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WorksheetsTaxation 1
Total questions: 69
Worksheet time: 2hrs 46mins
Ruaraidh is a Chartered Accountant with significant gambling debts who is being threatened by his creditors. He is aware that some of his clients trust him completely and would probably not realise if he took money from their accounts for his own use.
Which two of the following options correctly identify the type of threats Ruaraidh is experiencing according to the IESBA Code of Ethics?
Self-interest threat
Self-review threat
Advocacy threat
Familiarity threat
Intimidation threat
The ICAEW Code of Ethics defines the fundamental principle of integrity as an obligation on professional accountants:
not to compromise their professional or business judgement because of bias, conflict of interest or the undue influence of others
to act diligently in accordance with applicable technical and professional standards when providing professional services
to comply with relevant laws and regulations and avoid any action that may bring discredit to the profession
to be straightforward and honest in professional and business relationships
Which of the following would not be likely to give rise to a conflict of interest?
Acting for two competing business clients
Acting for both a husband and wife in a divorce settlement
Taking over a client from a rival accountancy firm
Acting for a company and an employee of the company being made redundant
Which of the following options is incorrect in relation to public policy on tax avoidance?
The courts may strike down certain tax planning schemes if they contain elements that lack commercial substance
Some tax avoidance schemes must be disclosed to HMRC
Abusive tax avoidance arrangements that generate a tax advantage may be challenged by HMRC
Tax avoidance is legal so the courts do not involve themselves in it
A professional accountant has for many years given tax advice to a husband and wife who are now going through a divorce. They are in dispute with each other in relation to matters that affect their tax affairs.
Which two of the following fundamental principles are threatened in this situation?
Objectivity
Professional competence and due care
Confidentiality
Professional behaviour
Which of the following statements is correct?
Both tax evasion and tax avoidance are legal
Tax evasion is legal and tax avoidance is illegal
Tax evasion is illegal and tax avoidance is legal
Both tax avoidance and tax evasion are illegal
Matilda used to earn £40,000 and paid £6,000 in income tax pa. She has recently received a substantial pay rise and now earns £95,000 pa. Her revised income tax is £28,500.
Select which of the following options correctly defines the principle on which this tax system is based.
Progressive taxation
Regressive taxation
Which of the following options is not a source of tax law?
Finance Act
Statutory instruments
HMRC extra-statutory concessions
Case law
Sue and John have been working as solicitors in partnership for many years, trading as Quash & Co. They have no employees. Their turnover is approximately £50,000 pa and they have adjusted trading profits of £32,500 pa.
Which two of the following taxes must Sue and John pay to HMRC?
Corporation tax
Income tax
National insurance contributions
VAT
Select whether each of the following statements is true or false.
The method of calculating the amount to be taxed on cars provided to employees reflects the impact of environmental concerns in developing tax legislation.
True
False
Income tax is an example of a regressive tax
True
False
Maria-Vittoria has net income for 2021/22 of £105,000.
What is Maria-Vittoria's personal allowance for 2021/22?
£12,570
£2,500
£10,070
£7,570
On 1 January 2022 Abdul gave £5,000 to charity under the Gift Aid scheme. His only income is an annual salary of £59,000.
Identify the correct treatment of the gift.
The gift reduces Abdul's income tax liability by:
£1,000
£1,250
£6,250
On 1 January 2022 Abdul gave £5,000 to charity under the Gift Aid scheme. His only income is an annual salary of £59,000.
Identify the correct treatment of the gift.
Tax relief is obtained by:
extending the basic rate band
making a deduction from employment income
making a deduction from total income
Thelma has taxable income (after deduction of the personal allowance) of £8,105 (non‑savings income) and £7,825 (savings income).
What is Thelma's income tax liability for 2021/22?
(a)
Billy is married to Maria. In 2021/22 Billy and Maria had net income before personal allowances of £42,500 and £6,800 respectively. Wherever possible Billy and Maria claim the marriage allowance.
Which two of the following are correct?
The marriage allowance will reduce Billy's income tax liability by £1,260 in 2021/22.
Billy's personal allowance will be £12,570 in 2021/22.
Maria's income tax liability will be unaffected by the marriage allowance in 2021/22.
Billy's income is too high for a marriage allowance claim in 2021/22
During 2021/22 Gordon has taxable income (after deduction of the personal allowance) of £42,900, consisting entirely of dividend income.
What is Gordon's total income tax liability for 2021/22?
£4,368
£4,518
£3,068
£3,218
Meredith and Mary are married. They have net income before personal allowances of £21,000 and £10,000 respectively for 2021/22, all comprising non‑savings income. They have made a claim for the marriage allowance in 2021/22.
What is Meredith's income tax liability in 2021/22?
£3,948
£1,686
£1,434
Meredith and Mary are married. They have net income before personal allowances of £21,000 and £10,000 respectively for 2021/22, all comprising non‑savings income. They have made a claim for the marriage allowance in 2021/22.
What is the effect of the marriage allowance claim on Mary's income tax liability in 2021/22?
It increases her income tax liability
It has no effect on her income tax liability
It reduces her income tax liability
Tracy is self employed and has trading profits assessable in 2021/22 of £166,000.
What is Tracy's personal allowance for 2021/22?
(a)
Paul has taxable income in 2021/22 of £174,000, comprised entirely of non-savings income.
What is Paul's income tax liability for 2021/22?
£63,260
£78,300
£62,060
£57,604
Joanna has taxable income in 2021/22 of £66,500 (non-savings income) and £107,000 (dividend income).
What is Joanna's income tax liability for 2021/22?
(a)
Asha had taxable income (after deduction of her personal allowance) of £25,000 of non‑savings income in 2021/22. Her husband, Tony, had no income during 2021/22, and he makes an election to transfer £1,260 of his personal allowance to Asha in 2021/22.
What is Asha's income tax liability for 2021/22?
(a)
Florence is an employee of Twins Ltd with a gross annual salary of £18,000. In addition Florence has taxable benefits worth £3,987. Twins Ltd does not use voluntary payrolling for benefits. Florence underpaid her tax for 2019/20 by £420. Florence has agreed with HMRC that this underpayment will be collected via her PAYE code for 2021/22.
What is Florence's PAYE code for 2021/22?
K945
1068L
648L
816L
David earns £70,000 a year. His employer provides him with taxable benefits of £16,450 relating to living accommodation.
What is David's PAYE code for 2021/22?
(a)
Which two of the following statements indicate that a trade is being carried on?
Henry has just sold a house that he bought three months ago. He spent £78,000 purely to make the property more attractive to potential purchasers.
Omar sold a third batch of shares in a single week, making a substantial profit.
Tariq is experiencing cash flow problems and has had to sell a car that he bought three months ago to replace his old car. This is Tariq's fourth car in the past year.
William restores and resells antique chandeliers for a profit in his spare time. He has just sold a chandelier that he has been renovating for the last six months. This is the third renovated chandelier that he has sold in the last two years.
The badges of trade are used for which of the following purposes?
To determine whether an individual is trading in their own right or is an employee
To determine whether a trading transaction is being carried out rather than a capital transaction
To determine whether a trading receipt is taxable or exempt
To determine whether a trading expense is allowable or disallowable
Erin began trading on 1 January 2022 and prepared her first accounts for the six months to 30 June 2022. She made the following purchases of assets.
£
1 January 2022
Office equipment
9,500
11 January 2022
Motor car (emissions of 39 g/km)
26,000
1 February 2022
Desks
1,000
Erin used the car purely for business purposes.
What are the maximum capital allowances available to Erin for the six months to 30 June 2022?
(a)
Paul has been trading for many years making up accounts to 31 December each year.
At 1 January 2022, the tax written down value of his main pool was £9,000.
On 1 May 2022, Paul bought a machine for use in the business costing £40,000.
What are the maximum capital allowances that Paul can claim for the year to 31 December 2022?
£8,820
£41,620
£49,000
£40,000
Kamala has been trading for many years making up accounts to 5 April.
The only asset in the business for capital allowances is a van, which Kamala uses 60% for business purposes. The tax written down value of the van at 6 April 2021 was £18,000. She sells the van in March 2022 for £20,000 (which is less than original cost).
What are the maximum capital allowances available to Kamala for the year ended 5 April 2022?
