R03 Mock Questions Flashcards
Miriam has worked in the same company for 15 years and has recently been asked by them to relocate to London to take up a new role. They have offered to reimburse relocation and removal expenses of £10,000. How will Miriam be taxed on this payment?
Relocation and removal expenses are tax-free up to £8,000. Of Miriam’s £10,000 expenses, £8,000 will be tax-free and £2,000 will be taxable as employment income.
Simon makes a £7,500 contribution to his employer in respect of his new company car. How will this be treated when calculating taxable benefit?
If an employee contributes towards the capital cost of their company car, the maximum deduction from the list price is £5,000. Therefore, £2,500 of Simon’s contribution is ignored.
John is employed full-time in a local school but in his spare time makes children’s toys. His earnings for this are £100 per week. Which National Insurance Contributions must John pay on these self-employed earnings?
As John’s annual earnings for self-employment are under the small profits threshold of £6,515, he is not obligated to pay NICs on them.
Florence has recently become self-employed. She is aware that she will have to pay National Insurance Contributions but wants to know how. You tell her that:
Class 2 and Class 4 are both accounted for under self-assessment.
Suzy has recently become employed following a period of self-employment and has discovered she has paid too much National Insurance through her employer’s payroll. What can she expect to happen to rectify the situation?
The overpayment will be used to cover any underpayment that occurred whilst she was self-employed before any repayment is made to her.
Pauline died on 1st October 2022. Who will be responsible for the payment of any Inheritance Tax due on her estate and when is it payable?
Pauline’s legal representatives must pay any tax due by 30th April 2023.
Scarlett was born in Spain but has been employed as a teacher in a local language school which means she has become a UK resident for this tax year. In relation to how her income from the school is taxed:
As a UK resident and as the income arises in the UK, it is fully taxable.
Alex is self employed and has asked you to explain what is included in the balancing payment he has to make to HMRC in January of each year. You tell him:
Class 2 National Insurance, the balance of income tax and Class 4 National Insurance and any capital gains tax outstanding.
Rhiannon and Vera exchanged their houses in October 2022 with no cash payment as both houses were worth £250,000. What, if any, Stamp Duty Land Tax (SDLT) is payable?
Both would be liable for SDLT of £2,500 each. When houses are exchanged, each person pays SDLT on the market value of the property they have acquired. In this instance, the SDLT would be £250,000 - £125,000 = £125,000 x 2% = £2,500 each.
Gillian has recently invested £20,000 into each of the following investments: UK Listed Shares, a Corporate Bond and a UK Domiciled Exchange Traded Fund. What amount of Stamp Duty Reserve Tax will Gillian pay in total?
£100.
Stamp Duty Reserve Tax is NOT payable on the purchase of corporate bonds or UK domiciled ETFs. It is payable at a rate of 0.5% on the UK listed shares. Therefore £20,000 x 0.5% = £100.
Kat is a higher rate taxpayer. She receives net interest of £260, how much more tax must she pay assuming her personal savings allowance has been used elsewhere?
£65
Jerry has been given a laptop by his new employer as part of his remuneration. The laptop was previously used by Jon, Jerry’s predecessor. The laptop originally cost £600, but its second hand value is £200. What amount is taken as the value for tax purposes?
£200
What penalty may be due where an individual fails to notify HMRC of a liability to Class 2 National Insurance?
£100
How old must an individual be in order to benefit from a personal allowance for income tax?
There is no minimum age
Sally will pay income tax in three instalments. This is most likely because:
She is self-employed.
The accounting period for Value Added Tax is usually:
Every three months.
Jane receives a dividend income of £1,980 in excess of her dividend allowance. As a Basic Rate taxpayer, how much more tax is due?
1980 x 8.75% = £173.25
Tilly did not pay her class 2 National Insurance contributions for 2016/17. If she pays them in 2022/2023, what will be the applicable rate?
The rate for 2022/2023
Who would not receive credit towards National Insurance Contributions?
someone who is self employed but not earning enough to pay class 2 contributions
What is the highest rate of income tax paid on savings income?
45%
Lisa receives a dividend of £1,800 in excess of her dividend allowance. As an additional rate taxpayer, how much more tax is due?
1800 x 39.35% = £708.30
Carol did not pay her class 2 NI contributions when they were due. It has now been 7 years since the missed payment:
Carol still needs to pay them however they will not count towards benefits such as basic state pension.
With regard to the directors of a company and the benefits they may receive, what counts as a director having a material interest in the company?
Solely or with associates and relatives, owning or controlling, directly or indirectly, more than 5% of the ordinary share capital.
