Technician/ Level 4 Diploma (QCF) Preparing personal taxation computations (PTC)

Transcription

1 Accounting Qualification Question paper Technician/ Level 4 Diploma (QCF) Preparing personal taxation computations (PTC) Friday 18 June 2010 (morning) Time allowed - 3 hours plus 15 minutes reading time Please complete the following information in BLOCK CAPITALS: Student member number Desk number Venue code Date Venue name Important: This exam paper is in two sections. You should try to complete every task 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. You must use permanent ink, preferably black, to write your answers. Correcting fluid may not be used. You must not, during the exam, communicate with any other candidate or be in possession of unauthorised materials, such as pre-prepared notes, books, programmable calculators and dictionaries. Any of these actions will constitute malpractice and will result in disciplinary action. If you are in possession of unauthorised materials you must give them to the Supervisor before the start of the exam. Do NOT open this paper until instructed to do so by the Supervisor.

2 This exam paper is in TWO sections. You must show competence in BOTH sections. So, try to complete EVERY task in BOTH sections. Section 1 contains 6 tasks and Section 2 contains 4 tasks. You should spend about 80 minutes on Section 1 and 100 minutes on Section 2. There is blank space for your workings on pages 10, 14 and the back cover, but you should include all essential workings and calculations in your answers. 2

3 Note: This page is perforated. You may remove it for easy reference. Taxation tables for personal tax 2009/10 Tax rates and bands % Basic rate 20 first 37,400 Higher rate 40 over 37,400 Savings income is taxed at 10%, 20% and 40% (10% applies to a maximum of 2,440 of savings income only where non-savings income is below this limit.) Dividends are taxed at 10% and 32.5%. Personal allowances Personal allowance 6,475 Car benefit percentage The base level for emissions is 135g/km. The figure for fuel is 16,900 Authorised mileage rates First 10,000 miles Over 10,000 miles 40p 25p Van scale charge Charge 3,000 Private fuel provided 500 HMRC official rate 4.75% Capital gains tax Annual exemption 10,100 Tax rate 18% 3

4 Note: This page is perforated. You may remove it for easy reference. Section 1 You should spend about 80 minutes on this section. Against each task is the recommended time for that task, but please note that these times are guidelines only. Data You are a trainee accountant working for a firm of Chartered Accountants. One of your friends, Gary Tomlinson, started a job in January 2009 and during 2009/10 he received benefits in kind. In May 2010, Gary realised that he needed to complete a tax return for the tax year just ended, and so he has asked you to help him complete his tax affairs for 2009/10. Gary has given you the following information which relates to 2009/10: 1. He is a sales representative with a basic annual salary of 18,000. PAYE of 3,110 has been deducted. 2. In April of each year, he is entitled to an annual bonus, based on his sales figures for the year ended February. The details of his bonuses since he started work are: Year ended Date of payment 28 February April , February April , Gary has the use of a company car. It is a Ford Focus, with a list price of 15,500. The company bought this car new in December 2008, paying 13,200 for it. Gary paid 1,500 to the company as a contribution to the cost of the car. The car has CO 2 emissions of 147g/km and a diesel engine. The company pays all the running costs of the car, including fuel. 4. When Gary first started working with the company, they agreed to give him a 7,600 interest free loan. Gary does not need to start repaying this loan until his basic salary exceeds 20, During 2009/10, Gary has been sent on several training courses, costing the company a total of On 1 November 2009, Gary joined the occupational pension scheme. In this scheme, all employees pay 4% of their basic salary and the company pays 6% of their salary. 7. Gary also received the following during 2009/10: Bank interest 220 Building society interest 288 National Lottery winnings 843 4

5 Task 1.1 (15 minutes) Calculate the total assessable benefits in kind for 2009/10. Identify any benefits that are not assessable. 5

6 Task 1.2 (15 minutes) Prepare a computation of taxable income for 2009/10, clearly showing the distinction between the different types of income. 6

7 Task 1.3 (10 minutes) Calculate the net income tax payable for 2009/10. Task 1.4 (10 minutes) As far as possible, complete the tax return on pages 8 and 9. Note: As the tax return for the period 6 April 2009 to 5 April 2010 was not available from HMRC in time for the preparation of this exam paper, the previous form is reproduced here. 7

