Fundamentals Level Skills Module Taxation (Irish) Specimen questions for June 2015 Time allowed This Reading is and not planning: a full specimen 15 minutes paper, it is a selection of specimen Writing: questions to 3 hours give an indication of the style of the questions. It includes three multiple choice questions and This paper is divided into two sections: one long question. Section A ALL 15 questions are compulsory and MUST be attempted The full exam will consist of the following: B ALL SIX questions are compulsory and MUST be Section A 15 multiple choice questions for 2 marks each attempted Section B Four 10 mark questions and two 15 mark Rates of tax and tables are printed on pages 2 4. questions All Do NOT questions open this are paper compulsory. until instructed by the supervisor. During reading and planning time only the question paper may To be see annotated. example You must of NOT the full write specimen in your answer exam, booklet please until refer to the instructed F6 (UK) by the Specimen supervisor. Paper. This question paper must not be removed from the examination hall. Paper F6 (IRL) The Association of Chartered Certified Accountants
This is a blank page. The question paper begins on page 3. 2
SUPPLEMENTARY INSTRUCTIONS 1. Calculations and workings need only be made to the nearest Euro. 2. All time apportionments should be made to the nearest month. 3. All workings should be shown in Section B. TAX REFERENCE MATERIAL JUNE AND DECEMBER 2015 The following rates, credits, formulae and allowances are based on the Finance (No. 2) Act 2013 and are to be used for all questions in this paper. Income tax rates Single/widow(er)/surviving civil partner without qualifying children 32,800 at 20% 6,560 Balance at 41% Married or in a civil partnership (one income) 41,800 at 20% 8,360 Balance at 41% Married or in a civil partnership (dual income) 41,800 at 20% 8,360 23,800 at 20% 4,760 Balance at 41% Single/widow(er)/surviving civil partner, qualifying for single person child carer credit 36,800 at 20% 7,360 Balance at 41% 3 [P.T.O.
Tax credits Single person s credit 1,650 Married person s/civil partner s credit 3,300 Widowed person/surviving civil partner in year of bereavement 3,300 without dependent children 2,190 with dependent children 1,650 Widowed person/surviving civil partner with dependent children first year after bereavement 3,600 second year after bereavement 3,150 third year after bereavement 2,700 fourth year after bereavement 2,250 fifth year after bereavement 1,800 Home carer credit (maximum) 810 Single person child carer credit 1,650 Incapacitated child credit 3,300 Dependent relative credit 70 Age credit single/widowed/surviving civil partner 245 married or in a civil partnership 490 Employee/PAYE credit 1,650 Rent allowance credit Rent limit single aged under 55 800 160 married/widowed/in a civil partnership/survivor of a civil partnership aged under 55 1,600 320 single aged 55 and over 1,600 320 married/widowed/in a civil partnership/survivor of a civil partnership aged 55 and over 3,200 640 Note: The rent allowance credit is only available to individuals who were tenants and eligible for the relief on 7 December 2010. Third level tuition fees Upper limit 7,000 Full-time qualifying course First 2,750 is ignored Part-time qualifying course First 1,375 is ignored Rates of PRSI Self-employed Rate 4% Where income is above 5,000, the rate is 4% of reckonable earnings or 500, whichever is greater. No PRSI where income is below 5,000 per annum. Rates of PRSI Employee Class A1 Rate 4% No PRSI on earnings of 352 or less per week. 4
Rates of PRSI Employer (for employees Class A1) Rate 10 75% Universal social charge (USC) for all taxpayers On the first 10,036 2% On the next 5,980 4% On the balance 7% For individuals, a surcharge of 3% applies in respect of relevant (non-paye) income that exceeds 100,000 per annum, regardless of age. For individuals, aged 70 and over, and individuals who hold a medical card regardless of age, the maximum rate is 4% on income up to 60,000 and 7% on income over 60,000. Exemptions: Individuals where income does not exceed 10,036 per annum All social welfare payments and income subject to DIRT Retirement annuities Age Percentage of net relevant earnings Up to 30 years 15% 30 years but less than 40 years 20% 40 years but less than 50 years 25% 50 years but less than 55 years 30% 55 years but less than 60 years 35% 60 years and over 40% Cap on net relevant earnings of 115,000. Tax free amount of ex gratia payments Basic exemption: 10,160 + (765 x number of years of complete service). Increased exemption: (10,160 + (765 x number of years of complete service)) + (10,000 less the present value of a current/future entitlement to a pension lump sum). Standard capital superannuation benefit (SCSB): (A x B/15) C Where: A = Annual average salary over the last three years of employment B = Number of complete years of service in the employment C = Any tax free lump sum received or receivable under an approved superannuation scheme. Corporation tax Standard rate 12 5% Higher rate 25% 5 [P.T.O.
Value added tax (VAT) Registration limits Turnover from the supply of goods 75,000 Turnover from the supply of services 37,500 Rates: Standard rate 23% Lower rate 13 5% Additional lower rate 9% Capital gains tax Rate 33% Annual exemption 1,270 Writing down and wear and tear allowances Type of expenditure Date incurred Writing down allowance Tax life (where relevant) Plant and machinery From 4 December 2002 12 5% Motor vehicles From 4 December 2002 12 5% Industrial buildings From 1 April 1992 4% 25 years Farm buildings From 27 January 1994 15% for six years and 10 years 10% in year seven Hotels From 27 January 1994 to 15% for six years and 7 years 3 December 2002 10% in year seven From 4 December 2002 4% 25 years Nursing homes and From 3 December 1997 to 15% for six years and 10 years, if first in use private hospitals 31 July 2006 10% in year seven by 1 February 2007 From 1 August 2006 15% for six years and 15 years, if first in use 10% in year seven after 1 February 2007 Childcare facilities From 2 December 1998 to 15% for six years and 10 years, if first in use 31 July 2006 10% in year seven by 1 February 2007 From 1 August 2006 15% for six years and 15 years, if first in use 10% in year seven after 1 February 2007 Carbon emissions table: Motor cars limits on capital costs Category A Category B/C Category D/E Category F/G 0 120g/km 121 155g/km 156 190g/km 191g/km+ Category A/B/C vehicles capital allowances/leasing charges are based on the specified amount of 24,000 regardless of the cost of the car. Category D/E vehicles capital allowances/leasing charges are based on 50% of either 24,000 or the cost of the car, whichever is lower. Category F/G vehicles do not qualify for capital allowances/leasing charges. 6
Motor cars Benefits in kind Business travel Business travel Percentage of original lower limit upper limit market value of car Kilometres Kilometres 0 24,000 30% 24,001 32,000 24% 32,001 40,000 18% 40,001 48,000 12% 48,001 Upwards 6% Preferential loan rates Loans used to fund the cost/repair of the employee s principal private residence 4% All other loans 13 5% Local property tax Tax bands for valuation purposes 0 100,000 100,001 150,000 150,001 200,000 200,001 250,000 250,001 300,000 300,001 350,000 350,001 400,000 400,001 450,000 450,001 500,000 500,001 550,000 550,001 600,000 600,001 650,000 650,001 700,000 700,001 750,000 750,001 800,000 800,001 850,000 850,001 900,000 900,001 950,000 950,001 1,000,000 Properties worth up to and including a value of 1 million will be assessed at a rate of 0 18%. Properties worth more than 1 million will be assessed on their actual value at 0 18% on the first 1 million and at 0 25% of their actual value on the portion above 1 million. 7 [P.T.O.
Indexation factors for capital gains tax Year expenditure incurred Multipliers for disposals in the year ending 31 December 2004 et seq 1974-75 7.528 1975-76 6.080 1976-77 5.238 1977-78 4.490 1978-79 4.148 1979-80 3.742 1980-81 3.240 1981-82 2.678 1982-83 2.253 1983-84 2.003 1984-85 1.819 1985-86 1.713 1986-87 1.637 1987-88 1.583 1988-89 1.553 1989-90 1.503 1990-91 1.442 1991-92 1.406 1992-93 1.356 1993-94 1.331 1994-95 1.309 1995-96 1.277 1996-97 1.251 1997-98 1.232 1998-99 1.212 1999-2000 1.193 2000-2001 1.144 2001 1.087 2002 1.049 2003 et seq 1.000 8
Section A ALL 15 questions are compulsory and MUST be attempted Note: Only three specimen questions provided. For full specimen exam, see F6 (UK) Specimen paper Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple choice question. Each question is worth 2 marks. 1 James is an employee and his employer has provided him with a company car from 1 July 2014. James s employer bought the car second hand for 30,000 and the car had originally cost 40,000 when new. During 2014 James drove the car 20,000 kilometres of which 13,000 were for business purposes. What is the amount of benefit in kind assessable on James in 2014? A 4,800 B 12,000 C 9,600 D 3,600 2 AMX Ltd has had the following results: Year ended Six months to Year to 30 June 2013 31 December 2013 31 December 2014 Case I income/(loss) 250,000 400,000 (600,000) How much of AMX Ltd s trading loss for 2014 can be relieved against the Case I income of 250,000 for the year ended 30 June 2013? A 0 B 250,000 C 125,000 D 200,000 3 Which of the following assets will ALWAYS be exempt from capital gains tax? (1) Irish Government securities (2) A car used for private purposes only (3) A house (4) Durable chattels A 1 and 2 B 1, 2 and 3 C 2 and 4 D All of the above 9 [P.T.O.
