Paper F6 Revision Questions and Answers

8/3/2019 Paper F6 Revision Questions and Answers

1/90

Income Tax - Individuals

Example 1

Jane earns 36,000 tax adjusted trading prot in 2010/11, receives bank interest o 4,000 and dividend income

o 5,400.

In addition she pays 800 to charity under the Git aid scheme

Calcla Ja c a payal 2010/11

1PAPer F6 revision Questions DeCember 2011 exAminAtions


2/90


Example 2

rcalcla Ja c a payal h a adjd adg p c wa ly 8,000



3/90


Example 3

Benny has tax adjusted trading prot o 120,000 in 2010/11. He paid 12,000 to charity under the git aid

scheme and 1,000 o qualiying interest payments.

Calcla by c a payal.



4/90


Example 4

ug apl 3 - rcalcla by c a payal ag h al cd 45,000 ddd

c 2010/11.



5/90


Example 5

Anne was born on 18th September 1940 and has Net Income o 25,000

D h pal ag allwac h ld 2010/11



6/90


Example 6

Tony and Kathy are a married couple. Tony has employment income o 50,000 and receives rental income o 5,000.

Kathy has no income.

Dc hw, a a cpl, hy cld dc h all a laly



7/90

Income Tax - Property Business Prot

Example 7

Robert owns two properties.

Property A is let out unurnished at an annual rental o 4,000 rom 1 July 2010.

Rent is payable quarterly in advance. Expenses amounted to 1,500 or the year to 6 April 2011 on an accruals basis.

Property B is let out urnished at an annual rental o 3,000, rom 1 August 2010.

Rent is payable annually in advance. Expenses amounted to 2,200 or the year to 6 April 2011. In addition, Robert

claimed a wear and tear allowance.

D r Ppy ic ad 2010/11.



8/90


Example 8

Molly grants a 20-year lease on a shop on 1 August 2010 or a premium o 25,000. The annual rent o 12,000 is

payable yearly in advance.

Calcla mlly Ppy ic 2010/11 ad h l aalal h a h p pad.



9/90


Example 9

Ben rented a urnished property to students at a monthly rental o 1,000 until 31 July 2010. The property was

redecorated in August and let again rom 1 September 2010 or 1,200 per month. Details o expenditure during

2010/11

Redecoration 2,010

Water rates 150

New washing machine 250

Gardening 520

Legal ee or tenancy agreement 75

Mortgage interest 3,700

Insurance 305

On 1 May 2010 he acquired another urnished property. He paid service charges o 25 per month and mortgage

interest o 500 per month. The property was let rom 1 August 2010 at a monthly rent o 600.

(a) Calcla b Ppy ic 2010/11

() What diference would it have made i the econd property wa claed a a Furnihed Holiday letting

ppy.



10/90


Example 10

Jimmy rents a room in his main residence to Kenny. Jimmy receives rental income o 4,750 and incurs relevant

expenses o 300 in 2010/11

Calcla Jy Ppy ic ag all lc a clad 2010/11



11/90

Income Tax - Unincorporated Business

Example 11

Kerrys net prot or the year ended 31 December 2010 was 30,000 included the ollowing:

Expenses:

Proprietors wages 10,000

Depreciation 2,800

Contribution to Political Party 76

Purchase o van or business 20,000

Fines or inadequate encing o equipment 750

Legal ees or acquisition o a 21 year lease 600

Donation to National Charity 100

Entertaining customers 300

Car Expenses 1,200

Income:

Income rom urnished lettings (net o Expenses) 1,800

Bank deposit interest (net) 500

Dividends (net) 4,200

Kerry took goods rom the business or her own use, with a cost o 280 and selling price 400.

Kerry paid the business 280 or the goods.

Kerry can show that her business use o the car is 80%.

Calcla h adjd p ya dd 31 Dc 2010



12/90


Example 12

Debra, a sole trader, prepares accounts to 31 December.

The WDVs or capital allowances purposes, as at 31/12/09 were as ollows:

General pool 30,000

Expensive car (private use 20%) 15,000

During the year ended 31/12/10 the ollowing transactions occurred:

1 January purchased plant 40,000

3 March purchased car, CO2

emissions o 135g/km 11,000

10 March purchased car, CO2emissions o 106g/km 18,000

18 April bought a printing press 4,000

6 May sold plant 2,000

10 June sold expensive car 16,000

12 December purchased a long lie asset 160,000

The printing press is to be treated as a short-lie asset. All assets sold were disposed o or less than cost.

Calcla h capal allwac h ya dd 31 Dc 2010.



13/90


Example 13

Elliot bought a new industrial building on 1 January 2011, incurring the ollowing costs:

Land 40,000

Building 200,000

Oces 50,000

He brought the building into industrial use immediately and continued to use it or industrial purposes until its

date o sale on 1 January 2013.

Elliot sold the building or 230,000 (including 50,000 or the land and 35,000 or the oces).

Calcla h allwac g ell. (H ppa acc 31 mach).



14/90


Example 14

Felix, a scientic instrument manuacturer, makes up annual accounts to 31 March. He bought a new industrial

building on 1 July 2010 and bought it into use straight away. The building cost 400,000 and was used or industrial

purposes until 30 June 2011. The actory was used or non-industrial purposes or the period 1 July 2011 to 30

September 2012.

On 1 October 2012 the actory was again in industrial use and continued to be so until its sale on 30 June 2013

or 475,000 to Terry.

Calcla h allwac aalal Fl all la pd acc.



15/90


Example 15

James prepares accounts to 30 September annually. His tax adjusted trading proft or the two years to 30 September

2010 were:

Year to 30 September 2009 17,000

Year to 30 September 2010 19,000

shw h a 2009/10 ad 2010/11



16/90


Example 16

Adam commenced trading on 1 July 2008. He prepared accounts to 30 June each year. His tax adjusted trading

prot or the rst two years were as ollows:

Year ended 30 June 2009 36,000


shw h a all la ya.



17/90


Example 17

Emily commenced trading on 1 July 2008. She prepared accounts to 31 March 2010 and annually thereater. Her

tax adjusted trading prot or the rst two accounting periods were as ollows:

21 months ended 31 March 2010 63,000

Year ended 31 March 2011 40,000

shw h a all la ya.



