Tuesday 5 December 2006 (morning) EXAM QUESTION PAPER. Time allowed 3 hours plus 15 minutes reading time

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1 NVQ/SVQ Level 4 in Accounting Preparing Business Taxation Computations (FA 2005) (BTC) (2003 standards) Tuesday 5 December 2006 (morning) EXAM QUESTION PAPER Time allowed 3 hours plus 15 minutes reading time Please complete the following information in BLOCK CAPITALS. You must give your student member number below. If you do not, your paper may not be marked. Student Member Number Approved Assessment Centre Code Desk number... Date Approved Assessment Centre Name... Important: This exam paper is in two sections. You should complete all tasks in both sections. We recommend that you use the 15 minutes reading time to study the exam paper fully and carefully so that you understand what to do for each task. However, you may begin to write your answers within the reading time, if you wish. We strongly recommend that you use a pen rather than a pencil. You may not use programmable calculators or dictionaries in the exam. Do NOT open this paper until instructed to do so by the Supervisor. BTC

2 You may use this page for your workings. 2

3 This page is perforated. You may remove it for easy reference. TAXATION TABLES FOR BUSINESS TAX 2005/06 Capital allowances: % Writing down allowance Plant and machinery 25 Industrial buildings 4 First year allowance Plant and machinery 40 Car with low emissions (not more than 120g/km) 100 Expenditure incurred by small businesses between 6 April 2004 and 5 April Capital gains indexation factors: November 1995 to February February 2000 to June Taper relief for business assets: No of years held after 5 April 1998 % gain chargeable or more 25 Corporation tax: Financial year 2005 Starting rate 0% Lower limit 10,000 Upper limit 50,000 Marginal relief fraction 19/400 Small companies rate 19% Lower limit 300,000 Upper limit 1,500,000 Marginal relief fraction 11/400 Full rate 30% Small company dividends from 1 April % Formula: Fraction x (M - P) x I P 3

4 This page is perforated. You may remove it for easy reference. This exam paper is in TWO sections. You must show competence in BOTH sections. You should therefore attempt and aim to complete EVERY task in EACH section. Section 1 contains 5 tasks and Section 2 contains 5 tasks. You should spend about 100 minutes on Section 1 and 80 minutes on Section 2. Blank space for workings is included on pages 2 and 19, but all essential calculations should be included within your answers, where appropriate. SECTION 1 DATA You work in the tax department of a firm of Chartered Accountants. Ian Goodwin is a client of the firm, and works as an electrician. He commenced trading on 1 January 2005, and made his first accounts to 30 April The adjusted trading profit, before capital allowances, for this 16-month period is 43,000. Ian Goodwin s capital transactions from the date of commencement are: Additions: 1 January 2005 Plant and machinery 2,500 1 January 2005 Motor van 7,500 1 June 2005 Plant and machinery 3,000 1 July 2005 Motor car, used 30% private usage 9,600 The business is classified as a small business for capital allowances purposes. No tax returns have been completed for the business, and Ian Goodwin has not yet informed HM Customs & Revenue that he is trading. 4

5 Task 1.1 Calculate the capital allowances figure for the 16-month period ended 30 April

6 Task 1.2 Calculate the net taxable trading profit for the period ended 30 April

7 Task 1.3 Calculate the assessable profits for the first three tax years, beginning 2004/05, clearly showing all relevant dates. Also show the amount and dates of any overlap profits. 7

8 DATA You have received a note from Ian Goodwin. He is concerned about having missed some very important dates when he should have contacted HM Revenue & Customs. Also, he knows that he needs to pay some tax and National Insurance (NI), but has no idea when and how much this will amount to. Task 1.4 Provide the following information for Ian Goodwin: (i) the date when he should have informed HM Revenue & Customs that he was trading (ii) the date when his first tax return should have been filed (iii) when he has to pay his tax liability (iv) when he has to pay his NI contributions 8

9 DATA You have received the following . From: To: Sent: 30 November 2006 Subject: Premises The business is doing quite well, and I m expanding it to include the manufacture of electrical components. I need a small factory to run this from and have found one that looks ideal. However, I m concerned that it s expensive and I don t know whether I will get any tax relief for it. It s a brand new building, and should cost 130,000. The builder has given me a breakdown of this cost as: Land - 30,000 Building - 100,000 Can you let me know what tax relief, if any, I will get for this purchase, so that I understand the tax consequences before I buy the building. Many thanks. Ian Goodwin Task 1.5 Reply to Ian Goodwin s , giving him as much information as you can. From: Accounting@boxmail.net To: Ian.Goodwin@boxmail.net Sent: 5 December 2006 Subject: Premises 9

