The Chartered Tax Adviser Examination

Transcription

1 Candidate Number You must tick the box below if you have answered this Module. The Chartered Tax Adviser Examination November 2014 AWARENESS MODULE D TAXATION OF INDIVIDUALS You should only answer this module if you have not sat/do not intend to sit the Taxation of Individuals Advisory paper. Each question carries 5 marks. You should answer all 12 questions. You should answer questions in brief bullet points and/or summary computations where appropriate. You must answer questions in the spaces provided. You may not need all the space provided. You should make all calculations to the nearest month and pound unless stated otherwise. Unless otherwise indicated by the provision of additional table information, you may assume that 2013/14 rates and allowances continue to apply for 2014/15 and future years. Candidates referring to actual or pending rates and allowances for 2014/15 and future years will not be penalised.

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3 1. On 1 December 2013 Jared sold 50,000 ordinary shares in Alpha Ltd and realised a capital loss of 65,000. Jared made no other capital disposals in 2013/14 and his only source of income was employment income of 60,000. You are required to: 1) State the conditions which must be met in order for the loss on the disposal of shares in Alpha Ltd to be qualifying for relief against income. 2) Briefly explain the advantages of making such a claim. Page 3 of 26

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5 2. Alice was employed during 2013/14 by Hoppit plc, earning a salary of 40,000 per annum. In addition to the salary, Hoppit plc provides medical insurance for Alice. The total cost to the company for 2013/14 was 1, of this related to Alice, the remainder being additional charges for her family to be covered by the policy as well. Alice made a contribution to the company s occupational pension plan of 5% of her salary. Alice was required to travel overseas with work during 2013/14 and spent 45 nights away from home. Hoppit plc paid 300 to cover charges made to the room for personal calls and newspapers each morning and also paid 200 for Alice s husband to travel with her on one occasion during the year. Calculate Alice s employment income for 2013/14, clearly explaining your treatment of each item. Page 5 of 26

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7 3. Bob borrowed 40,000 on 6 April 2013 to fund the purchase of a new computer and some shares. Interest was paid on the loan of 1,800 for 2013/14. The computer cost 4,000 and was used wholly for his employment. The remaining 36,000 was used to purchase a 3% shareholding in Barker Ltd, a qualifying company for the purposes of the Enterprise Investment Scheme, on 6 April Bob is neither a director nor an employee of Barker Ltd. Briefly explain how Income Tax relief is given for these transactions in 2013/14 assuming Bob makes any beneficial claims. Page 7 of 26

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9 4. Noah was born on 4 August During 2013/14 he received pension income totalling 5,800 and interest on a bank account of 17,200 (net). Noah made a gift aid donation during the year of 280 (net). Calculate the personal allowance available to Noah for 2013/14. Page 9 of 26

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11 5. During 2013/14 Raymond owned two properties which were rented out to tenants. Property 1 is a furnished apartment that was rented out for 550 per month for the whole year. Expenses incurred consisted of 400 insurance, 1,200 water rates and 5,000 for new furniture. Property 2 is an unfurnished house that was rented out for 680 per month. However, Raymond spent some time refurbishing the property during 2013/14, spending 5,000 on an extension and 2,500 on repairs to the garden fencing. The property was empty between April and January, but a new tenant moved in on 1 February Calculate the 2013/14 property income for Raymond. Page 11 of 26

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13 6. Cerys has begun the calculation of her Income Tax liability for 2013/14 as follows: Total Non Savings Savings Dividends Employment 10,440 10,440 Interest (gross) 28,000 28,000 Dividends (gross) 8,000 8,000 Total income 46,440 10,440 28,000 8,000 Personal allowance (9,440) (9,440) 37,000 1,000 28,000 8,000 Cerys made a gross personal pension contribution of 1,500 in the year. Calculate the Income Tax liability for Cerys for 2013/14. Page 13 of 26

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15 7. Bayley is a shareholder of Charter plc, a close company, and regularly receives dividends from the company in June each year of 9,000 (net). On 6 July 2013, Charter plc loaned Bayley 4,050 to help him pay his Income Tax. Bayley had intended to repay the loan in November However, he was unable to do so and Charter plc agreed to write the loan off on 5 December Bayley s annual income includes a salary from Argoice Ltd, an unconnected company, of 22,000 and interest on an ISA of 2,000. Calculate Bayley s Total Income for 2013/14. Page 15 of 26

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17 8. Martha has made personal pension contributions of 40,000 (gross) each year since 2007/08. She has employment income of 90,000 per annum and inherited a large sum of money from a distant relative in December As a result, she made an increased personal pension contribution for 2013/14 of 70,000 (gross). Briefly explain what Income Tax relief is available on the 2013/14 pension contribution. Page 17 of 26

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19 9. Donald has bank accounts in Overseabia and Foreignland on which he earns interest. During 2013/14 he received interest of 14,200 on the account in Overseabia, net of overseas tax of 2,800, and 8,500 on the account in Foreignland, net of overseas tax of 7,000. There is no double tax agreement with either country. Donald is a UK resident and domiciled individual and a higher rate taxpayer. Briefly explain, with the aid of calculations, to what extent UK Income Tax will be charged on the overseas interest earned during 2013/14. Page 19 of 26

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21 10. Kirsty owned a set of six antique chairs which she purchased in January 1995 for 25,000. She sold two of the chairs in August 2013 for 38,000, keeping the other four, which were valued at that time at 90,000. Kirsty had Total Income for 2013/14 of 29,440 and had made no other capital disposals. Calculate the Capital Gains Tax payable by Kirsty for 2013/14 on the disposal of the two chairs. Page 21 of 26

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23 11. Sam and Julie have been friends for years and each exercised some unapproved share options during 2013/14. They each had a salary of 45,000 for 2013/14. Sam is employed by Xanadu Ltd, an unquoted company, and was granted his option during He exercised the option on 1 September Julie is employed by Fernando plc, a company quoted on the London Stock Exchange, and was granted her option during She exercised the option on 1 December 2013 and purchased 1,000 shares for 4,000, although their market value at that date was 8,000. You are required to: 1) Briefly explain whether the shares in Xanadu Ltd and Fernando plc are readily convertible assets for PAYE and National Insurance purposes. 2) Calculate the Income Tax and National Insurance payable as a result of Julie exercising her share option in 2013/14. Page 23 of 26

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25 12. Caleb is an employee of Fabrical plc. For 2013/14 his Income Tax return shows an Income Tax liability of 22,000 and Income Tax payable for the year of 2,885. He has not been required to make any payments on account for 2013/14. Kyle s 2013/14 Income Tax return shows an Income Tax liability of 2,000 and Income Tax payable of 900. Kyle made payments on account for 2013/14 of 200 each. You are required to: 1) Briefly explain the options for Caleb to pay the 2,885 due for 2013/14 and whether any 2014/15 payments on account are required from him. 2) Briefly explain when Kyle is due to settle his 2013/14 Income Tax payable and whether any 2014/15 payments on account are required from him. Page 25 of 26

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