£2,000 balancing charge
£2,000 balancing allowance
£1,200 balancing charge
£1,200 balancing allowance
A sole trader, Nitin, has plant and machinery with a tax written down value of £18,400 on 1 January 2022. During the six-month period of account to 30 June 2022 he purchased a Mercedes car (emissions of 28 g/km) for £24,400, used only for business purposes.
What is the maximum amount of capital allowances available to Nitin for the six months ended 30 June 2022?
£26,056
£3,852
£27,712
£7,704
Martin purchased a van for £12,000 during his six-month period of account to 31 July 2022.
What is the maximum amount of capital allowances available for the van for the six months ended 31 July 2022?
£1,080
£2,160
£6,000
£12,000
Bob and Vic, who run a business, prepared their first set of accounts for the nine months ended 30 September 2022. On 1 April 2022 they purchased equipment for use in their business for £214,150.
What is the maximum amount of capital allowances Bob and Vic may claim in relation to the equipment for the nine months ended 30 September 2022?
£202,547
£201,910
£161,547
£158,660
Sanjeev, a sole trader who runs a small business, prepared his first set of accounts for the nine months ended 31 January 2022. On 1 August 2021 he purchased a new car for £15,200, which he used 60% of the time for business purposes. It is an electric car and has no CO2 emissions.
What is the maximum amount of capital allowances Sanjeev may claim in relation to the car for the nine months ended 31 January 2022?
(a)
John has been trading for many years making up accounts to 5 April. The tax written down value of his main pool was £15,000 at 6 April 2021.
The only other asset in the business for capital allowances was a car bought in 2013, which John used 75% for business purposes. The tax written down value of the car at 6 April 2021 was £7,000. On 1 September 2021 John sold the car for £7,800, which was less than original cost.
What are the maximum capital allowances available to John for the year ended 5 April 2022?
(a)
Bradley has been trading for many years making up accounts to 31 December.
The tax written down value of the main pool at 1 January 2022 was £675.
On 12 May 2022 Bradley purchased a printer for the business costing £300.
What are the maximum capital allowances available to Bradley for the year to 31 December 2022?
(a)
Graciana, who runs a small business, had plant and machinery with a tax written down value of £2,000 at 6 April 2021. During June 2021 she sold a van for £2,500 which cost £4,000 two years ago and purchased a new car with emissions of 0 g/km for £9,000. Both the van and the car were used 100% for business purposes.
What is the maximum amount of capital allowances available to Graciana for the year to 5 April 2022?
(a)
A sole trader, Arnold, has plant and machinery with a tax written down value of £21,600 on 1 January 2021. During the year ended 31 December 2021 he sold machinery for £2,800 which had cost £7,000.
What is the maximum amount of capital allowances available to Arnold for the year ended 31 December 2021?
(a)
Liam ceased trading on 31 January 2022. The recent tax-adjusted trading profits of his business are as follows.
£
Year ended 30 June 2020 62,000
Year ended 30 June 2021 19,000
Period ended 31 January 2022 8,000
Liam has overlap profits from commencement of £6,400.
What is Liam's trading profit assessment for 2021/22?
(a)
Yehudi and Hobart had been trading in partnership for many years. The partnership agreement allocates an annual salary to Yehudi of £7,400. The balance of any profits is shared equally. For the year ended 31 December 2021 the partnership had a tax-adjusted trading profit of £89,000.
What are the partners' assessable trading profits for 2021/22?
Yehudi £48,200 Hobart £40,800
Yehudi £44,500 Hobart £44,500
Yehudi £51,900 Hobart £44,500
Yehudi £40,800 Hobart £40,800
Jonah commenced trading on 1 October 2021, preparing his first accounts to 30 June 2022. The tax-adjusted trading profits for the period ended 30 June 2022 were £43,785.
What is Jonah's assessable trading profit for 2021/22?
Trading profit for 2021/22
(a)
John commenced trading on 1 July 2021, preparing his first accounts to 30 September 2022. The tax-adjusted trading profits for the period ended 30 September 2022 were £37,500.
What is John's assessable trading profit for 2021/22?
(a)
John commenced trading on 1 July 2021, preparing his first accounts to 30 September 2022. The tax-adjusted trading profits for the period ended 30 September 2022 were £37,500.