10 This page is for the continuation of your . You may not need all of it. 10

11 SECTION 2 DATA This page is perforated. You may remove it for easy reference. You are employed by Robbie Ltd, working in the accounts department. You have been asked to prepare some tax information, and then complete the CT600 (short) tax form. You have been given the following information that relates to the year ended 31 March 2006: Gross profit 801,220 Profit on sale of shares (Note 1) 45,777 UK Dividends received (Note 2) 40, ,497 General expenses (Note 3) 455,100 Administrative expenses 122,010 Wages and salaries 137, ,677 Net profit 172,820 Note 1: profit on sale of shares: Robbie Ltd sold 2,500 shares in Williams Ltd for 102,100 in June ,000 shares had been bought in November 1995 for 50,000. In February 2000, Robbie Ltd took up a rights issue of 1 for 2 shares, at 20 per share. Note 2: UK dividends received: The dividends were received from a company not associated with Robbie Ltd. Note 3: General expenses: These include: Gift Aid donation 5,000 Parking fines paid for a director 160 Depreciation 65,230 Donation to a trade association 1,000 Donation to a political party 850 Note 4: Capital allowances: These have already been calculated at 38,750. Note 5: Robbie Ltd has one associated company. 11

12 THIS PAGE IS INTENTIONALLY BLANK 12

13 Task 2.1 Calculate the capital gain arising from the disposal of the shares in Williams Ltd. Clearly show the number of shares, and their value, to carry forward. 13

14 Task 2.2 Calculate the adjusted trading profits, after capital allowances, for the year ended 31 March

15 Task 2.3 Calculate the PCTCT (profits chargeable to corporation tax) for the year ended 31 March

16 Task 2.4 Calculate the tax payable for the year ended 31 March Task 2.5 As far as is possible from the available information, complete the tax return on pages 17 and

17 Robbie Ltd

18 Page 2 Company tax calculation Turnover 1 Total turnover from trade or profession Income 3 Trading and professional profits 4 Trading losses brought forward claimed against profits 5 Net trading and professional profits 6 Bank, building society or other interest, and profits and gains from non-trading loan relationships 11 Income from UK land and buildings 14 Annual profits and gains not falling under any other heading Chargeable gains 16 Gross chargeable gains 17 Allowable losses including losses brought forward 18 Net chargeable gains box 3 minus box 4 box 16 minus box Profits before other deductions and reliefs Deductions and Reliefs 21 sum of boxes 5, 6, 11, 14 & Management expenses under S75 ICTA Trading losses of this or a later accounting period under S393A ICTA Put an 'X' in box 31 if amounts carried back from later accounting periods are included in box Non-trade capital allowances 35 Charges paid 37 Profits chargeable to corporation tax Tax calculation 38 Franked investment income 39 Number of associated companies in this period or 40 Associated companies in the first financial year box 21 minus boxes 24, 30, 32 and Associated companies in the second financial year Put an 'X' in box 42 if the company claims to be charged at the starting rate or the small companies rate on any part of its profits, or is claiming marginal rate relief 42 Enter how much profit has to be charged and at what rate of tax Financial year (yyyy) Amount of profit Rate of tax Tax p p 63 Corporation tax 64 Marginal rate relief 65 Corporation tax net of marginal rate relief 66 Underlying rate of corporation tax 67 Profits matched with non-corporate distributions 64 p 65 p 66 % total of boxes 46 and 56 p 68 Tax at non-corporate distributions rate 69 Tax at underlying rate on remaining profits 70 Corporation tax chargeable CT600 (Short) (2005) Version 2 68 p 69 p 70 enter value of box 63 or 65 or the total of boxes 68 and 69 if greater p

19 You may use this page for your workings. 19

20 NVQ/SVQ qualification codes Technician (2003 standards) - 100/2942/4 / G Unit number (BTC) - K/101/8115 Association of Accounting Technicians (AAT) Clerkenwell Road, London EC1R 5AD, UK Tel: +44 (0) Fax: +44 (0) aat@aat.org.uk Website: