– Personal allowance reduction/personal age allowance.
– Husband and wife/civil partners.
– Employed vs. self-employed.
– Losses – choice of relief/tax saving/maximum deduction restriction.
– Possibly a straddling period.
– Long period of account.
– Chargeable gains to calculate.
– Separate part of question 1 or 2 or whole question 4/5.
– Impaired debts.
– Invoices/simplified invoicing.
Capital gains tax:
– Husband and wife making disposals.
– Wasting assets or chattels.
– Exempt assets.
– Transfer of unused NRB between spouses.
Other topics for questions 4 and 5:
– Comparative scenario or other new style question.
– Self assessment.
– Ethics – including general anti-abuse rule.
– Income tax – employed earner and the sole trader.
– Capital allowances – aspects of groups.
– CGT – individual or company perspective with a number of disposals. We favour companies chargeable gains this time.
Q1: Income Tax
– Employment income including the evaluation of benefits,
– Savings income and dividend income and interest payable on special loans,
– Introducing a partner into the partnership with opening year rules.
– Computing the income tax payable.
– Computing national insurance.
Q3: Capital gains tax for individuals a mixed bag.
Q4: Property business income and trading losses for sole trader.
Q5: Residency position of a number of individuals, IHT on making lifetime gifts into a trust.
– Opening years and change of year end for sole traders.
– Capital allowances.
– Corporation tax losses.
– VAT default surcharge and VAT invoice content and annual accounting.
– CGT: Principal private residence and entrepreneur’s relief, chattels.
– IHT lifetime and death transfers.
Q.1 Income Tax and VAT
This question usually requires the preparation of an Income Tax Computation for at least one individual, possibly two (spouses or civil partners) or even three
taxpayers (members of the same family) The two main sources of income tested
within the computation are Employment Income and the adjusted trading profits of
the Self Employed. Property income is a popular exam area and the recent changes
in the definition of furnished holiday lettings may be tested here. Interest
income is also frequently tested with examples of taxable interest received net
and gross plus exempt interest and of course some dividend income. Watch out also for the
extension of the basic rate band and if applicable higher rate band.
A scenario involving a detailed computation of Employment Income with various benefits
and allowable expenses would seem likely. Possibly a cessation of an unincorporated trade and VAT deregistration with final VAT return
Class I NIC’s for employee and Class 1 and 1A NIC’s for the employer plus Classes 2 & 4 for the self employed trader
Q.2 Corporation Tax
May require the preparation of Corporation Tax Computations for a long period of account, for example the 15 months to 31 March 2014 giving rise to two Chargeable Accounting Periods with the first (12 months to 31 December 2013) straddling Financial Years 2012 and 2013.
As this is the first year for a few years that we could see a Capital Allowance computation for an
accounting period spanning 2 Financial Years this would be an obvious question topic.
A significant amount of marks are usually available for the adjustment of profit
statement and Capital Allowances Computation(s).
The company may be in a gains group and group relief group.
Q.3 Chargeable Gains
If a question involves corporate gains rather than an individual then the main
assets that a company may dispose of would include:
Properties – this may involve establishing the cost of the property from an
earlier acquisition via a no gain no loss transfer from a fellow gains group
member and/or the cost may have been reduced by a rollover relief claim at the
time of acquisition. The gain arising may now also be deferred by a full
rollover or partial rollover relief claim or if a depreciating asset is now
acquired a holdover relief claim may instead be available.
Land – a part disposal of land
Shares – use of share pool
Chattels – e.g. a painting from the boardroom (times are hard!)
If a share disposal by an individual takes place then this could be in the form
of a takeover, or the sale of shares that had been acquired as a result of an
If dealing with disposals by an individual reliefs are always tested, note gift relief and PPR relief
Questions 4 and 5
IHT is a regular feature of part of a question and may require the calculation of IHT on the death of the taxpayer who benefits from the transfer of the unused nil rate band from his/her spouse
Groups if not tested in Q.2
A question involving the provision of cars to employees and to an unincorporated
trader as per note (2) above.
– Taxation of benefits and of motor cars.
– Combination of employment income & different types of property income, maybe rent-a-room or personal income tax computation.
– Employment income – benefits with NICs.
– Partnerships – opening and closing year issues.
– Relief for a trading loss of self-employed persons.
– A 12-month accounting period, with adjustments for profit.
– Long period of account rules.
– Capital gains ion a group.
– Principal private residence.
– Entrepreneurs’ relief.
– VAT treatment of overseas trading (EU and non-EU sales and purchases).
– Class 1 and Class 1A NIC – benefits and PAYE.
– Unused nil rate bands from a predecessor spouse.