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PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Individuals Example 1 Jane earns

JUNE 2011 EXAMINATIONS

Individuals

Example 1

Jane earns £36,000 tax adjusted trading profit in 2010/11, receives bank interest of £4,000 and dividend income of £5,400.

In addition she pays £800 to charity under the Gift aid scheme

addition she pays £800 to charity under the Gift aid scheme Calculate Jane’s income tax payable

Calculate Jane’s income tax payable for 2010/11

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income tax payable for 2010/11 For latest course notes, free audio & video lectures, support and

1

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Individuals Example 2 Recalculate Jane’s

JUNE 2011 EXAMINATIONS

Individuals

Example 2

Recalculate Jane’s income tax payable if her tax adjusted trading profit income was only £8,000

if her tax adjusted trading profit income was only £8,000 For latest course notes, free audio

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profit income was only £8,000 For latest course notes, free audio & video lectures, support and

2

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Individuals Example 3 Benny has

JUNE 2011 EXAMINATIONS

Individuals

Example 3

Benny has tax adjusted trading profit of £120,000 in 2010/11. He paid £12,000 to charity under the gift aid scheme and £1,000 of qualifying interest payments.

Calculate Benny’s income tax payable.

interest payments. Calculate Benny’s income tax payable. For latest course notes, free audio & video lectures,

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Benny’s income tax payable. For latest course notes, free audio & video lectures, support and forums

3

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Individuals Example 4 Using example

JUNE 2011 EXAMINATIONS

Individuals

Example 4

Using example 3 - Recalculate Benny’s income tax payable assuming he also received £45,000 of dividend income in 2010/11.

he also received £45,000 of dividend income in 2010/11. For latest course notes, free audio &

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of dividend income in 2010/11. For latest course notes, free audio & video lectures, support and

4

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - Individuals Example 5 Anne was born on 18th

Individuals

Example 5

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

Determine the personal age allowances she is entitled to in 2010/11

the personal age allowances she is entitled to in 2010/11 For latest course notes, free audio

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JUNE 2011 EXAMINATIONS

2010/11 For latest course notes, free audio & video lectures, support and forums please visit JUNE

5

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Individuals Example 6 Tony and

JUNE 2011 EXAMINATIONS

Individuals

Example 6

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

Kathy has no income.

Discuss how, as a couple, they could reduce the overall tax liability

as a couple, they could reduce the overall tax liability For latest course notes, free audio

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the overall tax liability For latest course notes, free audio & video lectures, support and forums

6

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Property Business Profit

Income Tax - JUNE 2011 EXAMINATIONS Property Business Profit Example 7 Robert owns two properties. Property

Example 7

Robert owns two properties.

Property A is let out unfurnished at an annual rental of £4,000 from 1 July 2010.

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

Rent is payable quarterly in advance. Expenses amounted to £1,500 for the year to 6 April

Property B is let out furnished at an annual rental of £3,000, from 1 August 2010.

Rent is payable annually in advance. Expenses amounted to £2,200 for the year to 6 April 2011. In addition, Robert claimed a wear and tear allowance.

Determine Robert’s Property Income to be assessed in 2010/11.

Robert’s Property Income to be assessed in 2010/11. For latest course notes, free audio & video
Robert’s Property Income to be assessed in 2010/11. For latest course notes, free audio & video

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to be assessed in 2010/11. For latest course notes, free audio & video lectures, support and

7

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Property Business Profit

Income Tax - JUNE 2011 EXAMINATIONS Property Business Profit Example 8 Molly grants a 20-year lease

Example 8

Molly grants a 20-year lease on a shop on 1 August 2010 for a premium of £25,000. The annual rent of £12,000 is payable yearly in advance.

Calculate Molly’s Property Income for 2010/11 and the relief available to the tenant for the premium paid.

and the relief available to the tenant for the premium paid. For latest course notes, free

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tenant for the premium paid. For latest course notes, free audio & video lectures, support and

8

PAPER F6 – REVISION QUESTIONS

Income 2010/11
Income
2010/11
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Property Business Profit

2,010
2,010

150

250

520

75

3,700

305

Example 9

Ben rented a furnished property to students at a monthly rental of £1,000 until 31 July 2010. The property was redecorated in August and let again from 1 September 2010 for £1,200 per month. Details of expenditure during

Redecoration Water rates New washing machine Gardening Legal fee for tenancy agreement Mortgage interest Insurance

Legal fee for tenancy agreement Mortgage interest Insurance On 1 May 2010 he acquired another furnished
Legal fee for tenancy agreement Mortgage interest Insurance On 1 May 2010 he acquired another furnished

On 1 May 2010 he acquired another furnished property. He paid service charges of £25 per month and mortgage interest of £500 per month. The property was let from 1 August 2010 at a monthly rent of £600.

Calculate Ben’s Property Income for 2010/11

What difference would it have made if the second property was classed as a Furnished Holiday letting property.

was classed as a Furnished Holiday letting property. For latest course notes, free audio & video

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Holiday letting property. For latest course notes, free audio & video lectures, support and forums please

9

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Property Business Profit

Income Tax - JUNE 2011 EXAMINATIONS Property Business Profit Example 10 Jimmy rents a room in

Example 10

Jimmy rents a room in his main residence to Kenny. Jimmy receives rental income of £4,750 and incurs relevant expenses of £300 in 2010/11

Calculate Jimmy’s Property Income assuming all elections are claimed for 2010/11

Income assuming all elections are claimed for 2010/11 For latest course notes, free audio & video

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are claimed for 2010/11 For latest course notes, free audio & video lectures, support and forums

10

PAPER F6 – REVISION QUESTIONS

Income Expenses:
Income
Expenses:
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Expenses: Tax - JUNE 2011 EXAMINATIONS Unincorporated Business £ 10,000

JUNE 2011 EXAMINATIONS

Unincorporated Business

£
£

10,000

2,800

76

20,000

750

600

100

300

1,200

1,800

500

4,200

Example 11

Kerry’s net profit for the year ended 31 December 2010 was £30,000 included the following:

Proprietor’s wages Depreciation Contribution to Political Party Purchase of van for business Fines for inadequate fencing of equipment Legal fees for acquisition of a 21 year lease Donation to National Charity Entertaining customers Car Expenses Income:

National Charity Entertaining customers Car Expenses Income: Income from furnished lettings (net of Expenses) Bank
National Charity Entertaining customers Car Expenses Income: Income from furnished lettings (net of Expenses) Bank

Income from furnished lettings (net of Expenses) Bank deposit interest (net) Dividends (net)

Kerry took goods from the business for her own use, with a cost of £280 and selling price £400.

Kerry paid the business £280 for the goods.

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

Calculate the adjusted profit for year ended 31 December 2010

the adjusted profit for year ended 31 December 2010 For latest course notes, free audio &

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year ended 31 December 2010 For latest course notes, free audio & video lectures, support and

11

PAPER F6 – REVISION QUESTIONS Income Tax - Unincorporated Business Example 12 Debra, a sole
PAPER F6 – REVISION QUESTIONS
Income
Tax -
Unincorporated Business
Example 12
Debra, a sole trader, prepares accounts to 31 December.
The WDVs for capital allowances purposes, as at 31/12/09 were as follows:
£
General pool
Expensive car (private use 20%)
30,000
15,000
During the year ended 31/12/10 the following transactions occurred:
£
1
January
purchased plant
40,000
3
March
10
18
April
purchased car, CO 2 emissions of 135g/km
purchased car, CO 2 emissions of 106g/km
bought a printing press
11,000
March
18,000
4,000
6
May
sold plant
sold expensive car
purchased a long life asset
2,000
10
June
16,000
12
December
160,000

JUNE 2011 EXAMINATIONS

The printing press is to be treated as a short-life asset. All assets sold were disposed of for less than cost.

Calculate the capital allowances for the year ended 31 December 2010.

the capital allowances for the year ended 31 December 2010. For latest course notes, free audio

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year ended 31 December 2010. For latest course notes, free audio & video lectures, support and

12

PAPER F6 – REVISION QUESTIONS

Income Land
Income
Land
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Land Tax - JUNE 2011 EXAMINATIONS Unincorporated Business £ 40,000

JUNE 2011 EXAMINATIONS

Unincorporated Business

Land Tax - JUNE 2011 EXAMINATIONS Unincorporated Business £ 40,000 200,000 50,000 Example 13 Elliot bought

£

40,000

200,000

50,000

Example 13

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

Building

on 1 January 2011, incurring the following costs: Building Offices He brought the building into industrial

Offices

He brought the building into industrial use immediately and continued to use it for industrial purposes until its date of sale on 1 January 2013.

Elliot sold the building for £230,000 (including £50,000 for the land and £35,000 for the offices).

£50,000 for the land and £35,000 for the offices). Calculate the allowances given to Elliot. (He

Calculate the allowances given to Elliot. (He prepares accounts to 31 March).

given to Elliot. (He prepares accounts to 31 March). For latest course notes, free audio &

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accounts to 31 March). For latest course notes, free audio & video lectures, support and forums

13

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 14 Felix,

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 14 Felix, a scientific instrument manufacturer,

Example 14

Felix, a scientific instrument manufacturer, 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 for industrial purposes until 30 June 2011. The factory was used for non-industrial purposes for the period 1 July 2011 to 30 September 2012.

On 1 October 2012 the factory was again in industrial use and continued to be so until its sale on 30 June 2013 for £475,000 to Terry.

be so until its sale on 30 June 2013 for £475,000 to Terry. Calculate the allowances

Calculate the allowances available to Felix for all relevant periods of account.

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relevant periods of account. For latest course notes, free audio & video lectures, support and forums

14

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 15 James

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 15 James prepares accounts to 30 September

Example 15

James prepares accounts to 30 September annually. His tax adjusted trading profit for the two years to 30 September 2010 were:

£

Year to 30 September 2009 Year to 30 September 2010

17,000

19,000

to 30 September 2009 Year to 30 September 2010 17,000 19,000 Show the assessments for 2009/10

Show the assessments for 2009/10 and 2010/11

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for 2009/10 and 2010/11 For latest course notes, free audio & video lectures, support and forums

15

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 16 Adam

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 16 Adam commenced trading on 1 July

Example 16

Adam commenced trading on 1 July 2008. He prepared accounts to 30 June each year. His tax adjusted trading profit for the first two years were as follows:

£

Year ended 30 June 2009 Year ended 30 June 2010

36,000

42,000

ended 30 June 2009 Year ended 30 June 2010 36,000 42,000 Show the assessments for all

Show the assessments for all relevant years.

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for all relevant years. For latest course notes, free audio & video lectures, support and forums

16

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 17 Emily

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 17 Emily commenced trading on 1 July

Example 17

Emily commenced trading on 1 July 2008. She prepared accounts to 31 March 2010 and annually thereafter. Her tax adjusted trading profit for the first two accounting periods were as follows:

£

for the first two accounting periods were as follows: £ 21 months ended 31 March 2010

21 months ended 31 March 2010 Year ended 31 March 2011

63,000

40,000

Show the assessments for all relevant years.

For latest course notes, free audio & video lectures, support and forums please visit

for all relevant years. For latest course notes, free audio & video lectures, support and forums

17

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 18 Patricia

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 18 Patricia commenced trading on 1 September

Example 18

Patricia commenced trading on 1 September 2008.

She prepared accounts to 30 June 2009 and annually thereafter. Her tax adjusted trading profit for the first two periods were as follows:

£

trading profit for the first two periods were as follows: £ 10 months ended 30 June

10 months ended 30 June 2009 Year ended 30 June 2010

40,000

54,000

Show the assessments for all relevant years.

For latest course notes, free audio & video lectures, support and forums please visit

for all relevant years. For latest course notes, free audio & video lectures, support and forums

18

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 19 Jacqui

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 19 Jacqui commenced trading on 1 July

Example 19

Jacqui commenced trading on 1 July 2008. She prepared accounts to 30 April 2010 and annually thereafter. Her tax adjusted trading profit for the first two periods were as follows:

£

trading profit for the first two periods were as follows: £ 22 months ended 30 April

22 months ended 30 April 2010 Year ended 30 April 2011

66,000

30,000

Show the assessments for all relevant years.

For latest course notes, free audio & video lectures, support and forums please visit

for all relevant years. For latest course notes, free audio & video lectures, support and forums

19

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 20 Matthew

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 20 Matthew commenced trading on 1 May

Example 20

Matthew commenced trading on 1 May 1999. After trading profitably for some years, he ceased trading on 31 March 2011. His tax adjusted trading profit for the final three periods is as follows:

£

37,000

40,000

36,000

Year ended 30/4/2009 Year ended 30/4/2010 Period ended 31/3/2011 Assume his overlap profits (for the period 1/5/99 - 5/4/00) were £25,000.

profits (for the period 1/5/99 - 5/4/00) were £25,000. Show the assessments for all relevant years.

Show the assessments for all relevant years.

For latest course notes, free audio & video lectures, support and forums please visit

for all relevant years. For latest course notes, free audio & video lectures, support and forums

20

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 21 Anne

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 21 Anne decides to change her accounting

Example 21

Anne decides to change her accounting date from 31 March to 30 June making up accounts for the three month period to 30 June 2009. Anne’s tax adjusted trading profit is as follows:

£

Year ended 31 March 2009 Three months to 30 June 2009 Year ended 30 June 2010

Year ended 31 March 2009 Three months to 30 June 2009 Year ended 30 June 2010

Show the assessments for all relevant years.

72,000

16,000

90,000

For latest course notes, free audio & video lectures, support and forums please visit

years. 72,000 16,000 90,000 For latest course notes, free audio & video lectures, support and forums

21

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business £ 27,000 36,000

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business £ 27,000 36,000 45,000 54,000 Example 22 Tony,

£

27,000

36,000

45,000

54,000

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 for the 15-month period to 30 September 2009. Tony’s tax adjusted trading profit is as follows:

2009. Tony’s tax adjusted trading profit is as follows: Year ended 30 June 2007 Year ended

Year ended 30 June 2007 Year ended 30 June 2008 Period ended 30 September 2009 Year ended 30 September 2010

Show the assessments for all relevant years.

September 2010 Show the assessments for all relevant years. For latest course notes, free audio &
September 2010 Show the assessments for all relevant years. For latest course notes, free audio &

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for all relevant years. For latest course notes, free audio & video lectures, support and forums

22

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 23 Mike

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 23 Mike started trading on 1 November

Example 23

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

36,000

44,000

8 months ended 30 June 2009

Year ended 30 June 2010

44,000 8 months ended 30 June 2009 Year ended 30 June 2010 He bought a car

He bought a car with CO 2 emissions of 145g/km on 9 November 2008 for £15,000 for the sole use of his salesman.

Calculate his tax adjusted trading profit assessable amounts for 2008/09, 2009/10 and 2010/11.

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2008/09, 2009/10 and 2010/11. For latest course notes, free audio & video lectures, support and forums

23

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - Unincorporated Business Example 24 Barbara makes up accounts

Unincorporated Business

– REVISION QUESTIONS Income Tax - Unincorporated Business Example 24 Barbara makes up accounts to 31

Example 24

Barbara makes up accounts to 31 March each year.

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

Determine in which years Barbara may claim loss relief?

Determine in which years Barbara may claim loss relief? For latest course notes, free audio &

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JUNE 2011 EXAMINATIONS

For latest course notes, free audio & video lectures, support and forums please visit JUNE 2011

24

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business £ Example 25

JUNE 2011 EXAMINATIONS

Unincorporated Business

£
£

Example 25

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

His results are as follows:

Year ended

31 31 31 31
31
31
31
31

October 2008

October 2009

October 2010

October 2011

loss

(50,000)

profit

20,000

profit

15,000

profit (estimated)

27,000

Ken’s only income was employment income as follows:

27,000 Ken’s only income was employment income as follows: Up to and including 2006/07 2007/08 (7

Up to and including 2006/07 2007/08 (7 months)

£60,000 p.a.

£35,000

Show how the loss would be relieved under current year, carryback, special opening year loss relief and carry forward relief.

Which would be the most beneficial way for Ken to relieve the loss?

be the most beneficial way for Ken to relieve the loss? For latest course notes, free

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for Ken to relieve the loss? For latest course notes, free audio & video lectures, support

25

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 26 Bill

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 26 Bill and Ben share profits equally

Example 26

Bill and Ben share profits equally up to 31 October 2010 but in the ratio 2:1 thereafter. Their tax adjusted trading profits for the year to 31 December 2010 are £48,000.

Show the allocation of the tax adjusted trading profit to both partners in 2010/11

the tax adjusted trading profit to both partners in 2010/11 For latest course notes, free audio

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to both partners in 2010/11 For latest course notes, free audio & video lectures, support and

26

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAPER F6 – REVISION QUESTIONS Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 27 Tracy

JUNE 2011 EXAMINATIONS

Unincorporated Business

Income Tax - JUNE 2011 EXAMINATIONS Unincorporated Business Example 27 Tracy and Donna are in partnership

Example 27

Tracy and Donna are in partnership sharing profits equally. On 31 December 2009 Donna retired. Ethel was admitted to the partnership on 1 January 2010 and was entitled to one third of the profits.

The tax adjusted trading profit for the years to 30 June 2009, 2010 and 2011 are £40,000, £54,000 and £60,000. Respectively Donna has overlap profits brought forward of £15,000.

Donna has overlap profits brought forward of £15,000. Show the tax adjusted trading profit assessable for

Show the tax adjusted trading profit assessable for 2009/10, 2010/11 and 2011/12 for all partners.

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and 2011/12 for all partners. For latest course notes, free audio & video lectures, support and

27

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
£
£

JUNE 2011 EXAMINATIONS

Unincorporated Business

Tax - £ JUNE 2011 EXAMINATIONS Unincorporated Business Example 28 Gordon has the following income and

Example 28

Gordon has the following income and gains:

2009/10

6,000

20,000

2010/11

Total income

income and gains: 2009/10 6,000 20,000 2010/11 Total income Capital gains 7,000 16,000 He incurred a

Capital gains

7,000

16,000

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

Show Gordon’s taxable income and chargeable gains for 2009/10 and 2010/11 assuming that he relieves his trading loss as early as possible.

that he relieves his trading loss as early as possible. For latest course notes, free audio
that he relieves his trading loss as early as possible. For latest course notes, free audio

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loss as early as possible. For latest course notes, free audio & video lectures, support and

28

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Employee Benefits

Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 29 Thomas earns £40,000 per annum. He
Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 29 Thomas earns £40,000 per annum. He
Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 29 Thomas earns £40,000 per annum. He

Example 29

Thomas earns £40,000 per annum. He is provided by his employer with a flat close to the office. Its annual value is £4,100. The flat was purchased in 2002 for £250,000 and was first made available to Thomas in January 2006 when it was worth £280,000.

The employer paid heating bills of £580 in 2010/11. The furnishings in the house cost £20,000.

heating bills of £580 in 2010/11. The furnishings in the house cost £20,000. Assume an official

Assume an official rate of interest of 4%.

Calculate Thomas’s benefit in respect of the provision of the accommodation and associated expenses.

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and associated expenses. For latest course notes, free audio & video lectures, support and forums please

29

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Employee Benefits

Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 30 Clare earns £20,000 p.a. and is
Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 30 Clare earns £20,000 p.a. and is
Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 30 Clare earns £20,000 p.a. and is

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 of £30,000. The car was first made available to Clare on 1 July 2010. The car has an official CO 2 emission rate of 188 grams per kilometre. In the year 2010/11 she drove 16,000 miles, of which 2,000 were private. Clare contributes £20 per month to her employer for the private use of the car. Clare is also provided with fuel by her employer for private use.

is also provided with fuel by her employer for private use. Calculate Clare’s benefits in respect

Calculate Clare’s benefits in respect of the company car.

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respect of the company car. For latest course notes, free audio & video lectures, support and

30

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Employee Benefits

Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 31 Mike was first provided with a
Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 31 Mike was first provided with a
Income Tax - JUNE 2011 EXAMINATIONS Employee Benefits Example 31 Mike was first provided with a

Example 31

Mike was first provided with a CD player for his private use on 6 April 2009. It had a market value of £6,000.

His employer transferred the CD player to Mike on 6 April 2010, when it was worth £4,200. Mike was required by his employer to pay £500.

£4,200. Mike was required by his employer to pay £500. Calculate Mike’s benefit for 2009/10 and

Calculate Mike’s benefit for 2009/10 and 2010/11.

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for 2009/10 and 2010/11. For latest course notes, free audio & video lectures, support and forums

31

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS Pensions JUNE 2011 EXAMINATIONS Individuals - Example 32 Tony is self-employed
Pensions
Pensions

JUNE 2011 EXAMINATIONS

Individuals -

Example 32

Tony is self-employed

His tax adjusted trading profit assessable amount for 2010/11 is £20,000.

You are required to calculate the maximum pension contribution he could obtain relief for in 2010/11.

pension contribution he could obtain relief for in 2010/11. For latest course notes, free audio &

For latest course notes, free audio & video lectures, support and forums please visit

obtain relief for in 2010/11. For latest course notes, free audio & video lectures, support and

32

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 33 Gill sold
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 33 Gill sold
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 33 Gill sold

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 33

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

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

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

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

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

Calculate Gill’s capital gains tax payable for 2010/11 and state the due date for payment.

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the due date for payment. For latest course notes, free audio & video lectures, support and

33

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 34 Frederick bought
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 34 Frederick bought
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 34 Frederick bought

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 34

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

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

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

1993 for £10,000 and sold it in August 2010 for £3,000 Calculate the capital gains or

Calculate the capital gains or capital loss arising for each individual.

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arising for each individual. For latest course notes, free audio & video lectures, support and forums

34

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 35 Billy bought
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 35 Billy bought
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 35 Billy bought

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 35

Billy bought a set of ten terracotta warriors in March 1997 for £20,000. He sold 2 warriors in July 2010 for £6,000. The remaining 8 warriors were worth £28,000 in July 2010.

Calculate the Capital Gain in 2010/11

£28,000 in July 2010. Calculate the Capital Gain in 2010/11 For latest course notes, free audio

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the Capital Gain in 2010/11 For latest course notes, free audio & video lectures, support and

35

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 36 Simon purchased
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 36 Simon purchased
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 36 Simon purchased

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 36

Simon purchased an office block as an investment for £500,000 in April 2002. In September 2010 it was damaged by fire. Restoration Expenditure of £70,000 was incurred in February 2011 and Simon received insurance money of £60,000 in June 2011. The office block was worth £1,000,000 after the damage.

Assume Simon elects to deduct the proceeds of insurance against the cost of the building when the restored asset is sold.

the cost of the building when the restored asset is sold. Calculate the Capital gain arising

Calculate the Capital gain arising (if any) in June 2011 and the base cost of the asset on a subsequent disposal. (Assume the tax rates for 2010/11 continue into the future).

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continue into the future). For latest course notes, free audio & video lectures, support and forums

36

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 37 Betty purchased
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 37 Betty purchased
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 37 Betty purchased

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 37

Betty purchased an asset for £25,000 on 1 October 1991 which was destroyed by fire on 30 September 2010.

She received compensation of £36,000 from her insurance company on 1 January 2011 and purchased a replacement asset for £34,000 on 1 February 2011.

Calculate the Capital Gain arising on 1 January 2011 and the base cost of the replacement asset.

1 January 2011 and the base cost of the replacement asset. For latest course notes, free

For latest course notes, free audio & video lectures, support and forums please visit

of the replacement asset. For latest course notes, free audio & video lectures, support and forums

37

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 38 Nancy owns
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 38 Nancy owns
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 38 Nancy owns

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 38

Nancy owns 5,000 shares in Horwick plc, a quoted company. They were acquired in June 2007 and September 2009 for a total cost of £18,000. Nancy sells 2,000 of the shares in December 2010 for £36,000.

Nancy is not an employee of Horwick plc.

2010 for £36,000. Nancy is not an employee of Horwick plc. Compute the Capital Gain arising

Compute the Capital Gain arising on the sale of the shares in December 2010

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the shares in December 2010 For latest course notes, free audio & video lectures, support and

38

PAPER F6 – REVISION QUESTIONS

6
6
PAPER F6 – REVISION QUESTIONS 6 Shares 800 1,000 500 1,800 Individuals Capital Gains Tax Example

Shares

PAPER F6 – REVISION QUESTIONS 6 Shares 800 1,000 500 1,800 Individuals Capital Gains Tax Example

800

1,000

500

1,800

Individuals Capital Gains Tax

Example 39

Rebecca bought shares in Surpass plc as follows:

October 1990

1

December 1993

1
1

August 2002

11 November 2010

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

On 1 November 2010 she sold 3,550 shares.

issue of 1:4. On 1 November 2010 she sold 3,550 shares. Identify the shares Rebecca has

Identify the shares Rebecca has disposed of using the individual share matching rules.

has disposed of using the individual share matching rules. JUNE 2011 EXAMINATIONS For latest course notes,

JUNE 2011 EXAMINATIONS

For latest course notes, free audio & video lectures, support and forums please visit

rules. JUNE 2011 EXAMINATIONS For latest course notes, free audio & video lectures, support and forums

39

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS £ JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 40 Kit
£
£
PAPER F6 – REVISION QUESTIONS £ JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 40 Kit

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 40

Kit sold her unincorporated business on 31 October 2010 which she had owned for the previous 10 years, giving rise to the following Capital Gains and Capital Losses

Freehold factory Warehouse Goodwill Investment property

200,000

factory Warehouse Goodwill Investment property 200,000 (150,000) 350,000 120,000 She also disposed of shares in

(150,000)

350,000

120,000

She also disposed of shares in Planet Limited in June 2010, (a company in which she owned an 8% holding and was a part time employee for the last 5 years), giving rise to a capital gain of £700,000

last 5 years), giving rise to a capital gain of £700,000 Kit had capital losses brought

Kit had capital losses brought forward of £20,000, she has taxable income of £30,000.

Calculate Kit’s Capital Gains Tax Liability and state the due date for payment.

Gains Tax Liability and state the due date for payment. For latest course notes, free audio

For latest course notes, free audio & video lectures, support and forums please visit

the due date for payment. For latest course notes, free audio & video lectures, support and

40

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 41 Chloe, a
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 41 Chloe, a
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 41 Chloe, a

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 41

Chloe, a trader, disposed of land used in her business for £750,000 in March 2011. The land had cost her £100,000 in June 1988. The sale was not part of the disposal of the entire business. She purchased a factory (as part of the purchase of another unincorporated business), for trading use, in November 2011 for £700,000.

Calculate the chargeable gain on the disposal of the land and the base cost of the factory.

the disposal of the land and the base cost of the factory. For latest course notes,

For latest course notes, free audio & video lectures, support and forums please visit

the base cost of the factory. For latest course notes, free audio & video lectures, support

41

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 42 Peter sold
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 42 Peter sold
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 42 Peter sold

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

Example 42

Peter sold a business asset to Kris in October 2010 for £40,000 when its market value was £75,000. The asset had cost Peter £25,000 in March 1990.

Gift relief is claimed.

cost Peter £25,000 in March 1990. Gift relief is claimed. Calculate Peter’s chargeable gain and the

Calculate Peter’s chargeable gain and the base cost of the asset for Kris.

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cost of the asset for Kris. For latest course notes, free audio & video lectures, support

42

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 43 Jacqui bought
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 43 Jacqui bought
PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Individuals Capital Gains Tax Example 43 Jacqui bought

JUNE 2011 EXAMINATIONS

Individuals Capital Gains Tax

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 left the job on 6 January 2006 and travelled for 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 of £190,000.

house on 6 July 2010, making a capital gain of £190,000. Calculate the chargeable gain after

Calculate the chargeable gain after all relevant reliefs

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after all relevant reliefs For latest course notes, free audio & video lectures, support and forums

43

PAPER F6 – REVISION QUESTIONS Inheritance Tax Example 44
PAPER F6 – REVISION QUESTIONS
Inheritance
Tax
Example 44

Jasper died on 28 February 2011. His estate comprised of the following:

£

500,000

220,000

10,000

35,000

2,000

100,000

House Bank account Cash ISA Motor vehicles Credit card debts Repayment mortgage on the house

vehicles Credit card debts Repayment mortgage on the house Funeral expenses amounted to £7,000 JUNE 2011

Funeral expenses amounted to £7,000

mortgage on the house Funeral expenses amounted to £7,000 JUNE 2011 EXAMINATIONS Under the terms of

JUNE 2011 EXAMINATIONS

Under the terms of his will, Jasper left the house to his wife and the rest of the estate to his daughter.

During his life Jasper made various gifts as follows:

November 2003

- Gift to a trust of £200,000

- Gift to his daughter of £50,000

- Gift to his nephew of £175,000 on the occasion of his marriage

- Gift to a trust of £250,000.

December 2003

March 2007

August 2009

Jasper agreed to pay any lifetime IHT due.

The relevant nil rate bands are as follows:

£

255,000

285,000

325,000

Calculate the IHT arising on the lifetime gifts and the IHT as a result of death.

on the lifetime gifts and the IHT as a result of death. State the due dates

State the due dates for payment of any IHT arising and who will pay and suffer the IHT.

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will pay and suffer the IHT. For latest course notes, free audio & video lectures, support

44

PAPER F6 – REVISION QUESTIONS Corporation Tax Example 45 In the year to 31 March

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS Corporation Tax Example 45 In the year to 31 March 2011

Corporation Tax

Example 45

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

£

280,000

20,000

30,000

4,500

(1,000)

(80,000)

Tax adjusted trading profit Bank interest (accrued) Debenture interest (accrued) Dividends received (net) Gift Aid payment Dividends paid (net)

received (net) Gift Aid payment Dividends paid (net) Calculate corporation tax payable by Cannock plc. JUNE
received (net) Gift Aid payment Dividends paid (net) Calculate corporation tax payable by Cannock plc. JUNE

Calculate corporation tax payable by Cannock plc.

paid (net) Calculate corporation tax payable by Cannock plc. JUNE 2011 EXAMINATIONS For latest course notes,

JUNE 2011 EXAMINATIONS

For latest course notes, free audio & video lectures, support and forums please visit

plc. JUNE 2011 EXAMINATIONS For latest course notes, free audio & video lectures, support and forums

45

Expenses:
Expenses:
Expenses: PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 46 Fallings Ltd’s profit

PAPER F6 – REVISION QUESTIONS

Expenses: PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 46 Fallings Ltd’s profit

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 46

Fallings Ltd’s profit before tax for the year ended 31 December 2010 was £90,000 included the following:

£

42,000

2,800

180

20,000

750

600

2,000

480

300

1,200

100

1,800

500

4,200

Director’s salary Depreciation Gift Aid donation to charity Purchase of van for business Fines for inadequate fencing of equipment Legal fees for acquisition of a 21- year lease Amortisation of lease (cost £42,000) Christmas party for staff Entertaining customers Expenses of car used by a director Political donation to the Green Party Income:

by a director Political donation to the Green Party Income: Income from furnished lettings (net of

Income from furnished lettings (net of Expenses) Bank deposit interest Dividends (net)

A director took goods from the business for her own use, with a cost of £280 and selling price £400. The director’s loan account was debited with the £280 cost.

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

Calculate the adjusted profit for the year ended 31 December 2010.

the adjusted profit for the year ended 31 December 2010. For latest course notes, free audio

For latest course notes, free audio & video lectures, support and forums please visit

year ended 31 December 2010. For latest course notes, free audio & video lectures, support and

46

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 47 Westcroft Ltd, a

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 47 Westcroft Ltd, a small

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 47

Westcroft Ltd, a small company which manufactures greetings cards, prepares accounts to 31 December.