18/90


Example 18

Patricia commenced trading on 1 September 2008.

She prepared accounts to 30 June 2009 and annually thereater. Her tax adjusted trading prot or the rst two

periods were as ollows:

10 months ended 30 June 2009 40,000


shw h a all la ya.



19/90


Example 19

Jacqui commenced trading on 1 July 2008. She prepared accounts to 30 April 2010 and annually thereater. Her

tax adjusted trading prot or the rst two periods were as ollows:

22 months ended 30 April 2010 66,000

Year ended 30 April 2011 30,000

shw h a all la ya.



20/90


Example 20

Matthew commenced trading on 1 May 1999. Ater trading protably or some years, he ceased trading on 31

March 2011. His tax adjusted trading prot or the nal three periods is as ollows:

Year ended 30/4/2009 37,000

Year ended 30/4/2010 40,000

Period ended 31/3/2011 36,000

Assume his overlap prots (or the period 1/5/99 - 5/4/00) were 25,000.

shw h a all la ya.



21/90


Example 21

Anne decides to change her accounting date rom 31 March to 30 June making up accounts or the three month

period to 30 June 2009. Annes tax adjusted trading prot is as ollows:

Year ended 31 March 2009 72,000

Three months to 30 June 2009 16,000


shw h a all la ya.



22/90


Example 22

Tony, a sole trader, commenced trading on 1 July 2006. He has now decided to change his accounting date to 30

September by making up accounts or the 15-month period to 30 September 2009. Tonys tax adjusted trading

prot is as ollows:



Period ended 30 September 2009 45,000

Year ended 30 September 2010 54,000

shw h a all la ya.



23/90


Example 23

Mike started trading on 1 November 2008. His trading results beore deducting capital allowances were as ollows:

8 months ended 30 June 2009 36,000


He bought a car with CO2

emissions o 145g/km on 9 November 2008 or 15,000 or the sole use o his salesman.

Calcla h a adjd adg p aal a 2008/09, 2009/10 ad 2010/11.



24/90


Example 24

Barbara makes up accounts to 31 March each year.

For the year ended 31 March 2011 she incurred a trading loss o 10,000.

D whch ya baaa ay cla l l?



25/90


Example 25

Ken gave up his job with an orchestra, and started his own musical business on 1 November 2007.

His results are as ollows:

Year ended

31 October 2008 loss (50,000)

31 October 2009 prot 20,000

31 October 2010 prot 15,000

31 October 2011 prot (estimated) 27,000

Kens only income was employment income as ollows:

Up to and including 2006/07 60,000 p.a.

2007/08 (7 months) 35,000

(a) shw hw h l wld ld d c ya, cayack, pcal pg ya l l ad

cay wad l.

() Whch wld h cal way K l h l?



26/90


Example 26

Bill and Ben share prots equally up to 31 October 2010 but in the ratio 2:1 thereater. Their tax adjusted trading

prots or the year to 31 December 2010 are 48,000.

shw h allca h a adjd adg p h pa 2010/11



27/90


Example 27

Tracy and Donna are in partnership sharing profts equally. On 31 December 2009 Donna retired. Ethel was admitted

to the partnership on 1 January 2010 and was entitled to one third o the prots.

The tax adjusted trading prot or the years to 30 June 2009, 2010 and 2011 are 40,000, 54,000 and 60,000.Respectively Donna has overlap prots brought orward o 15,000.

shw h a adjd adg p aal 2009/10, 2010/11 ad 2011/12 all pa.



28/90


Example 28

Gordon has the ollowing income and gains:

2009/10 2010/11

Total income 6,000 7,000

Capital gains 20,000 16,000

He incurred a trading loss o 50,000 in his year ended 31 December 2010.

show Gordon taxable income and chargeable gain or 2009/10 and 2010/11 auming that he relieve hi

adg l a aly a pl.



29/90

Income Tax - Employee Benets

Example 29

Thomas earns 40,000 per annum. He is provided by his employer with a at close to the oce. Its annual value

is 4,100. The at was purchased in 2002 or 250,000 and was rst made available to Thomas in January 2006

when it was worth 280,000.

The employer paid heating bills o 580 in 2010/11. The urnishings in the house cost 20,000.

Assume an ocial rate o interest o 4%.

Calcla tha pc h p h accda ad acad p.



30/90


Example 30

Clare earns 20,000 p.a. and is provided with a petrol Volvo T5 by her employer. The car, which was purchased in

January 2006, had a list price o 30,000. The car was rst made available to Clare on 1 July 2010. The car has an

ocial CO2

emission rate o 188 grams per kilometre. In the year 2010/11 she drove 16,000 miles, o which 2,000

were private. Clare contributes 20 per month to her employer or the private use o the car. Clare is also providedwith uel by her employer or private use.

Calcla Cla pc h cpay ca.



31/90


Example 31

Mike was rst provided with a CD player or his private use on 6 April 2009. It had a market value o 6,000.

His employer transerred the CD player to Mike on 6 April 2010, when it was worth 4,200. Mike was required by

his employer to pay 500.

Calcla mk 2009/10 ad 2010/11.



32/90

Individuals - Pensions

Example 32

Tony is sel-employed

His tax adjusted trading prot assessable amount or 2010/11 is 20,000.

Y a qd calcla h a p c h cld a l 2010/11.



33/90

Individuals Capital Gains Tax

Example 33

Gill sold a actory used in her trade in November 2010 or 140,000. She had bought it in January 1988 or 60,000.

The disposal was not part o the sale o the entire business.

Gill made one other disposal in 2010/11 realising a capital loss o 4,500.

Gills Taxable income in 2010/11 is 32,000.

Calcla Gll capal ga a payal 2010/11 ad a h d da pay.



34/90


Example 34

Frederick bought an Antique vase costing 3,000 in July 1997 and sold it in February 2011 or 4,500

James bought a painting costing 2,000 in September 1999 and sold it September 2010 or 7,500

Sam bought a rare manuscript in July 1993 or 10,000 and sold it in August 2010 or 3,000

Calcla h capal ga capal l ag ach ddal.



