Chapter 8: National insurance contributions

Remember that when calculating NICs you should round mathematically at each step of the
computation.
1 Sho has his own business and has tax-adjusted trading profits for the year of £6,100. He also
has a part-time job earning £9,500 each year.
Which two of the following types of national insurance contributions must Sho pay for
2018/19?
A Class 1 primary
B Class 1 secondary
C Class 2
D Class 4 LO 1d

2 Robert, aged 59, is a director of Wagner Ltd, a company in which he owns 50% of the
shares. He takes £50,000 a year out of the company, £20,000 as a salary and the balance as
dividends.
The company employs George, aged 63, as Robert's personal assistant. His annual salary is
£15,000.
The company makes a profit of £80,000 before tax and before accounting for the amounts
paid to Robert.
Identify which of the following statements concerning NICs is/are correct.
Wagner Ltd will pay Class 4 NICs on the profits of £80,000.
A Correct
B Incorrect
George will pay Class 1 primary NICs on his earnings of £15,000.
C Correct
D Incorrect
Wagner Ltd will pay Class 1 secondary NICs on total employee remuneration of £65,000,
before deducting the employment allowance.
E Correct
F Incorrect LO 1d, 3k

3 Steven has the following details for 2018/19.

£
Salary from employment 15,000
Tax-adjusted trading profits after capital allowances 12,500
What are Steven's Class 4 national insurance contributions for 2018/19? £

LO 3k

ICAEW 2019 Chapter 8: National insurance contributions 35

 4 James has been trading for many years. His tax-adjusted trading profits for the last two
years have been as follows.
£
Year ended 5 April 2018 41,000
Year ended 5 April 2019 48,350
What are his Class 4 national insurance contributions for 2018/19?
A £4,591
B £3,453
C £3,593
D £2,932 LO 3k

5 Abe has been trading for many years. His adjusted trading profits for 2018/19 are £20,000.
What is Abe's total national insurance contributions liability for 2018/19?

A £1,042
B £1,195
C £1,389
D £1,542 LO 3k

6 During 2018/19 Ball Ltd pays Lena, one of its 25 employees, a salary of £38,862. The
company provides her with a car that has a cash-equivalent benefit of £5,000 and
supermarket vouchers which cost the company £500 pa.
What are the Class 1 secondary contributions payable by Ball Ltd in 2018/19 in respect of
Lena? £
Ignore the employment allowance. LO 3k

7 During 2018/19 Ball Ltd pays Lena, one of its 25 employees, a salary of £38,862. The
company provides her with a car that has a cash-equivalent benefit of £5,000 and
supermarket vouchers which cost the company £500 pa.
What are the Class 1A contributions payable by Ball Ltd in 2018/19 in respect of Lena?
£ LO 3k

8 Boris, aged 68, has a part-time job working for Jinx Ltd, earning £9,700 each year.
Identify whether the following statements are correct.
Boris will have Class 1 primary contributions deducted from his wages.
A Correct
B Incorrect
Jinx Ltd must pay Class 1 secondary contributions in relation to Boris's earnings.
C Correct
D Incorrect LO 1d

36 Principles of Taxation: Question Bank ICAEW 2019

 9 Cobalt Ltd made a trading profit of £50,000 in its year ended 31 March 2019.
The company employs only one employee, Bain, who is also a director on an annual salary
of £35,870.
What is the total national insurance liability of the company for 2018/19? £

LO 3k

10 During 2018/19 Bat Ltd pays Larry a salary of £45,000 and provides him with benefits
totalling £3,000.
What are the national insurance contributions payable by Bat Ltd in 2018/19 in respect of
Larry?
A £6,624
B £4,749
C £5,461
D £5,047
Ignore the employment allowance. LO 3k

11 During 2018/19 Trim Ltd pays Belinda a monthly salary of £3,300. In addition, Trim Ltd paid
Belinda a bonus of £4,000 in December 2018.
What is Belinda's total national insurance contributions liability for 2018/19?
£ LO 3k

