Question 1:
Mark is employed by ABC Ltd, a small family company, in which he holds 20,000 £1 ordinary shares; the remaining 80% are held by the other senior employees.
The company accounts show the following information:
Year to 30 November 2019 2020
£ £
Salary to Mark (paid at the end of each month) 28,500 33,000
Bonus to Mark (paid in the following February) 4,200 2,700
The following information is provided in respect of 2019/20.
(1) The senior employees have been able to use the company yacht moored on the south coast for two weeks each year since its purchase. Mark spent his fortnight on the boat along with his family.
The yacht cost the company £42,000 in 2014 (current value £33,000) and running and maintenance expenses amounted to £6,000 during the year.
(2) Mark belongs to a private medical scheme and the company paid the required premium of £270 (including £50 for his family),
(3) Mark took meals in the fully subsidised executive canteen; the cost for the year being £735. Another fully subsidised canteen was available for the other staff.
(4) When at the company premises Mark has use of a 3,500 cc Range Rover car owned by the company which emits 268 g/km of CO2. It had a list price of £62,000 when new in 2014 and costs £4,800 a year to run. It is garaged at the company’s head office and is also used by all the directors for business purposes.
Mark is also provided with a three-year-old 2 litre Mini (list price £16,500) with CO2 emissions of 149 g/km. Mark is provided with private fuel. Both cars run on petrol, and the list price includes delivery and number plates.
(5) He pays 3% of his basic salary into the company’s occupational pension scheme. The company contributes an amount equal to 7% of his salary.
(6) Mark is provided with a 2% interest rate loan from his employer of £20,000 which was granted three years ago to assist with the purchase of his daughter’s residence. He has no other loans and has paid interest only on a monthly basis.
(7) The company also loaned Mark one of its personal computers, with a printer, for use at home so that he could improve his IT skills. The equipment had cost the company £2,800 (including £350 for the printer) in June 2017. The market value of the equipment when it was first provided to Mark on the 6 April 2019 was £2,010.
(8) From 6 June 2019 he lived in Southampton in a house owned by the company which cost £80,000 in 1995. Its market value on 6 June 2019 was £138,000. The annual value for the period from 6 June 2019 to 5 April 2020 can be taken as £900.
The company paid the following expenses in connection with the house during his period of residence in 2019/20.
£
Council tax 550
Electricity 260
Telephone 110
Cleaning 130
The furniture in the house is estimated to have cost £7,200.
(9) Mark received a dividend of 40p per share in May 2019.
Required:
a) Compute Mark’s income tax liability for 2019/20.Assume the official rate of interest for 2019/20 is 2.5%. (15 marks)
b) Recalculate Mark income tax liability for 2019/20 assuming that he paid £4,000 to the charity under Gift Aid Donation Scheme. (5 marks)
(Total: 20 marks)
End of Question 1
Question 2:
This question has three separate part and each part should be answered
Part a – Tina
Tina sold a painting on 1 July 2019 for £500,000. She purchased the painting in February 1997 for £350,000.
She also disposed of a commercial investment property for £310,000 on 1 December 2019 and incurred agency fees of £15,000 on the disposal. She had purchased the property in August 1998 for £200,000.
In addition, she sold an antique vase for £10,000 in January 2020 which had cost her £15,000 in September 2017.
Tina had capital losses brought forward from previous tax years of £15,000. Tina’s taxable income for 2019/20 is £50,000.
Calculate Tina’s Capital Gains Tax for 2019/20
(8 marks)
Part b –Jane
Jane owns shares in ABC Ltd. She acquired 1,500 shares in the company on 31 May 2016 for £20,000, and 500 shares on 30 June 2017 for £10,000. On 7 July 2020 Jane bought a further 200 shares in ABC Ltd for £4,000.
Jane sold 1,000 shares in ABC Ltd on 28 June 2020 for £25,000. She is not an employee of ABC Ltd.
Calculate Jane’s capital gain on the disposal of the shares on 28 June 2020. (5 marks)
Part c –Jerome
Jerome bought a factory in June 2004 for £680,000. In August 2020 wishing to move to a more convenient location, he sold the factory for £800,000. He moved into a rented factory until January 2021 when he purchased and moved to a new factory.