35/90


Example 35

Billy bought a set o ten terracotta warriors in March 1997 or 20,000. He sold 2 warriors in July 2010 or 6,000.

The remaining 8 warriors were worth 28,000 in July 2010.

Calcla h Capal Ga 2010/11



36/90


Example 36

Simon purchased an oce block as an investment or 500,000 in April 2002. In September 2010 it was damaged

by re. Restoration Expenditure o 70,000 was incurred in February 2011 and Simon received insurance money

o 60,000 in June 2011. The oce block was worth 1,000,000 ater the damage.

Assume Simon elects to deduct the proceeds o insurance against the cost o the building when the restored

asset is sold.

Calcla h Capal ga ag ( ay) J 2011 ad h a c h a a q dpal.

(A h a a 2010/11 c h ).



37/90


Example 37

Betty purchased an asset or 25,000 on 1 October 1991 which was destroyed by re on 30 September 2010.

She received compensation o 36,000 rom her insurance company on 1 January 2011 and purchased a replacement

asset or 34,000 on 1 February 2011.

Calcla h Capal Ga ag 1 Jaay 2011 ad h a c h plac a.



38/90


Example 38

Nancy owns 5,000 shares in Horwick plc, a quoted company. They were acquired in June 2007 and September

2009 or a total cost o 18,000. Nancy sells 2,000 o the shares in December 2010 or 36,000.

Nancy is not an employee o Horwick plc.

Cp h Capal Ga ag h al h ha Dc 2010



39/90


Example 39

Rebecca bought shares in Surpass plc as ollows:

Shares

6 October 1990 800

1 December 1993 1,000

1 August 2002 500

11 November 2010 1,800

On 1 June 1996 there was a bonus issue o 1:4.

On 1 November 2010 she sold 3,550 shares.

idy h ha rcca ha dpd g h ddal ha achg l.



40/90


Example 40

Kit sold her unincorporated business on 31 October 2010 which she had owned or the previous 10 years, giving

rise to the ollowing Capital Gains and Capital Losses

Freehold actory 200,000

Warehouse (150,000)

Goodwill 350,000

Investment property 120,000

She also disposed o shares in Planet Limited in June 2010, (a company in which she owned an 8% holding and

was a part time employee or the last 5 years), giving rise to a capital gain o 700,000

Kit had capital losses brought orward o 20,000, she has taxable income o 30,000.

Calcla K Capal Ga ta Laly ad a h d da pay.



41/90


Example 41

Chloe, a trader, disposed o land used in her business or 750,000 in March 2011. The land had cost her 100,000

in June 1988. The sale was not part o the disposal o the entire business. She purchased a actory (as part o the

purchase o another unincorporated business), or trading use, in November 2011 or 700,000.

Calcla h chagal ga h dpal h lad ad h a c h acy.



42/90


Example 42

Peter sold a business asset to Kris in October 2010 or 40,000 when its market value was 75,000. The asset had

cost Peter 25,000 in March 1990.

Git relie is claimed.

Calcla P chagal ga ad h a c h a K.



43/90


Example 43

Jacqui bought a house in Manchester on 6 July 1991. She lived in it until 6 July 1996. She then took a job in

Birmingham living in accommodation provided by her employer, and let out the house in Manchester.

She let the job on 6 January 2006 and travelled or 2 years, returning to the house in Manchester on 6 January 2008.The house was empty during this period. She sold the house on 6 July 2010, making a capital gain o 190,000.

Calcla h chagal ga a all la l



44/90

Inheritance Tax

Example 44

Jasper died on 28 February 2011. His estate comprised o the ollowing:

House 500,000

Bank account 220,000

Cash ISA 10,000

Motor vehicles 35,000

Credit card debts 2,000

Repayment mortgage on the house 100,000

Funeral expenses amounted to 7,000

Under the terms o his will, Jasper let the house to his wie and the rest o the estate to his daughter.

During his lie Jasper made various gits as ollows:

12 November 2003 - Git to a trust o 200,000

15 December 2003 - Git to his daughter o 50,000

18 March 2007 - Git to his nephew o 175,000 on the occasion o his marriage

26 August 2009 - Git to a trust o 250,000.

Jasper agreed to pay any lietime IHT due.

The relevant nil rate bands are as ollows:

2003/04 255,000

2006/07 285,000

2009/10 325,000

Calcla h iHt ag h l g ad h iHt a a l dah.

sa h d da pay ay iHt ag ad wh wll pay ad h iHt.



45/90

Corporation Tax

Example 45

In the year to 31 March 2011 Cannock plc received and (paid) the ollowing amounts:

Tax adjusted trading prot 280,000

Bank interest (accrued) 20,000

Debenture interest (accrued) 30,000

Dividends received (net) 4,500

Git Aid payment (1,000)

Dividends paid (net) (80,000)

Calcla cpa a payal y Cack plc.



46/90

Corporation Tax

Example 46

Fallings Ltds prot beore tax or the year ended 31 December 2010 was 90,000 included the ollowing:

Expenses:

Directors salary 42,000

Depreciation 2,800

Git Aid donation to charity 180

Purchase o van or business 20,000

Fines or inadequate encing o equipment 750

Legal ees or acquisition o a 21- year lease 600

Amortisation o lease (cost 42,000) 2,000

Christmas party or staf 480

Entertaining customers 300

Expenses o car used by a director 1,200

Political donation to the Green Party 100

Income:

Income rom urnished lettings (net o Expenses) 1,800

Bank deposit interest 500

Dividends (net) 4,200

A director took goods rom the business or her own use, with a cost o 280 and selling price 400. The directors

loan account was debited with the 280 cost.

The director with a company car can show that her business use o the car is 80%.

Calcla h adjd p h ya dd 31 Dc 2010.



47/90

Corporation Tax

Example 47

Westcrot Ltd, a small company which manuactures greetings cards, prepares accounts to 31 December.

