MAN2105 Practice Exam Answers PDF

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INTRODUCTION TO TAX - MAN2105 Specimen Exam – Answers Question 1 a) Calculate the chargeable gains arising from the disposal of shares in Scarey plc and the factory FA 1985 pool

Number

Cost

Of Shares

Cost £

May 1991

10,000

Bonus Issue

1,000

Indexed

12,000

£

12,000

11,000 November 1999 IA £12,000 * 0.249

2,988 14,988

Nov 1999 purchase

10,000

22,000

22,000

21,000

34,000

36,988

December 2017 IA £36,988* 0.668

24,708 61,696

Disposal

(20,000)

Pool C/F

1,000

(32,381) 1,619

Proceeds

82,000

Cost

(32,381) 49,619

Indexation allowance (58758-32381)

(26,377)

Gain

23,242

(58,758) 2,,938

Factory

Sales Proceeds

612,900

Less cost

(225,000)

Unindexed Gain

387,900

Less: IA ( 225000x0.439)

(98,775)

Indexed Gain

289,125

Total chargeable gains = £23,242+£289,125= £312,367

b) Calculate the adjusted trading profit, before capital allowances, for the period ending 31 March 2020. £ Net profit

700,411

Add: Increase in general provn

30,000

Gifts of food

5,000

Entertaining customers

2,600

Depreciation

90,000 127,600 828,011

Less: Profit on sale of shares

(51,577)

Profit of the sales of the factory

(431,500) 344,934

c) Calculate the Plant and Machinery capital allowances CAP for the 12 months ended 31 December 2019

WBV B/F

Main Pool

S-L Asset

145,000

10,000

CAs

Acquisitions qualify For AIA: Van

12,000

AIA

(12,000)

Excess

12,000 0

Disposal

(11,000) 145,000

Balancing charge

(1,000) 1,000

WDA 18%

(26,100)

WDV C/F

118,900

(1,000) 26,100

-

Total CAs

* Acquisitions that qualify for an AIA are well within the limit.

37,100

CAP for the 3 months ended 31 March 2020

Main Pool

WDV B/F

Special rate Pool

CAs

118,900

Acquisitions qualify 100% FYA: Water efficient Plant

15,000

100% FYA

(15,000)

15,000

Acquisitions no AIA or FYA Audi 200g/km

Disposal Mar 2020

35,000

(86,500) 32,400

WDA 18%*3/12

(1,458)

WDA 6%*3/12 WDA C/F Total CAs

35,000 2 (525)

30,942

1,458 525

34,475 16,983

d) Show the TTP for the period ended 31 December 2019 and the period ended 31 March 2020. y/e 31.12.19

3m To 31.03.20

Profit

275,947

68,987

Capital Allowances

(37,100)

(16,983)

Trading Income

238,847

52,004

Chargeable Gain

-

312,367

238,847

364,371

TTP

e) Calculate the Corporation Tax payable for the total period ended 31 March 2020.

CT @19% (238,847+364,371)=603218*19%=114,611 f)

For both CAPs when is the final payment of tax due and by what date does the CT600 return need to be submitted online?

For both CAPs the CT600 is due 12m after the end of the period of account in which the last day of the specified period falls. CT600 due 31.03.2021

Payment due: 9 months and 1 day after the end of the period of account in which the last day of the specified period falls. 01.01.2021

Question 2 a) Describe three of the ‘badges of trade’ that HMRC might use to assess that Ben’s income is trading income. See Page 6.3 of textbook

b) In which tax year did he start trading? In Income tax year 2016/17

c) Calculate his taxable profits in his first tax year of trading and state the basis period

Basis period = 1.1.2017 to 5.4.2017 3/9 * 28,000 = 9,333 taxable profits

d) Calculate his taxable profits in his second tax year of trading and state the basis period.

Basis period for 2017/18 = 1.1.2017 to 31.12. 2017 Taxable profits = 3/12* 35000=

8750 28000 36750

e) Calculate his taxable profits in his third tax year of trading and state the basis period. Basis period for 2018/2019 = 1.10.2017 to 30.09.2018 Taxable profits= 35000

f)

Calculate his overlap profits and explain what relief, if any, is available for them. £ Overlap profits = 1.1.17-5.4.17 1.10.17-31.12.17

9333 8750 18,083

When a business ceases trading overlap profits reduce the final trading income assessment

Question 3 a) Calculate the division of profits between the partners for the accounting year ended 31 October 2019.

Total

Adam

Ben

Clive

£

£

£

£

1 Nov 2018– 31 Mar 2019

45,000

22,500

13,500

9,000

1 Apr 2019 – 31 Oct 2019

63,000

31,500

31,500

0

Total

108,000

54,000

45,000

9,000

b) What is the trading assessment for 2018/19 for Clive? The trading assessment for Clive is £23,800 (£84,000 x 2/10) + £9,000 - £2,000

Question 4 Nim – CGT Liability 2019/20 £

£

Ordinary shares in Kapook plc Proceeds (10000*£3.70)

37,000

Less: Cost (W1)

(23,400)

13,600 0

Ordinary shares in Jooba Ltd (no gain, no loss transfer between spouses) Antique table (W2)

3,500

UK Government securities (exempt)

0

Net Chargeable Gains

17,100

Less: Annual exempt amount

(12,000)

Amount subject to CGT

5,100

CGT payable (£5,400*10%) he is a lower rate tax payer

£510

W1 The disposal is first matched against the purchase on 24 July 2019 (this is within the following 30 days) and then against the shares in the share pool. The cost of the shares is therefore £23,400 (£5,800+£17,600). Share Pool

No. of shares

Cost £

Purchase 19/2/03

8,000

16,200

Purchase 6/6/08

6,000

14,600

14,000

30,800

Disposal 20/7/19 £30,800*8,000/14,000

(8,000)

(17,600)

Pool Bal c/f

6,000

13,200

W2 The antique table is a chattel £ Proceeds

8,700

Cost

(5,200)

Gain

3,500

The maximum gain is 5/3*(8,700-6,000)=£4,500. The chargeable gain is the lower of £3,500 and £4,500, so it is £3,500.

Question 5 Tax Due £8,500+£5,000= £13,500 Payment on Account 31/1/2020 £3,000 Payment on Account 31/7/2020 £3,000 Final Payment 31/1/2021 £7,500...