UK Taxation
UK Taxation
UK Taxation
DURATION: 2 Hours
INSTRUCTIONS TO CANDIDATES
Page 1 of 9
TAX RATES AND ALLOWANCES
1. For 2013-14, the main rates of income tax are as follows:
First £32,010 of taxable income 20% for non-savings and savings income
Taxable income in excess of the 45% for non-savings and savings income
£150,000 limit (the ‘additional rate’) 37.5% for dividend income (the ‘additional
rate’)
Personal allowance:
Income limit
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3. Residence status
Days in UK Previously resident Not previously resident
Less than 16 Automatically not resident Automatically not resident
16 to 45 Resident if 4 UK ties (or more) Automatically not resident
46 to 90 Resident if 3 UK ties (or more) Resident if 4 UK ties
91 to 120 Resident if 2 UK ties (or more) Resident if 3 UK ties (or more)
121 to 182 Resident if 1 UK tie (or more) Resident if 2 UK ties (or more)
183 or more Automatically resident Automatically resident
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7. Cap on income tax reliefs
Unless otherwise restricted, reliefs are capped at the higher of £50,000 or 25% of income.
8. Writing Down Allowance (WDA) is given on a reducing balance basis at the rate of 18% a
year.
9. Allowances in special rate pool: WDA is at rate of 8% for a 12-month period and is to be time-
apportioned for shorter or longer chargeable periods.
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SECTION A
COMPULSORY
QUESTION 1 (40 Marks)
On 1 June 2013 Jane Ulris commenced in self-employment running a shop.
Jane's profit and loss account for the year ended 31 May 2014 is:
£ £
Expenses:
Depreciation 10,640
Light and heat 2,470
Motor
Expenses 9,880
Professional
fees 4,700
Rent and rates 5,200
Repairs and
renewals 7,540
Sundry
expenses 3,940
Wages and
salaries 187,250
231,620
Notes:
1. During the year ended 31 May 2014, Jane drove a total of 28,000 out of which only 12,000
miles were for business purposes.
Jane paid £700 to her accountant for personal tax work and this was included in the
Accountancy item.
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3. Jane and her spouse live in a flat which is situated above the shop. The expenditure for
light, heat, rent and rates in the profit and loss account has been apportioned to be 60%
for the shop.
4. Wages and salaries include an annual salary of £47,000 paid to Jane’s spouse. He works
in the shop as a sales assistant. There are two other persons doing the same job and are
paid an annual salary of £26,000.
5. In June 2013, Jane spent £4,100 renovating his flat. This amount was included in the figure
for repairs and renewals in the profit and loss account. £3,440 was spent in painting the
shop.
6. Sundry expenses included £900 for a donation to a national charity and £640 for gifts to
customers.
7. During the year ended 31 May 2014, Jane took merchandise out of the shop for personal
use without paying for them. The cost of these clothes was £640. Jane adopts a markup
policy of 40%.
8. The capital allowances for the year ended 31 May 2014 are £25,180.
REQUIRED:
Calculate Jane’s tax adjusted trading profit for the year ended 31 May 2014.
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SECTION B
ANSWER any TWO (2) Questions
(b) Sandeep had not previously been UK-resident prior to the tax year 2013/14. He arrived in
the UK on 6 April 2013 and remained in the UK for 190 days. Sandeep does not work during
2013/14.
Required
Explain why Sandeep is UK resident in the tax year 2013/14. [7 Marks]
(c) Harriet had always been UK-resident prior to the tax year 2013/14, but she has not spent
more than 90 days in the UK in the two previous tax years. Harriet is self-employed and
does substantive (but not full-time) work in the UK during 2013/14. She has no close family.
Harriet owns a house in the UK. On 6 April 2013, she started to rent an overseas apartment
in which she lived for 255 days. She then returned to the UK where she lived in her house
for the remainder of the tax year 2013/14.
Required
Explain why Harriet is UK resident in the tax year 2013/14. [8 Marks]
(d) Ricardo had not previously been UK-resident prior to the tax year 2013/14 and has never
spent more than 60 days in the UK in previous tax years. His wife is UK resident. Ricardo
arrived in the UK on 6 April 2013 and remained in the UK for 92 days during which time he
lived in a rented flat. He also has a home outside the UK where he spent the rest of
2013/14. Ricardo does not work during 2013/14.
Required
Explain why Ricardo is non-UK resident in the tax year 2013/14. [8 Marks]
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QUESTION 3 (30 Marks)
a) Jake is a sole trader making up accounts to 5 April each year. At 5 April 2013, the TWDV
on his main pool is £25,000. In the year to 5 April 2014, David bought the following assets:
Calculate the maximum capital allowances claim that Jake can make for the year
ended 5 April 2014.
(15 marks)
b) Jake retains your services as a tax consultant. He wants to know the different types of capital
allowances that are available in the UK Taxation system.
Prepare a report to him describing the different types of capital allowances available
in the UK Taxation system.
(15 marks)
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QUESTION 4 (30 Marks)
Patel Shah is a computer programmer. Until 5 April 2013 he was employed by Net Computers
Plc, but since then has worked independently from home. Patel's income for the year ended 5
April 2014 is £60,000. All of this relates to work done for Net Computers Plc. His expenditure
for the year ended 5 April 2014 is as follows:
1) The business proportion of light, heat and telephone for Patel's home is £880.
3) A motor car was purchased on 6 April 2013 for £10,000 with C02 of 115g/km. Motor
expenses for the year ended 5 April 2014 amount to £3,500, of which 40% relate to journeys
between home the premises of Net Computers Plc. The other 60% relate to private mileage.
Required
(a) List eight factors that will indicate that a worker should be treated as an employee
rather than as a self-employed.
[12 Marks]
(b) (i) Calculate the amount of taxable trading profits if Patel is treated as self-employed
during 2013/14.
[9 Marks]
(ii) Calculate the amount of Patel's taxable earnings if she is treated as an employee
during 2013/14.
[9 Marks]
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