8 Employment Tax year 6 April 2008 to 5 April 2009 Your name Your unique taxpayer reference (UTR) Complete an Employment page for each employment or directorship 1 Pay from this employment the total from your P45 or P60 5 Your employer's name before tax was taken off 2 UK tax taken off pay in box 1 6 If you were a company director, put 'X' in the box 3 Tips and other payments not on your P60 read page EN 3 of the notes 7 And, if the company was a close company, put 'X' in the box read page EN 3 of the notes 4 PAYE tax reference of your employer (on your P45/P60) / 8 If you are a part-time teacher in England and Wales and are on the Repayment of Teachers' Loans Scheme for this employment, put 'X' in the box Benefits from your employment use your form P11D (or equivalent information) 9 Company cars and vans the total 'cash 13 Goods and other assets provided by your employer equivalent' amount the total value or amount 10 Fuel for company cars and vans the total 'cash 14 Accommodation provided by your employer the total equivalent' amount value or amount 11 Private medical and dental insurance the total 15 Other benefits (including interest-free and low interest 'cash equivalent' amount loans) the total 'cash equivalent' amount 12 Vouchers, credit cards and excess mileage allowance 16 Expenses payments received and balancing charges Employment expenses 17 Business travel and subsistence expenses 19 Professional fees and subscriptions 18 Fixed deductions for expenses 20 Other expenses and capital allowances SA Tax Return: Employment: Page E 1 HMRC 12/08 net

9 Shares schemes, employment lump sums, compensation, deductions and Seafarers' Earnings Deduction are on the Additional information pages enclosed in the Tax Return pack Second employment Complete an Employment page for each employment or directorship 1 Pay from this employment the total from your P45 or P60 5 Your employer's name before tax was taken off 2 Tax taken off pay in box 1 6 If you were a company director, put 'X' in the box 3 Tips and other payments not on your P60 read page EN 3 of the notes 7 And, if the company was a close company, put 'X' in the box read page EN 3 of the notes 4 PAYE tax reference of your employer (on your P45/P60) / 8 If you are a part-time teacher in England and Wales and are on the Repayment of Teachers' Loans Scheme for this employment, put 'X' in the box Benefits from your employment use your form P11D (or equivalent information) 9 Company cars and vans the total 'cash 13 Goods and other assets provided by your employer equivalent' amount the total value or amount 10 Fuel for company cars and vans the total 'cash 14 Accommodation provided by your employer the total equivalent' amount value or amount 11 Private medical and dental insurance the total 15 Other benefits (including interest-free and low interest 'cash equivalent' amount loans) the total 'cash equivalent' amount 12 Vouchers, credit cards and excess mileage allowance 16 Expenses payments received and balancing charges Employment expenses 17 Business travel and subsistence expenses 19 Professional fees and subscriptions 18 Fixed deductions for expenses 20 Other expenses and capital allowances SA Tax Return: Employment: Page E 2

10 Note: You may use this page for your workings. 10

11 Data After you completed Gary s tax return you received the following from him. From: GT@hotbox.com To: AATstudent@boxmail.net Sent: 15 June 2010 Subject: Advice Thanks for the completed tax return much appreciated. I would like some advice, if that s all right. First, I want to pay 40 per month to a charity and someone at work said I could do this through my salary and get tax relief on it. I don t understand this, so wondered if you could explain the different ways of paying money to charity. Secondly, before starting this job, I had a private pension that I was paying into. When I started this job, I stopped paying into this pension as I thought that I could not afford it. I know I have joined the company pension scheme, but I would like to contribute to the private one again, if possible. I only want to pay about 90 per month into this, but I m not sure if I can, as I have the company pension scheme now. Finally, one piece of really good news the company is so happy with my performance that I am being considered for promotion to a Sales Manager. This has a salary of 45,000 and a much better car, so I am really excited about this. Hopefully, I should hear by the middle of next month, but I m worried that I ll have to pay more tax. Any help on the above matters would be great. Gary Task 1.5 (25 minutes) Reply to Gary s Clearly explain the options available and tax implications of making regular payments to charities Clearly explain the tax implications of paying into a private pension scheme Calculate the extended basic rate tax band assuming that Gary gets his promotion and makes payments to both a charity and into a private pension from 1 August You should assume that all tax rates and rules that operate in 2009/10 are the same for 2010/11. Note: You must lay out your answer (on pages 12 and 13) in a structured, logical manner. 11

12 From: To: Sent: 18 June 2010 Subject: Re: Advice 12

13 Data Gary rang you last night, asking for further advice on his tax return. You weren t in when he rang, so your partner made a note of his query. Thanks for the tax return but don t know when it needs sending in - can you help? Task 1.6 (5 minutes) Before you ring Gary back to answer his query, write down the information that you need to give him. 13