The WDVs for capital allowances purposes, as at 31/12/09 were as follows:

£

General pool Expensive car (private use by director 20%)

1 3
1
3

January

March

10 March

30,000

15,000

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

purchased plant

purchased car CO 2 emissions of 145g/km

purchased car CO 2 emissions of 108g/km

sold plant sold Expensive car bought printing press purchased a long life asset

£

40,000

11,000

18,000

2,000

16,000

4,000

160,000

6 May 10 June 18 September 12 December
6
May
10
June
18
September
12
December

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

Calculate capital allowances for the accounting period ended 31 December 2010.

allowances for the accounting period ended 31 December 2010. For latest course notes, free audio &

For latest course notes, free audio & video lectures, support and forums please visit

ended 31 December 2010. For latest course notes, free audio & video lectures, support and forums

47

PAPER F6 – REVISION QUESTIONS Corporation Tax Example 48 Skip plc had the following income
PAPER F6 – REVISION QUESTIONS Corporation Tax Example 48 Skip plc had the following income

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS Corporation Tax Example 48 Skip plc had the following income and

Corporation Tax

Example 48

Skip plc had the following income and expenditure for the year ended 31 March 2011.

£

500,000

20,000

30,000

24,000

25,000

28,500

1,800

Adjusted profits Capital allowances Building society interest

Debenture interest

Gift Aid

– amount received in the year

– amount accrued for the year

– amount received in the year

– amount accrued for the year – amount paid

in the year – amount accrued for the year – amount paid Calculate the Taxable Total

Calculate the Taxable Total Profits for year ended 31 March 2011.

the Taxable Total Profits for year ended 31 March 2011. JUNE 2011 EXAMINATIONS For latest course

JUNE 2011 EXAMINATIONS

For latest course notes, free audio & video lectures, support and forums please visit

2011. JUNE 2011 EXAMINATIONS For latest course notes, free audio & video lectures, support and forums

48

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 49 Bugs Bunny Ltd

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 49 Bugs Bunny Ltd sold

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 49

Bugs Bunny Ltd sold a factory used in its trade in November 2010 for £140,000. The company had bought it in January 1998 for £60,000.

Assume that the indexation factor for 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 of £4,500.

in its year to 31 March 2011 realising a loss of £4,500. Calculate the Net chargeable

Calculate the Net chargeable Gains arising on the disposal of the two assets.

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disposal of the two assets. For latest course notes, free audio & video lectures, support and

49

February 1992 January 1994
February 1992
January 1994
February 1992 January 1994 July 1997 February 2002 January 4th 2011 PAPER F6 – REVISION QUESTIONS

July 1997

February 2002

January 4th 2011

PAPER F6 – REVISION QUESTIONS

2002 January 4th 2011 PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 50

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 50

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

1,000 shares costing £1,500

1:4 Bonus issue

2,000 shares costing £4,000

1:5 Rights issue at £1.75 per share

2,000 shares costing £4,500

issue at £1.75 per share 2,000 shares costing £4,500 Calculate the chargeable gain to include in

Calculate the chargeable gain to include in the Corporation tax computation.

Feb 1992

136.3

Jan 1994

141.3

July 1997

157.5

Feb 2002

173.8

Jan 2011

230.0

1997 157.5 Feb 2002 173.8 Jan 2011 230.0 For latest course notes, free audio & video

For latest course notes, free audio & video lectures, support and forums please visit

173.8 Jan 2011 230.0 For latest course notes, free audio & video lectures, support and forums

50

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 51 Daisy Ltd, a

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 51 Daisy Ltd, a trading

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 51

Daisy Ltd, a trading company disposed of a building for £750,000 in March 2011. The building had cost the company £100,000 in June 1990.

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

land, for trading use, in November 2011 for £700,000. Calculate the chargeable gain on the disposal

Calculate the chargeable gain on the disposal of the building and the base cost of the land.

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the base cost of the land. For latest course notes, free audio & video lectures, support

51

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 52 Bolton plc had

PAPER F6 – REVISION QUESTIONS

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 52 Bolton plc had the

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 52

Bolton plc had the following results for the years ending 31 December.

2009

2010

2011

10,000

(18,000)

42,000

2,000

2,000

2,000

1,000

1,000

1,000

Tax adjusted trading profit/(loss) Interest income Gift aid payment

trading profit/(loss) Interest income Gift aid payment Show how the loss is relieved, assuming Bolton plc

Show how the loss is relieved, assuming Bolton plc claims loss relief as soon as possible.

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relief as soon as possible. For latest course notes, free audio & video lectures, support and

52

Z in
Z
in
Z in PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 53 Ltd made

PAPER F6 – REVISION QUESTIONS

Z in PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 53 Ltd made

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 53

Ltd made a loss of £120,000 in the year to 31 December 2010, and T Ltd made a Taxable Total Profit of £100,000

the year to 30 September 2010.

Calculate the maximum trading loss that Z Ltd can surrender to T Ltd for use in T Ltd’s accounting period to 30 September 2010

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period to 30 September 2010 For latest course notes, free audio & video lectures, support and

53

J Ltd K Ltd PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example
J Ltd K Ltd
J Ltd
K Ltd

PAPER F6 – REVISION QUESTIONS

J Ltd K Ltd PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS Corporation Tax Example 54

JUNE 2011 EXAMINATIONS

Corporation Tax

Example 54

J Ltd and K Ltd had the following results:

y/e

y/e

31/3/2010

31/3/2011

£

£

Tax adjusted trading profit

500,000

200,000

Tax adjusted trading profit/(loss)

190,000

(120,000)

Calculate the Taxable Total Profits for each company in years ended 31 March 2010 and 31 March 2011 assuming the Trading loss in K Ltd is offset in the most beneficial manner for the group

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manner for the group For latest course notes, free audio & video lectures, support and forums

54

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
PAYE
PAYE

Coding

Example 55

William Ltd has the following income for the year to 31 March 2011:

Tax adjusted trading profit Overseas rental income (amount received net of 3% withholding tax)

£1,500,000

£155,200

received net of 3% withholding tax) £1,500,000 £155,200 Calculate the corporation tax for William Ltd for

Calculate the corporation tax for William Ltd for the year ended 31 March 2011

JUNE 2011 EXAMINATIONS

For latest course notes, free audio & video lectures, support and forums please visit

2011 JUNE 2011 EXAMINATIONS For latest course notes, free audio & video lectures, support and forums

55

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -
Self Assessment £
Self Assessment
£

Example 56

A taxpayer’s tax liability for 2009/10 was as follows:

Income tax Less: Tax deducted at source

9,400

(2,100)

7,300

700

3,500

11,500

at source 9,400 (2,100) 7,300 700 3,500 11,500 Class 4 NIC CGT Calculate the payments on

Class 4 NIC CGT

(2,100) 7,300 700 3,500 11,500 Class 4 NIC CGT Calculate the payments on account for 2010/11

Calculate the payments on account for 2010/11 and state the due dates for payment

on account for 2010/11 and state the due dates for payment JUNE 2011 EXAMINATIONS For latest

JUNE 2011 EXAMINATIONS

For latest course notes, free audio & video lectures, support and forums please visit

JUNE 2011 EXAMINATIONS For latest course notes, free audio & video lectures, support and forums please

56

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

Self Assessment £
Self Assessment
£

Example 57

Continuing with the previous example, suppose that the taxpayer’s liability for 2010/11 is as follows:

Income tax Less: Tax deducted at source

10,800

(2,500)

8,300

800

4,600

13,700

at source 10,800 (2,500) 8,300 800 4,600 13,700 Class 4 NIC CGT Calculate the balancing payment

Class 4 NIC CGT

(2,500) 8,300 800 4,600 13,700 Class 4 NIC CGT Calculate the balancing payment due on 31

Calculate the balancing payment due on 31 January 2012 and the first payment on account for 2011/12

31 January 2012 and the first payment on account for 2011/12 For latest course notes, free

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on account for 2011/12 For latest course notes, free audio & video lectures, support and forums

57

PAPER F6 – REVISION QUESTIONS

Income
Income
Tax -
Tax -

JUNE 2011 EXAMINATIONS

PAYE
PAYE

Coding

Example 58

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

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

She received benefits of £320 from her employer.

2010/11. She received benefits of £320 from her employer. She received untaxed income of £250, the

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

Underpaid tax of £150 from an earlier year is to be collected via her code.

Calculate Maureen’s PAYE tax coding notice for 2010/11.

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coding notice for 2010/11. For latest course notes, free audio & video lectures, support and forums

58

(a) (b)
(a)
(b)
(a) (b) PAPER F6 – REVISION QUESTIONS Corporation Tax - Self Assessment Example 59 Daisy limited

PAPER F6 – REVISION QUESTIONS

(a) (b) PAPER F6 – REVISION QUESTIONS Corporation Tax - Self Assessment Example 59 Daisy limited

Corporation Tax -

Self Assessment
Self Assessment

Example 59

Daisy limited has Taxable Total Profits of £2 million in year end 31 March 2011

Calculate the corporation tax and the due dates for payment

What is the filing date?

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JUNE 2011 EXAMINATIONS

date? For latest course notes, free audio & video lectures, support and forums please visit JUNE

59

PAPER F6 – REVISION QUESTIONS

VAT Example 60
VAT
Example 60

JUNE 2011 EXAMINATIONS

60

YR Ltd commenced trading on 1 June 2010. The value of its taxable supplies were £4,000 per month until 1 April 2011 when they increased to £8,500 per month.

When does YR Ltd have to notify HMRC that it needs to register for VAT and when is registration effective?

to register for VAT and when is registration effective? For latest course notes, free audio &

For latest course notes, free audio & video lectures, support and forums please visit

when is registration effective? For latest course notes, free audio & video lectures, support and forums

PAPER F6 – REVISION QUESTIONS

VAT Example 61
VAT
Example 61

JUNE 2011 EXAMINATIONS

61

Dolphin Ltd commenced trading on 1 June 2010. The value of 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.

When is Dolphin Ltd required to register for VAT and by what date must it notify HMRC?

to register for VAT and by what date must it notify HMRC? For latest course notes,

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what date must it notify HMRC? For latest course notes, free audio & video lectures, support

PAPER F6 – REVISION QUESTIONS

VAT Example 62
VAT
Example 62

JUNE 2011 EXAMINATIONS

62

In the quarter to the 30 June 2011, ST Limited made standard rated supplies of £100,000 and zero rated supplies of £50,000. It offered a 3% discount for payment within 28 days. Approximately a third of its customers took up the discount.

It made standard rated purchases of £61,250 (VAT inclusive), which included £2,250 for entertaining customers. It made zero rated purchases of £12,000.

customers. It made zero rated purchases of £12,000. It wrote off irrecoverable debts of £7,875 and

It wrote off irrecoverable debts of £7,875 and £5,525 in respect of amounts due 1 September 2010 and 1 April 2011. Both figures are VAT inclusive.

Purchased a car for the salesman who uses the car for private use costing £21,250 (including VAT) and machinery costing £11,750 (including VAT)

VAT) and machinery costing £11,750 (including VAT) Show the entries to be included on the VAT

Show the entries to be included on the VAT return for quarter to 30 June 2011. All figures are VAT exclusive unless otherwise stated.

Assume a VAT rate of 20% throughout.

otherwise stated. Assume a VAT rate of 20% throughout. For latest course notes, free audio &

For latest course notes, free audio & video lectures, support and forums please visit

a VAT rate of 20% throughout. For latest course notes, free audio & video lectures, support

PAPER F6 – REVISION QUESTIONS

VAT Example 63
VAT
Example 63

JUNE 2011 EXAMINATIONS

63

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

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

Standard rated purchases of £11,750 (including VAT)

Standard rated purchases of £11,750 (including VAT) If the relevant flat rate percentage is 9% for

If the relevant flat rate percentage is 9% for this trade, illustrate if it is advisable to use the flat rate scheme.

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to use the flat rate scheme. For latest course notes, free audio & video lectures, support

PAPER F6 – REVISION QUESTIONS

VAT Example 64
VAT
Example 64

JUNE 2011 EXAMINATIONS

64

Daisy Ltd’s VAT return for quarter to 30 June 2010 was submitted on 15 August 2010 with the payment of VAT £5,000 also on this date.

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

The next return to 31 December 2010 was on time, but the related VAT payment of £40,000 was only paid on 10 February 2011.

VAT payment of £40,000 was only paid on 10 February 2011. Discuss the VAT consequences of

Discuss the VAT consequences of the late submission of the VAT returns and/or payments for Daisy Limited.

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payments for Daisy Limited. For latest course notes, free audio & video lectures, support and forums

PAPER F6 – REVISION QUESTIONS

VAT Example 65
VAT
Example 65

JUNE 2011 EXAMINATIONS

65

Outline the advantages and disadvantages of Group VAT registration and outline which companies can form part of the VAT group

and outline which companies can form part of the VAT group For latest course notes, free

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can form part of the VAT group For latest course notes, free audio & video lectures,

PAPER F6 – REVISION QUESTIONS

VAT Example 66
VAT
Example 66

JUNE 2011 EXAMINATIONS

66

Mars Limited exports £100,000 of goods to customers in New Zealand (Non EU country) and dispatches £50,000 of 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 EU country) and has acquisitions from a business supplier in France (EU country) of £75,000.

from a business supplier in France (EU country) of £75,000. Mars Limited makes wholly taxable supplies.

Mars Limited makes wholly taxable supplies.

Prepare an extract from Mars Ltd’s VAT return for 30 June 2011, explaining your treatment of each item for VAT purposes.

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of each item for VAT purposes. For latest course notes, free audio & video lectures, support

PAPER F6 – REVISION ANSWERS

JUNE 2011 EXAMINATIONS

Income Tax - Individuals

Answer to example 1 Jane Income Tax computation 2010/11

Non–savings

Savings

Dividends

£

£

£

36,000

 

5,000

 

6,000

36,000

5,000

6,000

(6,475)

29,525

5,000

6,000

£

5,905

1,000

387

691

7,983

(600)

(1,000)

6,383

tax adjusted trading profit Bank interest 4,000 × 100/80 Dividends 5,400 × 100/90 Total Income Less: PA Taxable Income

5,400 × 100/90 Total Income Less: PA Taxable Income Tax calculation Non savings 29,525 × 20%

Tax calculation

Non savings

Income Less: PA Taxable Income Tax calculation Non savings 29,525 × 20% × 20% Tax liability

29,525

× 20%

× 20%

Tax liability Less tax deducted at source Dividends 6,000 × 10% Bank interest 5,000 × 20% Tax payable

Answer to example 2

[37,400 + (800 × 100/80) = 38,400 – 29,525 – 5,000 = 3,875]

× 10%

× 321/2%

The starting rate of 10% for savings income is not applicable as taxable non-savings income is above £2,440

Non–savings

Savings

Dividends

£

£

£

8,000

 

5,000

 

6,000

8,000

5,000

6,000

(6,475)

1,525

5,000

6,000

5,000 6,000 (6,475) 1,525 5,000 6,000 tax adjusted trading profit Bank interest 4,000 × 100/80

tax adjusted trading profit Bank interest 4,000 × 100/80 Dividends 5,400 × 100/90 Total Income Less: PA Taxable Income

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Income Less: PA Taxable Income For latest course notes, free audio & video lectures, support and

1

2

PAPER F6 – REVISION ANSWERS

Tax calculation

Non savings

JUNE 2011 EXAMINATIONS

1,525

@ 20%

305

Savings [2,440 – 1,525 = 915]

915 @ 10%

91

4,085

@ 20%

817

5,000

Dividends:

6,000

6,000 × 10% Tax liability Less tax deducted at source Dividends 6,000 × 10% Bank interest

× 10%

Tax liability Less tax deducted at source Dividends 6,000 × 10% Bank interest 5,000 × 20%

Tax payable

600

1,813

(600)

(1,000)

213

The payment to charity under the gift aid system is ignored as Jane is not a higher rate tax payer.

system is ignored as Jane is not a higher rate tax payer. Answer to example 3

Answer to example 3 Benny Income Tax computation 2010/11

Tax adjusted trading profit Total income Less: reliefs Qualifying interest Net income Less Personal allowance (W1) Taxable Income

