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Level 4

Personal Tax

Assessments performance feedback

Level 4 Diploma In Accounting

Computer Based Assessments (CBA) Performance Feedback Personal Tax (PTAX)

Contents

1. Introduction ......................................................................................................... 1 2. Purpose of the assessment…………………………………………………………..1

2. Task 1 ................................................................................................................. 2

3. Task 2 ................................................................................................................. 3

4. Task 3 ................................................................................................................. 4

5. Task 4 ................................................................................................................. 5

6. Task 5 ................................................................................................................. 6

7. Task 6 ................................................................................................................. 7

8. Task 7 ................................................................................................................. 8

9. Task 8 ................................................................................................................. 9 10. Task 9……………………………………………………………………………………9 11. Task 10…………………………………………………………………………………11 12. Task 11…………………………………………………………………………………13 13. Summary……………………………………………………………………………….14

Personal Tax (PTAX) Introduction The Personal Tax unit is an optional unit at Level 4. It covers taxation of individuals, such as employment income, capital gains, income from land and property and investment income. This unit allows students to show understanding of how individuals over 16 are taxed for a range of income types. This includes employment income, property income, investment income and capital gains. Both practical and theoretical aspects of the taxes are expected to be understood, together with the consequences of failing to follow taxation rules. The purpose of the assessment

There are eleven tasks, with the first seven specifically covering income tax, one question on tax returns and three questions on capital gains tax. Having successfully completed this assessment, students will be able to understand, with confidence, most core aspects of taxation as they affect an individual. This will make that student a valuable asset to any employer with employees. It will also make that student better appreciate their own taxation situation and ensure that they neither fall foul of the tax rules, nor do they needlessly pay excess tax. Analysis of student performance by task is represented in the chart below. Analysis of student performance by task is represented in the chart below. This report and analysis have been prepared using results of student performance during the period 1 October 2014 to 31 March 2015.

0%10%20%30%40%50%60%70%80%90%

100%

1 2 3 4 5 6 7 8 9 10 11

Level 4 - PTAX

Exceeded Met Borderline Below requirement Significantly below requirement

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Task by task feedback Task 1 Benefits in Kind – provision of cars The first task covers benefit in kind arising from cars. All aspects of this topic area could be assessed in this task, such as the computation of the scale charge percentage, the taxable benefit on the provision of the car, and the taxable benefit on the provision of fuel. The scale charge percentage is reasonably straightforward to compute, but students must remember two key issues: that diesel engines have an additional 3% and, irrespective of the engine type, the maximum percentage is 35%. A common error made by students is to add the additional 3% for diesel engines onto the 35% maximum, giving a percentage of 38%. The computation of the benefit for the provision of car is probably the most complex computation for this task. One of the reasons for this is that students must be able to compute the cost on which the scale charge percentage is to be applied. This is not as straightforward as it may appear. Students can therefore expect information to be presented such as:

On 1 July 2014, Joey was provided with a company car which cost his employer £22,150. The list price of this car is £23,700. Joey contributed £6,500 towards the cost of the car. During August 2014, Joey had a SatNav system installed in the car at a cost of £350. The car had a diesel engine with CO2 emissions of 204g/km.

Students will therefore need to understand which cost to use for the car (£23,700 as the list price), how much to deduct for the capital contribution made by Joey (£5,000 as this is the maximum deduction allowed) and what to do with the extra cost of the SatNav system. The issue of the accessory fitted after the car is bought is one that seems to cause students problems. Any accessories fitted after the car is bought are added to the list price if the cost is more than £100. Therefore, for the example above, the cost on which the benefit would be applied is £19,050 (£23,700 - £5,000 + £350). A further complication is that the car was only available from 1 July 2014, so only 9 months of benefit would apply. Students are asked to really focus on dates given in a question. It is very easy to start focussing on numbers, costs, percentage and forget that there is this key piece of information, which are the dates involved. To complete the above example, we can work out that the scale charge percentage is capped at 35%. Based on a petrol engine, the percentage would be 33% ((200 – 95)/5 + 12), so we add 3% for the diesel engine, but then cap the percentage at the maximum of 35%. Therefore, the benefit in kind would be £5,001 (£19,050 x 35% x 9/12). The benefit for the provision of fuel is a much easier computation as it is exactly as for the car, but with a given fixed sum of £21,700. Therefore, if Joey’s employer also paid for all the fuel, the benefit in kind for this provision would be £5,696 (£21,700 x 35% x 9/12). Students must read the information very carefully over this area as provision as fuel is not also applicable.

