Tax - Ch-7&8

Harry is a sole trader. He prepares accounts for the year ended 5 April 2024 and has deducted the following items of expenditure in the statement of profit or loss:

Depreciation - £3,000

Accountancy fees for preparing accounts - £1,000

Entertainment of: Staff (party at ­£300 per person for 6 employees) - £1,800

Entertainment of: Customers - ­£2900

Q. How much should be added back to Harry's net profit to arrive at his adjusted taxable

profit?

• 5400
• 5900

• 6500

• 7000

Rose is a sole trader who prepares accounts to 5 April each year using the cash basis of accounting. Her results for the period of account to 5 April 2024 show the following:

Cash sales - £91,000

Invoice sales - £4,000

Cash expenses - £20,200

The figure for invoice sales includes an invoice for £1,500 which was paid on 10 April 2024. In addition to the cash expenses of £20,200, Rose incurred motoring expenses of £2,800 for driving 8,000 miles of which 6,500 miles were for business purposes. Rose wishes to use approved mileage allowances for motoring.

What is Rose's taxable trading income for the tax year 2023/24?

• 20375
• 26385

• 36584

• 25594

Ella started in business as a sole trader on 6 November 2023 and prepared her first set of

accounts to 5 April 2024. On 6 December 2023 she acquired plant at a cost of £430,000.

What are the maximum capital allowances that Ella can claim for the period of account to

5 April 2024?

• £339,133

• £417,667

• £419,067

• £430,000

Joe has been in business for many years preparing accounts to 5 April each year. The tax written down value of his main pool at 6 April 2023 was £12,000. Joe sold machinery on 10 June 2023 for £11,900 which had originally cost £11,600. He made no acquisitions during the year ended 5 April 2024.

What is the maximum capital allowance that Joe can claim for the period of account to 5 April 2024?

• £1,000

• ­£400

• £100

• £72

Which TWO of the following items COULD be plant which is eligible for plant and machinery capital allowances?

• Refrigerator for coffee shop

• Extension to office building

• Sound insulation in a recording studio

• A bridge

Cheng is a sole trader who prepares accounts to 5 April each year. He acquired a car for both business and private purposes on 1 October 2023. The car has a CO2 emission rate of 115 g/km and cost £28,000. The private mileage for Cheng's period of account to 5 April 2024 was 25% of the total mileage for that year.

Required

What is the maximum amount of capital allowances that Cheng can claim in respect of the car

for the year ended 5 April 2024?

• £1,260

• £3,780

•   £630

• £1,680

Chi commenced self-employment on 6 April 2023, and for the year ended 5 April 2024 her trading profit using the normal accruals basis was £53,000, calculated as follows:

Revenue - £72500

Expenses:

-       Motor expenses – (£4400)

-       Other expenses – (£8200)

-       Capital allowances – (£6900)

Trading profit - £53000

Notes –

a)    Revenue –

The revenue figure of £72,500 includes receivables of £1,600 which were owed as at 5 April 2024.

b)   Motor Expenses –

The total motor expenses for the year ended 5 April 2024 were £5,500, of which 20% was for private journeys. This proportion has been disallowed in calculating the trading profit. During the year ended 5 April 2024, Chi drove 13,200 business miles.

c)    Other expenses –

The other expenses figure of £8,200 includes payables of £900 owed as at 5 April 2024.

d)   Capital allowances –

Capital allowances consist of an annual investment allowance claim of £4,020 in respect of office equipment purchased on 6 April 2023, and a writing down allowance of £2,880 claimed in respect of Chi's car. The car had cost £20,000 on 6 April 2023.

Q. Based on the trading profit of £53,000 for the year ended 5 April 2024, what is Chi's income tax liability for the tax year 2023/24?

• 8632

• 8935

• 9536

• 9678

Which TWO of the following statements about the cash basis of assessment are correct?

• The trader must prepare accounts to 5 April each year.

• The trader can deduct capital expenditure on plant and machinery (other than cars) as business expenses rather than using capital allowances.

• A trader can start to use the cash basis if his receipts for the tax year do not exceed £150,000.

• Under the cash basis, a trader can offset losses against other income or gains

Chi commenced self-employment on 6 April 2023, and for the year ended 5 April 2024 her trading profit using the normal accruals basis was £53,000, calculated as follows:

Revenue - £72500

Expenses:

-       Motor expenses – (£4400)

-       Other expenses – (£8200)

-       Capital allowances – (£6900)

Trading profit - £53000

Notes –

a)    Revenue –

The revenue figure of £72,500 includes receivables of £1,600 which were owed as at 5 April 2024.

b)   Motor Expenses –

The total motor expenses for the year ended 5 April 2024 were £5,500, of which 20% was for private journeys. This proportion has been disallowed in calculating the trading profit. During the year ended 5 April 2024, Chi drove 13,200 business miles.

c)    Other expenses –

The other expenses figure of £8,200 includes payables of £900 owed as at 5 April 2024.

d)   Capital allowances –

Capital allowances consist of an annual investment allowance claim of £4,020 in respect of office equipment purchased on 6 April 2023, and a writing down allowance of £2,880 claimed in respect of Chi's car. The car had cost £20,000 on 6 April 2023.

Q. If Chi uses the cash basis and claims approved mileage allowances, what is the amount of motor expenses (Note 2) which are allowable?

• £4,400

• £5,300

• £5,990

• £8,180

Chi commenced self-employment on 6 April 2023, and for the year ended 5 April 2024 her trading profit using the normal accruals basis was £53,000, calculated as follows:

Revenue - £72500

Expenses:

-       Motor expenses – (£4400)

-       Other expenses – (£8200)

-       Capital allowances – (£6900)

Trading profit - £53000

Notes –

a)    Revenue –

The revenue figure of £72,500 includes receivables of £1,600 which were owed as at 5 April 2024.

b)   Motor Expenses –

The total motor expenses for the year ended 5 April 2024 were £5,500, of which 20% was for private journeys. This proportion has been disallowed in calculating the trading profit. During the year ended 5 April 2024, Chi drove 13,200 business miles.

c)    Other expenses –

The other expenses figure of £8,200 includes payables of £900 owed as at 5 April 2024.

d)   Capital allowances –

Capital allowances consist of an annual investment allowance claim of £4,020 in respect of office equipment purchased on 6 April 2023, and a writing down allowance of £2,880 claimed in respect of Chi's car. The car had cost £20,000 on 6 April 2023.

Q. If Chi uses the cash basis, what is the amount of revenue which is chargeable (Note 1) and the other expenses (Note 3) which are allowable for the year ended 5 April 2024?

• Revenue £72,500, other expenses £8,200

• Revenue £70,900, other expenses £8,200

• Revenue £72,500, other expenses £7,300

• Revenue £70,900, other expenses £7,300