Personal Tax (FA2016) work-place scenario Answer book Anthony Jerrold. May AAT is a registered charity. No

Transcription

1 Personal Tax (FA2016) work-place scenario Answer book Anthony Jerrold May 2017 AAT is a registered charity. No

2 Background Anthony Jerrold is employed part-time at Beauty and the Beat, a local interior design company, to produce individual pieces of furniture. Beauty and the Beat work a standard forty hour week. When not employed by Beauty and the Beat he creates prints and art work that he sells on the internet and at local art fairs. In addition to this, he has a rental property which generates an additional source of income, as well as holding some shares. Anthony, works 20 hours per week and receives a salary of 25,000 per annum, pro rata (a full time week is 40 hours). During the year ended 31 March 2017 he was paid mileage, for travel to customers premises of 50p per mile for 5,000 miles. A sales bonus based on the year ended 31 March 2017, of 1,500 was also paid to him on 1 May Beauty and the Beat provide a pension scheme for their employees, Anthony makes employee contributions of 1% of salary and his employer contributions are 3% of salary. Anthony had tax deducted from his salary at source of 325 Anthony s assessable trading profits, were 15,000 for the year ended 30 September 2015 was 18,000 and for 30 September 2016 was 23,000. Anthony makes charitable donations each year, of a 20 monthly direct debit to a local animal charity and an annual payment of 200 to a national children s charity. Anthony receives rental income of 650 per month. The property was rented from 6 April 2016 until the 5 December 2016, when the tenant left leaving 1 month s rent owing. On 6 March 2017 his new tenant paid a year s rent up front - 7,800. Anthony s expenses were: buildings insurance 250, painting and other redecorating in between tenants 575, the purchase of a new television 390, (the previous tenant used their own) and 250 replacing the sofa, boiler service of 90 and mortgage interest of 1,500. Anthony received dividend income from his shares of 4,500. On 5 March 2017 he sold half of his holding for 10 per share. He made share purchases over several years as follows: 1/2/1986 2,500 shares purchased 3.50 per share 6/5/1990 5,000 shares purchased for 4.25 per share 18/7/1995 there was a bonus issue of 1 for 5 1/12/2001 1,750 shares were purchased for 5.50 per share 5/4/2006 2,150 shares were sold for 6.75 per share. 2

3 Task 1 Calculate the assessable employment income for Anthony for the year ended 5 April 2017: i. Assessable salary 25,000 x 20hrs /40hrs ii. Assessable mileage 5,000 x (50p- 45p) iii. Assessable bonus 0 - paid in 17/18 iv. Pension contributions (12,500 x 1%) v. Total assessable employment income 12, (125) 12,625 Task 2 What are the assessable trading profits to be included for 16/17 Profits for the year ended 30/9/16 as these fall within the 16/17 tax year 23,000 Task 3 Calculate Anthony s basic rate band 32,000 + gift aid (( ) x100/80) 32,550 3

4 Task 4 Calculate Anthony s assessable rental property income. Rent (8x x 650 less irrecoverable debt 1 x 650) 5,200 Less expenses: Insurance 250 Painting and redecorating Replacement of domestic items (Sofa only as TV is a new purchase) Boiler service 90 Mortgage interest 1,500 2,665 Assessable property income 2,535 4

5 Task 5 Calculate Anthony s tax liability of the year ended 5 April Total General Dividend Employment 12,625 12,625 Trading 23,000 23,000 Property 2,535 2,535 Dividend 4,500 4,500 Total income 42,660 38,160 4,500 Personal allowance 11,000 11,000 Taxable income 31,660 27,160 4,500 Tax General income Basic rate % 5,432 Dividend income Nil rate 0% 0 Tax liability 5,432 Less: tax deducted at source (325) Tax payable 5,107 Task 6 State Anthony s tax return filing deadline for submission of an electronic return, and the tax liabilities and payment deadlines. Anthony must file his tax return for the year ended 5 April 2017, online, by 31 January Anthony has tax payable of 5,107, assuming he has not made any payments on account towards this liability, this will also be payable by 31 January As his liability exceeds 1,000 and less than 80% of Anthony s tax is deducted at source, he must also now make payments on account in respect of the year ended 5 April 2018, the first, is due on 31 January 2018 and is based on half of his 16/17 tax payable - 5,107 x 50% = 2, Anthony has a total amount payable on 31 January 2018 of 7, His second payment on account of 2,553.50, is then due by 31 July

6 Task 7 Calculate the gain on disposal of Anthony s shares. Share pool No of shares 1/2/86 Purchase 2,500 8,750 6/5/90 Purchase 5,000 21,250 18/7/95 Bonus issue 1, /12/01 Purchase 1,750 9,625 Subtotal 10,750 39,625 5/4/06 Sale (2,150) (7,925) Subtotal 8,600 31,700 5/3/17 Sale (4,300) (15,850) Pool c/fwd 4,300 15,850 Capital Gain: Sale proceeds (4,300 x 10) 43,000 Cost (as above) (15,850) Gain 27,150 6

7 Task 8 Calculate the capital gains tax payable by Anthony, stating the payment date. Gain 27,150 Annual exemption 11,100 Chargeable 16,050 Capital gains tax Basic rate (32,550 31,660) 10% 89 Higher rate (16, ) 20% 3,032 Total capital gains tax 3,121 Payment date: 31 January

8 The Association of Accounting Technicians 140 Aldersgate Street London EC1A 4HY t: +44 (0) f: +44 (0) e: aat.org.uk Copyright 2017 AAT All rights reserved. Reproduction is permitted for personal and educational use only. No part of this content may be reproduced or transmitted for commercial use without the copyright holder s written consent. AAT is a registered charity. No