12 During 2018/19 Pirate Ltd pays Sue, aged 19, a salary of £48,000. The company provides
her with a car that has a cash-equivalent benefit of £3,000.
What are the Class 1 secondary contributions payable by Pirate Ltd in 2018/19 in respect of
Sue? £

Ignore the employment allowance. LO 3k

13 During 2018/19 Pirate Ltd pays Sue, aged 19, a salary of £45,000. The company provides
her with a car that has a cash-equivalent benefit of £3,000.
What are the Class 1A contributions payable by Pirate Ltd in 2018/19 in respect of Sue?
£ LO 3k

14 Hans is a sole trader employing only one worker, Olga, aged 42, on an annual salary of
£36,000.
What are the Class 1 secondary contributions payable by Hans in 2018/19 in respect of
Olga? £ LO 3k

ICAEW 2019 Chapter 8: National insurance contributions 37

 15 During 2018/19 Rene Ltd pays Kamal, an apprentice aged 23, a salary of £20,000.
What are the Class 1 secondary contributions payable by Rene Ltd in 2018/19 in respect of
Kamal? £

Ignore the employment allowance. LO 3k

16 During 2018/19 Rene Ltd pays Kamal, an apprentice aged 23, a salary of £20,000.
What are the Class 1 primary contributions payable by Kamal in 2018/19? £

LO 3k

38 Principles of Taxation: Question Bank ICAEW 2019

Chapter 9: Capital gains tax – individuals
1 The Quack partnership has recently disposed of an office building. The office building was
owned jointly by all the partners. The office building was sold to a property developer.
Who is liable to pay any capital gains tax due on the disposal of the office building?
A Partnership
B Partners jointly
C Property developer
D Partners individually LO 1e, 4a

2 Jamie entered into a contract with Annabelle to purchase a house. Contracts were
exchanged on 15 March 2019. The contracts were completed and legal title therefore
passed on 15 April 2019. Once contracts had been exchanged neither party could
withdraw. Payment was not made until 17 April 2019 and Jamie did not physically move
into the house until 18 April 2019.
On what date will Annabelle be treated as having disposed of the house for capital gains
tax purposes?
A 15 March 2019
B 15 April 2019
C 17 April 2019
D 18 April 2019 LO 1e

3 Which of the following statements about capital gains is true?

A Assets which are inherited are treated as being acquired by the donee at the price
originally paid by the donor.
B Wasting chattels bought and sold for more than £6,000 are chargeable to CGT.
C Stamp duty land tax paid on the purchase of land may be deducted as part of cost on a
subsequent disposal of the land.
D Where an asset is not sold at arm's length, the proceeds are deemed to equal cost so
that no chargeable gain arises. LO 4a, 4b

4 Katie purchased an antique vase in January 1989 for £13,000. She sold it for £5,600 in
March 2019 and paid auctioneer's fees of £800 for its sale.
What is Katie's allowable loss on sale?
A £(7,800)
B £(8,200)
C £(7,400)
D £(7,000) LO 4b

ICAEW 2019 Chapter 9: Capital gains tax – individuals 39

 5 Freddy made two disposals during 2018/19.
For each of the two disposals select how the resulting gains should be treated to determine
Freddy's total chargeable gains for 2018/19.
Gain of £4,500 on the disposal of a caravan.
A Chargeable gain
B Exempt
Gain of £1,000 on the sale of a sculpture. The sculpture originally cost £4,000.
C Chargeable gain
D Exempt LO 4a

6 Thomas purchased an antique chair in February 2001 for £2,500. He sold it in May 2018 for
£11,150. He paid £560 as commission to the agent who sold the chair for him.
What is the chargeable gain on the disposal of the chair?
A £8,650
B £8,583
C £7,650
D £8,090 LO 4b

7 David has net income for 2018/19 of £48,995. David has also made taxable gains of
£33,422 for 2018/19.
Select how each of the following items will affect the calculation of David's capital gains tax
liability for 2018/19, if at all.
His unused annual exempt amount from 2017/18
A Reduces capital gains tax payable
B Increases capital gains tax payable
C No effect
Becoming a higher-rate taxpayer for the first time
D Reduces capital gains tax payable
E Increases capital gains tax payable
F No effect LO 4d

