EXAM per Task Flashcards
Task 1:
Adjusting profits for tax
Basis periods
ADJUSTING PROFITS:
- First go down the PnL .. don’t just work through the notes. There will be Dep’n in the PnL but also maybe other items such as other income and profit from sale of machine for example.
- Watch out for double-negatives in the detail eg. there might be a net Debt amount which includes sub-amounts … if there is a ‘decrease in general debt provision’ … even though it’s in with expenses such as bad debt w/o this amount would be Deducted not added!.. NB: I think unless the word ‘General’ is included and change in debt provision is probably allowable (so do not adjust)
- Watch out for the other nasty… whether something is a repair or capex.. there was one example where it sounded like a whole roof was being replaced and I decided capex but it wasn’t..
- Don’t rush these - AAT are trying to trip you up.
BASIS PERIODS:
* These are tricky - do not rush! Use timeline and draw it out properly and neatly. Need to be confident: Opening years Change of Date Cessation
- Eg for one Change of Date example I correctly identified the YoC and did the CYB dates for the TY before and after and correctly put in the untaxed dates in the YoC …. but I calculated the no. of months as 11 when it was 23!!! I missed a whole year!
- Also watch for my silly error of increasing a short relevant period up to 12m by using up OLP.
(Use my little rule to check)
.. the OLP is used to REDUCE a long relevant period.
.. You tax backwards to incr. a short period (incr OLP)
Task 3:
Capital Allowances.
Check company or Sole trader. (for private use element)
- Write out the FLIPPING period dates right (watch for using End Date of previous period as end date of this period depending on question wording!!)
- Work out AIA (£1M for 2021) / Special rate 8/6% (1/4/19)
- Make a list of the items and notes on what needs done for each.
WATCH OUT FOR POP UP WINDOW NEEDING SCROLLED
eg. AIA Special rate FYA Short life WDA % / apportion / Biz use. Balancing Allowance / Biz use
Tick off item when adding or deducting for addition/disposal.
Tick off notes after applied.
Check didn’t miss adding everything to CA column.
CAPITAL ALLOWANCE CALC:
* Start by checking AIA & Sp. Rate / is it a Co. or S.T?
- Also read the details and make checkboxes for things need to remember such as apportioning not just the AIA but also the WDAs (this is easy to forget by the time you have finally got to the WDA calculations). Another one is private use … might be in as a red herring for a company but if it’s a .T then make a checkbox to remind me to apportion.
- Remember how to deal with
1. An item sold for more than cost (use cost price)
2. Cessation (where the machinery is sold for more than the pool balance… it creates a charge. - When doing a FYA for a car I seem to sometimes forget to add the amount to the CA column at same time as adding to the pool.. same for AIA.. maybe add a checkbox just for checking that everything got added to the CA column properly.
- Watch out for rounding… eg. I calculated an 18% WDA and put the figure in.. then remembered it was a 7m period so I went back and apportioned it… but because I used the figure I’d already put in I ended up £1 out because of rounding.. so make sure do this in one step eg. £15650 * 18% * 7/12 = ? and only round at that point.
Task 2
Partnerships
PARTNERSHIPS
- Read through first to see what dealing with eg. interest on capital.
- Draw out timeline carefully and split carefully.
- DON’T forget to time-apportion things like salary & interest on capital befor deducting and working out the profit split.
Silly mistakes have included:
- Getting the interest on Capital wrong through reading the wrong figure off workings (UNTIDY workings)
- Getting the number of partners wrong!!! (RTFQ)
- In a complex one having worked out allocation of profits for the accounting periods and then in part b working out the tax years and working out the first TY was 3 months … I took the period profit and did 3/12 …. but the first period was only 7 months so should have been 3/7. (Going too fast)
Task 4
Look over the tax returns so I have good grasp of whats going where with figures… necessary so that know how to handle the info given… see BPP 6.5 & page 7.30 Osb Tut. EG Goods own use goes in early pages of P’ship (page4) before get to the Page 6 likely to get in exam… whereas the Goods for own use box is in a diff place for sol trader
Looks like main things to remember are:
P’ship.
P’ship profits - so things like Sewing maching should deduct on the grounds that this would have got AIA?
Income from untaxed savings. (separate box)
P’ner side:
Watch out for how apportioned per p’ner
Again income from savings is separate box
Task 4
The AAT practice was very simple:
Gave an expenses section and notes which you used to put in ‘disallowed’ amounts on the right side.
Watch out - need to not fall into trap of just working through notes … there will be no note about Depreciation for example but still need to disallow the whole amount
Task 5
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Task 5
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Task 6
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Task 6
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Task 7
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Task 7
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Task 8
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Task 8
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Task 9
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Task 9
- Tax planning, avoidance, evasion definitions are in ref section 2 “intro to business tax”
