F 6 Practive Q

Income Tax – Individuals
EXAMPLE 1
Jane earns £32,000 Tax adjusted trading pro_ t in 2008/09, receives bank interest of
£4,000 and dividend income of £5,400. In addition she pays £800 to charity under
the Gift aid scheme
Calculate Jane’s income tax payable for 2008/09
PAPER F6 _ REVISION QUESTIONS
EXAMPLE 2
Recalculate Jane’s income tax payable if her tax adjusted trading pro_ t income was
only £8,000
EXAMPLE 3
Anne was born on 18th September 1940 and has Net Income of £24,000
Determine the personal age allowances she is entitled to in 2008/09
Tony and Kathy is 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
Property Business
EXAMPLE 5
Robert owns two properties.
Property A is let out unfurnished at an annual rental of £4,000 from 1 July 2008.
Rent is payable quarterly in advance. Expenses amounted to £1,500 for the year to
6 April 2009 on an accruals basis.
Property B is let out furnished at an annual rental of £3,000, from 1 August 2008.
Rent is payable annually in advance. Expenses amounted to £2,200 for the year to
6 April 2009. In addition, Robert
claimed a wear and tear allowance.
Determine Robert’s Property Income to be assessed in 2008/09.
EXAMPLE 6
Molly grants a 20-year lease on a shop on 1 August 2008 for a premium of £25,000.
The annual rent of £12,000 is payable yearly in advance.
Calculate Molly’s Property Income for 2008/09 and the relief available to the tenant
for the premium paid.
EXAMPLE 7
Ben rented a furnished property to students at a monthly rental of £1,000 until 31
July 2008. The property was redecorated in August and let again from 1 September
2008 for £1,200 per month. Details of expenditure during 2008/09
Redecoration 2,010
Water rates 150
New washing machine 250
Gardening 520
Legal fee for tenancy agreement 75
Mortgage interest 3,700
Insurance 305
On 1 May 2008 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 2008 at a monthly rent of £600.
(a) Calculate Ben’s Property Income for 2008/09

(b) What difference would it have made if the second property was classed as a
Furnished Holiday letting property.
EXAMPLE 8
Jimmy rents a room in his main residence to Kenny. Jimmy receives rental income of
£4,750 and incurs relevant expenses of £300 in 2008/09
Calculate Jimmy’s Property Income assuming all elections are claimed for 2008/09
EXAMPLE 9
Kerry’s net pro_ t for the year ended 31 December 2008 was £30,000 included the
following:
£
Expenses:
Proprietor’s wages 10,000
Depreciation 2 800
Contribution to Political Party 76
Purchase of van for business 20,000
Fines for inadequate fencing of equipment 750
Legal fees for acquisition of a 21 year lease 600
Donation to National Charity 100
Entertaining customers 300
Car Expenses 1,200
Income:
Income from furnished lettings (net of Expenses) 1,800
Bank deposit interest (net) 500
Dividends (net) 4,200
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 pro_ t for year ended 31 December 2008
Unincorporated Business
EXAMPLE 10
Debra, a sole trader, prepares accounts to 31 December.
The WDVs for capital allowances purposes, as at 31/12/07 were as follows:
£
General pool 30,000
Expensive car (private use 20%) 15,000
During the year ended 31/12/08 the following transactions occurred:
£
1 January purchased plant 40,000
3 March purchased car 11,000
10 March purchased low emission car 18,000
18 April bought printing press 4,000
6 May sold plant 2,000
10 June sold expensive car 16,000
12 December purchased a long life asset 110,000
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 2008.
EXAMPLE 11
Elliot bought a new industrial building on 1 January 2009, incurring the following
costs:
£
Land 40,000
Building 200,000
O_ ces 50,000
He brought the building into industrial use immediately and continued to use it for
industrial purposes until its date of sale on 1 January 2011.
Elliot sold the building for £230,000 (including £50,000 for the land and £35,000 for
the o_ ces).
Calculate the allowances given to Elliot. (He prepares accounts to 31 March.)
EXAMPLE 12
Felix, a scienti_ c instrument manufacturer, makes up annual accounts to 31 March.
He bought a new industrial building on 1 July 2008 and bought it into use straight
away. The building cost £400,000 and was used for industrial purposes until 30 June
2009. The factory was used for non-industrial purposes for the period 1 July 2009 to
30 September 2010.
On 1 October 2010 the factory was again in industrial use and continued to be so
until its sale on 30 June 2011 for £475,000 to Terry.
Calculate the allowances available to Felix for all relevant periods of account.