14 Note: You may use this page for your workings. 14

15 Note: This page is perforated. You may remove it for easy reference. Section 2 You should spend about 100 minutes on this section. Against each task is the recommended time for that task, but please note that these times are guidelines only. Data You work in the tax department of a small firm of chartered accountants. The following is information you have received from a client, Sophia, for 2009/10. Capital transactions: 1. In January 2010, Sophia sold a necklace that had been given to her by her mother. Her mother had bought the necklace in October 1990 for 8,500, and when she gifted it to Sophia in April 2000, it had a market value of 15,000. Sophia sold the necklace at auction for 26,000, incurring an auctioneer s fee of 5%. 2. In September 1997, Sophia had bought two vases for 4,000. In May 2009, Sophia sold one vase for 10,000, when the remaining vase was valued at 12, In December 2003, Sophia bought 350 shares in Booker Ltd for 25 per share. On 17 February 2010, she bought another 100 shares for 42 per share. On 31 January 2010, she had sold 200 shares for 48 per share. Properties: 19 Sleepy Street: this unfurnished townhouse was let for the whole of 2009/10 at a monthly rental of 350. The rent for March 2010 was not received until 14 April Grumpy Grange: this furnished bungalow was bought by Sophia in May The property was rather run down when she bought it and she spent 5,000 on repairing the property before it was ready to let. Tenants moved into the property on 1 October 2009, paying a monthly rental of Dopey Drive: this unfurnished apartment was rented out from 1 September 2008 to 31 May 2009 at 300 per month. Sophia redecorated the property at a cost of 1,500 and the new tenants moved into the property on 1 January They paid six months rent in advance, totalling 2,200. The expenditure for these properties comprised: 19 Sleepy 76 Grumpy 14 Dopey Street Grange Drive Agent s commission - % of the gross rent 5% 5% 10% Insurance for 2009/ Advertising for new tenants Other information: Sophia also owns a shop that sells children s designer clothing. The assessable profits from this business for 2009/10 were 42,050. Sophia received interest from an ISA of 385 during 2009/10 and she received dividends totalling

16 Note: This page is perforated. You should NOT use it for your workings. 16

17 Task 2.1 (30 minutes) (a) Calculate the chargeable gain or loss, if any, made on the disposal of the necklace. (b) Calculate the chargeable gain or loss, if any, made on the disposal of the vase. 17

18 (c) Calculate the chargeable gain or loss, if any, made on the disposal of the shares. Clearly show the balance of shares, and their value, to carry forward. (d) Calculate the capital gains tax liability for 2009/10, stating the date on which the tax is due. 18

19 Task 2.2 (20 minutes) Calculate the net taxable income from property for 2009/10. 19

20 Task 2.3 (20 minutes) Calculate the net income tax payable for 2009/10. 20

21 Data You have received the following from Sophia. From: To: Sent: 16 June 2010 Subject: Payments I am very grateful for the work you have done on my tax affairs. I can see that I have a large taxation bill to pay to HMRC, and although I have been paying tax for some time, I get very confused over what needs to be paid and when. My recent total income tax liabilities have been 4,864 for 2007/08, and 6,668 for 2008/09. On 31 January 2010, I paid a figure of 5,138, but I have no idea how HMRC worked this out. I now need to budget for the big tax bills that will be coming my way, so wondered if you could help me understand this. Please let me know what tax I will be paying from 31 July 2010 to 31 January 2011 and explain how these figures are calculated. Many thanks for your time. Sophia Task 2.4 (30 minutes) Reply to Sophia s , clearly explaining: (a) How the instalment system for income tax operates (b) How the 31 January 2010 tax liability was computed (c) How much she needs to pay on 31 July 2010 and 31 January 2011 From: AATstudent@boxnet.com To: Sophia@tesnet.com Sent: 18 June 2010 Subject: Re: Payments 21

22 This page is for the continuation of your . You many not need all of it. 22

23 This page is for the continuation of your . You many not need all of it. 23

24 NVQ/SVQ qualification codes Technician 100/2942/4 / G Unit number (PTC) H/101/8116 QCF qualification codes Level 4 Diploma Unit number (PTC) T/103/6455 Association of Accounting Technicians (AAT) Aldersgate Street, London EC1A 4HY, UK t: (UK) +44 (0) (non-uk) e: aat@aat.org.uk w: aat.org.uk