8 The Goose partnership has recently disposed of a chargeable asset. The chargeable asset
was owned jointly by all the partners.
Who is liable to pay any capital gains tax due on the disposal of the chargeable asset?
A Partners individually
B No capital gains tax is due
C Partnership
D Partners jointly LO 1e

40 Principles of Taxation: Question Bank ICAEW 2019

 9 In December 1997 Jasmine purchased a house for £176,000. Jasmine has always rented
out the house to tenants. In December 2000 Jasmine installed a new bathroom at a cost of
£6,400. In December 2018 Jasmine sold the house for £642,000. Jasmine also paid stamp
duty land tax at 1% of the purchase price when she bought the house.
What is the chargeable gain on disposal of the house?
Chargeable gain £ LO 4b

10 Jed purchased a rare painting in August 2004 for £3,200. He sold it in August 2018 for
£14,150. He paid £142 as commission to the agent who sold the painting for him.
What is the chargeable gain on the disposal of the painting?
A £10,808
B £10,950
C £13,583
D £13,347 LO 4a/4b

11 Which two of the following items are exempt assets for capital gains tax purposes?
A £15,000 of shares in an unquoted trading company
B A diamond necklace purchased for £1,000 and now worth £17,000
C A rare collection of snakes worth £320,000
D £10,000 of National Savings Certificates LO 4a

12 Which of the following disposals is a chargeable disposal for capital gains tax purposes?
A Bequest of a house in the will of a mother to her daughter
B Gift to a friend of £12,000 in National Savings Certificates
C Gift to a friend of a painting worth £1,000,000
D Gift of a painting to a charity when the painting was worth £300,000 LO 4a

13 Justin entered into a contract with Matthew to purchase a rare art collection. Contracts were
exchanged on 1 August 2018 subject to an independent valuation being done. The
valuation took place on 1 September 2018. Legal title finally passed on 5 September 2018.
Payment was not made until 7 September 2018.
On what date will Matthew be treated as having disposed of the art collection for capital
gains tax purposes?
A 1 August 2018
B 1 September 2018
C 5 September 2018
D 7 September 2018 LO 1e

ICAEW 2019 Chapter 9: Capital gains tax – individuals 41

 14 Which of the following statements about capital gains is true?
A CGT is chargeable on individuals, partnerships and companies.
B Stamp duty land tax paid on the purchase of land may not be deducted as part of cost
on a subsequent disposal of the land.
C Assets which are inherited are treated as being acquired by the donee at their value at
the time of the donor's death.
D Where an asset is sold by an individual, indexation allowance will decrease the
chargeable gain. LO 1e, 4b

15 Harry made two disposals during 2018/19.

For each of the disposals, select how the resulting gains should be treated to determine
Harry's total chargeable gains for 2018/19.
Gain of £2,500 on the disposal of a car.
A Chargeable gain
B Exempt
Gain of £3,000 on the sale of a greyhound, which originally cost £4,000.
C Chargeable gain
D Exempt LO 4a

16 Which of the following does not pay tax on its capital gains?
A NSPCC, a registered charity
B WFT plc, a quoted company
C George and Bert, who are in partnership together
D Bert, in his own right as an individual LO 4a

17 Which of the following is not a chargeable disposal made by Gordon?

A The sale of a building used by Gordon's business, to a third party
B The gift of shares to Gordon's son
C The loss of a painting valued at £50,000 during a fire at Gordon's house
D The gift of an antique table valued at £40,000 to Gordon's daughter on his death
LO 4a

42 Principles of Taxation: Question Bank ICAEW 2019

 18 Peter purchased a holiday home in July 2003. The holiday home cost £100,000 and he paid
solicitor's fees of £2,500 relating to the purchase.
During 2004 he spent £2,800 on a garage for the holiday home and £580 on repairs to the
plaster work when there was a flood. Peter anticipates selling the house within the next few
months.
The total allowable expenditure on the disposal of the holiday home will be
A £100,000
B £102,500
C £105,300
D £105,880 LO 4b