EXAMPLE 13
James prepares accounts to 30 September annually. His Trading Income for the two
years to 30 September 2008
were:
£
Year to 30 September 2007 17,000
Year to 30 September 2008 19,000
Show the assessments for 2007/08 and 2008/09
PAPER F6 _ REVISION QUESTIONS June 2009 Examinations 13
Income Tax - Unincorporated Business
For latest course notes updates, free audio and video lectures and support
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EXAMPLE 14
Adam commenced trading on 1 July 2006. He prepared accounts to 30 June each
year. His trading income for
the _ rst two years were as follows:
£
Year ended 30/6/07 36,000
Year ended 30/6/08 42,000
Show the assessments for all relevant years.
EXAMPLE 15
Emily commenced trading on 1 July 2006. She prepared accounts to 31 March 2008
and annually thereafter. Her
trading income for the _ rst two accounting periods were as follows:
£
21 months ended 31 March 2008 63,000
Year ended 31 March 2009 40,000
EXAMPLE 16
Patricia commenced trading on 1 September 2006.
She prepared accounts to 30 June 2007 and annually thereafter. Her Trading Income
for the _ rst two periods were
as follows:
£
10 months ended 30 June 2007 40,000
Year ended 30 June 2008 54,000
EXAMPLE 17
Jacqui commenced trading on 1 July 2006. She prepared accounts to 30 April 2008
and annually thereafter. Her
Trading Income for the _ rst two periods were as follows:
£
22 months ended 30/4/08 66,000
Year ended 30/4/09 30,000
EXAMPLE 18
Matthew commenced trading on 1 May 1999. After trading pro_ tably for some
years, he ceased trading on 31
March 2009. His Trading Income for the _ nal three periods is as follows:
£
Year ended 30/4/2007 37,000
Year ended 30/4/2008 40,000
Period ended 31/3/2009 36,000
Assume his overlap pro_ ts (for the period 1/5/99 - 5/4/00) were £25,000.
EXAMPLE 19
Anne decides to change her accounting date from 31 March to 30 June making up
accounts for the three month
period to 30 June 2007. Anne’s trading income is as follows:
£
Year ended 31 March 2007 72,000
Three months to 30 June 2007 16,000
EXAMPLE 20
Tony, a sole trader, commenced trading on 1 July 2004. He has now decided to
change his accounting date to
30 September by making up accounts for the 15-month period to 30 September
2007. Tony’s trading income is
as follows:
£
Period ended 30 September 2007 45,000
Year ended 30 September 2008 54,000
EXAMPLE 21
Mike started trading on 1 November 2006. His trading results before deducting
capital allowances were as follows:
8 months ended 30 June 2007 36,000
He bought a car on 9 November 2006 for £15,000 for the sole use of his salesman.
Calculate his Trading Income assessable amounts for 2006/07, 2007/08 and
2008/09.
EXAMPLE 22
Barbara makes up accounts to 31 March each year.
For the year ended 31 March 2009 she incurred a trading loss of £10,000.
Determine in which years Barbara may claim loss relief under S64?
EXAMPLE 23
Ken gave up his job with an orchestra, and started his own musical business on 1
November 2005.
His results are as follows:
Year ended £
31/10/06 loss (50,000)
31/10/07 pro_ t 20,000
31/10/08 pro_ t 15,000
31/10/09 pro_ t (estimated) 27,000
Ken’s only income was employment income as follows:
Up to and including 2004/05 £60,000 p.a.
2005/06 (7 months) £35,000
(a) Show how the loss would be relieved under s64, s72 and s83.
(b) Which would be the most bene_ cial way for Ken to relieve the loss?
EXAMPLE 24
Bill and Ben share pro_ ts equally up to 31 October 2008 but in the ratio 2:1
thereafter. Their adjusted trading pro_ ts
for the year to 31 December 2008 are £48,000.
Show the allocation of the trading pro_ t to both partners in 2008/09
EXAMPLE 25
Tracy and Donna are in partnership sharing pro_ ts equally. On 31 December 2007
Donna retired. Ethel was admitted
to the partnership on 1 January 2008 and was entitled to one third of the pro_ ts.
The trading income for the years to 30 June 2007, 2008 and 2009 are £40,000,
£54,000 and £60,000. Donna has
overlap pro_ ts brought forward of £15,000.
Show the Trading Income assessable for 2007/08 and 2008/09 for all partners.
EXAMPLE 26
Gordon has the following income and gains:
2007/08 2008/09
££
Total income 6,000 7,000
Capital gains 20,000 16,000
He incurred a trading loss of £50,000 in his year ended 31 December 2008.
Show Gordon’s taxable income and chargeable gains for 2007/08 and 2008/09
assuming that he relieves
his trading loss as early as possible.
