Professional Documents
Culture Documents
In addition she pays £800 to charity under the Gift aid scheme
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 2
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 3
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 4
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 5
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 6
Discuss how, as a couple, they could reduce the overall tax liability
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 7
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 8
Calculate Molly’s Property Income for 2010/11 and the relief available to the tenant for the premium paid.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 9
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.
(b) What difference would it have made if the second property was classed as a Furnished Holiday letting
property.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 10
Calculate Jimmy’s Property Income assuming all elections are claimed for 2010/11
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 11
£
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 can show that her business use of the car is 80%.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 12
£
General pool 30,000
Expensive car (private use 20%) 15,000
During the year ended 31/12/10 the following transactions occurred:
Calculate the capital allowances for the year ended 31 December 2010.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 13
£
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).
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 14
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 15
£
Year to 30 September 2009 17,000
Year to 30 September 2010 19,000
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 16
£
Year ended 30 June 2009 36,000
Year ended 30 June 2010 42,000
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 17
£
21 months ended 31 March 2010 63,000
Year ended 31 March 2011 40,000
Show the assessments for all relevant years.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 18
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
Year ended 30 June 2010 54,000
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 19
£
22 months ended 30 April 2010 66,000
Year ended 30 April 2011 30,000
Show the assessments for all relevant years.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 20
£
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 21
£
Year ended 31 March 2009 72,000
Three months to 30 June 2009 16,000
Year ended 30 June 2010 90,000
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 22
£
Year ended 30 June 2007 27,000
Year ended 30 June 2008 36,000
Period ended 30 September 2009 45,000
Year ended 30 September 2010 54,000
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 23
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 24
For the year ended 31 March 2011 she incurred a trading loss of £10,000.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 25
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
(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?
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 26
Show the allocation of the tax adjusted trading profit to both partners in 2010/11
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 27
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 28
2009/10 2010/11
£ £
Total income 6,000 7,000
Capital gains 20,000 16,000
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 29
The employer paid heating bills of £580 in 2010/11. The furnishings in the house cost £20,000.
Calculate Thomas’s benefit in respect of the provision of the accommodation and associated expenses.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 30
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 31
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 32
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 33
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.
Calculate Gill’s capital gains tax payable for 2010/11 and state the due date for payment.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 34
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 35
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 36
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).
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 37
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 38
Compute the Capital Gain arising on the sale of the shares in December 2010
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 39
Shares
6 October 1990 800
1 December 1993 1,000
1 August 2002 500
11 November 2010 1,800
Identify the shares Rebecca has disposed of using the individual share matching rules.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 40
£
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 41
Calculate the chargeable gain on the disposal of the land and the base cost of the factory.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 42
Calculate Peter’s chargeable gain and the base cost of the asset for Kris.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 43
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 44
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
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 45
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)
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 46
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
Entertaining customers 300
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 47
Corporation Tax
Example 47
Westcroft Ltd, a small company which manufactures greetings cards, prepares accounts to 31 December.
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 48
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 49
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 50
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:
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 51
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 52
Corporation Tax
Example 52
Bolton plc had the following results for the years ending 31 December.
Show how the loss is relieved, assuming Bolton plc claims loss relief as soon as possible.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 53
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
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 54
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
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 55
Calculate the corporation tax for William Ltd for the year ended 31 March 2011
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 56
£
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
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 57
£
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
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 58
She paid a personal pension premium of £1,000 (net) and £120 professional subscription in 2010/11.
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 59
(a) Calculate the corporation tax and the due dates for payment
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 60
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?
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 61
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?
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 62
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 63
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.
If the relevant flat rate percentage is 9% for this trade, illustrate if it is advisable to use the flat rate scheme.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 64
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.
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 65
VAT
Example 65
Outline the advantages and disadvantages of Group VAT registration and outline which companies can form part
of the VAT group
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PAPER F6 – REVISION QUESTIONS JUNE 2011 EXAMINATIONS 66
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.
Prepare an extract from Mars Ltd’s VAT return for 30 June 2011, explaining your treatment of each item for VAT
purposes.
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 1
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]
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
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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
Less tax deducted at source
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
£
Tax adjusted trading profit 120,000
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
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 3
Answer to example 4
Benny Income Tax computation 2010/11
Non–savings Dividends
£ £
Tax adjusted trading profit 120,000
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
Less tax deducted at source
Dividends (50,000 × 10%) (5,000)
Income tax payable 48,770
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%).
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4 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
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.
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 5
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.
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6 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Answer to example 12
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
Answer to example 13
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
Answer to example 14
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
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 7
Answer to example 15
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
Answer to example 16
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
Answer to example 17
The tax adjusted trading profit assessable amounts are as follows:
£
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.
Answer to example 18
The tax adjusted trading profit assessable amounts are as follows:
£
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
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8 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Answer to example 19
The tax adjusted trading profit assessable amounts are as follows:
£
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
Answer to example 20
The tax adjusted trading profit assessable amounts are as follows:
£
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
Answer to example 21
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.
Answer to example 22
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
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.
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 9
Answer to example 23
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
Overlap profits are £35,050 (21,250 + (41,400 × 4/12)) representing 9 months of profit
Answer to example 24
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.
Answer to example 25
(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
Carryforward relief £
Loss 50,000
Relieved against tax adjusted trading profit 2009/10 (20,000)
2010/11 (15,000)
2011/12 (15,000)
–
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10 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
(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.
Answer to example 26
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
Answer to example 27
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
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 11
Answer to example 28
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
Answer to example 30
£
Car 30,000 × 26% × 9⁄12 (Note) 5,850
Less: Contribution (20 × 9) (180)
5,670
Fuel: 18,000 × 26% × 9/12 3,510
Answer to example 31
2009/10 £
6,000 × 20% 1,200
2010/11
Greater of:
MV at time of transfer 4,200
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12 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Pension Contributions
Answer to example 32
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.
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.
Answer to example 34
(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)
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 13
Answer to example 35
£
Proceeds 6,000
6, 000 (3,529)
Less: Cost 20 , 000 ×
6, 000 + 28, 000
Capital Gain 2,471
Answer to example 36
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.
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
Answer to example 37
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
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14 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Answer to example 38
£
Proceeds 36,000
Less cost 18,000 × 2⁄5 (7,200)
Capital Gain 28,800
Answer to example 39
Next 30 day acquisitions 11/11/2010 1,800
Match with 1,750 (3,550 –1,800) shares from the share pool.
Answer to example 40
£
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
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.
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 15
Answer to example 41
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
Answer to example 42
£
Proceeds (MV) 75,000
Less: Cost (25,000)
50,000
Less: Gift relief (35,000)
Chargeable gain (40,000 − 25,000) 15,000
Entrepreneurs’ relief is not available as it was not the sale of the entire business
Answer to example 43
£
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
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16 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Inheritance Tax
Answer to example 44
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
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 17
£ £
3) 18/3/2007 PET is now chargeable
Value of PET after exemptions 168,000
Nil rate band at death 325,000
Less chargeable transfers in previous 7 years from gift
(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
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
Nil rate band at death 325,000
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
Due date for payment 31/8/2011
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18 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Corporation Tax
Answer to example 45
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
Answer to example 46
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
Entertaining customers 300
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
Bank deposit interest 500
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.
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 19
Answer to example 47
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
Answer to example 48
£
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
Answer to example 49
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
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20 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Answer to example 50
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
Summary
£
(1) 15,500
(2) 22,402
Total chargeable gain to include in the corporation tax computation 37,902
Answer to example 51
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
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 21
Answer to example 52
Years ending 31 December
2009 2010 2011
Tax adjusted trading profit 10,000 - 42,000
Less: Carry forward (4000)
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)
–
Answer to example 53
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.
Answer to example 54
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
Answer to example 55
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.
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22 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Answer to example 57
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
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PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS 23
VAT
Answer to example 60
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.
Answer to example 61
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.
Answer to example 62
£
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.
Answer to example 63
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
Answer to example 64
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
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24 PAPER F6 – REVISION ANSWERS JUNE 2011 EXAMINATIONS
Answer to example 65
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.
Answer to example 66
• 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.
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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