Assuming that all beneficial claims are made calculate the base cost of the new factory if it was purchased for
(a) £750,000
(b) £600,000 (7 marks)
Total (20 marks)
End of Question 2
Question 3:
This question has two separate part and each part should be answered
Part a- Sail
Sail Ltd has the following results for the year ended 31 March 2020. It has one wholly owned subsidiary company.
£
Trading profit 380,000
Interest receivable 9,000
Property Income 12,000
Chargeable gains 21,000
Dividends received from non-subsidiary UK companies 50,000
Qualifying charitable donations 22,000
Calculate the amount of corporation tax payable by Sail Ltd for the year ended 31 March 2020 and state giving reasons the due date for payment. (10 marks)
Part b- Swish
Swish Ltd has the following results for the year ended 31 March 2020.
£
Net loss per Accounts (Note (1)) (116,500)
Interest receivable 3,500
Chargeable gain 44,500
Notes
(1) Net loss is after charging: £
Depreciation 10,800
Entertaining customers 1,200
(2) All other expenses are allowable for corporation tax.
(3) The written down value of plant and machinery on the main pool at 1 April 2019 was £20,000. There were no purchases or sales during the year ended 31 March 2020.
(4) Swish Ltd has the following results for the previous year:
31/3/19
Trading profit 40,000
Interest receivable 2,000
Chargeable gain –
42,000
(a) Compute the trading loss for the year ended 31 March 2020.
(b) Show how the trading loss is relieved assuming relief is taken as soon as possible
(10 marks)
Total (20 marks)
End of Question 3
Question 4:
Timberlake Ltd, a partially exempt company for the purposes of value added tax (VAT), requires advice on simplifying the way in which it accounts for VAT.
-Timberlake Ltd is partially exempt for the purposes of VAT.
-Timberlake Ltd’s turnover for the year ended 31 March 2019 was £240,000 (VAT exclusive).
-Timberlake Ltd’s turnover for the year as a whole for VAT purposes comprised 86% taxable supplies and 14% exempt supplies.
-The input VAT suffered by Timberlake Ltd on expenditure during the year ended 31 March 2019 was:
£
Wholly attributable to taxable supplies 7,920
Wholly attributable to exempt supplies 1,062
Unattributable 4,150
Timberlake Ltd expects its turnover and expenditure figures to increase by approximately 25% next year.
The director of Timberlake heard about an annual test for computing the amount of recoverable input VAT during an accounting period and would like more information about this.
Determine, by reference to the de minimis tests 1 and 2, Timberlake Ltd’s recoverable input VAT for the year ended 31 March 2019. (15 marks)
Advise director of Timberlake Ltd’s eligibility for the annual test for computing the amount of recoverable input VAT for the year ending 31 March 2020 and the potential benefits to be gained from its use. (5 marks)
Total (20 amrks)
End of Question 4
Question 5:
Andrew made the following lifetime gifts:
(1) 23 October 2008 – A gift of £356,000 into a trust
(2) 17 September 2013 – A gift of £47,000 to his nephew on the occasion of his marriage
(3) 14 February 2015 – A gift to his wife of £100,000
(4) 26 August 2015 – A gift of £276,000 to a trust.
Calculate the IHT payable on the lifetime transfers assuming that Andrew pays any IHT due on the first transfer into trust and the trustees pay any IHT due on the second transfer into trust. Clearly state who is responsible for paying the tax and the due date for payment.
The nil rate bands are as follows:
2008/09 £312,000
2013/14 onwards £325,000 (10 marks)
(b) Andrew died on 30 November 2019 leaving an estate comprising of his main residence valued at £500,000 upon which there was an interest only mortgage of £150,000 outstanding on this property
In addition, he owned:
Quoted shares in various companies valued at £120,000
Paintings valued at £205,000
Motor cars valued at £50,000
Building society accounts of £36,000
Andrew had a life assurance policy on his own life from which the proceeds received were £105,000.
Andrew had credit card debts of £2,500 and had also verbally promised to pay the £1,000 legal fees of a friend. Funeral expenses amounted to £5,000.
Under the terms of his will, he left £100,000 to his wife, £20,000 to his niece and the
residue of the estate to his nephew.
Using the information from the part (a), calculate the IHT as a result of death on the lifetime gifts made by Andrew and the IHT on the death estate.
Clearly state who is responsible for paying the tax, who suffers it and the due date for payment. (10 marks)
Total (20 marks)