Income Tax - Employee Bene_ ts
EXAMPLE 27
Thomas earns £40,000 per annum. He is provided by his employer with a _ at close
to the o_ ce. Its annual value
is £4,100. The _ at was purchased in 2002 for £250,000 and was _ rst made
available to Thomas in January 2004
when it was worth £280,000.
The employer paid heating bills of £580 in 2008/09. The furnishings in the house
cost £20,000.
Assume an o_ cial rate of interest of 6.25%.
Calculate Thomas’s bene_ t in respect of the provision of the accommodation and
associated expenses.
EXAMPLE 28
Clare earns £20,000 p.a. and is provided with a petrol Volvo T5 by her employer.
The car, which was purchased in
January 2004, had a list price of £30,000. The car was _ rst made available to Clare
on 1 July 2008. The car has an
o_ cial CO2 emission rate of 193 grams per kilometre. In the year 2008/09 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.
Calculate Clare’s bene_ t in respect of the company car.
EXAMPLE 29
Mike was _ rst provided with a CD player for his private use on 6 April 2007. It had a
market value of £6,000.
His employer transferred the CD player to Mike on 6 April 2008, when it was worth
£4,200. Mike was required by
his employer to pay £500.
Calculate Mike’s bene_ t for 2007/08 and 2008/09.
Individuals - Pensions
EXAMPLE 30
Tony is self-employed
His Trading Income assessable amount for 2008/09 is £20,000.
You are required to calculate the maximum pension contribution he could obtain
relief for in 2008/09.
Individuals Capital Gains Tax
EXAMPLE 31
Gill sold a factory used in her trade in November 2008 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 2008/09 realising a loss of £4,500.
Calculate Gill’s capital gains tax payable for 2008/09.
EXAMPLE 32
Frederick bought an Antique vase costing £3,000 in July 1997 and sold it in February
2008 for £4,500
James bought a painting costing £2,000 in September 1999 and sold it September
2008 for £7,500
Sam bought a rare manuscript in July 1993 for £10,000 and sold it in August 2008
for £3,000
Calculate the capital gains or capital loss arising for each individual.
EXAMPLE 33
Billy bought a set of ten terracotta warriors in March 1997 for £20,000. He sold 2
warriors in July 2008 for £6,000.
The remaining 8 warriors were worth £28,000 in July 2008.
Calculate the Capital Gain in 2008/09
EXAMPLE 34
Simon purchased an o_ ce block as an investment for £500,000 in April 2002. In
September 2008 it was damaged
by _ re. Restoration Expenditure of £70,000 was incurred in February 2009 and
Simon received insurance money
of £60,000 in June 2009. The o_ ce 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.
Calculate the Capital gain arising (if any) in June 2009 and the base cost of the
asset on a subsequent
disposal.
EXAMPLE 35
Betty purchased an asset for £25,000 on 1 October 1991 which was destroyed by _
re on 30 September 2008.
She received compensation of £36,000 from her insurance company on 1 January
2009 and purchased a replacement
asset for £34,000 on 1 February 2009.
Calculate the Capital Gain arising on 1 January 2009 and the base cost of the
replacement asset.
EXAMPLE 36
Nancy owns 5,000 shares in Horwick plc, a quoted company. They were acquired in
June 2005 and September
2007 for a total cost of £18,000. Nancy sells 2,000 of the shares in December 2008
for £36,000.
Nancy is not an employee of Horwick plc.
Compute the Capital Gain arising on the sale of the shares in December 2008
EXAMPLE 37
Rebecca bought shares in Surpass plc as follows:
Shares
6/10/89 800
1/12/92 1,000
1/8/01 500
11/11/08 1,800
On 1 June 1995 there was a bonus issue of 1:4.
On 1 November 2008 she sold 3,550 shares.
Identify the shares Rebecca has disposed of using the individual share matching
rules.
EXAMPLE 38
Kit sold her unincorporated business on 31 October 2008 which she had owned for
the previous 10 years, giving
rise to the following capital Gains and capital Losses
£
Freehold factory 200,000
Warehouse (150,000)
Goodwill 350,000
Investment property 120,000
She also disposed of shares in Planet Limited in June 2008, (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
Kit had capital losses brought forward of £20,000.
Calculate Kits Capital Gains Tax Liability and state the due date for payment.
EXAMPLE 39
Chloe, a trader, disposed of land used in her business for £750,000 in March 2009.
The land had cost her £100,000
in June 1988. The sale was not part of the disposal of the entire business. She
purchased goodwill (as part of the
purchase of another unincorporated business), for trading use, in November 2009
for £700,000.