Section B ALL SIX questions are compulsory and MUST be attempted Note: Only one specimen question provided. For full specimen exam, see F6 (UK) Specimen paper 1 Ambucall Ltd is an Irish incorporated and resident company. The company provides private ambulance services and is approved by all the major private health insurance companies and statutory bodies. The company s statement of profit or loss for the year ended 31 December 2014 shows the following: Notes Turnover 1,190,000 Less expenses Depreciation 193,000 Repairs and maintenance (1) 70,000 Motor and travel (2) 175,000 Rates, light and heat (3) 85,000 Interest paid (4) 36,000 Salaries and wages (5) 600,000 Legal and professional fees (6) 50,000 (1,209,000) (19,000) Other income (7) 10,000 Profit on disposal of non-current assets 4,200 Net loss (4,800) Notes: (1) Repairs and maintenance comprise: Rewiring of office 18,000 Replacing a flat roof on one of the garages with a pitched roof of superior quality 30,000 Resurfacing of car park to repair pot holes 22,000 70,000 (2) Motor and travel: Motor and travel costs include 20,000 of payments made to staff for using their own cars for work purposes and 15,000 for entertainment of potential customers at sporting events. (3) Rates, light and heat: During the year, the company paid annual rates of 22,000 for a premises which they had ceased to use in 2009. The premises had been advertised for rent from that time but to date it is still vacant. (4) Interest paid: Interest paid includes 20,000 in respect of interest on a loan used to purchase non-current assets for use in the company s trade and 2,000 of interest on late payment of PAYE. (5) Salaries and wages: Accrued pension contributions due at 1 January 2014 were 40,000; at 31 December 2014 this figure had fallen to 20,000. 10
(6) Legal and professional fees comprise: Audit fees 46,000 Property consultant s fees 4,000 50,000 The property consultant s fees are ongoing costs incurred by the company to try to obtain a tenant for the vacant premises. (7) Other income of 10,000 arose from dividends received from a 1% shareholding in a UK trading company. Other information relating to non-current assets The company s non-current assets at 1 January 2014 were as follows: Equipment Computers Motor vehicles Ambulances Cost 100,000 30,000 36,000 800,000 Tax written down value 62,500 25,000 27,000 125,000 Additions during the year were: Equipment at a cost of 60,000. A car for one of the company s directors. This category D car cost 35,000 and the director uses the car 20% for business purposes. Disposals during the year were: A category B car, which had been purchased in May 2011 for 22,000, for proceeds of 9,000. Required: (a) Compute the Case I adjusted income of Ambucall Ltd for the year ended 31 December 2014. Note: Your computation should commence with the loss before tax figure of (4,800) and should list all of the items referred to in notes (1) to (7) indicating by the use of zero (0) any items which do not require adjustment. (13 marks) (b) Compute the corporation tax liability of Ambucall Ltd for 2014. (2 marks) (15 marks) End of Question Paper 11
Answers
Fundamentals Level Skills Module, Paper F6 (IRL) Taxation (Irish) Sample answers and Marking Scheme Section A 1 A 40,000 x 24% (Note)= 9,600 x 6/12 = 4,800 (Note: 13,000 x 12/6 = 26,000 km = 24% band) 2 C 600,000 400,000 = 200,000 available losses. Restricted to 6/12 of 250,000 = 125,000. 3 A 2 marks each 15
Section B Marks 1 Ambucall Ltd (a) Case I adjusted income year ended 31 December 2014 Loss before tax (4,800) Addbacks: Depreciation 193,000 0 5 Rewiring of office 0 0 5 Replacement of roof with a superior version 30,000 0 5 Repairs to car park 0 0 5 Payments to staff for use of own cars for work 0 0 5 Entertaining customers 15,000 0 5 Annual rates premises not used in trade 22,000 0 5 Interest paid on loan 0 0 5 Interest on late payment of PAYE 2,000 0 5 Audit fees 0 0 5 Property consultant s fees 4,000 266,000 0 5 261,200 Deductions: Salaries and wages (pension payment (40,000 20,000)) 20,000 1 0 Dividend income 10,000 0 5 Profit on disposal of non-current assets 4,200 0 5 Capital allowances (working) 131,932 (166,132) W Case I adjusted income 95,068 WORKING: Capital allowances Equipment Computers Motor Ambulances vehicles Cost 1 January 2014 100,000 30,000 36,000 800,000 0 5 Additions at cost 60,000 0 12,000 1 0 Disposals 0 0 (24,000) 1 0 Totals 160,000 30,000 24,000 800,000 Wear and tear 12 5% 20,000 3,750 3,000 100,000 0 5 Total of wear and tear allowances = 126,750 Tutorial note: There is no restriction on motor vehicles used by an employee for non-business use. Disposal of motor vehicle Deemed cost in May 2011 24,000 0 5 Wear and tear at 12 5% for three years (9,000) 0 5 Tax written down value 15,000 Sales proceeds, adjusted, 9,000 x 24,000/22,000 9,818 1 0 Less tax written down value (15,000) Balancing allowance 5,182 0 5 13 Total of capital allowance claim for the year (126,750 + 5,182) = 131,932 16
Marks (b) Corporation tax liability 2014 Case I adjusted income (part (a)) 95,068 0 5 Case III, UK dividends 10,000 0 5 Total income 105,068 Corporation tax 105,068 at 12 5% 13,134 1 0 2 0 15 17