What are John's overlap profits on commencement of trade?
(a)
Melanie started trading on 1 January 2021. She decided to make up accounts to 31 October each year.
Her taxable trading income is as follows.
Period ended 31 October 2021 £3,000
Year ended 31 October 2022 £23,760
What are the overlap profits?
(a)
Khalid ceased trading on 31 March 2022. His taxable trading income was:
Year ended 31 December 2021 £5,600
Period ended 31 March 2022 £4,500
Khalid had £2,300 of overlap profits on commencement.
What is the taxable trading income for 2021/22?
(a)
Connor commenced trading on 1 January 2022, preparing his first accounts to 31 December 2022. The tax-adjusted trading profits for the year ended 31 December 2022 are expected to be £42,860.
What is Connor's assessable trading profit for 2021/22?
Trading profit for 2021/22
(a)
Jacob commenced trading on 1 July 2021, preparing his first accounts to 31 December 2021. The tax-adjusted trading profits for the first two periods of account are:
£
6 months ended 31 December 2021 4,800
Year ended 31 December 2022 22,640
What is Jacob's trading profit assessment for 2021/22?
(a)
Jacob commenced trading on 1 July 2021, preparing his first accounts to 31 December 2021. The tax-adjusted trading profits for the first two periods of account are:
£
6 months ended 31 December 2021 4,800
Year ended 31 December 2022 22,640
What are the overlap profits on commencement?
(a)
Oliver and Jamie began trading in partnership on 1 July 2021. The partnership agreement allocates interest on capital at a rate of 5% pa. The capital balances are £50,000 and £75,000 respectively. The balance of any profits is shared in the ratio 2:1. For the year ended 30 June 2022 the partnership had a tax-adjusted trading profit of £102,850.
What are the partners' assessable trading profits for 2021/22?
O: 68,567 J: 34,283
O: 51,425 J: 25,712
O: 66,900 J: 35,950
O: 50,175 J: 26,963
Cameron started trading on 1 July 2021. He decided to make up his accounts to 30 April each year.
In the 10 months to 30 April 2022, Cameron had tax-adjusted profits of £16,450. He estimates that his tax-adjusted profits for the year to 30 April 2023 will be £27,840.
What is the profit taxed in 2021/22?
(a)
Sam has her own business and has tax-adjusted trading profits for the year ended 31 March 2022 of £7,000. She also has a part-time employment, earning £10,000 each year.
Which two of the following types of national insurance contributions must Sam pay in relation to 2021/22?
Class 1 primary
Class 1 secondary
Class 2
Class 4
Disc Ltd made a trading profit of £31,500 in its year ended 31 March 2022. The company has a director with an annual salary of £8,000. The company only has one other employee, Dermot, who has an annual salary of £45,000, paid in equal amounts over the year.
What is the total national insurance liability of the company for 2021/22?
Total national insurance liability
(a)
Leanne had an antique painting which she had purchased in May 1994 for £9,000. She sold it for £3,000 in December 2021 and paid auctioneer's fees of £400 for its sale.
What is Leanne's allowable loss?
(a)
Lesley has chargeable gains for 2021/22 of £55,300. Lesley is a higher rate taxpayer.
What is Lesley's capital gains tax liability for 2021/22?
Capital gains tax liability
(a)
Which two of the following items are exempt assets for capital gains tax purposes?
A £5 commemorative UK coin produced in 2012
A painting worth £15,000 which was inherited rather than purchased
£25,000 of shares in an unquoted trading company
£10,000 of National Savings Certificates
Steve entered into a contract with Sophie to purchase her art collection. Contracts were exchanged on 15 December 2021. Once contracts had been exchanged neither party could withdraw. The contracts were completed and legal title therefore passed on 3 January 2022. Payment was not made until 10 January 2022 and Steve did not physically take delivery of the art collection until 1 April 2022.
On what date will Steve be treated as having purchased the art collection for capital gains tax purposes?
15 December 2021
3 January 2022
10 January 2022
1 April 2022
Which of the following pays capital gains tax on chargeable gains?
RSPCA, a registered charity
Mug plc, a quoted trading company
Sid and Nancy who are in partnership together
Bert's registered pension scheme
Charles was a wealthy man who had disposed of a number of his assets over the few years leading up to his death in February 2022.