Calculate the chargeable gain on the disposal of the land and the base cost of the
goodwill.
EXAMPLE 40
Peter sold a business asset to Kris in October 2008 for £40,000 when its market
value was £75,000. The asset had
cost Peter £25,000 in March 1990.
Gift relief is claimed.
Calculate Peter’s chargeable Gain and the base cost of the asset for Kris.
EXAMPLE 41
Jacqui bought a house in Manchester on 6 July 1989. She lived in it until 6 July 1994.
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 2004 and travelled for 2 years, returning to the house
in Manchester on 6 January 2006.
The house was empty during this period. She sold the house on 6 July 2008, making
a capital gain of £190,000.
Calculate the chargeable gain after all relevant reliefs
Corporation Tax
EXAMPLE 42
In the year to 31 March 2009 Cannock plc received and (paid) the following
amounts:
£
Trading Income 280,000
Bank interest (accrued) 20,000
Debenture interest (accrued) 30,000
Dividends received (net) 4,500
Gift Aid payment (1,000)
Dividends paid (net) (80,000)
Calculate corporation tax payable by Cannock plc.
Corporation Tax
EXAMPLE 43
Westcroft Ltd, a small company which manufactures greetings cards, prepares
accounts to 31 December.
The WDVs for capital allowances purposes, as at 31/12/07 were as follows:
£
General pool 30,000
Expensive car (private use by director 20%) 15,000
During the year ended 31/12/08 the following transactions occurred:
£
1 January purchased plant 40,000
3 March purchased car 11,000
10 March purchased low emissions 18,000
6 May sold plant 2,000
10 June sold Expensive car 16,000
18 September bought printing press 4,000
12 December purchased a long life asset 110,000
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 2008.
Corporation Tax
EXAMPLE 44
Fallings Ltd’s pro_ t before tax for the year ended 31 December 2008 was £90,000
included the following:
£
Expenses:
Director’s salary 42,000
Depreciation 2,800
Gift Aid donation to charity 180
Purchase of van for business 20,000
Fines for inadequate fencing of equipment 750
Legal fees for acquisition of a 21- year lease 600
Amortisation of lease (cost £42,000) 2,000
Christmas party for sta_ 480
Entertaining customers 300
Expenses of car used by a director 1,200
Political donation to the Green Party 100
Income:
Income from furnished lettings (net of Expenses) 1,800
Bank deposit interest 500
Dividends (net) 4,200
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 pro_ t for the year ended 31 December 2008.
Corporation Tax
EXAMPLE 45
Skip plc had the following income and expenditure for the year ended 31 March
2009.
£
Adjusted trading pro_ ts 500,000
Capital allowances 20,000
Building society interest – amount received in the year 30,000
– amount accrued for the year 24,000
Debenture interest – amount received in the year 25,000
– amount accrued for the year 28,500
Gift Aid – amount paid 1,800
Calculate the pro_ ts chargeable to corporation tax for year ended 31 March 2009.
Corporation Tax
EXAMPLE 46
Bugs Bunny Ltd sold a factory used in its trade in November 2008 for £140,000. The
company had bought it in
January 1989 for £60,000.
Assume that the indexation factor for the period January 1988 to November 2008 is
0.851. The company made
one other disposal in its year to 31 March 2009 realising a loss of £4,500.
Calculate the Net chargeable Gains arising on the disposal of the two assets.
Corporation Tax
EXAMPLE 47
ST Limited sold 5,000 shares in JM Ltd for £50,000 on 12 January 2009. They had
been acquired as follows:
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 2009 2,000 shares costing £4,500
Calculate the chargeable gain to include in the Corporation tax computation.
RPI’s are: Feb 1992 136.3
Jan 1994 141.3
July 1997 157.5
Feb 2002 173.8
Jan 2009 212.6
Corporation Tax
EXAMPLE 48
Daisy Ltd, a trading company disposed of a building for £750,000 in March 2009.
The building had cost the company
£100,000 in June 1990.
Assume an indexed rise of 80% to March 2009. Daisy Ltd then purchased land, for
trading use, in November 2009
for £700,000.
Calculate the chargeable gain on the disposal of the building and the base cost of
the land.
Corporation Tax
EXAMPLE 49
Bolton plc had the following results for the years ending 31 July.
2006 2007 2008
Trading income/(loss) 10,000 (18,000) 42,000
Interest income 2,000 2,000 2,000
Gift aid payment 1,000 1,000 1,000
Show how the loss is relieved, assuming Bolton plc claims loss relief as soon as
possible.