19 Which two of the following are exempt wasting chattels for the purposes of capital gains
tax.
A Office furniture, purchased for use only in Jack's business office on which he claims
capital allowances
B A racehorse purchased as an investment by Max
C Goodwill of a computer manufacturing business with an expected life of 20 years
D A caravan, purchased by David for use on family holidays LO 4a

20 Identify whether each of the following disposals will be chargeable or exempt.

Javier sold a painting at auction and received £5,900 after deducting auctioneers fees of
£310. The painting had originally cost him £3,500.
A Chargeable
B Exempt
Savion received £2,600 for some shares that he sold after deducting £150 of fees. The
shares originally cost him £800.
C Chargeable
D Exempt LO 4a

21 Lourdes bought an antique brooch for £4,000 in October 2003. In January 2019, she sold it
on the internet and received £6,200 after deduction of £100 fees.
What is Lourdes' chargeable gain?
A £333
B £500
C £2,200
D £2,300 LO 4b

ICAEW 2019 Chapter 9: Capital gains tax – individuals 43

 22 In February 2004 Nuria purchased a painting for £6,700. She sold it at auction for £4,600
after deducting £200 of auctioneer's fees in October 2018.
What is the allowable loss on disposal?
A £(2,300)
B £(2,100)
C £(700)
D £(900) LO 4b

23 Which of the following may result in a chargeable gain?

A A gift of a painting worth £250,000 to a local art gallery
B A sale of shares in Beagle plc by the RSPCA, a registered charity
C A gift of antique jewellery worth £25,000 by Robert, to his daughter as a wedding gift
D James sold gilt edged securities valued at £40,000 to his friend Arthur for £27,000
LO 4a

24 On which two of the following disposals must a chargeable gain/allowable loss be

calculated?
A A sale of shares in Check plc by Cristiano. The shares were held in an ISA.
B Torey cashed in his National Savings Certificates in order to raise money for his
wedding.
C Townsend lost an antique ring valued at £8,000 and received a cheque from the
insurance company for that sum.
D Toshi sold a painting for £5,000. It was given to him several years ago when his
grandfather died. At that time it was worth £6,400. LO 4a

25 Fraser sold a diamond brooch at auction in June 2018, and received £7,900 after deduction
of auctioneer's fees of £300. The brooch had cost him £6,100 in July 2001. Since then he
had spent £250 in August 2002 having it cleaned and repaired. In September 2005 he paid
£400 to have additional diamonds and rubies added to the brooch.
What is Fraser's chargeable gain on disposal of the brooch? £ LO 4b

44 Principles of Taxation: Question Bank ICAEW 2019

 26 Identify whether each of the following disposals will be chargeable or exempt.
Erwin sold a painting at auction and received £6,100 after deducting auctioneer's fees of
£200. The painting had originally cost him £3,500.
A Chargeable
B Exempt
Eryk received £5,900 for jewellery that he sold. The jewellery originally cost him £5,900 plus
auctioneer's fees of £200.
C Chargeable
D Exempt LO 4a

27 Ervin bought an antique vase for £4,000 in October 2006. In January 2019, he sold it for
£6,300.
Assuming the annual exempt amount is used up by other disposals, Ervin's taxable gain on
the vase is
A £0
B £500
C £2,000
D £2,300 LO 4b

28 In February 2005 Ebeneezer purchased a painting for £5,900. He sold it at auction for
£5,600 after deducting £150 of auctioneer's fees in October 2018.
What is the allowable loss on disposal?
A £0
B £(300)
C £(50)
D £(150) LO 4b

29 Which two of the following assets are exempt assets for capital gains tax purposes?
A An antique diamond necklace worth £3,000 (cost £2,500)
B A small hotel
C An oil painting worth £12,000 (cost £9,000)
D Fixed plant and machinery sold at a profit
E Shares held in an ISA LO 4a

30 On 1 December 2018 David sold his holiday cottage for £200,000. He had bought the
cottage in July 1999. The table below shows David's expenditure on the cottage prior to its
sale.
Which three of these costs will be deducted in calculating David's chargeable gain?
A Legal fees on purchase £800
B Purchase price £110,000
C Redecoration costs £2,100
D Cost of building a garage £7,500
E Replacement of a few roof tiles after a storm £150 LO 4b

ICAEW 2019 Chapter 9: Capital gains tax – individuals 45

 31 Martha has recently made two disposals. For each of the two disposals select how the
resulting gains or losses should be treated in the computation of Martha's taxable gains.
Gain of £3,600 on the sale of goodwill in her ice cream van business.
A Chargeable gain
B Exempt
Loss of £2,000 on the sale of a diamond necklace which had cost £4,000.
C Allowable capital loss
D Exempt LO 4a

32 Joshua has draft taxable gains of £30,500 for 2018/19 including the two items below. Select
how Joshua's draft taxable gains will be affected by the correct treatment of each item.
A gain of £4,200 on the sale of his 10-year-old racehorse.
A No effect
B Increase
C Decrease
Auctioneer's fees of £500 have been deducted in arriving at the £13,400 gain on sale of an
antique sculpture at an auction.
D No effect
E Increase
F Decrease LO 4c

33 On 1 January 2019 Anna sold an office building for £500,000 before paying legal fees of
£25,000. She had bought the building for £280,000 in July 2009.
Anna made no other disposals of chargeable assets during 2018/19. She had taxable
income of £26,500 in 2018/19 after deduction of her personal allowance.
What is Anna's capital gains tax liability for 2018/19?
A £35,860
B £38,200
C £40,860
D £36,660 LO 4d

34 Becky sold a necklace for £56,000 in January 2019, incurring auctioneer's fees of £1,100.
Becky had inherited the necklace from her mother on her mother's death in May 2006 when
it was worth £20,000. Becky's mother had bought the necklace for £5,000 in January 1992.
Becky made no other disposals of chargeable assets during 2018/19. She had taxable
income of £60,000 in 2018/19.
What is Becky's capital gains tax liability for 2018/19?
A £4,640
B £7,640
C £6,980
D £4,860 LO 4d

46 Principles of Taxation: Question Bank ICAEW 2019

 35 Jeremy has made two disposals. For each of the two disposals below, select how the gain
or loss should be treated in the computation of Jeremy's taxable gains.
Gain of £13,000 on shares in an ISA.
A Chargeable gain
B Exempt
Loss of £3,000 on shares held directly by Jeremy which had cost £5,000.
C Allowable capital loss
D Exempt LO 4a

36 Which of the following may result in a chargeable gain?

A Sale of a vintage car for £20,000 which originally cost £12,000
B Gift of cash of £50,000 from Jamil to his daughter to use as a house deposit
C Sale for £5,000 of the goodwill of a trading business by Jack
D Gift of premium bonds by Lisa to her daughter as a wedding gift LO 4a

37 On 1 December 2018 Claire sold a painting for £50,200 which she had bought, unframed,
from the artist for £8,000 in 2002. She had paid £1,600 to have the painting framed before
sale.
Claire made no other disposals of chargeable assets during 2018/19. She had taxable
income of £31,500 in 2018/19 after deduction of her personal allowance.
What is Claire's capital gains tax liability for 2018/19?
A £5,800
B £7,820
C £5,780
D £5,480 LO 4d

38 In March 1989, Matthew purchased an office for £641,600. Matthew sold the office in March
2019 for £1,250,400, incurring £120,000 estate agents' fees on the sale.
Matthew made no other disposals of chargeable assets during 2018/19. Matthew has
taxable income of £30,130 in 2018/19 after deduction of his personal allowance.
What is Matthew's capital gains tax liability for 2018/19?
A £97,323
B £94,983
C £95,420
D £118,983 LO 4d

ICAEW 2019 Chapter 9: Capital gains tax – individuals 47

48 Principles of Taxation: Question Bank ICAEW 2019