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Lastly, information could be given in the task about monthly contributions made by an employee to the employer for the use of the car. These contributions are not capital based (as in our example above of £6,500). Instead, these contributions are to be deducted from the benefit once computed. Care, however, needs to be taken over whether the contribution is towards the provision of the car or the fuel. If against fuel, it will not normally be deductible from the fuel benefit, but it is deductible from the provision of car benefit. Agreed – this is confusing, so students must study this area in detail to fully appreciate the complex rules, which are not covered here. To continue with our example, Joey made monthly contributions to his employer of £200 towards:

a) The provision of the car, then the taxable benefit would be £3,201 (£5,001 – (£200 x 9)) b) The provision of the fuel, then the taxable benefit would remain at £5,696 as the contribution

would not be deductible. Note that only nine monthly payments would have been made by Joey since July 2014. A large majority of students have demonstrated competence in this task, which is an improvement over the results for the same period last year. It is very pleasing to see an improving trend in this task. To ensure ongoing improvements, students are advised to read the information with great care, in particular taking note of key dates and time frames. Task 2 Benefits in Kind – all excluding cars All other benefits in kind are assessable within this task, including accommodation, loans, use of assets and an extensive list of miscellaneous taxable and non-taxable benefits in kind. The full list is given in the study and assessment guide for this unit as available from the AAT website. As stated in the last performance report, students are not fully engaging with this topic. It is acknowledged that there are many small areas that need to be understood and learnt, but students are not applying the rules for the more common benefits, never mind the less common ones. The benefit in kind arising from accommodation appears to be a major issue with students, in particular the cost of accommodation to include in the expensive accommodation computation. Leaners are expected to know about the six year rule and enhancement expenditure. An example question could read:

Joey was provided with a house from 1 July 2014 to live in by his employer. The house cost his employer £205,000 in June 2007 when they bought the house. On 1 July 2014, the house was valued at £320,000. In September 2014, £7,500 was spent on an extension.

For a question of this type, the student would normally be asked two questions:

a) What is the cost of the accommodation on which the benefit will be computed? b) What is the benefit in kind arising from the provision of the house?

One of the reasons for splitting the question like this is because the computation is long and so it is fairer to students to break it down. The answer to the first question would be £320,000. Students need to know that as Joey moved into

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the house more than six years after it was bought by the employer, then the market value on the date the employee moves in is used instead of the cost to the employer. Had the employer bought the house after 1 July 2008 (ie less than six years before Joey moved in) then the original cost of £205,000 would be used. Secondly, as the extension happened after 6 April 2014, it is ignored for 2014/15. The cost of £7,500 will be added to the market value when the computation is completed for 2015/16. The answer to the second question will use the student’s own answer from a) in the formula ((Cost - £75,000) x 3.25% x 9/12). Again, students must remember that Joey only moved in on 1 July 2014, so only nine months apply. The answer is therefore £5,972 ((£320,000 - £75,000) x 3.25% x 9/12). For the rest of the benefits covered in this task, attention to detail is critical. Students must use the detailed list given at the end of the study and assessment guide to know which benefits are examinable. Application of knowledge is critical here, not just learning the rules, as students can be expected to fill in amounts or details on benefits so that they are not taxable. The last performance report expressed concern over the very poor success rate on this task, and this has not improved. Only 30% of students are deemed to be competent, which is at the same level as previously. Again, 20% of students being significantly below the required standard, so this is an area that both tutors and students must put more time and resources into during the learning process. Task 3 Income from property This is the only task that covers the topic of income from property and can include rental property (both furnished and unfurnished), rent-a-room schemes and furnished holiday lettings. The area were students appear to be struggling with the most is the distinction between capital and revenue expenditure and hence which expenses get tax relief, and which do not. This is not as straightforward a distinction as might be assumed, so students need to focus on the detail behind this distinction. The other issue is correctly working out the wear and tear allowance for furnished rental property, in particular the figure on which the 10% is based. HMRC states that ‘The wear and tear allowance is equal to 10% of the net rents after deducting charges or services that a tenant would usually bear but which are, in fact, borne by you (such as local rates).’ More specifically, the charges or services, which are deducted, are usually council tax and water rates. A typical question will contain information about one or two rental properties, and students will need to input figures into free-text boxes to show the amount of income and expenses. It is which expenses that are allowable and not allowable that is causing the biggest concern in this task as many students are not getting these computations correct. Students could also be asked about how to treat losses from property and it is vital that students understand that these losses can only be carried forward. Whilst 30% of students exceeded the performance required, less than 70% achieved competence overall. This is reduction from last year, and worth noting. Students are not spending the time to read the question in detail to fully understand the requirements. Appreciating time periods is also causing an issue. This is usually when an expense, such as insurance, needs to be time apportioned to match the tax year.

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Task 4 Investment income This task specifically covers income from investments, such as bank interest, building society interest, dividends and individual savings accounts. Students need to understand which income is received net, which is received gross, the underlying tax rate and how the gross income is taxed within the tax computation for an individual. The results have shown a marked reduction in success within this task, with 76% achieving competence as compared to 84% previously. Marks gained by students in the live assessments appear to be very polarised – they either get full, or near full, marks, or literally just one or two. It is assumed that this is due to the narrowness of the topic, in that if students understand the computations, they are doing them all well and gaining full marks, but if they really do not understand the computations, then all the answers are completely wrong. The task in the sample assessment for FA14 shows a typical layout of questions in this task. However, another way that the question could be asked is:

Three taxpayers receive income from investments. The table below shows the income received from the investment and the taxpayers’ other taxable income. Complete the table to show the taxable income from investments and any additional tax that is payable on the investment income.

Taxpayer Source of investment

income

Investment income received

£

Other taxable income

£

Taxable investment

income £

Additional tax payable

£

Jane ISA 240 42,000 Joey Building

society

1,840

30,000

Jules Dividends 864 74,500 Evidence with this style of question is that working out the taxable investment income is reasonably straightforward – although too many students think that interest from an ISA is taxable. The column that causes the most issue is the final one and this is partly because the students are not reading the question carefully enough. It is the additional tax that needs to be paid over, after tax deducted at source, that is needed here, not the total tax payable by the taxpayer. Also, the question clearly states that the other income is after personal allowances, as it is the taxable income, so personal allowances do not need to be accounted for again. Students are asked to have a go at this question before looking at the answer, to ensure that they have read the requirements of the task in the detail needed. The answer is:

Taxpayer Source of investment

income

Investment income received

£

Other taxable income

£

Taxable investment

income £

Additional tax payable

£

Jane ISA 240 42,000 0 0 Joey Building

society

1,840

30,000

2,300

87 Jules Dividends 864 74,500 960 216

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Task 5 Computation of total and taxable income This task is designed to allow students to show that they understand how all the previous tasks work together when computing total and taxable income for an individual. Computations will not include items such as working out the benefit in kind for a car, as this has already been assessed in a previous task. The point of this task is to pull all income and expenses together. Also, students may need to calculate the personal allowances an individual is entitled to, such as shown in the sample assessment. Taxpayers with all income brackets can be expected so students need to ensure that they fully understand how to compute personal allowances. A typical question style can be seen in the sample assessment for FA14. Whilst this question may appear to be straightforward, it is surprising how many students are making fundamental errors. Examples of these errors would be including exempt income, such as interest from ISAs and lottery winnings. There is confusion over the handling of the pension contribution made by employers, which need to have a £0 entry in the table as there is no impact of the taxpayer. Other style of questions could include a shorter table to complete, and then a part b) to follow. This part b) sometimes relates to the question in part a). For example, if the total income from a) was £106,000, the personal allowance entered in the relevant box would be £7,000 (£10,000 – ((£106,000 - £100,000) / 2), thus giving taxable income of £99,000. Let’s assume that this taxpayer does not pay into the occupational pension scheme. Part b) could ask what the personal allowance would be for the taxpayer in a) if:

a) The taxpayer paid £8,000 into the occupational pension scheme. b) The employer paid £8,000 into the occupational pension scheme.

With this question, the student should understand that by the taxpayer paying £8,000 into the occupational pension scheme, the taxable income would be reduced by this amount, bringing the taxable income to below £100,000 so that the full personal allowances of £10,000 would be available to the taxpayer. Also, the student should understand that there is no impact on a taxpayer’s income for amounts paid into occupational pension schemes by the employers. Therefore, the personal allowance of £7,000 would remain the same. The success rate in this task is higher than previous rates, and nearly 40% of students are exceeding the level of competence required. However, there is still a third of students who are marginal at best, and well below the standard required at worst, so there is definitely room for improvement in this task.

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Task 6 Computation of tax payable and payment of tax This is the first of the human marked tasks and can include a variety of areas. It mainly focusses on working out the actual tax payable by an individual and then the timing of when that payment needs to be made. However, this task may also include an explanation of how tax payable or personal allowances are calculated. It is clear from the live assessments that the area which most students struggle with is payments on account. An example of the type of question that could be asked is:

Joey has been self-employed for many years and has agreed his tax liabilities as follows:

Tax year Tax liability £ 2011/12 22,040 2012/13 27,840 2013/14 32,300 2014/15 34,030

Calculate Joey’s payments to HMRC to be made in the calendar years 2014 and 2015.

Typical wrong answers seen in the live assessments show students knowing about the dates, but not understanding how the payments are worked out, or students confusing which tax years are paid on which dates. Therefore, typical wrong answers could include the following examples:

Dates Workings £ 31 Jan 2014 £27,840 / 3 9,280 31 July 2014 £27,840 / 3 9,280 31 Jan 2015 £27,840 / 3 9,280

Dates Workings £

31 Jan 2014 £32,300 / 2 16,150 31 July 2014 £32,300 / 2 16,150 31 Jan 2015 £34,030 / 2 17,015 31 July 2015 £34,030 / 2 17,015

Students need to work methodically through the payment dates that would apply to each tax year, to see which dates fall into the calendar years of 2014 and 2015. So, it would be expected that students notes would look something like:

Tax year Dates of payments 2011/12 31/1/12, 31/7/12 and 31/1/13 2012/13 31/1/13, 31/7/13 and 31/1/14 2013/14 31/1/14, 31/7/14 and 31/1/15 2014/15 31/1/15, 31/7/15 and 31/1/16

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The relevant dates that fall into 2014 and 2015 could be highlighted as above, and from there the following correct answer would be worked out:

Dates Workings £ 31 Jan 2014 (£27,840 - £22,040) + (£27,840/2) 19,720 31 July 2014 £27,840/2 13,920 31 Jan 2015 (£32,300 - £27,840) + (£32,300/2) 20,610 31 July 2015 £32,300/2 16,150

Although the success rate in this task has improved from below 40% to above 50%, there is still a lot of work to be done by tutors and students in this task. If you are a student who has struggled with the above example, please spend a lot more time on studying this area as it is clearly an area that is losing valuable marks. Task 7 Theory underpinning topic and penalties As stated in the previous performance report, this written task on theory and penalties has the lowest success rate of any task in this assessment. In the previous report, only 30% of students demonstrate competence in this task – this level has now dropped to 25%. An enormous 40% are significantly below the required level, which should be noted. Markers report answers of one sentence for the whole task, which clearly cannot earn many, if any, marks at all. There are recurring issues that may explain why students are doing so badly. Firstly, they have not learnt the rules around penalties sufficiently to be able to produce those rules in the exam, and secondly, there is a complete lack of ability to apply those rules to the scenario presented in the question. Again, markers report answers where every penalty is listed in an answer, presumably in the hope that some of them are correct. Answers of this nature are rarely awarded high marks as a scatter-gun approach does not illustrate application of knowledge. Let’s consider a sample question:

Today is 17 October 2014. Joey filed his 2012/13 tax return on 30 January 2014 and this showed a tax liability for 2012/13 of £2,300. Joey has not yet paid any of this tax to HMRC. In the box below you need to explain to Joey what penalties he may incur by not having paid any of his tax liability for 2012/13.

Unfortunately, a typical answer given by students will give all the penalties that apply to late filing of a tax return. If this were the case, then no marks would be awarded for the answer, even if the penalties discussed were accurate for late filing. Students would launch into their answer without giving due consideration to the fact that the latest date by which the 2012/13 needed to be filed was 31 January 2014, and so Joey filed his on time, and hence no penalties would be incurred. This question is all about late payment of tax, as explained in the bold instruction, so the only answers that can attract marks are the ones that deal with the appropriate penalties.

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Students would be expected to appreciate that this tax is now eight and a half months late, so there would be a 10% penalty applied. Students would be expected to explain how the 10% has arisen and a good answer could also include the fact that an additional 5% penalty will apply if Joey has still not paid the tax after 12 months after the due date. A reasonable standard of spelling, grammar and punctuation are expected but this is not critical to achieving good marks. Therefore, if English is not the student’s strongest area, then this should not make any difference. Provided the marker can understand what has been written, then marks will be awarded. Task 8 Tax returns There are three tax returns that are assessable here: employment income, property income and capital gains. None of these returns is particularly complex to answer and provided students read the questions carefully to understand which box to complete in the return, there should be no issues. Although the success rate is high at 84%, it is lower than it was the previous year, which was over 90%. It is unknown why this should be the case, as the three tax returns are exactly the same. There are cases of careless errors, in particular in the property income tax return. Students need to read the information provided carefully to work out which is the relevant box that an expense would belong to. Also, too often students do not complete boxes 38 and 40 in the property income tax return which show the profit made for the tax year. Not inserting sub totals within tax returns can also cause loss of valuable marks. It is expected that these boxes are completed and they will carry marks. Task 9 Basics of capital gains tax All aspects of capital gains tax, other than those specifically assessed in Task 10 or 11, are assessable here. Students can expect questions on areas such as disposal of assets, enhancement expenditure, chattels, part disposals, chargeable persons, chargeable disposals, connected persons and so on. This is not an exhaustive list, however, and the study and assessment guide should be read to appreciate all the areas that can be assessed in this task. With nearly 50% of students exceeding the required performance, this task is clearly allowing students to demonstrate their knowledge and understanding of the topic. Yet a number of students have not achieved the required level of competence. For these students, it appears to be the topic of chattels that is causing the most difficulty. There seems to be confusion over when amounts are capped or forced to be £6,000, when the 5/3 formula is applied, or when none of the £6,000 chattel rules apply.

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Let’s look at an example question:

A taxpayer disposed of three assets during 2014/15. Information on the proceeds and cost for each asset is given in the table below and you need to complete the boxes to show if there is a gain or loss arising from the disposal, and the amount of that gain or loss.

Chattel Proceeds £ Cost £ Gain or loss £ Ring 6,500 5,800

Watch 5,500 7,400

Desk 7,100 6,600

Typical wrong answers to this would include (with an explanation of what the student has done):

Chattel Proceeds £

Cost £

Gain or loss £ Explanation

Ring 6,450 5,400 Gain 450 Used £6,000 for the cost figure

Watch 5,500 7,400 Loss 1,900 Not used £6,000 as the deemed proceeds figure

Desk 7,100 6,600 Gain 1,833 Applied the formula (£7,100 - £6,000) x 5/3

The correct answers are:

Chattel Proceeds £

Cost £

Gain or loss £ Explanation

Ring 6,450 5,400 Gain 750

Applied the formula (£6,450 - £6,000) x 5/3 as this is lower gain than the actual gain of £1,050.

Watch 5,500 7,400 Loss 1,400 £6,000 is used as the deemed proceeds figure.

Desk 7,100 6,600 Gain 500

As both proceeds and cost are above £6,000, the normal capital gains tax rules apply of simply proceeds less cost.

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Task 10 Taxation of shares The last of the human marked tasks, this one focuses solely on the taxation of shares. Students can expect the questions to include purchases, sales, bonus issues, rights issues and matching rules. The success rate of this task has improved since the previous performance report, with 64% of students now being successful. However, it would be expected that the success rate in the task should be substantially higher than this, as there is only one matching rule that needs to be understood and applied. However, time and again, students are not applying the matching rules accurately, losing valuable marks. Students are unable to distinguish between rights issues and bonus issues, ignoring the matching rules or when deducting a sale of shares, deducing the proceeds instead of cost. An example question could look like:

Joey bought 2,000 shares in Ethan Ltd in May 2001 for £12 per share. In September 2007, there was a 1 for 5 bonus issue and in April 2010, there was a rights issue of 1 for 10 at £10 per share. Joey sold 1,000 shares in October 2012 for £21 per share. On 2 January 2015, he sold 800 shares for £28 per share and on 19 January 2015 he bought another 500 shares for £25 per share. Clearly showing the balance of shares and their value to carry forward, calculate the gain made on the sale of the shares for 2014/15. All workings must be shown in your calculations.

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A typical wrong answer given by students could look like the following, with comments given on what the errors are:

Event Shares £ Explanation

May 2001 Purchase 2,000 24,000 Correct September 2007

Bonus issue 400 4,800 Applying the cost per share of the original

purchase. 2,400 28,800

April 2010 Right issue 240 2,400 Correct

2,640 31,200 October 2012 Sold 1,000 21,000 Applying the proceeds per share instead of taking a

proportion of the pool cost of £31,200. 1,640 10,200

January 2015 Sold 800 4,976

Deducting the full 800 shares, when 500 should first have been matched against the purchase made 17 days later.

840 5224

January 2015 Purchase 500 12,500

This should have been matched to the disposal 17 days earlier and hence should not have been in the pool at all.

Not giving the balance of shares and their value to carry forward.

Proceeds 43,400 Adding together the proceeds from both disposal, despite one being in the tax year 2012/13.

Cost 4,976 This cost should have been the apportioned cost

from the pool for only 300 shares, plus the shares bought on 19 January 2015.

Gain 38,424 Out of this answer, only two lines are correct, hence the student would only gain two marks, despite doing quite a lot of work on this answer. This answer may seem extreme in the number of errors made, but this calibre of answer is not uncommon in the weaker students. The correct answer is:

Event Shares £ Explanation

May 2001 Purchase 2,000 24,000 September 2007

Bonus issue 400 0 As these are bonus issues, there is no monetary

value involved. 2,400 24,000

April 2010 Right issue 240 2,400

2,640 26,400 October 2012 Sold 1,000 10,000 The computation is £26,400 x 1,000/2,640.

1,640 16,400

January 2015 Sold 300 3,000

The other 500 shares are matched to the purchase made 17 days later. The cost is worked out as £16,400 x 300/1,640.

1,340 13,400 A specific requirement of the instructions. Proceeds 22,400

Cost 15,500 £12,500 cost of the shares purchased on 19 January 2015 plus £3,000 from the share pool.

Gain 6,900 The best way to tackle understanding shares is simply to practice. Tutors are advised to give students vast amounts of questions to practice that cover all the various combinations of matching rules, bonus issues and rights issues.

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Task 11 Capital gains tax exemptions, losses, reliefs and tax payable Clearly another task that is not a favourite of students, this task covers a range of topics. Capital gains losses, annual exempt amount, the impact of income tax bands on capital gains tax, and reliefs such as private residence are all assessable. As stated in the previous performance report, the success rate for this task is about 50% of students demonstrating competence in this task. Given that it is quite a small task, there is not a huge range of questions that can be asked, so students are encouraged to ensure that they fully appreciate the topics that are covered here so that they can maximise their performance. In recent live assessments, the area that appears to be causing the most difficulty is in calculating the actual capital gains tax payable. T here are many different figures that can be given for this style of question, so tutors are encouraged to make up a range of questions using the example below so that students can practice over and over again. An example of such a question could read:

The following information relates to three taxpayers who sold capital assets during 2014/15. These are the only assets that they sold during this tax year. Calculate the capital gains tax payable, if any, for each taxpayer.

Taxpayer Sold to Proceeds £

Market value £

Cost £

Other Taxable income

£ Jane Father 10,000 18,000 3,000 42,000 Joey Friend 15,000 16,000 7,000 30,000 Jules Husband 23,000 45,000 8,000 50,000

There are a variety of steps that the student needs to work through in this question:

1) Are the parties connected so that market value may be used instead of proceeds?

2) How much of a gain is there to tax once the annual exempt amount has been deducted?

3) How much of the gain is taxable in the basic rate band of 18%?

4) How much of the gain is taxable in the higher rate band of 28%? Working through each of the above, Jane and her father are connected, so the market value of £18,000 needs to be used. This gives a taxable gain, after the annual exempt amount, of £4,000 (£18,000 - £3,000 - £11,000). As her other income is in the higher rate band, then all the £4,000 is taxable at 28%, giving a capital gains tax liability of £1,120. For Joey, he is not connected to his friend, so the proceeds of £15,000 will be used in the computation. This will give him a taxable gain of £0 as the gain of £8,000 (£15,000 - £7,000) is covered by his annual exempt amount of £11,000. Therefore he has a capital gains liability of £0.

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Transfers between spouses are treated differently for capital gains tax purposes. Transfers between them are dealt with on a no gain / no loss basis, so that effectively the ‘proceeds’ are deemed to be the original cost to the spouses making the transfer. In the above example, the ‘proceeds’ are treated as £8,000, being the same as the cost of the asset to Jules. Therefore, the capital gains tax payable by Jules is £0. It should be easy to see how such a question can be varied to vastly change the final answer. For example, if the proceeds for the asset sold by Joey was £21,000 instead of £15,000 then he would have had a taxable gain of £3,000 (£21,000 - £7,000 - £11,000). As Joey has only £1,865 left of his basic rate band, the capital gains tax computation would be (£1,865 x 18%) + ((3,000 - £1,865) x 28%), giving tax payable of £653.50. (Note, that if the question asks for answers to be in round pounds only, both £653 and £654 would be marked as correct). Summary Tasks that need more focus and study time are Tasks 2, 6, 7 and 11 as these have the lowest success rates. Attention to detail is critical to be successful in this unit. The actual topics within this unit are not overly large so solid knowledge on the smaller areas is expected from students. Also, very careful reading of tasks is critical. There is no evidence that students are struggling to complete the whole assessment in the time allocated, so taking more time on reading and understanding the requirements is vital to ensuring success.

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