Which two of the following are chargeable disposals for capital gains tax purposes?
In August 2016, the gift of a painting to the National Gallery, to be displayed in an exhibition
In January 2017, the gift of a painting to his son
In July 2019, the loss of a painting valued at £50,000 during a fire at Charles' house
In February 2022, the gift of a painting valued at £40,000 to his daughter on his death
Lothar purchased a holiday home in June 2004. The holiday home cost £95,000 and he paid stamp duty land tax and solicitors' fees of £1,800 relating to the purchase.
In August 2021 he spent £3,400 building a conservatory onto the holiday home and £600 on redecorating the property prior to selling it, which he expects to do within the next few months.
The total allowable expenditure on disposal of the holiday home is:
(a)
In January 1999, Matilda purchased a house for £235,000. Matilda has always rented out the house to tenants. In April 2004 Matilda installed a new kitchen at a cost of £8,500. In January 2022 Matilda sold the house for £435,000. Matilda had to pay estate agency fees at 1% of the sale price.
What is the chargeable gain on disposal of the house?
(a)
Harriet purchased an antique necklace in January 2003 for £4,000. She sold it in January 2022 for £9,400. She paid £200 as commission to the agent who sold the necklace for her.
What is the chargeable gain on disposal of the necklace?
(a)
Mary has taxable income for 2021/22 of £5,040, after deduction of the personal allowance. Mary has also made taxable gains of £53,456 for 2021/22.
What is Mary's capital gains tax liability for 2021/22?
(a)
Fernando made several disposals to his family members (all of whom are connected to him and to each other for capital gains tax purposes) during 2021/22.
Which of the following would be treated as a single disposal for the purpose of computing Fernando's total chargeable gain or allowable loss?
The sale of 2,000 shares in A plc to his mother in April 2021, followed by a further 1,000 shares in A plc in December 2021
The sale to his brother of two paintings, by different artists, that used to hang in Fernando's living room
The gift to his sister Violet of a bracelet and a matching necklace to her civil partner Daisy
The sale to his son and daughter of two adjacent terraced houses
In January 2018, Cinema Ltd purchased an investment property for £470,000 plus stamp duty land tax of £14,100. Cinema Ltd has always rented out the property. In April 2019 Cinema Ltd redecorated the entire property at a total cost of £34,000. In January 2022 Cinema Ltd sold the property for £870,000. Cinema Ltd had to pay estate agency fees at 1% of the sale price.
What is the chargeable gain on disposal of the property?
(a)
Elderberry Ltd is incorporated on 15 July 2021. It opens an interest bearing building society account on 6 August 2021 and commences to trade on 1 December 2021. It makes up its first set of accounts to 31 December 2022 and annually thereafter.
What are the dates of Elderberry Ltd's first accounting period for corporation tax purposes?
15 July 2021–30 November 2021
6 August 2021–30 November 2021
1 December 2021–30 November 2022
1 December 2021–31 December 2022
Rope Ltd purchased a building in April 2018 for £46,809, incurring estate agents' fees and conveyancing costs of £3,191. Rope Ltd extended the car park at a cost of £12,000 in June 2018. The company sold it in January 2022 for gross proceeds of £150,000, incurring legal fees of £6,000.
What is the chargeable gain on the disposal?
(a)
Monk plc has taxable total profits of £1,480,000 for its year ended 31 March 2022. It receives dividends of £50,000 from unconnected companies on 2 February 2022.
What is Monk plc's corporation tax liability for the year ended 31 March 2022?
(a)
Vicar Ltd has adjusted trading profits of £800,000 and chargeable gains of £50,000 for its year ended 31 December 2021. It receives dividends of £20,000 from unconnected companies on 2 February 2021.
What is Vicar Ltd's corporation tax liability for the year ended 31 December 2021?
(a)
Bishop Ltd has taxable total profits of £825,000 for its nine-month accounting period to 30 September 2021. It receives a dividend of £30,000 from an unconnected company on 2 February 2021 and £10,000 from its 100% owned subsidiary on 31 August 2021.
What is Bishop Ltd's corporation tax liability for the period ended 30 September 2021?
(a)