The WDVs or capital allowances purposes, as at 31/12/09 were as ollows:

General pool 30,000

Expensive car (private use by director 20%) 15,000

During the year ended 31/12/10 the ollowing transactions occurred:

1 January purchased plant 40,000

3 March purchased car CO2


10 March purchased car CO2


6 May sold plant 2,000

10 June sold Expensive car 16,00018 September bought printing press 4,000

12 December purchased a long lie asset 160,000

The printing press is to be treated as a short-lie asset. All disposals were or less than cost.

Calcla capal allwac h accg pd dd 31 Dc 2010.



48/90

Corporation Tax

Example 48

Skip plc had the ollowing income and expenditure or the year ended 31 March 2011.

Adjusted prots 500,000

Capital allowances 20,000

Building society interest amount received in the year 30,000

amount accrued or the year 24,000

Debenture interest amount received in the year 25,000

amount accrued or the year 28,500

Git Aid amount paid 1,800

Calcla h taal tal P ya dd 31 mach 2011.



49/90

Corporation Tax

Example 49

Bugs Bunny Ltd sold a actory used in its trade in November 2010 or 140,000. The company had bought it in

January 1998 or 60,000.

Assume that the indexation actor or the period January 1998 to November 2010 is 0.358.

The company made one other disposal in its year to 31 March 2011 realising a loss o 4,500.

Calcla h n chagal Ga ag h dpal h w a.



50/90

Corporation Tax

Example 50

ST Limited sold 5,000 shares in JM Ltd or 50,000 on 12 January 2011. They had been acquired as ollows:

February 1992 1,000 shares costing 1,500

January 1994 1:4 Bonus issue

July 1997 2,000 shares costing 4,000

February 2002 1:5 Rights issue at 1.75 per share

January 4th 2011 2,000 shares costing 4,500

Calcla h chagal ga cld h Cpa a cpa.

RPIs are: Feb 1992 136.3

Jan 1994 141.3

July 1997 157.5

Feb 2002 173.8

Jan 2011 230.0



51/90

Corporation Tax

Example 51

Daisy Ltd, a trading company disposed o a building or 750,000 in March 2011. The building had cost the company

100,000 in June 1990.

Assume an indexed rise o 70% to March 2011. Daisy Ltd then purchased land, or trading use, in November 2011or 700,000.

Calcla h chagal ga h dpal h ldg ad h a c h lad.



52/90

Corporation Tax

Example 52

Bolton plc had the ollowing results or the years ending 31 December.

2009 2010 2011

Tax adjusted trading prot/(loss) 10,000 (18,000) 42,000

Interest income 2,000 2,000 2,000

Git aid payment 1,000 1,000 1,000

shw hw h l ld, ag bl plc cla l l a a pl.



53/90

Corporation Tax

Example 53

Z Ltd made a loss o 120,000 in the year to 31 December 2010, and T Ltd made a Taxable Total Prot o 100,000

in the year to 30 September 2010.

Calcla h a adg l ha Z Ld ca d t Ld t Ld accg pd 30

sp 2010



54/90

Corporation Tax

Example 54

J Ltd and K Ltd had the ollowing results:

y/e

31/3/2010

y/e

31/3/2011

J Ltd Tax adjusted trading prot 500,000 200,000

K Ltd Tax adjusted trading prot/(loss) 190,000 (120,000)

Calcla h taal tal P ach cpay ya dd 31 mach 2010 ad 31 mach 2011 ag

h tadg l K Ld h cal a h gp



55/90

Income Tax - PAYE Coding

Example 55

William Ltd has the ollowing income or the year to 31 March 2011:

Tax adjusted trading prot 1,500,000

Overseas rental income (amount received net o 3% withholding tax) 155,200

Calcla h cpa a Wlla Ld h ya dd 31 mach 2011



56/90

Income Tax - Sel Assessment

Example 56

A taxpayers tax liability or 2009/10 was as ollows:

Income tax 9,400

Less: Tax deducted at source (2,100)

7,300

Class 4 NIC 700

CGT 3,500

11,500

Calcla h pay acc 2010/11 ad a h d da pay



57/90

Income Tax - Sel Assessment

Example 57

Continuing with the previous example, suppose that the taxpayers liability or 2010/11 is as ollows:

Income tax 10,800

Less: Tax deducted at source (2,500)

8,300

Class 4 NIC 800

CGT 4,600

13,700

Calcla h alacg pay d 31 Jaay 2012 ad h pay acc 2011/12



58/90

Income Tax - PAYE Coding

Example 58

Maureen, who is single, is a basic rate taxpayer.

She paid a personal pension premium o 1,000 (net) and 120 proessional subscription in 2010/11.

She received benets o 320 rom her employer.

She received untaxed income o 250, the tax liability on which is discharged by set-of against allowances.

Underpaid tax o 150 rom an earlier year is to be collected via her code.

Calcla ma PAYe a cdg c 2010/11.



59/90

Corporation Tax - Sel Assessment

Example 59

Daisy limited has Taxable Total Prots o 2 million in year end 31 March 2011

(a) Calcla h cpa a ad h d da pay

() Wha h lg da?



60/90

VAT

Example 60

YR Ltd commenced trading on 1 June 2010. The value o its taxable supplies were 4,000 per month until 1 April

2011 when they increased to 8,500 per month.

Wh d Yr Ld ha y HmrC ha d g vAt ad wh ga c?



61/90

VAT

Example 61

Dolphin Ltd commenced trading on 1 June 2010. The value o its taxable supplies was 3,000 per month until 1

April 2011 when the company signed a contract such that monthly sales were expected to be 70,000.

Wh Dlph Ld qd g vAt ad y wha da y HmrC?



62/90

VAT

Example 62

In the quarter to the 30 June 2011, ST Limited made standard rated supplies o 100,000 and zero rated supplies

o 50,000. It ofered a 3% discount or payment within 28 days. Approximately a third o its customers took up

the discount.

It made standard rated purchases o 61,250 (VAT inclusive), which included 2,250 or entertaining customers.

It made zero rated purchases o 12,000.

It wrote of irrecoverable debts o 7,875 and 5,525 in respect o amounts due 1 September 2010 and 1 April

2011. Both gures are VAT inclusive.

Purchased a car or the salesman who uses the car or private use costing 21,250 (including VAT) and machinery

costing 11,750 (including VAT)

shw h cldd h vAt qa 30 J 2011.

