Mock Sept 2023

Question 1

When Ficus Ltd set up its trading operation in overseas in Cosmia , we advised not to make an election in respect of its trade, in case the operation initially made losses.

As the operation is profitable, briefly explain whether Ficus Ltd should now make such an election.

-Cosmia tax @ 25%

Answer 1

• rate is Cosmia is higher than UK
• DTR reduced UK CT to nil
• no need to make election to exempt the PEs profits from UK CT
• irrevocable
• apply to all future PEs

Question 2

Which overseas income would you offset QCD from first
W= 20,880 @ 13% net income
C= 75,000 @ 25% net income
For DTR question

Answer 2

W = has lower % rate = so less corp tax to pay = dtr would deduct 13% rather than 19%

Question 3

Which income does DTR calculation use:
Gross income
Income after removing QCD

Answer 3

Gross income

Question 4

When selling a building and the cost stated doesn’t include the STLD figure, what’s the tax implication

Answer 4

Proceed - (cost + SDLT)
X 18% corp tax

Question 5

What’s the tax implication when selling plant and machinery:
Proceed 50,000
Cost 80,000
TWDV is nill

Answer 5

TWDV: Nill
Less disposal
Market value (50,000)
Balancing charge = 50,000
X 19% = x

Question 6

What’s the maximum loss deduction against general income

Answer 6

Greater of
50,000
And
25% ANI
Usually always 50k unless ANI is great than 200k

Question 7

When offsetting loss agains gains, would it be after or before deduction AEA of 12,300

Answer 7

Loss would be set after AEA

Question 8

What’s the rule with loss being generating in one of the x years of trading and carrying back for x years

Answer 8

If loss generated for
- first 4 years of trading
Can carry back for 3 years of trading
On FIFO basis

Question 9

How to calculate tax saving when income reduced from 127,000 to 119,000 due to a loss c/f of 8,000

Answer 9

HRTP @ 40%
Still within the same tax bracket
8,000 x 0.4 = 320
12570 - ((119,000-100,000)/2) = X x 0.4 = X2
Add both

Question 10

How to calculate QSR

Answer 10

IHT paid x ( net received from death estate / total death estate ) x taper relief

Question 11

What can you do to increase charitable donation for death member

Answer 11

• deed of variation to the dead persons will
• within two years of their death
• for no consideration
• contacting a statement that the variation it to have effect for IHT purposes

Question 12

Which conditions should be met for the residential property to qualify as a furnished holiday accommodation

Answer 12

• based in uk / EEA
• available to let more that 7 months
• occupancy (actually let) for more than 3.5 months
• let furnished
• on a commercial basis
• no long term occupation (more that 31 days to the same person)

Question 13

Calculate the income tax relief available when investing in VCT

Answer 13

Income tax reducer
- Amount of investment into VCTx 30%
- but limited to clients income tax liability (capped)

Question 14

When sole trader buying shares and receiving dividends , what tax should you consider

Answer 14

Buying shares should include stamp duty at 0.5%
Dividend= dividend rate based on total income

Question 15

What are the Conditions of a buy back share treated as a capital disposal

Answer 15

• unquoted trading company
• s/h. = uk resident
• own shares more than 5 years
• now has shares less than 75% of what they use to have
• less than 30% shareholding currently
• reason is to benefit the trade not part of an avoidance scheme

Question 16

Conditions of Badr

Answer 16

• employee of trading company
• own more that 5%
• for two years

Question 17

Is badr avaialble for the following:

Shareholder is selling their Building to a company that previously been used but paid commercial rent

Answer 17

No
Shareholder charged full market rent to the company

Question 18

If a company has 5 or less shareholder what type of company is this

Answer 18

Close company

Question 19

What’s the tax implication of a shareholder taking a loan for a company and shareholder

Answer 19

• if loan is less than 10k then exempt benefit for the shareholder = no cost
• over 10k = benefit = pay class 1 nic
• tax charge @ 33.75% per loan
• this will be repaid when the loan is repaid
• not a cost to the company
• if the loan is written off = tax charge will be repaid
• loan written off will be treated as dividend income to the shareholder at their dividend rate.
• class 1 NIC is charged on the loan written off @ 15.05%