EXAM tips

Question 1

When adjusting trading income.. best method?

Answer 1

1. Go down income statement first:

Income section first:
DEDUCT items eg. interest & dividends

Expenses section:
ADD back eg. non allowable expenses.
(Watch out for a ‘double negative’ in a net figure eg. Decrease in general bad debt provision is actually a negative figure in the income statement expenses meaning it has actually increased profit so in this case you would DEDUCT)

2. THEN deal with the notes.

Question 2

Disallowable expenses from AAT Lifelong learning video (the ones I’m not confident on only)

Answer 2

1. Not incurred wholly & Exclusively:
   eg. personal tax advice; everyday clothing.
2. Withdrawal of Profits:
   Drawings, dividends
3. Private expenditure ST’s & P’ners:
   Use of assets;
   Goods for own use;
   Fines
4. Capex & Dep’n:
   Capex includes INITIAL repairs to make 2nd hand asset useable.
5. Political/Charity:
   Charity donations only allowable if W&E for trading purposes, payable to local charities.
   (Instead use gift aid for individuals and QCDs for companies)

6. Legal/ Professional.
Incl relating to Capex and lawbreaking.
Incl. Company formation.
Incl. Costs associated with a fine.
Cost defending director against motor offense.
Includes aquiring a NEW lease (capex?)

7. Car lease payents - a proportion is Disallowed (15%) if the CO2 emmissions exceed a predetermined limit (set by Gov each FA)
8. W/O of non-trade loans eg employee, customer
9. Debts
   No general. (Specific provisions and Impairments are allowable)

Question 3

Not clear on Interest when adjusting profit for CT … I’m hoping exam would spell it out ‘non-trading interest’ which you would deduct and add back …

Answer 3

..

Question 4

Basis periods.

Current year basis?

Answer 4

The 12-month period of account ending in a tax year

Question 5

For Capital allowance calculation task .. first question is whether its a ST/P’ship or a Company.

Answer 5

Company:

• Split to 12m CAPs & put items in by date.
• Time apportion AIA & WDAs
• Private use doesn’t apply

S.T or P'ship:
* APs up to 18m are allowed.
* Time apportion AIAs & WDAs
* Adjust for private use
Private use:
(Use a Single asset pool for cars .
Use separate lines for each AIA amount claimed in the mini calc so can adjust only the relevant lines for PU. Remember that you ignore private use when checking AIA limit breach though. The PU affects the amount you put in the CAs column on the right.
Adjust WDAs at the bottom but remember here also the full amount is deducted from the pool for c/f amounts). It's just the CLAIM amount for the period that you are adjusting for PU. (I THINK)

eg. mini calc:
Acquisitions qualifying for AIA:
Computer  5,000
AIA claimed (5,000)
Pickup truck 20,000
AIA claimed (20,000) * 80%

So the full 20,000 comes off the AIA and pool but only the 80% goes in the Capital Allowances column on the right.

Question 6

Capital allowances:

What to remember about the special rate %

Answer 6

The date of change is 1/4/19 & 6/4/19 (but you can use 1/4/19 for STs & P’ships also)

It is NOT the date of the car purchase that is relevant - you must work out a hybrid % for the period if it straddles the change date.

To do the calc use 3 decimal places:
8 * 1/12 = 0.667
6 * 11/12 = 5.500
Hybrid % = 6.167

Question 7

Capital allowances:

How to deal with Short-Life Assets (<8years)

Answer 7

Reason is so that you can w/o balancing amount when you sell so need Separate column for each one .. SLA (1) SLA (2)

Put each in separate col/pool.
The WDA is still 18% so you can use the same line at the bottom as the 18% applying to the Main Pool but make sure you add the amounts together to get the right total in tha CAs col at the right.

I think it’s akin to what you are doing with Cars … not sure why you would add any car/van to main pool ..

Question 8

Capital allowances:
For time apportioning its the full amount that comes off the AIA (which itself has been apportioned) .. and the same ull amount goes to the CA column.

Same at the bottom …. you time-apportion the WDA amounts and thats the amounts that come off the WDVs..

Its ONLY the PU bits that get deducted ONLY from the Capital Allowance column on the right… the WDA amounts in the other cols show the total amount withought the PU deducted…. I THINK

Question 9

ntlr

Answer 9

non-trading loan relationship (NTLR)

Question 10

Augmented profits?

Answer 10

Augmented profits excludes dividends from 51% group companies

Question 11

Do not rush when reading questions. short or long

Answer 11

It’s too easy to slip up.. eg I was answering a question about installment date for a large company given a y/e of x date … and was so busy rushing to the fact that i needed to work out the year beginning that I nearly missed the fact that the date asked for was the 4th installment not the first as is usually asked for…

Question 12

I seem to have habit of muddling 2 items

eg. Take 2 dates to consider whether shares need matched and get it wrong way round even though I know the rule.
eg. ST profit is 6,600 - how much NICs.. I realise 6475 threshold is relevant but interpret it as no NICs due instead of other way round…

like POA dates I need to probably write on paper as more ikely to get it right.. also just dont think I can rush even if I know the rule its easy to muddle the application of it..

Answer 12

.Definitely take time to read and understand the question and make sure pick up on what testing..