Income Tax

Non savings

× 20%

× 40%

114,525

Income tax liability Less tax deducted at source Income tax payable

(W1)
(W1)

Net income Less: Gross gift aid payment (12,000 × 100/90) Adjusted Net Income

Standard personal allowance Less: 1/2 × (104,000 – 100,000) Revised Personal Allowance

Non–savings

£

120,000

120,000

(1,000)

119,000

(4,475)

114,525

£

10,480

24,850

35,330

(–)

35,330

119,000

(15,000)

104,000

6,475

(2,000)

4,475

(W2)

37,400 + 15,000 = 52,400

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(W2) 37,400 + 15,000 = 52,400 For latest course notes, free audio & video lectures, support

PAPER F6 – REVISION ANSWERS

Answer to example 4 Benny Income Tax computation 2010/11

Non–savings £ Tax adjusted trading profit 120,000 Dividend income 45,000 × 100/90

Total income Less: reliefs Qualifying interest Net income Less Personal allowance (W1) Taxable Income

Dividends

£

50,000

50,000

50,000

120,000

(1,000)

119,000

(–)

119,000

(W2)
(W2)

Income Tax

£

10,480

26,640

14,950

1,700

53,770

(5,000)

48,770

169,000

(15,000)

154,000

Non savings

48,770 169,000 (15,000) 154,000 Non savings 52,400 66,600 × 20% × 40% 119,000 Dividends (165,000 –

52,400

66,600

× 20%

× 40%

119,000

Dividends

(165,000 – 119,000)

× 321/5%

× 421/5%

46,000

4,000

50,000

Income tax liability Less tax deducted at source Dividends (50,000 × 10%) Income tax payable

Net income Less: Gross gift aid payment (12,000 × 100/90) Adjusted Net Income

As adjusted net income £112,950 the personal allowance is reduced to Nil 37,400 + 15,000 = 52,400

(W3)
(W3)

150,000 + 15,000 = 16,500

Answer to example 5 In 2010/11 Anne is 70 years old Personal allowance Less 1/2 (25,000 - 22,900) Revised Personal allowance

9,490

(1,050)

8,440

JUNE 2011 EXAMINATIONS

3

Answer to example 6 As Tony is a higher rate tax payer on his employment income, he has a tax liability on his property income of 40%. Kathy has no income and as such is wasting her personal allowance and basic rate banding. It would be better if Kathy were to own the Property such that the property income is assessed on her. The property income of £5,000 will be covered by her personal allowance, so no liability will occur. This will save the couple tax of £2,000 (£5,000 × 40%).

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tax of £2,000 (£5,000 × 40%). For latest course notes, free audio & video lectures, support

4

PAPER F6 – REVISION ANSWERS

Income Tax - Property Business Profit

Answer to example 7 Assessable amount for year 2010/11

JUNE 2011 EXAMINATIONS

Property A £4,000 × 9/12

Less:

Expenses

Property B £3,000 × 8/12 Less: Expenses Wear and tear allowance 10% × 2,000

× 8/12 Less: Expenses Wear and tear allowance 10% × 2,000 Property Income 2010/11 £ £

Property Income 2010/11

£

£

3,000

(1,500)

 

1,500

2,000

(2,200)

(200)

 

(400)

1,100

2,000 (2,200) (200)   (400) 1,100 Answer to example 8 Molly - Property Income for 2010/11:

Answer to example 8 Molly - Property Income for 2010/11:

Premium (51-20/50 × 25000) Rental income 12,000 × 8/12

15 500

,

20

Tenant:

Relief available

Answer to example 9

(a)

Rental income 1) 4 × 1,000 + 7 × 1,200 2) 8 × 600

Less expenses:

× £

1) 4 × 1,000 + 7 × 1,200 2) 8 × 600 Less expenses: × £

(b)

Property

(2)

was

£

15,500

8,000

23,500

775

pa

Property (1)

Property (2)

Total

12,400

12.400

 

4,800

4,800

(2,010)

(2,010)

(150)

(150)

(520)

(520)

(75)

(75)

(3,700)

(3,700)

(305)

(305)

(1,225)

(480)

(1,225)

(275)

(275)

(5,500)

(5,500)

4,415

(1,455)

2,960

would

not

have

been

offset

against

Redecoration Water rates Gardening Legal fees Mortgage interest Insurance Wear and tear allowance 10% × (12,400 – 150)/4,800 Service charge (11 × 25) Mortgage interest (11 × 500)

Furnished

Holiday

letting

property

Property Income for 2010/11 = £2,960

(1)

income. The Property income would have been £4,415 for 2010/11, and the loss on Property (2) would be treated as a trading loss for offset against the total income and gains of 2010/11 and/or 2009/10. In addition the loss could be offset against total income of 2007/08, 2008/09 and 2009/10 under new business rules, or carried forward against future profits. In addition the wear & tear allowance would not be available but capital allowances could be claimed on the cost of the furniture instead.

If

then

the

loss

Property

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If then the loss Property For latest course notes, free audio & video lectures, support and

PAPER F6 – REVISION ANSWERS

Answer to example 10

(a)

Normal assessment Rental income Less expenses Wear & tear allowance 10% × 4,750 Property Income Rent a Room with election Rental income less rent a room relief Property Income The Rent a Room relief election should be made.

(b)

Income The Rent a Room relief election should be made. (b) Income Tax - Unincorporated Business

Income Tax - Unincorporated Business

Answer to example 11

£

£

30,000

10,000

2,800

76

20,000

750

600

100

300

240

120

34,986

1,800

500

4,200

 

(6,500)

58,486

1,800 500 4,200   (6,500) 58,486 Net profit per accounts Add back Proprietor’s wages

Net profit per accounts Add back Proprietor’s wages Depreciation Political donation Purchase of van Fine Legal fees Donation to national charity Entertaining Car expenses (1,200 × 20%) Profit on goods for own use (400 − 280)

Income from furnished lettings Bank deposit interest Dividends

Adjusted profit

lettings Bank deposit interest Dividends Adjusted profit 4,750 (300) (475) 3,975 4,750 (4,250)

4,750

(300)

(475)

3,975

4,750

(4,250)

500

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JUNE 2011 EXAMINATIONS

500 For latest course notes, free audio & video lectures, support and forums please visit JUNE

5

6

PAPER F6 – REVISION ANSWERS

Answer to example 12 Capital allowances year ended 31/12/2010

JUNE 2011 EXAMINATIONS

80%

 

General

Expensive car private use (1) £

Special rate

Short life

pool

pool

asset (1)

£

£

£

£

WDV b/f Additions qualifying for AIA Long life asset Less AIA (Maximum)

160,000

(100,000)

30,000

15,000

 
Additions qualifying for AIA Plant Printing press AIA 40,000 4,000 (–) 60,000

Additions qualifying for AIA Plant Printing press AIA

Additions qualifying for AIA Plant Printing press AIA 40,000 4,000 (–) 60,000

40,000

4,000

(–)

60,000

 
40,000 4,000
40,000 4,000

40,000

40,000 4,000

4,000

 

Other additions

Motor car

CO 2 emissions - 111-160g/km

11,000

81,000

15,000

60,000

4,000

Disposals

(2,000)

(16,000)

79,000

(1,000)

60,000

4,000

WDA @ 20% Balancing Charge WDA @ 10% WDA @ 20%

(15,800)

 

1,000

@ 80%

 

(6,000)

 

(800)

Additions qualifying for FYA Motor car <110 g/km FYA @ 100%

18,000

(18,000)

 

WDV c/f

63,200

54,000

3,200

Answer to example 13 Elliot Cost (50,000 < 25% × 250,000) Y/e 31/3/2011 to y/e 31/3/2012 WDA: (1% × 250,000) × 2 years WDV Y/e 31/3/2013 No WDA or Balancing Adjustment in year of sale

Y/e 31/3/2013 No WDA or Balancing Adjustment in year of sale Answer to example 14 Industrial

Answer to example 14 Industrial buildings allowances – Felix

£

250,000

(5,000)

245,000

Allowances

£

100,000

15,800

(800)

6,000

800

18,000

139,800

 