All gures are VAT exclusive unless otherwise stated.

Assume a VAT rate o 20% throughout.



63/90

VAT

Example 63

BW Ltd has the ollowing sales & purchases in year ended 30 June 2011:

Standard rated sales o 70,500 (including VAT) and zero rated sales o 5,000.

Standard rated purchases o 11,750 (including VAT)

i h la fa a pcag 9% h ad, lla adal h fa a ch.



64/90

VAT

Example 64

Daisy Ltds VAT return or quarter to 30 June 2010 was submitted on 15 August 2010 with the payment o VAT

5,000 also on this date.

The return and payment or quarter to 30 September 2010 was on time.

The next return to 31 December 2010 was on time, but the related VAT payment o 40,000 was only paid on 10

February 2011.

Dc h vAt cqc h la h vAt ad/ pay Day Ld.



65/90

VAT

Example 65

ouline he adanages and disadanages f Grup vAt regisrain and uline which cmpanies can frm par

h vAt gp



66/90

VAT

Example 66

Mars Limited exports 100,000 o goods to customers in New Zealand (Non EU country) and dispatches 50,000

o goods to non business customers in Germany (EU country) in the quarter to 30 June 2011.

In addition within this VAT quarter it imports 150,000 of goods from an Australian business supplier (non EUcountry) and has acquisitions rom a business supplier in France (EU country) o 75,000.

Mars Limited makes wholly taxable supplies.

Ppa a ac ma Ld vAt 30 J 2011, plag y a ach vAt

pp.



67/90

1PaPer F6 revision answers December 2011 examinations

i t - iddul

Answer to example 1

JaneIncomeTaxcomputation

ng sg Ddd

taxadjustedtradingprot

Bankinterest/0 Dividends/0

TotalIncome

Less:PA ()

TaxableIncome

Taxcalculation

Nonsavings

%

Savings

%

Dividends:

[+(/0)==]

%

%

Taxliability

Lesstaxdeductedatsource

Dividends% ()Bankinterest% ()

Taxpayable

Thestartingrateo%orsavingsincomeisnotapplicableastaxablenon-savingsincomeisabove

Answer to example 2

ng sg Ddd

taxadjustedtradingprot

Bankinterest/0

Dividends/0

TotalIncome Less:PA ()

TaxableIncome


68/90


69/90


Answer to example 4

BennyIncomeTaxcomputation

ng Ddd

Taxadjustedtradingprot

Dividendincome/0

Totalincome

Less:reliesQualiyinginterest ()

Netincome

LessPersonalallowance( W) ()

TaxableIncome

IncomeTax

Nonsavings

( W) %

%

(W)Dividends

()

/%

/%

Incometaxliability

Lesstaxdeductedatsource

Dividends(%) ()

Incometaxpayable

(W) Netincome

Less:Grossgitaidpayment(/0) ()

AdjustedNetIncome

AsadjustednetincomethepersonalallowanceisreducedtoNil

(W) +=

(W) +=

Answer to example 5

InAnneisyearsold

Personalallowance

Less (-) ()

RevisedPersonalallowance

Answer to example 6

AsTonyisahigherratetaxpayeronhisemploymentincomehehasataxliabilityonhispropertyincomeo%.

Kathyhasnoincomeandassuchiswastingherpersonalallowanceandbasicratebanding.

ItwouldbebetteriKathyweretoownthePropertysuchthatthepropertyincomeisassessedonher.Thepropertyincomeo

willbecoveredbyherpersonalallowancesonoliabilitywilloccur.

Thiswillsavethecoupletaxo(%).


70/90

PaPer F6 revision answers December 2011 examinations4

i t - Ppy bu Pf

Answer to example 7

Assessableamountoryear

PropertyA

9/1

Less:Expenses ()

PropertyB

8/1

Less:Expenses ()

Wearandtearallowance% ()

()

PropertyIncome

Answer to example 8

Molly-PropertyIncomeor:

Premium(-)

Rentalincome8/1

Tenant:Relieavailable15 500

20775

, pa

Answer to example 9

(a) Ppy (1) Ppy (2) tl

Rentalincome

)+ .)

Lessexpenses:

Redecoration () ()

Waterrates () ()

Gardening () ()

Legalees () ()

Mortgageinterest () ()

Insurance () ()

Wearandtearallowance%() () () ()

Servicecharge() () ()

Mortgageinterest() () ()

()

Prop er ty I nc ome o r =

(b) IProperty ()wasFurnishedHoliday lettingproperty thenthelosswouldnothavebeen osetagainstProperty()

income.

ThePropertyincomewouldhavebeenorandthelossonProperty()wouldbetreatedasatradingloss

orosetagainstthetotalincomeandgainsoandor.

Inadditionthelosscouldbeosetagainsttotalincomeoandundernewbusinessrulesor

carriedorwardagainstutureprots.Inadditionthewear&tearallowancewouldnotbeavailablebutcapitalallowances

couldbeclaimedonthecostotheurnitureinstead.


71/90


Answer to example 10

( a) Normalassess ment

Rentalincome

Lessexpenses ()

Wear&tearallowance% ()

PropertyIncome

(b) R ent a Ro om wit h election

Rentalincome lessrentaroomrelie ()

PropertyIncome

TheRentaRoomrelieelectionshouldbemade.

i t - Upd bu


Netprotperaccounts

Addback

Proprietorswages

Depreciation

Politicaldonation

Purchaseovan

Fine

Legalees

Donationtonationalcharity

Entertaining

Carexpenses(%)

Protongoodsorownuse()

Less:

Incomeromurnishedlettings

Bankdepositinterest

Dividends

()

Adjustedprot


72/90



Capitalallowancesyearended

Gl

pl

80%

ep

p u (1)

spl

pl

sh l

(1)all

WDVb

AdditionsqualiyingorAIA

Longlieasset

LessAIA(Maximum) ()

AdditionsqualiyingorAIA

Plant

Printingpress

AIA ()

Otheradditions

MotorcarCO emissions--gkm

Disposals () ()

()

WDA@% ()

BalancingCharge @% ()

WDA@% ()

WDA@% ()

AdditionsqualiyingorFYA

Motorcar


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Theseormthebasisortheassessableamountsorand:

(Yearto)

(Yearto)


Thetaxadjustedtradingprotassessableamountsareasollows:

(-)

9/1

(Yearto)

(Yearto)

Overlapprotsarerepresentingmonthsoprot.



(-)

9/1

(Yearto)

2/1

(Yearto)

Nooverlapprot.



(-)

7/10

(-)

+(2/1)

(Yearto)

Overlapprotsarerepresentingmonthsoprot


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(-)

9/

(-)

2/

(Yearto)

2/

(Yearto)

Overlapprotsarerepresentingmonthsoprot.



(Yearto)

(monthsromto)

(+)

Lessoverlapprots ()

Finalassessableamount


Thetaxadjustedtradingprotassessableamountswillbeasollows:

Yearto

-monthperiodtonewaccountingdateo

to9/1

Periodto

Yearto

Theprotsoassessedinareoverlapprotssincetheywerealsoassessedin.Theywillbecarried

orwardandwouldnormallybeosetwhenAnneceasestrading.


Thetaxadjustedtradingprotassessableamountswillbeasollows:

to9/1

Theprotsoareoverlapprotsrepresentingmonthsoprot.

Yearto

Yearto

-monthperiodto

Less:Overlapprots/ ()

Yearto

Inprotsormonthsareassessed.Becausethenormalbasisoassessmentisthatonlymonthsprotsare

assessedTonyisallowedtoosetmonthsworthohisoverlapprotsthatarosewhenhecommencedtrading.Theseoverlap

protsareoraperiodomonthssotheosetisbasedonaractiono/.


75/90



CapitalallowancesPl all

monthsto

Addition(Motorcar-gkm)

WDA%8/1 ()

WDVc

ye

WDA% ()

WDVc

AdjustedprotPf ca t djud dg pf

monthsto ()

ye ()

Taxadjustedtradingprotassessableamounts:

to

5/

t o

+/1

ye

Overlapprotsare(+(/1))representingmonthsoprot


Lossisin.

ReliemaybeclaimedinandoragainstTotalincomeandthengains.Inadditionthelossmaybe carried

orwardagainsttherstavailabletradingprotothesametrade.


(a) Taxadjustedtradingprotassessableamounts:

Actual(-) Nil

monthstoaccountingdate(ye) Nil

CYB(ye)

CYB(ye)

CYB(ye)

CurrentandCarrybackrelie5/1

RelieavailableagainstTotalIncomeoandor

Loss

Less:Allocatedto ()

RelieavailableagainstTotalIncomeoandor

Specialopeningyearrelie

RelieavailableagainstTotalIncomeoand

RelieavailableagainstTotalIncomeoand

Carryorwardrelie

Loss Relievedagainsttaxadjustedtradingprot ()

()

()


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(b) ThemostbenecialwayorKentorelievehislosswouldbe:

ThetradinglossoorshouldberelievedunderspecialopeningyearlossrelieagainstTotal

Incomeo;andthetradinglossoorshouldberelievedunderspecialopeningyearlossrelie

againstTotalIncomeo.

Thisgivesrelieasearlyaspossibleatarateo%andavoidswastingpersonalallowances.


tl bll b

-(/1)

-(2/1)

ye


Allocationoprots: ty D ehl

ye()

ye()()

()

ye()

TaxadjustedtradingprotAssessment ty D ehl

CYBye

Finalyearmto

+

Lessoverlapprot ()

Firstyear

(to)

/

Secondyear

()

(+61)

CYBye

CYBye

Ethelhasoverlapprotso(to)and(to)totalling


77/90


78/90


P cu


ThemaximumpensioncontributionsTonycanmakearethegreatero

%x=

Hismaximumcontributionsarethereore.Thiswillbepaidneto%taxatsourcei.e.hewillonlypayintohis

pensionundandHMRCwillcontribute.Iheweretocontributemorethanintotheundhewouldonlyreceivetaxrelieasabove

Asheisonlyabasicratetaxpayerthenthereisnoinclusioninhisincometaxcomputation.Youonlyincludethecontribution

iheisahigherratetaxpayerbyextendingthebasicrateandadditionalratebands.

iddul cpl G t


November

Proceeds

Less:Cost ()

CapitalGain Less:Capitallossintheyear ()

Less:Annualexemption ()

CGTpayable( W)

Duedate

( W) %

%

Note:Entrepreneursrelieisnotavailableas thisisthedisposalo asingleassetandisnotas partothesaleo thewhole

business.


(a) Frederick

Assetisanonwastingchattelcostandproceedsarelessthansoitisexempt.

(b) James

Assetisanonwastingchattelwithcostandproceeds>

i) Normalcalculation

Proceeds Less:Cost ()

Gain

ii) Restriction

5/3[]=

G = 2,500

(c) Sam

Assetisanonwastingchattelwithcost>andproceeds

DeemedProceeds

Less:Cost ()

Capitalloss ()


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Proceeds

Less:Cost 20 0006 000

6 000 28 000,

,

, ,

+

()

CapitalGain

Answer to example 36Theassetisdamaged-Thisisapartdisposalbutasallotheinsuranceproceedsareusedorrestorationandanelectionis

madetheproceedscanberolledoveragainsttheallowablecostwhentheassetiseventuallysold.

Ju 2011-Nogain

DateodisposalisJunewheninsurancemoneyisreceived.

wh h ully ld:

Proceeds X

Acquisitioncost

Lessinsuranceproceeds ()

()Restorationcosts ()

CapitalGain X

InoelectionhadbeenmadethenacapitalgainwouldhaveariseninJuneasollows:

Proceeds

Cost ,,

, , ,500 000

60 000

60 000 1 000 000

+

()

CapitalGain

Onasubsequentsaletheacquisitioncostwillbe

=Alsoadeductionortherestorationcostscanbemadeo


DisposalJanuary

Proceeds

LessAcquisitioncost ()

CapitalGain

Lessgaindeerred(W) ()

ChargeableGain

(w1) Theproceedsarereinvestedbuthaveonlybeenpartiallyreinvested.

Gainchargeablenow=

Proceedsreceived

Lessreplacementasset ()

ChargeableNow

Availabletodeer()

Whenthenewassetissold:

Cost

Less:Gaindeerred ()

Basecost


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Proceeds

Lesscost2/ ()

CapitalGain


Nextdayacquisitions

Matchwiththesharepoolacquisition(s)

sh pl

:bonus

Matchwith()sharesromthesharepool.


Gains not qualifying for Entrepreneurs relief

Investmentproperty

LessCapitallossesb(Note) ()

LessAnnualexemption(Note) ()

CGT@%(Note)

Gains qualifying for Entrepreneurs relief

Saleobusiness

Freeholdactory

Goodwill

Warehouse ()

Saleoshares

Gain

CGT@%(Note)

TotalCGT+=

Duedateorpaymenton

Note : Thecapitallossbandtheannualexemptionareosetagainstthegainsnotqualiyingorentrepreneursrelieas

theywillbethesubjecttoahighertaxratethangainsqualiyingorentrepreneursrelie.

Note : AlthoughKithassomeremainingbasicratebandaterhertaxableincomethisisdeemedtohavebeenutilised.by

gainsqualiyingorentrepreneursrelie.

Note : Themaximumgainsonwhichentrepreneursrelieisavailableissoallotheiseligible.The

remaininglietimelimito()isavailableoruturegainsqualiyingorentrepreneurs

relie.


81/90



March

Proceeds

Less:Cost ()

Lessgainrolledover ()

Chargeablegain()

Basecostotheactory

Cost

Less:Gainrolledover ()

Entrepreneursrelieisnotavailableonthesaleothelandasitwasnotthesaleotheentirebusiness


Proceeds(MV )

Less:Cost ()

Less:Gitrelie ()

Chargeablegain()

K

Cost(MV )

Less:Gitrelie ()

Entrepreneursrelieisnotavailableasitwasnotthesaleotheentirebusiness


Indexedgain

Less:PPRrelie( W) ()

Less:Lettingrelie( W) ()

Chargeablegain

(W)aul d Dd

oupLg a

years years years

(ElsewhereintheUK+anyotherreason)

(partolastyears)year years

years

years years years years

PPR5/1=

(W) Lettingrelielowero

2

19190 000 25 000

1

2 =, ,


82/90


ih t


L

) CLT 200,000

LessAnnualexemptions:

2003/04 (3,000)2002/03 b/f (3,000)

194,000

Nilratebandatgit 255,000

Lesschargeabletransersinpreviousyearsromgit

() ()

(255,000)

CoveredbytheNilrateband

) PET 50,000


-used ()

50,000

NolietimetaxonaPET

) PET 175,000

LessMarriageexemption (1,000)


(3,000)

b (3,000)

168,000NolietimetaxonaPET

) CLT 250,000


2009/10 (3,000)

2008/09 bf (3,000)

244,000

Nilratebandatgit 325,000


() (194,000)

()

IHTat% 28,250

PayablebyJasper

Duedate

Grosschargeabletranser+=

Dh l g

DateodeathFebruary

GitsonoraterFebruary

) November-NoadditionaltaxontheCLT

) December-ThePETisexempt


83/90


) PETisnowchargeable

ValueoPETaterexemptions 168,000

Nilratebandatdeath 325,000


() (194,000)

()

37,000

IHTat% 14,800

Lesstaperrelieyears% (2,960)

IHTpayable 11,840

PayablebyJaspersnephew

Duedateorpayment

) Additional taxonCLT

Grosschargeabletranser 272,250

Nilratebandatdeath 325,000


(-) (194,000)

(168,000)

272,250

IHTat% 108,900

Lesstaperrelie


84/90


cp t


YearendedMarch

Tradingprot

InterestReceivable(+)

Less:GitAidpayment ()

TaxableTotalProts

AugmentedProts(+/0)

Corporationtax

%

Less:7/400()29/334,000 ()

Corporationtaxliability


Adjustmenttoprotbeoretax

Protbeoretaxperaccounts

Addback

Directorssalary

Depreciation

GitAidpayment

Purchaseovan

Fine

Legalees

Leaseamortisation

Christmaspartyorsta

Politicaldonation

Entertainingcustomers

ExpensesocarusedbyDirector

GoodstakenbyDirector

Less:

Incomeelementoleaseamortisation(note)

Incomeromurnishedlettings

Bankdepositinterest

Dividends

()

Adjustedprot

Note:

() Allowableelementoleaseamortisation

Incomeelement51 21

5042 000 25 200

=, ,

Annualdeduction25 200

211200

, ,=

() Noprivateuseadjustmentsarerequiredbutthedirectormaybesubjecttoabenetcharge.


85/90



Capitalallowances-yearended

Gl pl ep

(1)

(p u)

spl

pl

sh-l

(1)

all

WDVb

AdditionsQualiyingorAIA

Longlieasset

LessAIA(MAX) ()

AdditionsQualiyingorAIA

Plant

PrintingPress

AIA-used ()

BalancequaliyingorFYA@%

Otheradditions

CarCO

emissionso-gkm

Disposal () ()

()

WDA@% ()

Balancingcharge ()

WDA@% ()

WDA@% ()

AdditionsqualiyingorFYA

Motorcar


86/90



Matchingrules

) Samedayx

) Previousdays Jan shares

Proceeds2 000

5 00050 000

,

,,

Less: Cost ()

Gain

) -previousdays sharepool

n cidd

Feb

Bonus:

IndextoJulyromFeb157 5 136 3

136 31500

. .

.,

PurchaseJuly

IndextoFeb173 8 157 5

157 55 733

. .

.,

[email protected]

IndextoJan230 0 173 8

173 87 464

. .

.,

Sale () () ()

Proceeds 3 0005 000

50 000,,

,

Less:Cost ()

UnindexedGain

Less:IA() ()

Chargeablegain

Summary

()

()

Totalchargeablegaintoincludeinthecorporationtaxcomputation


March

Proceeds

Less:Cost ()

Less:IA% ()

Lessgainrolledover ()

Gainchargednow()

BasecostolandCost

Less:Gainrolledover ()


87/90



Y dg 31 D

2009 2010 2011

Taxadjustedtradingprot -

Less:Carryorward ()

InterestIncome

Less:Currentyear&carrybackrelie () ()

Less:GitAid ()

TaxableTotalProt Nil Nil

Thegitaidortheyearsendedandarewasted.

Lossmemorandum

Lossye

Less: currentyearye ()

Carrybackye ()

Carryorwardye ()


9/1ZLtdslosso=

9/1TLtdsproto=.

th u h 75,000

Theclaimismadebytheclaimantcompany;theconsentothesurrenderingcompanyisrequired.


JLtdshouldclaimgrouprelieooryeMarchtoreduceprotstothesmallprotlimit.

KLtdshouldrelieveagainstyeMarchunderthecarrybackprovisionstoreduceprotstothesmallprotlimit.

Thebalanceolossisbestrelievedunderthecarrybackprovisionsasitresultsinanimmediatetaxreund(notethatthegrouprelieclaimismaderstandthebalanceothelossisdealtwithundercurrentandcarrybackrelie ).

Summary

y/ 31/3/2010 y/ 31/3/2011

JLtdTaxableTotalProts

Lessgrouprelie - ()

RevisedTaxableTotalProts

KLtdTaxadjustedtradingprot -

Less:carrybackrelie () -

TaxableTotalProt -


tl UK o

TaxableTotalProt ( W)

CorporationTax@%

DTR () ()

DoubletaxationrelieisrestrictedtotheoverseastaxontheoverseasincomeasthisislessthantheUKtaxpayableo.

(W) Rentalincome

Withholdingtaxat%


88/90


income tax seLF assessment


Paymentsonaccountwillbedueorasollows:

(+ = )


Thebalancingpaymentorwillbe:

Totaltaxliability

Less:Paymentsonaccount ()

Balancingpaymentdue

Firstpaymentonaccountor

(+)=

TotaldueJanuary=

income tax PaYe coDinGAnswer to example 58

Allowances

Personalallowance

PPP(paidnetoBRT )

Expensedeductions

Less: Deductions

Benets

Untaxedincome Taxunderpaymentsb(/0)

Maureenscodeor L

corPoration tax seLF assessment


Corporationtax=@%=

Asthecompanyislargethecorporationtaxisdueorinstalments.

yeM arch ()

October

January

April

July

ThecompanyhasalingdateoMarchorthecorporationtaxcomputationyeMarch.


89/90


vat


Taxableturnoverinrstmonthswas()+().

Thepositionthereateris:

E nd o Jun e + =

End oJuly + =

E ndo Au gu st + = YRLtdexceedsthethresholdattheendAugust.

NotiyHMRCbySeptember.RegistrationiseectiveromOctober.


FromJunetoMarchthevalueoDolphinLtdstaxablesupplieswas.

Soitisnotyetrequiredtoregisterusingthehistoricaltest.

Butusingtheuturetestonthecompanyexpectsitstaxablesuppliesinthenextdaystoexceed.

ItisrequiredtoregisterimmediatelyieromApril.

NotiyHMRCbyMay.


oupu vat

(%)%

ipu vat

Standardratedpurchases[ , , ]61250 2 25020

120

()

Irrecoverabledebts7 87520

120, (Note) ()

(>monthsold)

Machine11750 20120

, ()

VATPayableJuly

Note: NoVATrecoveryoncustomerentertainingorcarswithanyprivateuse.


a) Withoutusingthefatratescheme

OutputVAT 70 50020

120,

InputVAT1175020

120, ()

VATpayable

b ) Us in g fa t rate s che me

%=

Usingtheschemesaves()inyeJuneandtheVATadministrationissimplied.


Qu Du sud cqu

Surcharg eliabilitynoticeiss ued.Periodonoticeuntil June

Butpayment

Firstdeaultinnoticeperiod.Surchargepenalty%=.

AlsonoticeperiodextendedtoDecember


90/90



th dg gup vat g :

NoVATisaccountedorontransactionsbetweengroupmemberswithintheVATgroup

OnlyoneVATreturnissubmittedorthegroup;thereoreanadministrativeadvantage.

Thegroupcanchoosewhichcompaniestoincludeorexclude(benecialtoexcludeazeroratedcompany)

th ddg gup vat g :

ThelimitsorCashandAnnualAccountingschemeswillapplytothegroupasawholeandnotonanindividualcompany

basis. Jointandseveralliabilityoeachcompanyinthegroup

Possibleadministrationissuescollectinginormationtobepassedontotherepresentativemember.

TwoormorecompaniescanregisterasagrouporVATpurposes.Theymustbeundercommoncontroloathirdcompany

andresidentintheUK

ThegroupistreatedorVATpurposesasiitwereasinglecompanyregisteredorVATonitsown.

Arepresentativememberothegroupisappointedandthiscompanyisresponsibleorcompletingandsubmittingasingle

VATreturnandpayingtheVATonbehalothegroup.

AllcompaniesintheVATgrouparejointlyandseverallyliableoranyVATliabilitiesothegroup.


TheexportstoaNewZealandbusinesscustomerwillbezeroratedasitisanexportogoodstoanonEUcountry ThedispatchtoGermannonbusinesscustomerwillbestandardratedsooutputVATwillbe%=

TheimportoogoodsromanAustralianbusinesssupplieswillresultinMarsLtdpayingVAT@%ie

%=toHMRCatpointoentryintotheUK.(ThisisassumingthatMarsLtddoesnotusethedutydeerment

scheme).ThiscanbethenrecoveredasinputVAT.

TheacquisitionogoodsvaluedatromabusinesssupplierinFrancewillresultinMarsLtdaccountingoroutput

VATo%=asasel-supply.TheselsupplyoutputVATocanalsoberecoveredasinputVAT.

Qu 30 Ju 2011

vat u

oupu vat

ExportogoodstoEUnonbusinesscustomer%

SelsupplyonacquisitionromEUsupplier%

ipu vat

ImportogoodsromnonEUsupplier% ()

SelsupplyonacquisitionromEUsupplier% ()

Documents

Paper F6 Revision Questions and Answers