/03 was £7,580. My father thinks that his tax liability for 2003/04 is going to be about £10,000. The notification from the Inland Revenue reads: The amounts due for 2002/03 are: First payment on account £3,400 due by 31 January 2003 Second payment on account £3,400 due by 31 July 2003 Balancing payment £780 due by 31 January 2004 The payments on account due for 2003/04 are: First payment on account £3,790 due by 31 January 2004 Second payment on account £3,790 due by 31 July 2004 My father has paid the tax due on 31 January 2004, but we don’t understand how the Inland Revenue arrived at these figures. Please explain how the Inland Revenue has worked out these payment amounts and dates. Many thanks. Averil

11

Task 1.6 Reply to Averil’s e-mail, answering her queries. From: [email protected] To: [email protected] Sent: 18 June 2004 16:02 Subject: Re: Help ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

12

This page is for the continuation of your e-mail. You may not need all of it. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________

13

SECTION 2 DATA One of the firms’ clients, Adam Harrison, was 63 on 4 April 2004. He had the following capital transactions during the year 2003/04:

1. He bought a house on 1 October 1985 for £65,000. He lived in the house until 31 January 1988. He then worked abroad for exactly two years before returning to the UK to live in the house again. He took early retirement on 1 April 1994, moving to Portugal to live until 1 April 2003. He moved back into the house until 30 November 2003, when he sold it for £187,500.

2. On 1 July 2003, Adam sold 2,500 of his shares in Central Ltd for £75,800. The shares

are not business assets for the purposes of taper relief. He had acquired 6,000 shares in Central Ltd in January 1999 for £140,160. In August 2001, Adam took up a rights issue of 1 for 10 at £8 per share.

3. On 1 February 2004, Adam sold an antique table for £15,000. He had bought it in

July 1984 for £7,000, and had spent £1,000 in August 1999 on refurbishing it. During the tax year 2003/04, Adam received:

• a company pension of £2,000 per month

• £250 interest on an ISA.

14

THIS PAGE IS INTENTIONALLY BLANK

15

Task 2.1 Calculate the taxable gain or loss made on the disposal of the house, after any taper relief, if applicable. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

16

Task 2.2 Calculate the taxable gain or loss made on the disposal of the shares, after any taper relief, if applicable. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

_________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

17

Task 2.3

Calculate the taxable gain or loss made on the disposal of the table, after any taper relief, if applicable. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

18

Task 2.4

Calculate the capital gains tax liability for 2003/04. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

19


20

DATA You received the following e-mail from Adam Harrison. From: [email protected] To: [email protected] Sent: 3 June 2004 16:12 Subject: Losses I know that you have calculated all the necessary figures for my 2003/04 tax transactions, but I forgot to tell you that I have £6,000 capital losses from 2002/03 to bring forward. Sorry if this will spoil the work that you have already done! Awaiting your response Adam Harrison Task 2.5 Reply to Adam’s e-mail, explaining to him how the losses from 2002/03 will affect his tax liability for 2003/04. From: [email protected] To: [email protected] Sent: 18 June 2004 15:32 Subject: Re: Losses ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

21

This page is for the continuation of your e-mail. You may not need all of it. ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________ ___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

___________________________________________________________________________

22


23


Association of Accounting Technicians154 Clerkenwell Road, London EC1R 5AD, UK Tel: +44 (0)20 7837 8600 Fax: +44 (0)20 7837 6970 © 06.04

Documents

NVQ/SVQ Level 4 in Accounting Preparing Personal Taxation ......NVQ/SVQ Level 4 in Accounting Preparing Personal Taxation Computations (FA 2003) (PTC) Friday 18 June 2004 (morning)