Allowances

£

£

Cost Y/e 31/3/2011 (400,000 × 1%) y/e 31/3/2012 (notional) y/e 31/3/2013 WDA 1% WDV

400,000

(4,000)

4,000

(4,000)

(4,000)

4,000

388,000

y/e 31/3/2014 - No WDA or Balancing Adjustment in year of sale

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Adjustment in year of sale For latest course notes, free audio & video lectures, support and

PAPER F6 – REVISION ANSWERS

JUNE 2011 EXAMINATIONS

7

Answer to example 15

These form the basis for the assessable amounts for 2009/10 and 2010/11:

£

2009/10

(Year to 30/9/2009)

17,000

2010/11

(Year to 30/9/2010)

19,000

Answer to example 16

The tax adjusted trading profit assessable amounts are as follows:

£

2008/09 2009/10
2008/09
2009/10

(1/7/2008 - 5/4/2009) 36,000 × 9/12

27,000

36,000

(Year to 30/6/2009)

- 5/4/2009) 36,000 × 9/12 27,000 36,000 (Year to 30/6/2009) 2010/11 (Year to 30/6/2010) Answer to

2010/11

(Year to 30/6/2010)

Answer to example 17

(1/7/2008 - 5/4/2009)

(Year to 31/3/2010)

(Year to 31/3/2011)

No overlap profit.

 

£

27,000

36,000

40,000

£

28,000

49,000

54,000

42,000

Overlap profits are £27,000 representing 9 months of profit.

The tax adjusted trading profit assessable amounts are as follows:

Answer to example 18

The tax adjusted trading profit assessable amounts are as follows:

2008/09 2009/10
2008/09
2009/10

(1/9/2008 - 5/4/2009) 40,000 × 7/10

(1/9/2008 - 31/8/2009) 40,000 + (2/12 × 54,000)

2010/11

(Year to 30/6/2010)

Overlap profits are £37,000 representing 9 months of profit

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representing 9 months of profit For latest course notes, free audio & video lectures, support and

8

PAPER F6 – REVISION ANSWERS

Answer to example 19

The tax adjusted trading profit assessable amounts are as follows:

2008/09

(1/7/2008 - 5/4/2009) 66,000 × 9/22

2009/10

(6/4/2009 - 5/4/2010) 66,000 × 12/22

2010/11

£

27,000

36,000

(Year to 30/4/2010) 66,000 × 12/22 36,000 2011/12 (Year to 30/4/2011) 30,000 Overlap profits are
(Year to 30/4/2010)
66,000 × 12/22
36,000
2011/12
(Year to 30/4/2011)
30,000
Overlap profits are £33,000 representing 11 months of profit.
Answer to example 20
The tax adjusted trading profit assessable amounts are as follows:
£
2009/10
(Year to 30/4/2009)
37,000
2010/11
(23 months from 1/5/2009 to 31/3/2011)
(40,000 + 36,000)
Less overlap profits
Final assessable amount
76,000
(25,000)
51,000
Answer to example 21
The tax adjusted trading profit assessable amounts will be as follows:
2008/09
2009/10
Year to 31/3/2009
12-month period to new accounting date of 30/6/2009
1/7/2008 to 31/3/2009 – 72,000 × 9/12
Period to 30/6/2009
2010/11
Year to 30/6/2010

54,000

16,000

JUNE 2011 EXAMINATIONS

£

72,000

70,000

90,000

The profits of £54,000 assessed in 2009/10 are overlap profits, since they were also assessed in 2008/09. They will be carried forward and would normally be offset when Anne ceases trading.

2006/07
2006/07

Answer to example 22 The tax adjusted trading profit assessable amounts will be as follows:

1/7/2006 to 5/4/2007 – 27,000 × 9/12

The profits of £20,250 are overlap profits representing 9 months of profit.

 

£

20,250

2007/08

2008/09

Year to 30/6/2007 Year to 30/6/2008

27,000

36,000

2009/10

15-month period to 30/9/2009

45,000

Less:

Overlap profits 20,250 × 3/9

(6,750)

 

38,250

2010/11

Year to 30/9/2010

54,000

In 2009/10 profits for 15 months are assessed. Because the normal basis of assessment is that only 12 months profits are assessed, Tony is allowed to offset 3 months worth of his overlap profits that arose when he commenced trading. These overlap profits are for a period of 9 months, so the offset is based on a fraction of 3/9.

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is based on a fraction of 3/9. For latest course notes, free audio & video lectures,

PAPER F6 – REVISION ANSWERS

Answer to example 23 Capital allowances

JUNE 2011 EXAMINATIONS

9

 

Pool

Allowances

£

£

8

months to 30/6/2009

Addition (Motor car 111-160g/km)

15,000

WDA 20% × 8/12 WDV c/f y/e 30/6/2010 WDA 20% WDV c/f

8
8

Adjusted profit

months to 30/6/2009 y/e 30/6/2010

Profit

£

36,000

44,000

(2,000)

2,000

13,000

(2,600)

2,600

10,400

CA

£

(2,000)

(2,600)

Tax adjusted trading profit £

34,000

41,400

Tax adjusted trading profit assessable amounts: 1/11/2008 to 5/4/2009 34,000 × 5/8 1/11/2008 to 31/10/2009

Tax adjusted trading profit assessable amounts:

1/11/2008 to 5/4/2009 34,000 × 5/8 1/11/2008 to 31/10/2009 34,000 + 41,400 × 4/12 y/e 30/6/2010

£

21,250

47,800

41,400

Overlap profits are £35,050 (21,250 + (41,400 × 4/12)) representing 9 months of profit

 

Answer to example 24 Loss is in 2010/11. Relief may be claimed in 2010/11 and/or 2009/10 against Total income and then gains. In addition the loss may be carried forward against the first available trading profit of the same trade.

Answer to example 25

Tax adjusted trading profit assessable amounts:

2007/08

2008/09

2009/10 2010/11 2011/12 2007/08 2008/09
2009/10
2010/11
2011/12
2007/08
2008/09

Actual (1/11/2007 - 5/4/08) 12 months to accounting date (y/e 31/10/2008) CYB (y/e 31/10/2009) CYB (y/e 31/10/2010) CYB (y/e 31/10/2011)

Current and Carryback relief 50,000 × 5/12 Relief available against Total Income of 2007/08 and/or 2006/07

Loss Less: Allocated to 2007/08 Relief available against Total Income of 2008/09 and/or 2007/08

 

£

Nil

Nil

20,000

15,000

27,000

£

20,833

50,000

(20,833)

29,167

2007/08

2008/09

Special opening year relief Relief available against Total Income of 2004/05, 2005/06 and 2006/07 Relief available against Total Income of 2005/06, 2006/07 and 2007/08

£

20,833

29,167

Carryforward relief Loss Relieved against tax adjusted trading profit

 

£

50,000

2009/10

(20,000)

2010/11

(15,000)

2011/12

(15,000)

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2011/12 (15,000) – For latest course notes, free audio & video lectures, support and forums please

10

PAPER F6 – REVISION ANSWERS

JUNE 2011 EXAMINATIONS

(b)

The most beneficial way for Ken to relieve his loss would be:

The trading loss of £20,833 for 2007/08, should be relieved under special opening year loss relief, against 2004/05 Total Income of £60,000; and the trading loss of £29,167 for 2008/09 should be relieved under special opening year loss relief against 2005/06 Total Income of £60,000.

This gives relief as early as possible at a rate of 40%, and avoids wasting personal allowances.

Answer to example 26

 

Total

Bill

Ben

£

£

£

1/1/2010 - 31/10/2010 (10/12)

40,000

20,000

20,000

1/11/2010 - 31/12/2010 (2/12) 8,000 5,333 2,667

48,000

25,333

22,667

- 31/12/2010 (2/12) 8,000 5,333 2,667 48,000 25,333 22,667 y/e 31/12/2010 Answer to example 27 Allocation
- 31/12/2010 (2/12) 8,000 5,333 2,667 48,000 25,333 22,667 y/e 31/12/2010 Answer to example 27 Allocation

y/e 31/12/2010

Answer to example 27

Allocation of profits: