Paper F6 Revision Questions

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 1
Income Tax - Individuals

Example 1
Jane earns £36,000 tax adjusted trading profit in 2010/11, 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 2010/11
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Example 2
Recalculate Jane’s income tax payable if her tax adjusted trading profit income was only £8,000

Example 3
Benny has tax adjusted trading profit of £120,000 in 2010/11. He paid £12,000 to charity under the gift aid
scheme and £1,000 of qualifying interest payments.
Calculate Benny’s income tax payable.

Example 4
Using example 3 - Recalculate Benny’s income tax payable assuming he also received £45,000 of dividend
income in 2010/11.

Example 5
Anne was born on 18th September 1940 and has Net Income of £25,000
Determine the personal age allowances she is entitled to in 2010/11

Example 6
Tony and Kathy are 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
Income Tax - Property Business Profit

Example 7
Robert owns two properties.
Property A is let out unfurnished at an annual rental of £4,000 from 1 July 2010.
Rent is payable quarterly in advance. Expenses amounted to £1,500 for the year to 6 April 2011 on an accruals basis.
Property B is let out furnished at an annual rental of £3,000, from 1 August 2010.
Rent is payable annually in advance. Expenses amounted to £2,200 for the year to 6 April 2011. In addition, Robert
claimed a wear and tear allowance.
Determine Robert’s Property Income to be assessed in 2010/11.

Example 8
Molly grants a 20-year lease on a shop on 1 August 2010 for a premium of £25,000. The annual rent of £12,000 is
payable yearly in advance.
Calculate Molly’s Property Income for 2010/11 and the relief available to the tenant for the premium paid.

Example 9
Ben rented a furnished property to students at a monthly rental of £1,000 until 31 July 2010. The property was
redecorated in August and let again from 1 September 2010 for £1,200 per month. Details of expenditure during
2010/11
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 2010 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 2010 at a monthly rent of £600.
(a) Calculate Ben’s Property Income for 2010/11
(b) What difference would it have made if the second property was classed as a Furnished Holiday letting
property.

Example 10
Jimmy rents a room in his main residence to Kenny. Jimmy receives rental income of £4,750 and incurs relevant
expenses of £300 in 2010/11
Calculate Jimmy’s Property Income assuming all elections are claimed for 2010/11
Income Tax - Unincorporated Business

Example 11
Kerry’s net profit for the year ended 31 December 2010 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 profit for year ended 31 December 2010

Example 12
Debra, a sole trader, prepares accounts to 31 December.
The WDVs for capital allowances purposes, as at 31/12/09 were as follows:
£
General pool 30,000
Expensive car (private use 20%) 15,000
During the year ended 31/12/10 the following transactions occurred:
1 January purchased plant 40,000

3 March purchased car, CO2 emissions of 135g/km 11,000
10 March purchased car, CO2 emissions of 106g/km 18,000
18 April bought a printing press 4,000
6 May sold plant 2,000
10 June sold expensive car 16,000
12 December purchased a long life asset 160,000
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 2010.

Example 13
Elliot bought a new industrial building on 1 January 2011, incurring the following costs:
£
Land 40,000
Building 200,000
Offices 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 2013.
Elliot sold the building for £230,000 (including £50,000 for the land and £35,000 for the offices).
Calculate the allowances given to Elliot. (He prepares accounts to 31 March).

Example 14
Felix, a scientific instrument manufacturer, makes up annual accounts to 31 March. He bought a new industrial
building on 1 July 2010 and bought it into use straight away. The building cost £400,000 and was used for industrial
purposes until 30 June 2011. The factory was used for non-industrial purposes for the period 1 July 2011 to 30
September 2012.
On 1 October 2012 the factory was again in industrial use and continued to be so until its sale on 30 June 2013
for £475,000 to Terry.
Calculate the allowances available to Felix for all relevant periods of account.

Example 15
James prepares accounts to 30 September annually. His tax adjusted trading profit for the two years to 30 September
2010 were:
£
Year to 30 September 2009 17,000
Year to 30 September 2010 19,000
Show the assessments for 2009/10 and 2010/11

Example 16
Adam commenced trading on 1 July 2008. He prepared accounts to 30 June each year. His tax adjusted trading
profit for the first two years were as follows:
£
Year ended 30 June 2009 36,000
Show the assessments for all relevant years.

Example 17
Emily commenced trading on 1 July 2008. She prepared accounts to 31 March 2010 and annually thereafter. Her
tax adjusted trading profit for the first two accounting periods were as follows:
£
21 months ended 31 March 2010 63,000
Year ended 31 March 2011 40,000

Example 18
Patricia commenced trading on 1 September 2008.
She prepared accounts to 30 June 2009 and annually thereafter. Her tax adjusted trading profit for the first two
periods were as follows:
£
10 months ended 30 June 2009 40,000

Example 19
Jacqui commenced trading on 1 July 2008. She prepared accounts to 30 April 2010 and annually thereafter. Her
tax adjusted trading profit for the first two periods were as follows:
£
22 months ended 30 April 2010 66,000
Year ended 30 April 2011 30,000

Example 20
Matthew commenced trading on 1 May 1999. After trading profitably for some years, he ceased trading on 31
March 2011. His tax adjusted trading profit for the final three periods is as follows:
£
Year ended 30/4/2009 37,000
Year ended 30/4/2010 40,000
Period ended 31/3/2011 36,000
Assume his overlap profits (for the period 1/5/99 - 5/4/00) were £25,000.

Example 21
Anne decides to change her accounting date from 31 March to 30 June making up accounts for the three month
period to 30 June 2009. Anne’s tax adjusted trading profit is as follows:
£
Year ended 31 March 2009 72,000
Three months to 30 June 2009 16,000

Example 22
Tony, a sole trader, commenced trading on 1 July 2006. He has now decided to change his accounting date to 30
September by making up accounts for the 15-month period to 30 September 2009. Tony’s tax adjusted trading
profit is as follows:
£
Period ended 30 September 2009 45,000
Year ended 30 September 2010 54,000

Example 23
Mike started trading on 1 November 2008. His trading results before deducting capital allowances were as follows:
8 months ended 30 June 2009 36,000
He bought a car with CO2 emissions of 145g/km on 9 November 2008 for £15,000 for the sole use of his salesman.
Calculate his tax adjusted trading profit assessable amounts for 2008/09, 2009/10 and 2010/11.

Example 24
Barbara makes up accounts to 31 March each year.
For the year ended 31 March 2011 she incurred a trading loss of £10,000.
Determine in which years Barbara may claim loss relief?

Example 25
Ken gave up his job with an orchestra, and started his own musical business on 1 November 2007.
His results are as follows:
Year ended £
31 October 2008 loss (50,000)
31 October 2009 profit 20,000
31 October 2010 profit 15,000
31 October 2011 profit (estimated) 27,000
Ken’s only income was employment income as follows:
Up to and including 2006/07 £60,000 p.a.

2007/08 (7 months) £35,000
(a) Show how the loss would be relieved under current year, carryback, special opening year loss relief and
carry forward relief.
(b) Which would be the most beneficial way for Ken to relieve the loss?

Example 26
Bill and Ben share profits equally up to 31 October 2010 but in the ratio 2:1 thereafter. Their tax adjusted trading
profits for the year to 31 December 2010 are £48,000.
Show the allocation of the tax adjusted trading profit to both partners in 2010/11

Example 27
Tracy and Donna are in partnership sharing profits equally. On 31 December 2009 Donna retired. Ethel was admitted
to the partnership on 1 January 2010 and was entitled to one third of the profits.
The tax adjusted trading profit for the years to 30 June 2009, 2010 and 2011 are £40,000, £54,000 and £60,000.
Respectively Donna has overlap profits brought forward of £15,000.
Show the tax adjusted trading profit assessable for 2009/10, 2010/11 and 2011/12 for all partners.

Example 28
Gordon has the following income and gains:
2009/10 2010/11
£ £
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 2010.
Show Gordon’s taxable income and chargeable gains for 2009/10 and 2010/11 assuming that he relieves his
trading loss as early as possible.
Income Tax - Employee Benefits

Example 29
Thomas earns £40,000 per annum. He is provided by his employer with a flat close to the office. Its annual value
is £4,100. The flat was purchased in 2002 for £250,000 and was first made available to Thomas in January 2006
when it was worth £280,000.
The employer paid heating bills of £580 in 2010/11. The furnishings in the house cost £20,000.
Assume an official rate of interest of 4%.
Calculate Thomas’s benefit in respect of the provision of the accommodation and associated expenses.

Example 30
Clare earns £20,000 p.a. and is provided with a petrol Volvo T5 by her employer. The car, which was purchased in
January 2006, had a list price of £30,000. The car was first made available to Clare on 1 July 2010. The car has an
official CO2 emission rate of 188 grams per kilometre. In the year 2010/11 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. Clare is also provided
with fuel by her employer for private use.
Calculate Clare’s benefits in respect of the company car.

Example 31
Mike was first provided with a CD player for his private use on 6 April 2009. It had a market value of £6,000.
His employer transferred the CD player to Mike on 6 April 2010, when it was worth £4,200. Mike was required by
his employer to pay £500.
Calculate Mike’s benefit for 2009/10 and 2010/11.
Individuals - Pensions
Example 32
Tony is self-employed
His tax adjusted trading profit assessable amount for 2010/11 is £20,000.
You are required to calculate the maximum pension contribution he could obtain relief for in 2010/11.
Individuals Capital Gains Tax

Example 33
Gill sold a factory used in her trade in November 2010 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 2010/11 realising a capital loss of £4,500.
Gills Taxable income in 2010/11 is £32,000.
Calculate Gill’s capital gains tax payable for 2010/11 and state the due date for payment.

Example 34
Frederick bought an Antique vase costing £3,000 in July 1997 and sold it in February 2011 for £4,500
James bought a painting costing £2,000 in September 1999 and sold it September 2010 for £7,500
Sam bought a rare manuscript in July 1993 for £10,000 and sold it in August 2010 for £3,000
Calculate the capital gains or capital loss arising for each individual.

Example 35
Billy bought a set of ten terracotta warriors in March 1997 for £20,000. He sold 2 warriors in July 2010 for £6,000.
The remaining 8 warriors were worth £28,000 in July 2010.
Calculate the Capital Gain in 2010/11

Example 36
Simon purchased an office block as an investment for £500,000 in April 2002. In September 2010 it was damaged
by fire. Restoration Expenditure of £70,000 was incurred in February 2011 and Simon received insurance money
of £60,000 in June 2011. The office 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 2011 and the base cost of the asset on a subsequent disposal.
(Assume the tax rates for 2010/11 continue into the future).

Example 37
Betty purchased an asset for £25,000 on 1 October 1991 which was destroyed by fire on 30 September 2010.
She received compensation of £36,000 from her insurance company on 1 January 2011 and purchased a replacement
asset for £34,000 on 1 February 2011.
Calculate the Capital Gain arising on 1 January 2011 and the base cost of the replacement asset.

Example 38
Nancy owns 5,000 shares in Horwick plc, a quoted company. They were acquired in June 2007 and September
2009 for a total cost of £18,000. Nancy sells 2,000 of the shares in December 2010 for £36,000.
Nancy is not an employee of Horwick plc.
Compute the Capital Gain arising on the sale of the shares in December 2010

Example 39
Rebecca bought shares in Surpass plc as follows:
Shares
6 October 1990 800
1 December 1993 1,000
1 August 2002 500
11 November 2010 1,800
On 1 June 1996 there was a bonus issue of 1:4.
On 1 November 2010 she sold 3,550 shares.
Identify the shares Rebecca has disposed of using the individual share matching rules.

Example 40
Kit sold her unincorporated business on 31 October 2010 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 2010, (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, she has taxable income of £30,000.
Calculate Kit’s Capital Gains Tax Liability and state the due date for payment.

Example 41
Chloe, a trader, disposed of land used in her business for £750,000 in March 2011. The land had cost her £100,000
in June 1988. The sale was not part of the disposal of the entire business. She purchased a factory (as part of the
purchase of another unincorporated business), for trading use, in November 2011 for £700,000.
Calculate the chargeable gain on the disposal of the land and the base cost of the factory.

Example 42
Peter sold a business asset to Kris in October 2010 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 43
Jacqui bought a house in Manchester on 6 July 1991. She lived in it until 6 July 1996. 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 2006 and travelled for 2 years, returning to the house in Manchester on 6 January 2008.
The house was empty during this period. She sold the house on 6 July 2010, making a capital gain of £190,000.
Calculate the chargeable gain after all relevant reliefs
Inheritance Tax
Example 44
Jasper died on 28 February 2011. His estate comprised of the following:
£
House 500,000
Bank account 220,000
Cash ISA 10,000
Motor vehicles 35,000
Credit card debts 2,000
Repayment mortgage on the house 100,000
Funeral expenses amounted to £7,000

Under the terms of his will, Jasper left the house to his wife and the rest of the estate to his daughter.
During his life Jasper made various gifts as follows:
12 November 2003 - Gift to a trust of £200,000
15 December 2003 - Gift to his daughter of £50,000
18 March 2007 - Gift to his nephew of £175,000 on the occasion of his marriage
26 August 2009 - Gift to a trust of £250,000.
Jasper agreed to pay any lifetime IHT due.
The relevant nil rate bands are as follows:
£
2003/04 255,000
2006/07 285,000
2009/10 325,000
Calculate the IHT arising on the lifetime gifts and the IHT as a result of death.
State the due dates for payment of any IHT arising and who will pay and suffer the IHT.
Corporation Tax
Example 45
In the year to 31 March 2011 Cannock plc received and (paid) the following amounts:
£
Tax adjusted trading profit 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 46
Fallings Ltd’s profit before tax for the year ended 31 December 2010 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 staff 480
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 profit for the year ended 31 December 2010.
Corporation Tax
Example 47
Westcroft Ltd, a small company which manufactures greetings cards, prepares accounts to 31 December.
The WDVs for capital allowances purposes, as at 31/12/09 were as follows:

£
General pool 30,000
Expensive car (private use by director 20%) 15,000
During the year ended 31/12/10 the following transactions occurred:

£
1 January purchased plant 40,000
3 March purchased car CO2 emissions of 145g/km 11,000
10 March purchased car CO2 emissions of 108g/km 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 160,000
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 2010.
Corporation Tax
Example 48
Skip plc had the following income and expenditure for the year ended 31 March 2011.
£
Adjusted profits 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 Taxable Total Profits for year ended 31 March 2011.
Corporation Tax
Example 49
Bugs Bunny Ltd sold a factory used in its trade in November 2010 for £140,000. The company had bought it in
January 1998 for £60,000.
Assume that the indexation factor for the period January 1998 to November 2010 is 0.358.
The company made one other disposal in its year to 31 March 2011 realising a loss of £4,500.
Calculate the Net chargeable Gains arising on the disposal of the two assets.
Corporation Tax
Example 50
ST Limited sold 5,000 shares in JM Ltd for £50,000 on 12 January 2011. 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 2011 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 2011 230.0
Corporation Tax
Example 51
Daisy Ltd, a trading company disposed of a building for £750,000 in March 2011. The building had cost the company
£100,000 in June 1990.
Assume an indexed rise of 70% to March 2011. Daisy Ltd then purchased land, for trading use, in November 2011
for £700,000.
Calculate the chargeable gain on the disposal of the building and the base cost of the land.
Corporation Tax
Example 52
Bolton plc had the following results for the years ending 31 December.
2009 2010 2011

Tax adjusted trading profit/(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 53
Z Ltd made a loss of £120,000 in the year to 31 December 2010, and T Ltd made a Taxable Total Profit of £100,000
in the year to 30 September 2010.
Calculate the maximum trading loss that Z Ltd can surrender to T Ltd for use in T Ltd’s accounting period to 30
September 2010
Corporation Tax
Example 54
J Ltd and K Ltd had the following results:
y/e y/e
31/3/2010 31/3/2011
£ £
J Ltd Tax adjusted trading profit 500,000 200,000
K Ltd Tax adjusted trading profit/(loss) 190,000 (120,000)
Calculate the Taxable Total Profits for each company in years ended 31 March 2010 and 31 March 2011 assuming
the Trading loss in K Ltd is offset in the most beneficial manner for the group
Income Tax - PAYE Coding

Example 55
William Ltd has the following income for the year to 31 March 2011:
Tax adjusted trading profit £1,500,000

Overseas rental income (amount received net of 3% withholding tax) £155,200
Calculate the corporation tax for William Ltd for the year ended 31 March 2011
Income Tax - Self Assessment

Example 56
A taxpayer’s tax liability for 2009/10 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 2010/11 and state the due dates for payment
Income Tax - Self Assessment

Example 57
Continuing with the previous example, suppose that the taxpayer’s liability for 2010/11 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 2012 and the first payment on account for 2011/12
Income Tax - PAYE Coding

Example 58
Maureen, who is single, is a basic rate taxpayer.
She paid a personal pension premium of £1,000 (net) and £120 professional subscription in 2010/11.
She received benefits of £320 from her employer.
She received untaxed income of £250, the tax liability on which is discharged by set-off 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 2010/11.
Corporation Tax - Self Assessment

Example 59
Daisy limited has Taxable Total Profits of £2 million in year end 31 March 2011
(a) Calculate the corporation tax and the due dates for payment
(b) What is the filing date?
VAT
Example 60
YR Ltd commenced trading on 1 June 2010. The value of its taxable supplies were £4,000 per month until 1 April
2011 when they increased to £8,500 per month.
When does YR Ltd have to notify HMRC that it needs to register for VAT and when is registration effective?
VAT
Example 61
Dolphin Ltd commenced trading on 1 June 2010. The value of its taxable supplies was £3,000 per month until 1
April 2011 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 62
In the quarter to the 30 June 2011, ST Limited made standard rated supplies of £100,000 and zero rated supplies
of £50,000. It offered 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 off irrecoverable debts of £7,875 and £5,525 in respect of amounts due 1 September 2010 and 1 April
2011. Both figures are VAT inclusive.
Purchased a car for the salesman who uses the car for private use 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 30 June 2011.
All figures are VAT exclusive unless otherwise stated.
Assume a VAT rate of 20% throughout.
VAT
Example 63
BW Ltd has the following sales & purchases in year ended 30 June 2011:
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 flat rate percentage is 9% for this trade, illustrate if it is advisable to use the flat rate scheme.
VAT
Example 64
Daisy Ltd’s VAT return for quarter to 30 June 2010 was submitted on 15 August 2010 with the payment of VAT
£5,000 also on this date.
The return and payment for quarter to 30 September 2010 was on time.
The next return to 31 December 2010 was on time, but the related VAT payment of £40,000 was only paid on 10
February 2011.
Discuss the VAT consequences of the late submission of the VAT returns and/or payments for Daisy Limited.
VAT
Example 65
Outline the advantages and disadvantages of Group VAT registration and outline which companies can form part
of the VAT group
VAT
Example 66
Mars Limited exports £100,000 of goods to customers in New Zealand (Non EU country) and dispatches £50,000
of goods to non business customers in Germany (EU country) in the quarter to 30 June 2011.
In addition within this VAT quarter it imports £150,000 of goods from an Australian business supplier (non EU
country) and has acquisitions from a business supplier in France (EU country) of £75,000.
Mars Limited makes wholly taxable supplies.
Prepare an extract from Mars Ltd’s VAT return for 30 June 2011, explaining your treatment of each item for VAT
purposes.
PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 1

Answer to example 1
Jane Income Tax computation 2010/11
Non–savings Savings Dividends
£ £ £
tax adjusted trading profit 36,000
Bank interest 4,000 × 100/80 5,000
Dividends 5,400 × 100/90 6,000
Total Income 36,000 5,000 6,000
Less: PA (6,475)
Taxable Income 29,525 5,000 6,000
Tax calculation
£
Non savings
29,525 × 20% 5,905
Savings
5,000 × 20% 1,000
Dividends:
[37,400 + (800 × 100/80) = 38,400 – 29,525 – 5,000 = 3,875]
3,875 × 10% 387

2,125 × 321/2% 691
6,000
Tax liability 7,983
Less tax deducted at source
Dividends 6,000 × 10% (600)
Bank interest 5,000 × 20% (1,000)
Tax payable 6,383
The starting rate of 10% for savings income is not applicable as taxable non-savings income is above £2,440
Answer to example 2
Non–savings Savings Dividends
£ £ £
tax adjusted trading profit 8,000
Bank interest 4,000 × 100/80 5,000
Dividends 5,400 × 100/90 6,000
Total Income 8,000 5,000 6,000
Less: PA (6,475)
Taxable Income 1,525 5,000 6,000
2 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Tax calculation
Non savings
1,525 @ 20% 305
Savings
[2,440 – 1,525 = 915]
915 @ 10% 91
4,085 @ 20% 817
5,000
Dividends:
6,000 × 10% 600
Tax liability 1,813
Dividends 6,000 × 10% (600)
Bank interest 5,000 × 20% (1,000)
Tax payable 213
The payment to charity under the gift aid system is ignored as Jane is not a higher rate tax payer.
Answer to example 3
Benny Income Tax computation 2010/11
Non–savings
£
Total income 120,000
Less: reliefs
Qualifying interest (1,000)
Net income 119,000
Less Personal allowance (W1) (4,475)
Taxable Income 114,525
Income Tax
£
Non savings
(W2) 52,400 × 20% 10,480
62,125 × 40% 24,850
114,525
Income tax liability 35,330
Less tax deducted at source (–)
Income tax payable 35,330
(W1) Net income 119,000

Less: Gross gift aid payment (12,000 × 100/90) (15,000)
Adjusted Net Income 104,000
Standard personal allowance 6,475
Less: 1/2 × (104,000 – 100,000) (2,000)
Revised Personal Allowance 4,475
(W2) 37,400 + 15,000 = 52,400
Answer to example 4
Benny Income Tax computation 2010/11
Non–savings Dividends
£ £
Dividend income 45,000 × 100/90 50,000
Total income 120,000
Less: reliefs
Qualifying interest (1,000)
Net income 119,000 50,000
Less Personal allowance (W1) (–)
Taxable Income 119,000 50,000
Income Tax £
Non savings
(W2) 52,400 × 20% 10,480
66,600 × 40% 26,640
119,000
(W3) Dividends
(165,000 – 119,000)
46,000 × 321/5% 14,950
4,000 × 421/5% 1,700
50,000
Income tax liability 53,770
Dividends (50,000 × 10%) (5,000)
Income tax payable 48,770
(W1) Net income 169,000

Less: Gross gift aid payment (12,000 × 100/90) (15,000)
Adjusted Net Income 154,000
As adjusted net income ≥ £112,950 the personal allowance is reduced to Nil

(W2) 37,400 + 15,000 = 52,400
(W3) 150,000 + 15,000 = 16,500
Answer to example 5
In 2010/11 Anne is 70 years old
Personal allowance 9,490
Less 1/2 (25,000 - 22,900) (1,050)
Revised Personal allowance 8,440
Answer to example 6
As Tony is a higher rate tax payer on his employment income, he has a tax liability on his property income of 40%.
Kathy has no income and as such is wasting her personal allowance and basic rate banding.
It would be better if Kathy were to own the Property such that the property income is assessed on her. The property income of
£5,000 will be covered by her personal allowance, so no liability will occur.
This will save the couple tax of £2,000 (£5,000 × 40%).

Answer to example 7
Assessable amount for year 2010/11
£ £
Property A
£4,000 × 9⁄12 3,000
Less: Expenses (1,500)
1,500
Property B
£3,000 × 8⁄12 2,000
Less: Expenses (2,200)
Wear and tear allowance 10% × 2,000 (200)
(400)
Property Income 2010/11 1,100
Answer to example 8
Molly - Property Income for 2010/11:
£
Premium (51-20/50 × 25000) 15,500
Rental income 12,000 × 8⁄12 8,000
23,500
15, 500
Tenant: Relief available × £775 pa
20
Answer to example 9
(a) Property (1) Property (2) Total
Rental income
1) 4 × 1,000 + 7 × 1,200 12,400 12.400
2) 8 × 600 4,800 4,800
Less expenses:
Redecoration (2,010) (2,010)
Water rates (150) (150)
Gardening (520) (520)
Legal fees (75) (75)
Mortgage interest (3,700) (3,700)
Insurance (305) (305)
Wear and tear allowance 10% × (12,400 – 150)/4,800 (1,225) (480) (1,225)
Service charge (11 × 25) (275) (275)
Mortgage interest (11 × 500) (5,500) (5,500)
4,415 (1,455) 2,960
Property Income for 2010/11 = £2,960
(b) If Property (2) was Furnished Holiday letting property then the loss would not have been offset against Property (1)
income.
The Property income would have been £4,415 for 2010/11, and the loss on Property (2) would be treated as a trading loss
for offset against the total income and gains of 2010/11 and/or 2009/10.
In addition the loss could be offset against total income of 2007/08, 2008/09 and 2009/10 under new business rules, or
carried forward against future profits. In addition the wear & tear allowance would not be available but capital allowances
could be claimed on the cost of the furniture instead.
Answer to example 10
(a) Normal assessment
Rental income 4,750
Less expenses (300)
Wear & tear allowance 10% × 4,750 (475)
Property Income 3,975
(b) Rent a Room with election
Rental income 4,750
less rent a room relief (4,250)
Property Income 500
The Rent a Room relief election should be made.

£ £
Net profit per accounts 30,000
Add back
Proprietor’s wages 10,000
Depreciation 2,800
Political donation 76
Purchase of van 20,000
Fine 750
Legal fees 600
Donation to national charity 100
Entertaining 300
Car expenses (1,200 × 20%) 240
Profit on goods for own use (400 − 280) 120
34,986
Less:
Income from furnished lettings 1,800
Dividends 4,200
(6,500)
Adjusted profit 58,486
Capital allowances year ended 31/12/2010
80%
General Special rate Short life
Expensive car Allowances
pool pool asset (1)
private use (1)
£ £ £ £ £ £
WDV b/f 30,000 15,000
Additions qualifying for AIA
Long life asset 160,000
Less AIA (Maximum) (100,000) 100,000
60,000
Additions qualifying for AIA
Plant 40,000
Printing press 4,000
AIA (–)
40,000 4,000
Other additions
Motor car CO2 emissions - 111-160g/km 11,000
81,000 15,000 60,000 4,000
Disposals (2,000) (16,000)
79,000 (1,000) 60,000 4,000
WDA @ 20% (15,800) 15,800
Balancing Charge 1,000 @ 80% (800)
WDA @ 10% (6,000) 6,000
WDA @ 20% (800) 800
Additions qualifying for FYA

Motor car <110 g/km 18,000
FYA @ 100% (18,000) 18,000
139,800
WDV c/f 63,200 – 54,000 3,200
Elliot £
Cost (50,000 < 25% × 250,000) 250,000
Y/e 31/3/2011 to y/e 31/3/2012
WDA: (1% × 250,000) × 2 years (5,000)
WDV 245,000
Y/e 31/3/2013
No WDA or Balancing Adjustment in year of sale
Industrial buildings allowances – Felix
Allowances
£ £
Cost 400,000
Y/e 31/3/2011 (400,000 × 1%) (4,000) 4,000
y/e 31/3/2012 (notional) (4,000) –
y/e 31/3/2013 WDA 1% (4,000) 4,000
WDV 388,000
y/e 31/3/2014 - No WDA or Balancing Adjustment in year of sale
These form the basis for the assessable amounts for 2009/10 and 2010/11:
£
2009/10
(Year to 30/9/2009) 17,000
2010/11
(Year to 30/9/2010) 19,000
The tax adjusted trading profit assessable amounts are as follows:
£
2008/09
(1/7/2008 - 5/4/2009)
36,000 × 9⁄12 27,000
2009/10
(Year to 30/6/2009) 36,000
2010/11
(Year to 30/6/2010) 42,000
Overlap profits are £27,000 representing 9 months of profit.
£
2008/09
(1/7/2008 - 5/4/2009)
63,000 × 9⁄21 27,000
2009/10
(Year to 31/3/2010)
63,000 × 12⁄21 36,000
2010/11
(Year to 31/3/2011) 40,000
No overlap profit.
£
2008/09
(1/9/2008 - 5/4/2009)
40,000 × 7⁄10 28,000
2009/10
(1/9/2008 - 31/8/2009)
40,000 + (2⁄12 × 54,000) 49,000
2010/11
(Year to 30/6/2010) 54,000
Overlap profits are £37,000 representing 9 months of profit
£
2008/09
(1/7/2008 - 5/4/2009)
66,000 × 9⁄22 27,000
2009/10
(6/4/2009 - 5/4/2010)
66,000 × 12⁄22 36,000
2010/11
(Year to 30/4/2010)
66,000 × 12⁄22 36,000
2011/12
(Year to 30/4/2011) 30,000
Overlap profits are £33,000 representing 11 months of profit.
£
2009/10
(Year to 30/4/2009) 37,000
2010/11
(23 months from 1/5/2009 to 31/3/2011)
(40,000 + 36,000) 76,000
Less overlap profits (25,000)
Final assessable amount 51,000
The tax adjusted trading profit assessable amounts will be as follows:
£
2008/09 Year to 31/3/2009 72,000
2009/10 12-month period to new accounting date of 30/6/2009
1/7/2008 to 31/3/2009 – 72,000 × 9⁄12 54,000
Period to 30/6/2009 16,000
70,000
2010/11 Year to 30/6/2010 90,000
The profits of £54,000 assessed in 2009/10 are overlap profits, since they were also assessed in 2008/09. They will be carried
forward and would normally be offset when Anne ceases trading.
The tax adjusted trading profit assessable amounts will be as follows:
£
2006/07 1/7/2006 to 5/4/2007 – 27,000 × 9⁄12 20,250
The profits of £20,250 are overlap profits representing 9 months of profit.
2007/08 Year to 30/6/2007 27,000
2008/09 Year to 30/6/2008 36,000
2009/10 15-month period to 30/9/2009 45,000
Less: Overlap profits 20,250 × 3⁄9 (6,750)
38,250
2010/11 Year to 30/9/2010 54,000
In 2009/10 profits for 15 months are assessed. Because the normal basis of assessment is that only 12 months profits are
assessed, Tony is allowed to offset 3 months worth of his overlap profits that arose when he commenced trading. These overlap
profits are for a period of 9 months, so the offset is based on a fraction of 3⁄9.
Capital allowances
Pool Allowances
£ £
8 months to 30/6/2009
Addition (Motor car 111-160g/km) 15,000
WDA 20% × 8⁄12 (2,000) 2,000
WDV c/f 13,000
y/e 30/6/2010
WDA 20% (2,600) 2,600
WDV c/f 10,400
Adjusted profit
Profit CA Tax adjusted trading profit
£ £ £
8 months to 30/6/2009 36,000 (2,000) 34,000
y/e 30/6/2010 44,000 (2,600) 41,400
Tax adjusted trading profit assessable amounts:

£
2008/09 1/11/2008 to 5/4/2009
34,000 × 5⁄8 21,250
2009/10 1/11/2008 to 31/10/2009
34,000 + 41,400 × 4⁄12 47,800
2010/11 y/e 30/6/2010 41,400
Overlap profits are £35,050 (21,250 + (41,400 × 4/12)) representing 9 months of profit
Loss is in 2010/11.
Relief may be claimed in 2010/11 and/or 2009/10 against Total income and then gains. In addition the loss may be carried
forward against the first available trading profit of the same trade.
(a) Tax adjusted trading profit assessable amounts:
£
2007/08 Actual (1/11/2007 - 5/4/08) Nil
2008/09 12 months to accounting date (y/e 31/10/2008) Nil
2009/10 CYB (y/e 31/10/2009) 20,000
2010/11 CYB (y/e 31/10/2010) 15,000
2011/12 CYB (y/e 31/10/2011) 27,000
£
2007/08 Current and Carryback relief 50,000 × 5⁄12 20,833
Relief available against Total Income of 2007/08 and/or 2006/07
2008/09 Loss 50,000

Less: Allocated to 2007/08 (20,833)
Relief available against Total Income of 2008/09 and/or 2007/08 29,167
Special opening year relief £

2007/08 Relief available against Total Income of 2004/05, 2005/06 and 2006/07 20,833
2008/09 Relief available against Total Income of 2005/06, 2006/07 and 2007/08 29,167
Carryforward relief £
Loss 50,000
Relieved against tax adjusted trading profit 2009/10 (20,000)
2010/11 (15,000)
2011/12 (15,000)
–
(b) The most beneficial way for Ken to relieve his loss would be:
The trading loss of £20,833 for 2007/08, should be relieved under special opening year loss relief, against 2004/05 Total
Income of £60,000; and the trading loss of £29,167 for 2008/09 should be relieved under special opening year loss relief
against 2005/06 Total Income of £60,000.
This gives relief as early as possible at a rate of 40%, and avoids wasting personal allowances.
Total Bill Ben
£ £ £
1/1/2010 - 31/10/2010 (10⁄12) 40,000 20,000 20,000
1/11/2010 - 31/12/2010 (2⁄12) 8,000 5,333 2,667
y/e 31/12/2010 48,000 25,333 22,667
Allocation of profits: Tracy Donna Ethel
£ £ £
y/e 30/6/2009 (£40,000) 20,000 20,000
y/e 30/6/2010 (£54,000)
1/7/2009 – 31/12/2010 (£27,000) 13,500 13,500
1/1/2010 – 30/6/2010 (£27,000) 18,000 9,000
31,500 13,500 9,000
y/e 30/6/2011 (£60,000) 40,000 20,000
Tax adjusted trading profit Assessment Tracy Donna Ethel

£ £ £
2009/10
CYB y/e 30/6/2009 20,000
2009/10 Final year 18m to 31/12/2009
£20,000 + 13,500 33,500
Less overlap profit (15,000)
18,500
First year 2009/10
(1/1/2010 to 5/4/2010)
£9,000 × 3⁄6 4,500
Second year 2010/11
(1/1/2010 – 31/12/2010)
£(9,000 + 6/12 × 20,000) 19,000
2010/11
CYB y/e 30/6/2010 31,500
2011/12
CYB y/e 30/6/2011 40,000 20,000
Ethel has overlap profits of £4,500 (1/1/2010 to 5/4/2010) and £10,000 (1/7/2010 to 31/12/2010) totalling £14,500
2009/10 2010/11
Income tax computation £ £
Total Income 6,000 7,000
Loss relief (6,000) (7,000)
Net income / Taxable income Nil Nil
Capital gains tax computation
Gains 20,000 16,000
Less: Trading loss relief (20,000) (16,000)
Nil Nil
Loss memorandum
Loss y/e 31/12/2010 50,000
Less: Total income 2009/10 (6,000)
Gains 2009/10 (20,000)
Total income 2010/11 (7,000)
Gains 2010/11 (16,000)
Loss to carryforward under against first available trading profit 1,000
Income Tax-Employee Benefits

£
Benefit
Accommodation
Annual value: 4,100
Additional charge 4% (250,000 − 75,000) 7,000
Expenses 580
Furnishings (20,000 × 20%) 4,000
15,680
£
Car 30,000 × 26% × 9⁄12 (Note) 5,850
Less: Contribution (20 × 9) (180)
5,670
Fuel: 18,000 × 26% × 9/12 3,510
Note: The relevant percentage is 26% (15% + 11% (185 -130)/5).
2009/10 £
6,000 × 20% 1,200
2010/11
Greater of:
MV at time of transfer 4,200
MV when first made available 6,000

Less: Amount charged as benefit (1,200)
4,800
Higher figure 4,800

Less contribution (500)
Benefit 4,300
Pension Contributions
The maximum pension contributions Tony can make are the greater of
£3,600
100% x 20,000= £20,000
His maximum contributions are therefore £20,000. This will be paid net of 20% tax at source i.e. he will only pay £16,000 into his
pension fund and HMRC will contribute £4,000.
If he were to contribute more than £20,000 into the fund he would only receive tax relief as above
As he is only a basic rate taxpayer then there is no inclusion in his income tax computation. You only include the contribution
if he is a higher rate taxpayer by extending the basic rate and additional rate bands.

November 2010 £
Proceeds 140,000
Less: Cost (60,000)
Capital Gain 80,000
Less: Capital loss in the year (4,500)
75,500
Less: Annual exemption (10,100)
65,400
CGT payable (W1) 17,772

Due date 31/1/2012
£
(W1) 5,400 × 18% 972
60,000 × 28% 16,800
65,400 17,772
Note: Entrepreneurs’ relief is not available as this is the disposal of a single asset and is not as part of the sale of the whole
business.
(a) Frederick
Asset is a non wasting chattel, cost and proceeds are less than £6,000 so it is exempt.
(b) James
Asset is a non wasting chattel with cost ≤ £6,000 and proceeds > £6,000
i) Normal calculation
Proceeds 7,500
Less: Cost (2,000)
Gain 5,500
ii) Restriction
5⁄3 [7,500 – 6,000] = £2,500
Gain = £2,500
(c) Sam
Asset is a non wasting chattel with cost > £6,000 and proceeds ≤ 6,000
Deemed Proceeds 6,000
Less: Cost (10,000)
Capital loss (4,000)
£
Proceeds 6,000
6, 000 (3,529)
Less: Cost 20 , 000 ×
6, 000 + 28, 000
Capital Gain 2,471
The asset is damaged - This is a part disposal but as all of the insurance proceeds are used for restoration and an election is
made, the proceeds can be rolled over against the allowable cost when the asset is eventually sold.
June 2011 - No gain
Date of disposal is June 2011 when insurance money is received.
When the asset is eventually sold:

£
Proceeds X
Acquisition cost 500,000
Less insurance proceeds (60,000)
(440,000)
Restoration costs (70,000)
Capital Gain X
If no election had been made then a capital gain would have arisen in June 2011 as follows:
£
Proceeds 60,000
60, 000 (28,302)
Cost £500, 000 ×
60, 000 + 1, 000, 000
Capital Gain 31,698
On a subsequent sale the acquisition cost will be

500,000 – 28,302 = 471,698
Also a deduction for the restoration costs can be made of £70,000
Disposal 1 January 2011
£
Proceeds 36,000
Less Acquisition cost (25,000)
Capital Gain 11,000
Less gain deferred (W1) (9,000)
Chargeable Gain 2,000
(W1) The proceeds are reinvested, but have only been partially reinvested.
Gain chargeable now =
Proceeds received 36,000
Less replacement asset (34,000)
Chargeable Now 2,000
Available to defer (11,000 – 2,000) 9,000
When the new asset is sold:

Cost 34,000
Less: Gain deferred (9,000)
Base cost 25,000
£
Proceeds 36,000
Less cost 18,000 × 2⁄5 (7,200)
Capital Gain 28,800
Next 30 day acquisitions 11/11/2010 1,800
Match with the share pool acquisition(s)

Share pool
6/10/1990 800
1/12/1993 1,000
1,800
1:4 bonus 450
1/8/2002 500
2,750
Match with 1,750 (3,550 –1,800) shares from the share pool.
£
Gains not qualifying for Entrepreneurs’ relief
Investment property 120,000
Less Capital losses b/f (Note 1) (20,000)
100,000
Less Annual exemption (Note 1) (10,100)
89,900
CGT @ 28% (Note 2) 25,172
Gains qualifying for Entrepreneurs’ relief

Sale of business
Freehold factory 200,000
Goodwill 350,000
Warehouse (150,000)
400,000
Sale of shares 700,000
Gain 1,100,000
CGT @ 10% (Note 1) 110,000
Total CGT 25,172 + 110,000 = £135,172

Due date for payment on 31/1/2012
Note 1: The capital loss b/f and the annual exemption are offset against the gains not qualifying for entrepreneurs’ relief as
they will be the subject to a higher tax rate than gains qualifying for entrepreneurs’ relief.
Note 2: Although Kit has some remaining basic rate band after her taxable income, this is deemed to have been utilised.by
gains qualifying for entrepreneurs’ relief.
Note 3: The maximum gains on which entrepreneurs’ relief is available is £5,000,000, so all of the £1,100,000 is eligible. The
remaining lifetime limit of (£5,000,000 – £1,100,000) £3,900,000 is available for future gains qualifying for entrepreneurs’
relief.
March 2011
£
Proceeds 750,000
Less: Cost (100,000)
650,000
Less gain rolled over (600,000)
Chargeable gain (750,000 − 700,000) 50,000
£
Base cost of the factory
Cost 700,000
Less: Gain rolled over (600,000)
100,000
Entrepreneurs’ relief is not available on the sale of the land as it was not the sale of the entire business
£
Proceeds (MV) 75,000
Less: Cost (25,000)
50,000
Less: Gift relief (35,000)
Chargeable gain (40,000 − 25,000) 15,000
Kris’s base cost

£
Cost (MV) 75,000
Less: Gift relief (35,000)
40,000
Entrepreneurs’ relief is not available as it was not the sale of the entire business
£
Indexed gain 190,000
Less: PPR relief (W1) (150,000)
40,000
Less: Letting relief (W2) (25,000)
Chargeable gain 15,000
Actual and Deemed
(W1) Letting Absent
Occupation
6/7/1991 – 6/7/1996 5 years
6/7/1996 –6/1/2006 7 years 2 1/2 years
(Elsewhere in the UK + any other reason)
6/1/2006 – 6/1/2008
1/2 year 11/2 years
(part of last 3 years)
6/1/2008 – 6/7/2010 2 1/2 years
15 years 2 1/2 years 11/2 years 19 years
PPR 15⁄19 × 190,000 = 150,000

(W2) Letting relief –lower of
– £150,000
– £40,000
21
– 2 × 190, 000 = £25, 000
19
Inheritance Tax
Lifetime
£ £
1) 23/10/2003 CLT 200,000
Less Annual exemptions:
2003/04 (3,000)
2002/03 b/f (3,000)
194,000
Nil rate band at gift 255,000
Less chargeable transfers in previous 7 years from gift
(12/11/1996 – 12/11/2003) (–)
(255,000)
–
Covered by the Nil rate band
2) 15/12/2003 PET 50,000

2003/04 - used (–)
50,000
No lifetime tax on a PET
3) 18/3/2007 PET 175,000

Less Marriage exemption (1,000)
2006/07 (3,000)
2005/06 b/f (3,000)
168,000
No lifetime tax on a PET
4) 26/8/2009 CLT 250,000

2009/10 (3,000)
2008/09 bf (3,000)
244,000
Nil rate band at gift 325,000
(26/8/2002 – 26/8/2009) (194,000)
(131,000)
113,000
IHT at 25% £28,250
Payable by Jasper
Due date 30/4/2010
Gross chargeable transfer £244,000 + £28,250 = £272,250
Death tax on lifetime gifts
Date of death 28 February 2011
Gifts on or after 28 February 2004
1) 12 November 2003 - No additional tax on the CLT
2) 15 December 2003 - The PET is exempt
£ £
3) 18/3/2007 PET is now chargeable
Value of PET after exemptions 168,000
Nil rate band at death 325,000
(18/3/2000 – 18/3/2007) (194,000)
(131,000)
37,000
IHT at 40% 14,800
Less taper relief 3 – 4 years 14,800 × 20% (2,960)
IHT payable 11,840
Payable by Jasper’s nephew
Due date for payment 31/8/2011
4) 26/8/2009 Additional tax on CLT

Gross chargeable transfer 272,250
(26/8/2002 - 26/8/2009) (194,000)
(168,000)
–
272,250
IHT at 40% 108,900
Less taper relief < 3 years (–)
108,900
Less lifetime tax (28,250)
Additional IHT payable 80,650
Payable by the trustees of the trust
Death estate
Date of death: 28 February 2011
£ £
House 500,000
Less Repayment mortgage (100,000)
400,000
Bank Account 220,000
Cash ISA 10,000
Motor vehicles 35,000
Less Debts
Credit card debts (2,000)
Less Funeral expenses (7,000)
Less Exempt transfers
Wife (400,000)
Chargeable Estate 256,000
Less chargeable transfers in previous 7 years from death
(28/2/2004 – 28/2/2011) (168,000)
(272,250) –
256,000
IHT at 40% £102,400
Payable by the personal representatives
Suffered by Jasper’s daughter
Corporation Tax
Year ended 31 March 2011
£
Trading profit 280,000
Interest Receivable (20,000 + 30,000) 50,000
330,000
Less: Gift Aid payment (1,000)
Taxable Total Profits 329,000
‘Augmented Profits’ (329,000 + 4,500 × 100⁄90) 334,000
Corporation tax £
329,000 × 28% 92,120
Less: 7/400 × (1,500,000 − 334,000) × 329,000⁄334,000 (20,100)
Corporation tax liability 72,020
Adjustment to profit before tax
£ £
Profit before tax per accounts 90,000
Add back
Directors salary –
Depreciation 2,800
Gift Aid payment 180
Purchase of van 20,000
Fine 750
Legal fees 600
Lease amortisation 2,000
Christmas party for staff –
Political donation 100
Expenses of car used by Director –
Goods taken by Director –
Less:
Income element of lease amortisation (note 1) 1,200
Income from furnished lettings 1,800
Dividends 4,200
(7,700)
Adjusted profit 109,030
Note:
(1) Allowable element of lease amortisation
51− 21
Income element × 42, 000 = £25, 200
50
25, 200
Annual deduction = £1, 200
21
(2) No private use adjustments are required but the director may be subject to a benefit charge.
Capital allowances - year ended 31/12/10
General pool Expensive car Special rate Short-life Allowances
(1) pool asset
(private use) (1)
£ £ £ £
WDV b/f 30,000 15,000
Additions Qualifying for AIA
Long life asset 160,000
Less AIA (MAX) (100,000) 100,000
60,000
Additions Qualifying for AIA
Plant 40,000
Printing Press 4,000
AIA - used (–)
Balance qualifying for FYA @ 40% 40,000 4,000
Other additions
Car CO2 emissions of 111-160g/km 11,000
81,000 15,000 60,000 4,000
Disposal (2,000) (16,000)
79,000 (1,000) 60,000 4,000
WDA @ 20% (15,800) 15,800
Balancing charge 1,000 (1,000)
WDA @ 10% (6,000) 6,000
WDA @ 20% (800) 800
Additions qualifying for FYA

Motor car < 110g/km 18,000
FYA @ 100% (18,000) 18,000
– 139,600
WDV c/f 63,200 – 54,000 3,200
£
y/e 31 March 2011
Tax adjusted trading profit (500,000 − 20,000) 480,000
Interest Receivable (24,000 + 28,500) 52,500
532,500
Less: Gift Aid (1,800)
Taxable Total Profits 530,700
November 2010 £
Proceeds 140,000
Less: Cost (60,000)
IA 60,000 × 0.358 (21,480)
58,520
Less: Capital loss in Accounting period (4,500)
Net Chargeable Gain 54,020
Matching rules
1) Same day x
2) Previous 9 days 4 Jan 2011 2,000 shares
£
2, 000 20,000
Proceeds × 50, 000
5, 000
Less: Cost (4,500)
Gain 15,500
3) 1/4/82 - previous 10 days share pool

Indexed
N Cost
cost
Feb 1992 1,000 1,500 1,500
Bonus 1:4 250 – –
1,250 1,500 1,500
157.5 − 136.3 233
Index to July 1997 from Feb 1992 × 1, 500
136.3 1,250 1,500 1,733
Purchase July 1997 2,000 4,000 4,000
3,250 5,500 5,733
173.8 − 157.5 593
Index to Feb 2002 × 5, 733
157.5
3,250 5,500 6,326
Rights issue 1.5 @ £1.75 each 650 1,138 1,138
3,900 6,638 7,464
230.0 − 173.8 2,414
Index to Jan 2011 × 7, 464
173.8 3,900 6,638 9,878
Sale (3,000) (5,106) (7,598)
£
3, 000 30,000
Proceeds × 50, 000
5, 000
Less: Cost (5,106)
Unindexed Gain 24,894
Less: IA (7,598 – 5,106) (2,492)
Chargeable gain 22,402
Summary
£
(1) 15,500
(2) 22,402
Total chargeable gain to include in the corporation tax computation 37,902
March 2011 £
Proceeds 750,000
Less: Cost (100,000)
Less: IA 100,000 × 70% (70,000)
580,000
Less gain rolled over (530,000)
Gain charged now (750,000 − 700,000) 50,000
Base cost of land

Cost 700,000
Less: Gain rolled over (530,000)
170,000
Years ending 31 December
2009 2010 2011
Tax adjusted trading profit 10,000 - 42,000
Less: Carry forward (4000)
Interest Income 2,000 2,000 2,000

Less: Current year & carryback relief (12,000) (2,000)
– – 40,000
Less: Gift Aid – – (1,000)
Taxable Total Profit Nil Nil 39,000
The gift aid for the years ended 31/12/2009 and 31/12/2010 are wasted.
Loss memorandum £
Loss y/e 31/12/2010 18,000
Less: current year – y/e 31/12/2010 (2,000)
Carry back y/e 31/12/2009 (12,000)
Carry forward y/e 31/12/2011 (4,000)
–
9⁄12 × Z Ltd’s loss of £120,000 = £90,000
9⁄12 × T Ltd’s profit of £100,000 = £75,000.
The maximum is therefore £75,000
The claim is made by the claimant company; the consent of the surrendering company is required.
J Ltd should claim group relief of £50,000 for y/e 31 March 2011 to reduce profits to the small profit limit.
K Ltd should relieve £40,000 against y/e 31 March 2010 under the carryback provisions to reduce profits to the small profit limit.
The balance of loss £30,000 is best relieved under the carryback provisions as it results in an immediate tax refund (note that the
group relief claim is made first, and the balance of the loss is dealt with under current and carryback relief ).
Summary
y/e 31/3/2010 y/e 31/3/2011
J Ltd Taxable Total Profits 500,000 200,000
Less group relief - (50,000)
Revised Taxable Total Profits 500,000 150,000
K Ltd Tax adjusted trading profit 190,000 -

Less: carryback relief (70,000) -
Taxable Total Profit 120,000 -
Total UK Overseas
Taxable Total Profit 1,660,000 1,500,000 160,000 (W1)
Corporation Tax @ 28% 464,800 420,000 44,800
DTR (4,800) – (4,800)
460,000 420,000 40,000
Double taxation relief is restricted to the overseas tax on the overseas income, as this is less than the UK tax payable of £44,800.
(W1) Rental income 155,200

Withholding tax at 3% 4,800
160,000
INCOME TAX –SELF ASSESSMENT

Payments on account will be due for 2010/11 as follows:
31/1/2011 (£7,300 + £700 = £8,000/2) £4,000
31/7/2011 £4,000
The balancing payment for 2010/11 will be:
£
Total tax liability 13,700
Less: Payments on account (8,000)
Balancing payment due 31/1/2012 5,700
First payment on account for 2011/12

(8,300 + 800)/2 = £4,550
Total due 31 January 2012 = £10,250
INCOME TAX –PAYE CODING

Allowances £
Personal allowance 6,475
PPP (paid net of BRT) –
Expense deductions 120
6,595
Less: Deductions
Benefits 320
Untaxed income 250
Tax underpayments b/f (150 × 100⁄20) 750
1,320
5,275
Maureen’s code for 2010/11 527L
CORPORATION TAX –SELF ASSESSMENT

Corporation tax = £2,000,000 @ 28% = £560,000
As the company is large, the corporation tax is due for instalments.
y/e 31 March 2011 (1/4/2010 – 31/3/2011)
14 October 2010 £140,000
14 January 2011 £140,000
14 April 2011 £140,000
14 July 2011 £140,000
The company has a filing date of 31 March 2012 for the corporation tax computation y/e 31 March 2011.
VAT
Taxable turnover in first 12 months 1/6/2010 – 31/5/2011 was £57,000 (£4,000 × 10) +(£8,500 × 2).
The position thereafter is:
End of June 2011 57,000 + 8,500 – 4,000 = 61,500
End of July 2011 61,500 + 8,500 – 4,000 = 66,000
End of August 2011 66,000 + 8,500 – 4,000 = 70,500
YR Ltd exceeds the threshold at the end August 2011.
Notify HMRC by 30 September 2011. Registration is effective from 1 October 2011.
From 1 June 2010 to 31 March 2011 the value of Dolphin Ltd’s taxable supplies was £30,000.
So it is not yet required to register using the historical test.
But using the future test on 1/4/11 the company expects its taxable supplies in the next 30 days to exceed £70,000.
It is required to register immediately ie from 1 April 2011.
Notify HMRC by 1 May 2011.
£
Output VAT
(£100,000 × 97%) × 20% 19,400
Input VAT
20 (9,833)
Standard rated purchases [ 61, 250 – 2, 250 ] ×
20 120
Irrecoverable debts 7, 875 × (Note 1) (1,313)
(> 6 months old) 120
20 (1,958)
Machine 11750
, ×
120
VAT Payable 30 July 2011 6,296
Note: No VAT recovery on customer entertaining or cars with any private use.
a) Without using the flat rate scheme
£
20 11,750
Output VAT 70, 500 ×
120
20 (1,958)
Input VAT 11750
, ×
120
VAT payable 9,792
b) Using flat rate scheme

75,500 × 9% = £6,795
Using the scheme saves £2,997 (£9,792 – £6,795) in y/e 30 June 2011 and the VAT administration is simplified.
Quarter Due Submitted Consequences
30/6/2010 31/7/2010 15/8/2010 Surcharge liability notice issued. Period of notice until 30 June 2011
30/9/2010 31/10/2010 31/10/2010 –
31/12/2010 31/1/2011 31/1/2011 First default in notice period. Surcharge penalty 2% × £40,000 = £800.
But payment 10/2/2011 Also notice period extended to 31 December 2011
The advantages of group VAT registration are:
• No VAT is accounted for on transactions between group members within the VAT group
• Only one VAT return is submitted for the group; therefore an administrative advantage.
• The group can choose which companies to include or exclude (beneficial to exclude a zero rated company)
The disadvantages of group VAT registration are:
• The limits for Cash and Annual Accounting schemes will apply to the group as a whole and not on an individual company
basis.
• Joint and several liability of each company in the group
• Possible administration issues collecting information to be passed on to the representative member.
Two or more companies can register as a group for VAT purposes. They must be under common control of a third company
and resident in the UK
The group is treated for VAT purposes as if it were a single company registered for VAT on its own.
A representative member of the group is appointed and this company is responsible for completing and submitting a single
VAT return and paying the VAT on behalf of the group.
All companies in the VAT group are jointly and severally liable for any VAT liabilities of the group.
• The exports to a New Zealand business customer will be zero rated as it is an export of goods to a non EU country
• The dispatch to German non business customer will be standard rated, so output VAT will be £50,000 × 20% = £10,000
• The import of £150,000 of goods from an Australian business supplies will result in Mars Ltd paying VAT @ 20% ie £150,000×
20% = £30,000 to HMRC at point of entry into the UK. (This is assuming that Mars Ltd does not use the duty deferment
scheme). This can be then recovered as input VAT.
• The acquisition of goods valued at £75,000 from a business supplier in France will result in Mars Ltd accounting for output
VAT of £75,000 × 20% = £15,000 as a ‘self-supply’. The ‘self supply’ output VAT of £15,000 can also be recovered as input VAT.
Quarter to 30 June 2011

VAT return extract
£
Output VAT
Export of goods to EU non business customer £50,000 × 20% 10,000
‘Self supply’ on acquisition from EU supplier £75,000 × 20% 15,000
Input VAT
Import of goods from non EU supplier £150,000 × 20% (30,000)
‘Self supply’ on acquisition from EU supplier £75,000 × 20% (15,000)

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PAPER F6 – REVISION QUESTIONS  JUNE 2011 EXAMINATIONS 1

Income Tax - Individuals

Calculate Jane’s income tax payable for 2010/11

Income Tax - Individuals

Income Tax - Individuals

Calculate Benny’s income tax payable.

Income Tax - Individuals

Income Tax - Individuals

Determine the personal age allowances she is entitled to in 2010/11

Income Tax - Individuals

Kathy has no income.

Income Tax - Property Business Profit

Determine Robert’s Property Income to be assessed in 2010/11.

Income Tax - Property Business Profit

Income Tax - Property Business Profit

(a) Calculate Ben’s Property Income for 2010/11

Income Tax - Property Business Profit

Income Tax - Unincorporated Business

Kerry paid the business £280 for the goods.

Calculate the adjusted profit for year ended 31 December 2010

Income Tax - Unincorporated Business

The WDVs for capital allowances purposes, as at 31/12/09 were as follows:

1 January purchased plant 40,000

Income Tax - Unincorporated Business

Calculate the allowances given to Elliot. (He prepares accounts to 31 March).

Income Tax - Unincorporated Business

Income Tax - Unincorporated Business

Show the assessments for 2009/10 and 2010/11

Income Tax - Unincorporated Business

Show the assessments for all relevant years.

Income Tax - Unincorporated Business

Income Tax - Unincorporated Business

Show the assessments for all relevant years.

Income Tax - Unincorporated Business

Income Tax - Unincorporated Business

Show the assessments for all relevant years.

Income Tax - Unincorporated Business

Show the assessments for all relevant years.

Income Tax - Unincorporated Business

Show the assessments for all relevant years.

Income Tax - Unincorporated Business

8 months ended 30 June 2009 36,000

Year ended 30 June 2010 44,000

Income Tax - Unincorporated Business

Determine in which years Barbara may claim loss relief?

Income Tax - Unincorporated Business

His results are as follows:

Ken’s only income was employment income as follows:

Up to and including 2006/07 £60,000 p.a.

Income Tax - Unincorporated Business

Income Tax - Unincorporated Business

Income Tax - Unincorporated Business

He incurred a trading loss of £50,000 in his year ended 31 December 2010.

Income Tax - Employee Benefits

Assume an official rate of interest of 4%.

Income Tax - Employee Benefits

Calculate Clare’s benefits in respect of the company car.

Income Tax - Employee Benefits

Calculate Mike’s benefit for 2009/10 and 2010/11.

Individuals Capital Gains Tax

Gills Taxable income in 2010/11 is £32,000.

Individuals Capital Gains Tax

Individuals Capital Gains Tax

Calculate the Capital Gain in 2010/11

PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 1