Mary, a basic rate taxpayer with earnings of £15,000 PA and savings income of £5,000 PA, is about to dispose of some unit trusts, realising a capital gain, and surrender an offshore bond with a chargeable gain. As a result of these transactions, with regard to the gain on the unit trusts, she will be liable solely to higher rate tax. Assuming that these transactions do not cause her to become an additional rate taxpayer, to which rate(s) of income tax may she be personally liable with regard to the surrender?
20% only or to both 20% and 40%
Safia, a widow, received all of her spouse’s estate on his death. She has recently died leaving her £600,000 estate to her children. Why was there no liability to Inheritance Tax?
Two nil-rate bands, in effect, were applied to her estate.
Heather, whose father and mother are UK domiciled, has lived and worked abroad full time for 10 years in Mexico where she owns a flat. One month ago, she returned to the UK because her mother is ill but will return to Mexico in one months’ time and return to work. How is she most likely to be viewed by HM Revenue and Customs for UK residence and domicile purposes for the tax year 2022/2023?
She will be domiciled but not resident
June is an employed higher rate taxpayer. She made a donation to a charity via gift aid in the previous tax year, but failed to inform HMRC. Who, if anyone, is likely to be disadvantaged by this?
June only, because she will receive no higher rate tax reduction for the donation.
Harry recently disposed of some shares in a business. What is a necessary condition for the disposal to qualify for hold-over relief?
His total shareholding must account for at least 5% of the issued share capital.
In deciding whether an individual should be treated as employed or self-employed for tax purposes:
the existence of a contract to provide services usually indicates that the individual is self-employed.
Sylvia wants to set up a trust for her grandchildren where the assets and income can be distributed to them in line with their individual needs and requirements. What is the most suitable trust for Sylvia?
Discretionary Trust
Margaret is a higher rate taxpayer and has total dividend income of £60,000. How much tax will she pay on this income in 2022/2023?
60,000 - 2,000 (dividend allowance) = 58,000 x 33.75% = £19,575
Anastacia has had some of her husband’s income tax personal allowance transferred to her. This means that:
he has income of less than £12,570 and she is neither a higher rate or additional rate taxpayer.
Jane is a higher rate taxpayer and has received net interest of £5,000 from her portfolio of directly held gilts. What should she declare on her annual tax return?
The net interest received.
Jodie, who is an additional rate taxpayer, makes a gift aid payment of £4,500 to her favourite charity. The payment is treated as if it were a donation of:
£5,625 (4500 x 5 / 4)
Fred, a higher rate taxpayer, died in June, having used none of his capital gains tax annual exempt amount for the current tax year. How much CGT, if any, would be payable by his estate on the £15,000 gains made on his shareholdings at the time of his death?
Nil - there is no CGT on the disposal of assets on the death of an individual.
Ben died in August, leaving a shareholding in a private company to his son Adam. The shareholding was valued on Ben’s death for inheritance tax purposes. If Adam subsequently sells the shares, the acquisition cost for capital gains tax purposes will be the:
value placed on the shares for IHT purposes
Richard, who is a higher rate taxpayer, sold one of his buy-to-let properties in July 2022, realising a gain of £24,000. He has carried forward losses of £10,000 and has not realised any other gains in the current tax year. How much capital gains tax would be payable in respect of his gain?
£24,000 - £10,000 - £12,300 x 28% = £476
When an asset is sold, the date of the disposal for capital gains tax purposes is the date that the:
contract for sale becomes binding
Alfred purchased an asset on 30th April 1975, finally selling it in the 2022/2023 tax year after making a substantial chargeable gain. How will its base cost be calculated?
By reference to its market value on 31st March 1982
Sian makes a gift aid donation to charity in 2022/2023 and she has been advised to have this backdated to the previous tax year. What would the position be?
she could have it treated as being paid in the previous tax year, and she will receive relief in 2022/2023 as a repayment.
Lena, who is an employed higher rate taxpayer wishes to file her return by paper for 2022/2023. By which date must she do so?
31st October 2023
Rory, who is self-employed, has a tax liability for 2021/2022 of £18,000. If he files his 2021/2022 tax return online, by when must he have done so, and what first payment on account for 2022/2023 is made at that time?
31st January 2023 and a £9,000 first payment.
Trevor has noticed that he has made an error on his self assessment tax return for 2021/2022. What is the latest date that Trevor can notify HMRC of an amendment to his return?
31st January 2024
Matt, who is self employed, fails to make his balancing payment on 31st January 2023. How long before he is charged a 5% penalty on any tax that still remains unpaid?
