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Advanced Taxation NI 2

nd Year Examination

May 2017

Solutions, Examiners Comments & Marking Scheme

Advanced Taxation NI May 2017 2nd

Year Paper

of 25

NOTES TO USERS ABOUT THESE SOLUTIONS

The solutions in this document are published by Accounting Technicians Ireland. They are intended to

provide guidance to students and their teachers regarding possible answers to questions in our

examinations.

Although they are published by us, we do not necessarily endorse these solutions or agree with the views

expressed by their authors.

There are often many possible approaches to the solution of questions in professional examinations. It

should not be assumed that the approach adopted in these solutions is the ideal or the one preferred by us.

Alternative answers will be marked on their own merits.

This publication is intended to serve as an educational aid. For this reason, the published solutions will

often be significantly longer than would be expected of a candidate in an examination. This will be

particularly the case where discursive answers are involved.

This publication is copyright 2017 and may not be reproduced without permission of Accounting

Technicians Ireland.

© Accounting Technicians Ireland, 2017.

of 11 Adv. Taxation (NI) S2017


Year Paper

Accounting Technicians Ireland

2nd

Year Examination: May 2017

Paper: ADVANCED TAXATION (Northern Ireland)

Thursday 11 May 2017

2.30 p.m. to 5.30 p.m.

INSTRUCTIONS TO CANDIDATES

PLEASE READ CAREFULLY

For candidates answering in accordance with the law and practice of Northern

Ireland.

Candidates should answer the paper in accordance with the appropriate provisions

up to and including the Finance Act, 2016. The provisions of the Finance Act, 2017

should be ignored.

Allowances and rates of taxation, to be used by candidates, are set out in a separate

booklet supplied with the examination paper.

Answer ALL THREE QUESTIONS in Section A, and ANY TWO of the FOUR

questions in Section B. If more than TWO questions are answered in Section B, then

only the first two questions, in the order filed, will be corrected.

Candidates should allocate their time carefully.

All workings should be shown.

All figures should be labelled as appropriate e.g. £s, units, etc.

Answers should be illustrated with examples, where appropriate.

Question 1 begins on Page 2 overleaf.

The following insert is included with this paper.

Tax Reference Material (NI)



Year Paper

SECTION A

Answer QUESTION 1 and QUESTION 2 and QUESTION 3 (Compulsory) in this Section

QUESTION 1 (Compulsory)

Zenith Ltd has the following results for the year ended 31 December 2016:

£ Adjusted Trading Profits 615,400

Capital Allowances (Note 1) NOTE 1

Chargeable Gains (Note 2) NOTE 2

Capital loss brought forward 2,000

Rents receivable 14,200

Patent royalty Income (Gross) 16,800

Bank deposit interest receivable 2,880

Dividends received from UK companies 5,760

Qualifying charitable donations paid (1,200)

Zenith Ltd has trade losses brought forward of £35,724 which they wish to use now.

Note 1

During the period Zenith Ltd has the following Non current asset information:-

Balances brought forward £

General Pool 84,000 Special Rate Pool 26,900 Additions

1 May 2016 Plant & Machinery 203,900 12 August 2016 Energy saving plant 24,000 5 October 2016 BMW420D 37,500 Disposal Proceeds

23 June 2016 Plant & Machinery

(Cost £27,050) 16,700

5 October 2016 Mercedes C320 Car 172 g/km

( Cost £32,000) 14,800

The sales director used both cars with an agreed 30% private use.



Year Paper

Note 2 On the 6 March 2016 Zenith Ltd has sold 4,500 shares in Pluto plc for £22,500. The shares in

Pluto plc had been purchased as follows:-

Date Number of shares Cost £

1 July 1999 1,500 3,000 1 September 2009 1,500 3,750 27 February 2016 750 1,800 6 March 2016 750 2,500

Relevant RPI for the disposals are as follows:- July 1999

- 165.1

Sept 2009 - 215.3

Mar 2016 - 265.4

Required:

(1) Calculate Zenith Ltd’s Capital Allowances claim for the year ended 31 December 2016 and

show the tax written down values carried forward. (10 marks)

(2) Calculate the gain made on the sale of shares in Pluto Plc. (8 marks)

(3) Using all the information above calculate Zenith Ltd’s Corporation Tax liability for y/e 31

December 2016 assuming all reliefs and allowances are claimed at the earliest opportunity.

(10 marks) (4) State the date by which the company must pay their corporation tax liability.

(2 marks)

Total 30 Marks



Year Paper


The following multiple choice question comprises of ten parts each of which is followed by four

possible answers. There is only one right answer in each part.

Requirement

Indicate the right answer to each of the following ten parts.

N.B. Each part carries (2 Marks)

Candidates should answer this question by ticking the appropriate boxes on the special answer sheet

which is contained within the answer booklet.

1. A UK registered business acquires goods from another EU country.

Which one of the following statements is correct?

a) As long as the UK business supplies it’s VAT number to the EU supplier the goods will

be zero rated and VAT doesn’t need to be accounted for

b) The UK business will charge itself output tax for the goods on VAT return and reclaim

input tax on the same return

c) The UK business will pay output tax to HMRC at that point of entry into the UK and

can reclaim input tax on the next return

d) The EU supplier will charge VAT on the goods and the UK business will be able to

reclaim the VAT on its next return

2. Deirdre has a VAT registered business with accounting year end of 30th

of April 2017.

Deirdre operates the annual accounting scheme.

Which of the following statements is correct?

a) She pays some of her VAT by monthly instalments with the balance due by 31 May

2017

b) She pays some of her VAT by monthly instalments with the balance due by 30 June

2017 c) She pays all of her VAT in a single payment by 31

st May 2017

d) She pays all of her VAT in a single payment by 30th

June 2017

3. Janet was provided with a company car in January 2017. The company paid the list price of £27,000 for the car but Janet contributed £6000 towards the purchase price. The car has a

diesel engine and has CO2 emissions of 140 g/km. The company pays all the running costs of

£1680 per annum but does not pay for any private fuel cost and Janet. Janet pays £50 a month to her employer for the private use of the car.

What is Janet’s taxable car benefit for 2016/2017?

a) £3,070

b) £1,320

c) £1,390

d) £1,310



Year Paper

4. Joel is a hotel manager and is provided with job-related accommodation on the site of the

hotel. His annual salary is £25,000 and has other benefits of £500. He makes payment to his

employers registered occupational pension scheme of £2,000 per annum (gross). The

accommodation has an annual value of £1,500 and cost his employer £90,000 four years

ago. The accommodation contains furniture which cost his employer £10,000 four years ago

(when he first moved into the accommodation). His employer pays all of his household bills

totalling £1000.

What is Joel’s taxable accommodation benefit for 2016/2017?

a) £2,350

b) £3,000

c) £4,300

d) £4,950

5. Sunita has sold two paintings in 2016/2017 and made gains (before annual exemption) of

£16,900 and £11,500. Her taxable income for the year after deducting her personal

allowance is £23,675.

What is Sunita’s capital gains tax liability for 2016/2017?

a) £2,627.50

b) £5,207.50

c) £4,011.50

d) £7,479.50

6. Dermot made a capital loss (after the annual exemption) of £4,000 in 2015/2016.

In 2016/20 17 (before annual exemption) he made a chargeable gain of £12,600 and a capital

loss of £3,000.

How much capital loss is carried forward at the end of 2016/2017?

a) £5,500 b) £NIL c) £3,000 d) £4,000

7. Pear Ltd. prepares accounts to 31st

March each year. On 1st

May 2016 Pear Ltd incurred

expenditure of £12,000 on the purchase of fixtures and fittings and machinery. On 1st

July

2016 the company sold some of this machinery which proved unsuitable for £7,000 (cost £6,000). The tax written down value of the pool at 1

st April 2016 was £7,400.