Corporation Tax
EXAMPLE 50
Z Ltd made a loss of £120,000 in the year to 31 December 2008, and T Ltd made a
pro_ t of £100,000 in the year
to 30 September 2008.
Calculate the maximum trading loss that Z Ltd can surrender to T Ltd for use in T
Ltd’s accounting period
to 30 September 2008
Corporation Tax
EXAMPLE 51
J Ltd and K Ltd had the following results:
y/e
31/3/08
y/e
31/3/09
££
J Ltd Trading Income 500,000 200,000
K Ltd Trading Income/(loss) 190,000 (120,000)
Calculate the PCTCT for each company in years ended 31 March 2008 and 31 March
2009 assuming the
Trading loss in K Ltd is o_ set in the most bene_ cial manner for the group
Corporation Tax
EXAMPLE 52
William Ltd has the following income for the year to 31 March 2009:
Trading Income £1,500,000
Overseas dividend (amount received) £155,200
The overseas dividend is from an 80% holding in Junkie Inc.
Its results for the year ended 31 March 2009 are as follows:
£
Trading Income 420,000
Taxation: Corporation tax (123,000)
Distributable pro_ ts 297,000
Dividends paid: Net 194,000
Withholding tax at 3% 6,000
200,000
Retained pro_ ts 97,000
The actual foreign corporation tax subsequently paid was £115,000
Calculate the corporation tax for William Ltd for the year ended 31 March 2009
Income Tax - Self Assessment
EXAMPLE 53
A taxpayer’s tax liability for 2007/08 was as follows:
£
Income tax 9,400
Less: Tax deducted at source (2,100)
7,300
Class 4 NIC 700
CGT 3,500
11,500
Calculate the payments on account for 2008/09 and state the due dates for
payment
Income Tax - Self Assessment
EXAMPLE 54
Continuing with example above, suppose that the taxpayer’s liability for 2008/09 is
as follows:
£
Income tax 10,800
Less: Tax deducted at source (2,500)
8,300
Class 4 NIC 800
CGT 4,600
13,700
Calculate the balancing payment due on 31 January 2010 and the _ rst payment on
account for 2009/10
Income Tax - PAYE Coding
EXAMPLE 55
Maureen, who is single, is a basic rate taxpayer.
She paid a personal pension premium of £1,000 (net) and £120 professional
subscription in 2008/09.
She received bene_ ts in kind of £320 from her employer.
She received untaxed income of £250, the tax liability on which is discharged by
set-o_ 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 2008/09.
Corporation Tax - Self Assessment
EXAMPLE 56
Daisy limited has PCTCT of £2 million in year end 31 March 2009
(a) Calculate the corporation tax and the due dates for payment
(b) What is the _ ling date?
VAT
EXAMPLE 57
YR Ltd commenced trading on 1 June 2008. The value of its taxable supplies were
£4,000 per month until 1 April
2009 when they increased to £8,000 per month.
When does YR Ltd have to notify HMRC that it needs to register for VAT and when is
registration
e_ ective?
VAT
EXAMPLE 58
Dolphin Ltd commenced trading on 1 June 2008. The value of its taxable supplies
was £3,000 per month until 1
April 2009 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?
VAT
EXAMPLE 59
In the quarter to the 31 March 2009 ST Limited made a standard rated supplies of
£100,000 and zero rated supplies
of £50,000. It o_ ered 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.
It wrote o_ bad debts of £7,875 and £5,525 in respect of amounts due 1 July 2008
and 1 January 2009. Both _ gures
are VAT inclusive.
Purchased a car for the salesman costing £21,250 (including VAT) and machinery
costing £11,750 (including
VAT)
Show the entries to be included on the VAT return for quarter to 31 March 2009.
All _ gures are VAT exclusive unless otherwise stated.
VAT
EXAMPLE 60
BW Ltd has the following sales & purchases in year ended 31 December 2008:
Standard rated sales of £70,500 (including VAT) and zero rated sales of £5,000.
Standard rated purchases of £11,750 (including VAT)
If the relevant _ at rate percentage is 11% for this trade, illustrate if it is advisable
to use the _ at rate
scheme.
VAT
EXAMPLE 61
Daisy Ltd’s VAT return for quarter to 30 June 2008 was submitted on 15 August
2008 with the payment of VAT
£5,000 also on this date.
The return and payment for quarter to 30 September 2008 was on time.
The next return to 31 December 2008 was on time, but the related VAT payment of
£40,000 was only paid on 10
February 2009.
Discuss the VAT consequences of the late submission of the VAT returns and/or
payments for Daisy Limited.

F 6 Practive Q

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Income Tax – Individuals

(a) Calculate Ben’s Property Income for 2008/09

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