1 CRN:15452SEMESTER 1 EXAMINATIO PROGRAMMES:BSc (Hons) Accounting and Finance BSc (Hons) Accounting and Finance with Professional Experience Year BSc (Hons) Business and Financial Management BSc (Hons) Business and Financial Management with Professional Experience Yea BSc (Hons) Financial Mathematic
Module Title: Business Taxation________________________________________________________________Instructions to Candidates:You must answer ALL questionsThe paper is marked out of 100.This exam contributes 75% of the module mark.
2Question 1DarcyFor the tax year 2019/20, Darcy has a trading profit of £158,000. During the year he made personal pension contributions of £30,000 and a net gift aid donation of £8,600.Ahmed Ahmed had a salary of £52,500 and saving income of £1,800. His employer has deducted £7,800 in PAYE from his earnings.Ahmed also acquired a property on 1st June 2019 for the purpose of letting. The property was first let from 1 July 2019 unfurnished for an annual rental of £4,000 payable quarterly in advance from 1st July 2019. Ahmed incurred the following expenditure in respect of this property during the period to 5 April 2020.£20 June 2019Repairs to roof following a storm on 15 June 20191,60029 June 2019Insurance for y/e 31/05/20204201 February 2020Repainting exterior810Required:a.
Calculate Darcy’s taxable income for the tax year 2019/20.(5 marks)
b.Explain how Darcy would get tax relief related to his pension contribution(3marks)
c.Calculate the income tax payable by Ahmed and state the payment due date for the tax year 2019/20.(12 marks)(Total marks
20)Question 2Marcus made some disposals of assets in the 2019/20 tax year.
He has come to you for assistance with the tax implications of the disposals, and any resulting tax liability.On 31 January 2020 he sold his house for £700,000. He had purchased it for £450,000 on 1 June 2002. In May 2009 he added an extension costing £70,000. He lived in the house from 1 June 2002 to 31 July 2010 when he moved into his partner’s house. On 1 March 2020, he received proceeds of £40,000 on the maturity of some Treasury Stock. He originally invested £25,000 in November 2001.
3On 12 March 2020, he sold 50,000 shares in Rashford Ltd for £450,000. Rashford Ltd is an investment company,and does not qualify for Entrepreneur’s Relief. The full history of his investment, to date, is set out below:Date Description Nr of sharesCost/Disposal(£)23/02/1993Acquisition10,00020,00018/04/2002Rights issue3:4 @ £3.80 per share01/05/2003Disposal-5,00020,00001/03/2004Bonus issue3:112/02/2011Acquisition20,000100,00012/03/2020Disposal-50,000-450,00014/03/2020Acquisition10,00088,000On 1 April 2020, Marcus sold an antique dresser for £8,300, incurring incidental selling costs of £300. He inherited iton the death of his father in 2016, when it had a probate value of £5,400. His father originally paid £3,000 for the dresser back in 1995. Other Information Marcus is UK resident and married to Lucia. During the 2019/20 tax year, he has earnings from employment of £33,650 and savings income of £1,000. Marcus has capital losses brought forward of £64,700. Required:CalculateMarcus’s CGT liability for 2019/20.(20 marks)Question 3Married couples and civil partners can make use of each other’s tax-free allowance without special tax planning.Required
Discuss the inheritance tax rules for married couples.(10 marks)
4Question 4Fastactplc is a UK resident trading company, manufacturing digital products. The company has recently changed its accounting reference date from 30 June to 31 March. Trading Profits In the nine-month period to 31 March 2020, Fastact plc had a trading profit of £3,200,500.
This figure has been adjusted (correctly) for all items, except for capital allowances and interest payable. Capital Transactions During the nine-month period, Fastact plc made the following capital transactions:05/09/2019Sold a commercial property for £650,000, incurring legal fees of £20,000 in connection with the sale. The property was originally acquired for £280,000 on 1 April 2014, incurring fees and stamp duty land tax of £15,000.
The property was extensively refurbished in December 2015, at a cost of £150,000.18/11/2019Purchased machinery for £500,000.18/12/2019Purchased a brand water cooling system for £800,000. This figure includes £25,000 for installation into the factory.31/12/2019Purchased a car for the company’s chief executive. The car cost £80,000, has CO2 emissions of 156g/km.02/01/2020Sold five acres of investment land for £500,000, incurring fees of £40,000 on sale.
The company originally acquired eight acres of land for £600,000 in March 2012, incurring legal fees of £50,000 in connection with the purchase. At the time of disposal, the remaining three acres of land as valued at £150,000.06/02/2020Sold some items of plant & machinery for £100,000, and integral features for £80,000. No item was sold for more than costTax written down values brought forward at 1 July 2019:
5£Main Pool300,000Special rate pool200,000Interest payableDuring the period, the company accrued interest payable of £81,750; however, none of this has yet been deducted in arriving at the company’s taxable income.£Overdraft interest20,000Interest on a loan to purchase the above machinery in November 20199,600Arrangement fee in respect of the above loan4,800Interest on late paid corporation tax500Interest on loan to buy the above investment land14,000Other information:•
Fastactplc accrued interest receivable of £120,000 in the accounting period. This relates to the purchase of debentures for investment purposes.
The company has capital losses brought forward at 1 July 2019, of £35,000.
Fastact plc received no other income inthe period.
Use the following RPIs in your calculations, where required:January 2020 283.0 September 2019 284.1 December 2017 278.1 December 2015 257.5 April 2014251.3March 2012232.5Required:Calculate Fastactplc’s corporation tax liability for the nine-month period ended 31 March 2020.(30 marks) Question 5Ben has recently started a new business as a video producer selling custom-designed videos for advertising of small businesses.
6His wife, Ellie, has also set up a business providing online private tuition. They commenced their businesses on the same day, 1 January 2020. Their actual and forecast revenues for the first twelve months of trading, is as follows:Monthly revenueMonth EndBen EllieJanuary 20202,000 500 February 20202,500 600 March 20203,000 800 April 20205,000 800 May 20205,000 800 June 20205,000 800 July 20205,000 800 August 20205,000 800 September 20205,000 800 October 20205,000 800 November 20205,000 1,000 December 20205,000 1,000 Required:a.Based on the above forecasts, explain whether Ben and Ellie are required to register for VAT in their first twelve months of trading. (3 marks)
b.Explain the advantages and disadvantages of VAT registration, with regards to Ben and Ellie’s businesses. (8 marks) Ben has a meeting on 15th May 2020, with a huge name in the sports industry. He is expecting that meeting to result in an order for£100,000, which he would need to deliver and invoice within a very tight two-week deadline.
c.Explain how this would impact on Ben’s requirement to register for VAT. (5 marks) d.In the event that Ben is eventually required to register for VAT, explain the workings and benefits of the Annual Accounting Scheme to him. (4 marks) (Total 20 marks)End of Exam