Capital allowances that can be claimed for y/e 31st

of March 2017 amount to:

a) £12,252

b) £12,072

c) £2,412

d) £2,232



Year Paper

8. Longer plc prepares accounts to 31st December each year. It’s taxable total profits for year end 31 December 2016 are £1,600,000. Longer plc has no subsidiary companies, receives no

dividend income and it’s total profits for the year ended 31st

December 2015 was £720,000. Which of the following statements is correct with respect to Longer plc’s corporation tax liability for the y/e 31 December 2016?

a) The liability is payable in 4 equal instalments beginning 14-7-2016

b) The liability is payable in 4 equal instalments beginning 14-7-2017

c) The liability is payable on 1 October 2017

d) The liability is payable on 31 December 2017

9. Which one of the following statements is correct with regard to sole trader’s losses?

a) A loss can only be relieved against trading profits made in the same tax year

b) A loss can be relieved in the preceding tax year but only after a claim for relief has

been made in the current tax year

c) A carried forward loss must be relieved against profits from the same trade in future

years

d) A loss can be relieved against total income in future years

10. James commenced his own business on 5th

February 2017. If he does not receive a notice to

complete a tax return for 2016/2017 by what date should he notify HMRC that he is

chargeable to tax for 2016/2017?

a) 5 August 2017

b) 5 October 2017

c) 31 October 2017

d) 31 January 2018

Total 20 Marks



Year Paper


Dominic is a new client who has been building up his sole trader business since his retirement in 2012.

He has written to you with the following query dated 8 November 2017.

“ I wonder if you would explain a few things to me about tax payments. My previous accountants gave

me the following information about 2016/2017:

£ Income Tax Liability 17,500 Capital Gains Tax liability 5,880 PAYE deducted at source 6,300

I never used to pay any tax by instalments but I have paid two instalments this year already of £4,400

each. I am unsure when the next instalment is due or how much that will be and indeed whether I will

have funds to pay it. I look forward to an early reply”.

Required:

Prepare an email reply to Dominic outlining clearly the following:-

(i) How much he will be required to pay (5 Marks)

(ii) On what date the payment will be due (2 Marks)

(iii) the consequences should he not be able to pay any tax due on time

(3 Marks)

Total 10 Marks



Year Paper

SECTION B

Answer ANY TWO of the FOUR questions in Section B

QUESTION 4

Mr William Windsor has made the following disposals in 2016/2017

(1) In May 2016 William sold jewellery for £24,000. This jewellery had been given to him by his wife

Kate a year earlier when it was valued at £20,000. The original cost of the jewellery when

purchased by Kate was £16,000.

(2) An apartment which he had occupied as his principal private residence was sold in June 2016 for

£175,000. The apartment was bought some years earlier for £85,000 but William had done some

work to it at a cost of £30,000. During the period of ownership William had not always lived there

but had occupied it as follows: –

1.1.1998– 31.12.1999 Lived in the apartment

1.1.2000– 30.04.2006 Employed overseas

1.5.2006– 30.06.2006 Lived in apartment

1.7.2006– 31.12.2010 Spent time travelling 1.1.2011– 30.06.2016 Lived in the apartment.

(3) In July 2016 he sold his beloved Toyota Supra car for £20,000. This car had originally cost him

£14,000 in June 2000.

(4) In September 2016 he sold part of a plot of land that he had bought some years earlier for £30,000.

The full plot had been bought in December 2004 for £12,000. At the time of the sale the remaining

land was valued at £90,000.

(5) In December 2016 William sold an antique dresser for £6,400. The dresser had

been bought some years earlier for £1,000.

Required:

Calculate the chargeable gains arising on the sale of assets during 2016/2017.

Total 20 Marks


Question 5

Endgame Ltd. a retailing company ceased trading on 31 March 2017 and deregistered from VAT on

that date. Most of its sales are cash sales in the UK. The following information relates to the company’s

final VAT return for the Q/E 31 March 2017

(1) UK credit sales invoiced totalling £2,000 (exc. VAT) was issued for Standard rated sales in

the quarter. Endgame Ltd. states on its invoices that it offers all its credit sales customers a 4%

discount for payment within 14 days of the date of the sales invoice. 60% of the customers

pay within the discount period.

(2) UK cash sales (Inc. VAT) amounted to £41,160 of which £38,520 was in respect of standard

rated sales and £2,640 was in respect of zero rated sales. Other cash sales in the quarter were

as follows:

Sales to EU VAT registered customers £16,000

Sales to EU non VAT registered EU customers £1,500

Sales to customers in USA £2,250

(3) In addition to the above sales revenue Endgame Ltd sold the following:-

£

Sale of stock (clearance) 28,800

Sale of machinery 31,200

Sale of motor vehicle (used 30% private use by sales director) 3,600

(4) There were no purchases of stock in the quarter.

(5) Standard rated expenses amounted to £69,960 of which £4,320 was in respect of entertaining

UK customers.

(6) No account has been taken for an item of stock that has been taken and given as a gift to a

customer. The cost to the company was £300 (Inc. VAT). The company has a normal mark up

on such products of 20%.

(7) Endgame wrote off an impairment loss on 31 March 2017 in its accounts in respect of a sales

invoice that was due for payment on 12 August 2016. Output VAT of £384 was originally

paid in respect of this sale.

All of the above figures are inclusive of VAT unless otherwise stated.

Required

1. Calculate the VAT payable in the final Q/E 31 March 2017. (16 Marks)

2. State the date by which the amount due must be paid. (2 Marks)

3. By what date must Endgame Ltd. inform HMRC that they are ceasing to make taxable supplies.

(2 Marks)

Total 20 Marks


Question 6

Matthew has been employed by Alexis Ltd. for some years but it would be his hope that he leaves in

the next couple of years to grow his own business venture “Matt’s Motor Supplies”. For 2016/17 his

employment income and remuneration includes: -

(1) Annual salary of £40,000 until 1 September 2016 when he received a pay rise of £2,000 pa.

The salary is paid at the end of each month. PAYE of £7,820.

(2) Matthew receives a commission based on 1% of the sales he has made for the y/e 31

December. This is paid annually to him on the following 1 May. The sales that have been

made are as follows:-

y/e 31 December 2015 £120,000

y/e 31 December 2016 £135,000

(3) Matthew does not have the use of a company car but is paid a mileage allowance of 35p per

mile for every business mile. In 2016/2017 Matthew travelled a total of 14,000 business miles.

(4) Matthew pays 5% of his salary into his employer’s approved occupational pension scheme.

His employer pays an amount equal to 6% of his salary into the scheme.

Matthew started his business venture “Matt’s Motor Supplies” on 1 January 2015. Results in the early

years have been modest but continue to grow steadily as follows: -

Period end 30 April 2016 £8,800 y/e 30 April 2017 £5,920 y/e 30 April 2018 (predicted) £11,100

In October 2016 Matthew took the opportunity to buy the Freehold shop next door which he now lets

out commercially. The shop was purchased on 1 October 2016 and Matthew spent

£8,400 replacing the roof of the building as the shop was not usable until the work was carried out.

On 1 December 2016 the property was let to a tenant with Matthew receiving a premium of

£12,000 for the grant of a 30 year lease. The monthly rent is £960 payable in advance and during the

period 1 December 2016 and 5 April 2017 Matthew received four rental payments. Matthew paid

insurance of £480 in respect of the property to cover the y/e 30 September 2017. There was a fire in

February 2017 and the new roof was destroyed and Matthew spent

£8,600 replacing it. (Only £8,200 of this was paid for by Matthew’s insurance company).

Matthew’s other income in the year 2016/2017 include:-

£

Dividend from Ark plc 1,000 Interest from KK Building Society 437 Interest from an ISA 400

On 1 November 2016 Matthew made a net gift aid donation of £4,000

Required

1. Identify the assessable profits from “Matt’s Motor Supplies” for the first four years of trading

to establish what profits will be assessed in the 2016/2017 year and calculate any overlap

profits arising. (4 Marks)

2. Calculate Matthew’s Income Tax liability for 2016/2017. (16 Marks)

Total 20 Marks


Question 7

The residence status of an individual determines whether their overseas income is subject to income tax

in the UK.

Required:

In relation to Income Tax outline

(A)

the implication of being resident in the UK in a tax year

(2 Marks)

the implication of being non-resident in the UK in a tax year

(2 Marks)

the implications of being

(i) resident and domiciled in the UK (2 Marks) (ii) Resident but not domiciled in the UK. (2 Marks)

(2 Marks)

(B) By reference to the residence tests explain whether or not the following individuals

would be considered resident in the UK in the 2016/17 tax year.

1. Marcus was born in Germany and lived there in his home town until the tax year

2016/2017 when he came to UK to visit from 10 June 2016 until 22 January 2017.

(3 Marks)

2. Chantelle was born in France. She has lived in her home town in France until

the tax year 2016/2017 when she came to the UK to visit for a month.

(3 Marks)

3. George has always spent more than 300 days in UK and therefore he has

been UK tax resident there. However, this year George gave up work on 5 April

2016 and on 18 May 2016 he set off on an around the world holiday. He did not

return until 14 April 2017. Initially he spent five weeks in his holiday home in

Portugal but then he did not spend any more than 10 days in any other country

whilst he was away.

Whilst he was away he kept in touch with his wife and young children who remained in the

Family home in the U.K.

(6 Marks)

Total 20 Marks


Year Paper

Page 12 of 25 Advanced Taxation NI S2017

2nd

Year Examination: May 2017

Advanced Taxation NI

Suggested Solutions

and

Examiner’s Comments

Students please note: These are suggested solutions only; alternative answers may also be deemed to be correct

and will be marked on their own merits.

Statistical Analysis – By Question

Question No. 1 2 3 4 5 6 7

Average Mark (%) 63 39 57 69 48 60 46

Nos. Attempting 216 220 218 159 77 182 17

Statistical Analysis - Overall

Pass Rate 72%

Average Mark 56%

Range of Marks Nos. of Students

0-39 43

40-49 19

50-59 58

60-69 51

70 and over 49

Total No. Sitting Exam 220

Total Absent 12

Total Approved Absent 8

Total No. Applied for Exam 240

General Comments:

GENERAL COMMENTS ON THE PAPER AS A WHOLE

Overall the performance in this paper has been very good indeed. There has not only been a significant

increase in the pass rate from 66% to 72% but there has also been an increase in the average pass mark

from 53% to 56%. Significantly also was the increase in the maximum mark achieved a fantastic 98%

but also 7 students achieving marks in the 90- 100 range!. This was a paper that examined all the key

areas of the syllabus and students who prepared for these scored well but there are still some areas that

require attention.

I do, however, note here agaijn my comments on Q7 in this paper which I repeat:

A very small number of students answered this question and I suspect that this was because the specific

rules were simply not known and should be! I would be very concerned if such a question had appeared

in the compulsory section of the paper.


Year Paper


Examiner Comments on Question One

Solution 1

General Pool Special Rate pool Allowances

claimed Marks

£ £ £ £

WDV b/f 84,000 26,900 1

Additions not

qualifying for

AIA/FYA

BMW 420d 37,500 1

64,400

Additions

qualifying for

AIA

Plant &

Machinery

203,900

Less AIA (200,000) 200,000 1

3,900

Disposal (16,700) (14,800) 1

71,200 49,600

Less WDA

18%/8%

(12,816) (3,968) 16,784 2

Additions

qualifying for 100

% FYA

Energy saving

plant

24,000

Less FYA (24,000) 24,000 1

WDV c/f 58,384 45,632 1

Total allowances

claimed

£240,784 10

2. Using the matching rules the 4,500 shares sold are as follows:-

Number

6 March 2016 (same day purchases) 750

27 February 2016 (previous 9 days) 750

1,500

All other shares were purchased > 9 days

previously therefore they must be from the share

pool

1 July 1999 1,500

1 September 2009 1,500

3,000

Students performed well in this question but attention should be given to a number of key areas. In the

calculation of Capital Allowances these include a need to ignore private use of assets for Corporation tax

purposes, an understanding of the Special rate asset status and a requirement to restrict disposal proceeds

to cost. In part 2 a notable number of students simply did not know the matching rules for the disposal

of the shares.


Year Paper


Gain £ £ Marks

On same day disposal

Sale proceeds (750/4,500

*22,500)

3,750

Less Allowable cost (2,500) 1,250 0.5

On previous 9 days

Sale proceeds (750/4,500

*22,500)

3,750

Less Allowable cost (1,800) 1,950 0.5

On sale from share pool

Sale proceeds

(3,000/4,500 *22,500)

15,000

Less Allowable cost (6,750)

Un-indexed gain 8,250

Less Indexation

allowance (see below)

(9,302 – 6,750) (2,552) 5,698 7

Chargeable gain 8,898 8

Number Cost Indexed

Cost

£ £

1 July 1999 1,500 3,000 3,000

Index to next event

215.3-165.1/165.1 = 0.304 * 3,000 912

Sept 2005 Purchase 1,500 3,750 3,750

3,000 6,750 7,662

Sept 2009 to Mar 2016 261.4-

215.3/215.3 = 0.214 * 7,662

1,640

3,000 6,750 9,302

March 2016 sale (3,000) (6,750) (9,302)

0 0 0


Year Paper


3 Zenith Ltd

Corporation Tax computation

year ended 31 December 2016

£

Marks

Trading profits (working one) 338,892 3 (see below)

Chargeable gains (working two) 6,898 2 (see below)

Rents receivable 14,200 1

Patent royalty income 16,800

1

Bank deposit interest receivable 2,880

1

Total profits 379,670

Less qualifying charitable

donations

(1200) 1

PCTCT 378,470

Corporation tax payable 378,470 *20% = £75,694 1

10

Workings

1. Trading profits

£ Marks

Adjusted trade profits 615,400 1

Less capital allowances (240,784) 1

Trade losses brought forward (35,724) 1

338,892 3

2. Chargeable gains

£

Chargeable gains on sale of shares 8,898

1

Less capital losses brought

forward

(2,000) 1

6,898 2

4. Zenith with a year ended 31 December 2016 must pay corporation tax by 1 October 2017 (i.e. nine months plus

one day after year end). 2 marks

Total: 30 Marks


Year Paper


Examiner Comments on Question Two

Solution 2

1. B

2. B

3. C

(i)

CO2140 g/km 25% + 3% = 28%

Cost 27,000

Less (5,000) Max

= £22,000

* 28%= 6,160 * 3/12

1,540

Less Employee contribution

(3 * £50)

(150)

1,390

4.

A

Annual value- exempt as job related -

Expensive accommodation- as above -

Provision of services

Furniture (20% * 10,000) 2,000

Household bills 1,000

3,000

Restricted to 10 % * Employment Income

10% * (25,000 + 500 -2,000) £2,350

5.

A

Chargeable gains (16,900 + 11,500) 28,400

Less Annual exemption (11,100)

17,300

Charged

(32,000-23,675)*10% 832.50

Balance (17,300 – 8,325) * 20% 1,795.00

2,627.50

6.

D £4,000. Capital losses in CY must always be relieved in full and are deducted before the Annual

exemption.

As always the multiple choice question covers a wide range of topics and sadly this catches out students

who simply have knowledge gaps. Bizarrely also some students simply do not provide an answer to all

10 questions!


Year Paper


7.

A £12,252

Pool Allowances

WDV b/f 7,400

Additions 12,000

Less AIA (12,000) 12,000

Disposals (restricted to cost) (6,000)

1,400

WDA @ 18% (252) 252

8.

C 1 October 2017. Longer plc did not have augmented profits > £1,500,000 in the previous year and

therefore given profits are not > £10,000,000 will not have to pay instalments for y/e 31 December 2016.

Normal due date within 9months and 1 day of the Accounting period (i.e. 1 10.2017)

9.

C

A current year loss must be relieved against profits from the same trade in future years.

10.

B 5 October 2017 i.e. within 6months of the end of the tax year.

(10 x 2 Marks)

Total: 20 Marks


Year Paper


Examiner Comments on Question Three

Solution 3

To

From

Subject

1.

Payment to be made:

£ Marks

Outstanding tax due 2016/17 17,500 1

Less PAYE deducted at source (6,300) 1

11,200

Capital gains tax liability 5,880 1

17,080

Less ( POA 2* £4,400) (8,800) 1

8,280

Add first instalment 2017/18

(17,500-6300/2) 5,600 1

13,880 5

2. This will be due to be paid on 31 January 2018. (2 Marks)

3. If you pay late you will be charged interest from the date you should have paid until the date the tax is

actually paid at a rate of 3% per annum. (1 Mark)

In addition if you make your balancing payment of £8, 280 late you will be charged a late payment penalty.

(1 Mark) If the payment is made within 30 days of the due date a penalty of 5% of the tax due can be charged. For

payments after 30 days this charge increases. At 6 months late a further 5% will be charged.

(3 Marks)

Total: 10 Marks

Students generally performed well in this question but a couple of issues should be noted. If you are

given figures in the body of the question please use these for your calculations. Payments on account

must be known and calculated. Differentiation must be made between interest and penalty payments and

finally when you are asked for dates of payments due it is not acceptable in your email response to say

“ I will come back to you on the dates of payment” !


Year Paper


Examiner Comments on Question Four

Solution 4

(1)

Sale of jewellery £ £ Marks

Proceeds 24,000

Less deemed cost (16,000)

8,000 3

(2)

Sale of apartment £ £

Proceeds 175,000

Less Allowable cost

Purchase price (85,000)

Enhancement costs (30,000)

60,000 * 204/222 See

below

55,135 4

Months

Occupied 24

Employed overseas 76

Occupied 2

Any reason 36 18

Occupied 66

204 18

Total ownership 222 4

(3) Sale of car

Exempt asset (2 Marks)

(4) Plot of land

£ £

Proceeds 30,000

Less Allowable cost

30,000/30,000+90,000*12,000 (3,000) 27,000 2

(5) Sale of antique dresser

£ £

Proceeds 6,400

Less Cost (1,000)

Chargeable gain 5,400 2

Limited to 5/3 * (6,400-

6,000)

667 2

Total Gains chargeable £90,802 (1 Mark)

Total: 20 Marks

Students prepared well for this question and rules were known and answers were presented well. Do

note however in part 5 that the normal gain should be calculated first and then restricted to… 2/3rds rule


Year Paper


Examiner Comments on Question Five

Solution 5

1. Endgame Ltd

VAT return

Q/E 31.3.2017

Gross VAT Net Marks

£ £ £

Output VAT

UK credit sales (W1) 1,952 390 1,562 2

UK car sales (W2) 41,160 6,420 34,740 1

Sales to EU VAT

registered

16,000 – 16,000 1

Sales to EU non-

VAT

1,500 250 1,250 1

Sales in USA 2,250 – 2,250 1

Sale of stock 28,800 4,800 24,000 1

Sale of machinery 31,200 5,200 26,000 1

Sale of motor vehicle 3,600 - 3,600 2

Gift to customers 300 50 250 2

17,110

Input VAT

Standard rated

expenses (W3)

65,640 10,940 54,700 1

Entertainment 4,320 - 4,320 1

Impairment loss 1,920 384 1,536 2

11,324 16

VAT Payable £5,786

Workings

1. UK Credit sales £

Discount taken (2,000 * 0.96 *

60%) * 20%

230.40

Discount not taken (2,000 * 0.40) *

20%

160.00

390.40

2. UK credit sales £

Standard rated sales

(38,520 /6)

6,420

Zero rated -

6,420

3. Standard rated

expenses

(69,960-4320)/6 10,940

2. This will be due for payment electronically by 7 May 2017. (2 Marks)

3. Notification must be made 30 days after the trade ceased i.e. 30 April 2017. (2 Marks)

Total: 20 Marks

As often happens in VAT questions students simply do not know the detail of areas tested. Students

need to know the specific rules relating to the treatment of discounts, EU VAT registered sales, sale of

motor vehicles and deemed supplies.


Year Paper


Examiner Comments on Question Six

Solution 6

Commenced 1 January 2015

Prepares accounts £

16 month end 30 April 2016 8,800

Year-end 30th

of April 2017 5,920

Year-end 30th

of April 2018 11,100

Year YOA Basis period £ Marks

1 2014/15 1 January 2015 – 5

April 2015

3/16*8800

1650 1

2 2015/16 No AP 6 April 15 –

5 April 16

12/16*8800

6600 1

3 2016/17 12 month end 30

April 2016

12/16*8800

6600 1

4 2017/18 CYB year end 30

April 2017

5920 1

Overlap 1.5. 2015 – 5.4.20

16

11/16*8800 6050

2. Matthew

Income tax computation

2016/17

N/S S Div Total Marks

Income from employment

(W1)

39,709 39,709 5 (see below)

Income from self-

employment

6600 6600

Rental income (W2) 8240 8240 5 (see below)

BSI 437 437 0.5

ISA – Exempt 0.5

Dividend 1000 1000 0.5

Total income 54,549 437 1000 55,986

Less PA (11,000) (11,000) 0.5

Taxable income 43,549 437 1000 44,986

N/S 37,000*20% 7400.00 2

N/S 6549*40% 2619 60 0.5

Basic rate band £32,000

Add gross gift aid (4000/0.8) 5000

Extended basic rate £37,000

Students performed well in this question which is pleasing to see as it covered a wide range of topics in

Income Tax.


Year Paper


S (PSA) 437*0% – 0.5

Div (DA) 1000*0% – 1

10,019.60

Less PAYE (7820.00)

Outstanding income tax

due

2199.60 20

Workings

1. Income from employment

£

Salary to 1 September 2016

(40,000*5/12)

16,667 0.5

(42,000*7/12) 24,500 0.5

41,167

Commission paid 1 May 2016

(120,000*1%)

1,200 1

42,367

Less contribution to employer’s

pension scheme (41,167*5%)

(2058) 1

40,309

Less mileage expense

(10,000*45p = 4500

4000*25p = 1000

5,500

Less reimbursed (14,000*35p)=

4,900

(600) 2

39,709 5

2. Rental Income

£

Premium received 12,000

Less 12,000 * 2% * (30-1) (6,960)

5,040

Rent receivable (960 * 4) 3,840

8,880 3

Less Expenses

Roof replacement - 1

Roof repairs (8,600-8,200) (400) 0.5

Insurance (480 * 6/12) (240) 0.5

8,240

Total: 20 Marks


Year Paper


Examiner Comments on Question Seven

Solution 7

(a).

(1) If you are tax resident in the UK you will be liable to UK income tax on all UK and non-UK income.

(2 Marks) (2) If you are non-tax resident you will be liable to UK income tax on income arising in the UK only.

(2 Marks) (3) (1) if resident and domiciled in the UK you will be liable to UK income tax on all UK and non-UK income

(2 Marks) (2) if resident but not domiciled in the UK you will be liable to income tax on all UK income and can elect to be

liable to UK income tax on foreign income and gains on the remittance basis.

(2Marks)

(b).

1. Marcus has been in the UK for 225 days in the tax year 2016/17 which is greater than 183 days which will

mean he will be deemed automatically tax resident for tax year 2016/17.

(2 Marks) 2. Chantelle has not been UK tax resident in any of the last three tax years (2 Marks)

and has been in the UK for less than 46 days in the current tax year. Accordingly she will automatically be treated

as non-UK resident in the tax year 2016/17. (2 Marks)

3 George has spent too many days in the UK to be automatically non-resident but will be treated as non-resident

this year (2 Marks)

because he is in the UK for 16 – 45 days in 2016/17 he will be resident if he meets at least four UK tie tests

– Close family tie

– Accommodation tie

- Days in UK greater than 90 in the last two years

– Country tie (more time in the UK than in any other country)

– For this year George will be considered UK tax resident in 2016/17 (4 Marks)

Total: 20 Marks

A very small number of students answered this question and I suspect that this was because the specific

rules were simply not known and should be! I would be very concerned if such a question had appeared

in the compulsory section of the paper.

advanced taxation ni - accounting technicians ireland · advanced taxation ni 2nd year ... zenith...

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