Once 30 days have passed.
What is the latest date by which an employer must give their employees a P60 for 2022/2023?
31st May 2023
An employer failed to pay HMRC money owed for PAYE and National Insurance Contributions on 2 occasions during 2022/2023. Both times the payment was 2 months late. What penalty will be incurred for the second late payment which was for an amount due of £68,500?
£685 (1%)
David made a net profit of £30,000 in the tax year 2022/2023. Under self assessment, when will he need to pay his balancing payment for this tax year?
January 2024
Rose is self employed and has calculated that her income tax liability is £25,000 for 2021/2022 and £35,000 for 2022/2023. How much income tax will she pay on 31 Jan 2024?
£27,500
For the tax year 2022/2023, the income tax payments for a self employed individual are payment on account on:
31st Jan 2023, a second payment on account on 31 July 2023 and a balancing payment on 31 Jan 2024
Martha, who is self employed, has made a gift aid donation in 2022/2023 which she wishes to carry back to the previous year. What is the correct procedure in this situation?
The relief is calculated as if it were given in 2021/2022, but any repayment is included in the calculation for 2022/2023. There will be no reductions in payments on account for 2022/2023.
An employer pays HMRC all monies owed for PAYE and National Insurance Contributions electronically. For the tax month of September, this must be paid across to HMRC by :
22nd October
Chris has been asked by HMRC to make an accelerated payment of a disputed tax liability. What is the most likely reason for this?
He has been found by HMRC to be using a failed tax avoidance arrangement.
Within how many months of their receipt of a self assessment tax return does HMRC usually have the right to carry out a compliance check into its accuracy?
12 months
Class 2 and Class 4 NICs account for what percentage of the National Insurance Fund?
3%
Stefan has a company car valued at £15,100 and has private fuel paid by his employer. Assuming the carbon emissions of the car lead to a percentage charge of 25%, What is the taxable benefit of the fuel?
£6,325 - The charge for private fuel use is based on a set figure each year, for 2022/2023 its £25,300. 25% of £25,300 is £6,325.
Who determines the rates and bands for income tax in England?
Parliament
Amy is a company director and is paid a flat fee of £20,000. How are her National Insurance Contributions calculated?
By considering her total earnings from the start of the tax year and using the annual limits
Rory made a £14,000 loss on a disposal in this tax year whereas his wife Amy made a substantial gain. What is he permitted to do?
Carry the loss forward to use against future gains using only enough to reduce future gains to the annual exempt amount.
Mr Sloane has created 6 trusts, one of which has made a gain of £10,000 on the sale of an investment. What is the annual exempt amount for Capital Gains Tax that can be used against this gain?
£1,230
Damon owed a balancing tax payment of £10,000 on 31st January 2023. In late March 2023, he still had not paid it. What penalty will HMRC usually charge Damon?
£500
Caroline, a first time buyer buys a flat in England for £127,950. What stamp duty land tax (SDLT) will be payable?
£0
What do promoters of tax avoidance schemes receive from HMRC in the event of their scheme being registered?
a reference number
Klaus and Caroline, both age 38, are married with 2 children age 15 and 17. What is the total amount they can pay into ISAs in the current tax year?
£78,000
Elijah has been asked to be a trustee of a trust where there is no interest in possession. He has asked you what the implications of this are. You can tell him that:
- there is no requirement for him to pay income to any particular beneficiary.
- if a beneficiary dies, there is no charge to IHT on their estate.
When considering business asset disposal relief for capital gains tax purposes, the:
reduced rate of capital gains tax applies to lifetime gains of £1m or less
Hazel received a gift of £100,000 in May 2022. She has fully utilised her ISA allowance for 2022/23 and would like to invest the £100,000 in a tax-efficient manner. If she has a total income of £7,500 PA, the most tax efficient investment would be:
a deposit account
What tax benefit could someone making a new investment into an Enterprise Investment Scheme enjoy?
Deferral of an existing capital gains tax
Armando is interested in investing in a guaranteed equity product linked to the performance of the FTSE 100. The components used within the product are most likely to be a combination of a: -
Fixed-interest investment and a derivative of the FTSE 100.
Vanessa is considering investing her money in a local authority bond and wants to know more about them. Vanessa should be advised that:
interest is paid gross and is taxable as savings income.
An employer pays HMRC all money owed for PAYE and National Insurance Contributions electronically. For the month of September this money must be paid to HMRC by:
22nd October
National Insurance contributions above the upper earnings limit are payable by:
an employee at 3.25% with no upper limit
