Taxation

(United Kingdom)
September/December 2015

Time allowed
Reading and planning:
Writing:

15 minutes
3 hours

This question paper is divided into two sections:

Section A ALL 15 questions are compulsory and MUST be attempted
Section B ALL SIX questions are compulsory and MUST be attempted
Rates of tax and tables are printed on pages 24.
Do NOT open this question paper until instructed by the supervisor.
During reading and planning time only the question paper may be
annotated. You must NOT write in your answer booklet until instructed
by the supervisor.
Do NOT record any of your answers on the question paper.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Paper F6 (UK)

Fundamentals Level Skills Module

SUPPLEMENTARY INSTRUCTIONS
1.
2.
3.

Calculations and workings need only be made to the nearest .

All apportionments should be made to the nearest month.
All workings should be shown in Section B.

TAX RATES AND ALLOWANCES

The following tax rates and allowances are to be used in answering the questions.
Income tax

Basic rate
Higher rate
Additional rate

1 31,865
31,866 to 150,000
150,001 and over

Normal
rates
20%
40%
45%

Dividend
rates
10%
325%
375%

A starting rate of 10% applies to savings income where it falls within the first 2,880 of taxable income.

Personal allowance
Personal allowance
Born on or after 6 April 1948
Born between 6 April 1938 and 5 April 1948
Born before 6 April 1938

10,000
10,500
10,660

Income limit
Personal allowance
Personal allowance (born before 6 April 1948)

100,000
27,000

Residence status
Days in UK
Less than 16
16 to 45
46 to 90
91 to 120
121 to 182
183 or more

Previously resident
Automatically not resident
Resident if 4 UK ties (or more)
Resident if 3 UK ties (or more)
Resident if 2 UK ties (or more)
Resident if 1 UK tie (or more)
Automatically resident

Not previously resident

Automatically not resident
Automatically not resident
Resident if 4 UK ties
Resident if 3 UK ties (or more)
Resident if 2 UK ties (or more)
Automatically resident

Child benefit income tax charge

Where income is between 50,000 and 60,000, the charge is 1% of the amount of child benefit received for every
100 of income over 50,000.

Car benefit percentage

The relevant base level of CO2 emissions is 95 grams per kilometre.
The percentage rates applying to petrol cars with CO2 emissions up to this level are:
75 grams per kilometre or less
76 grams to 94 grams per kilometre
95 grams per kilometre

5%
11%
12%

Car fuel benefit

The base figure for calculating the car fuel benefit is 21,700.

New individual savings accounts (NISAs)

The overall investment limit is 15,000.

Pension scheme limit

Annual allowance 201415
201112 to 201314

40,000
50,000

The maximum contribution that can qualify for tax relief without any earnings is 3,600.

Authorised mileage allowances: cars

Up to 10,000 miles
Over 10,000 miles

45p
25p

Capital allowances: rates of allowance

Plant and machinery
Main pool
Special rate pool

18%
8%

Motor cars
New cars with CO2 emissions up to 95 grams per kilometre
CO2 emissions between 96 and 130 grams per kilometre
CO2 emissions over 130 grams per kilometre

100%
18%
8%

Annual investment allowance

Rate of allowance
Expenditure limit

100%
500,000

Cap on income tax reliefs

Unless otherwise restricted, reliefs are capped at the higher of 50,000 or 25% of income.
Corporation tax
Financial year
Small profits rate
Main rate
Lower limit
Upper limit
Standard fraction

2012
20%
24%

2013
20%
23%

2014
20%
21%

300,000
1,500,000

300,000
1,500,000

300,000
1,500,000

1/100

3/400

1/400

Marginal relief
Standard fraction x (U A) x N/A

[P.T.O.

Value added tax (VAT)

Standard rate
Registration limit
Deregistration limit

20%
81,000
79,000

Inheritance tax: tax rates

1 325,000
Excess Death rate
Lifetime rate

Nil
40%
20%

Inheritance tax: taper relief

Years before death
Over
Over
Over
Over

3
4
5
6

but
but
but
but

less
less
less
less

than
than
than
than

4
5
6
7

Percentage
reduction
20%
40%
60%
80%

years
years
years
years

Capital gains tax

Rates of tax Lower rate
Higher rate
Annual exempt amount
Entrepreneurs relief Lifetime limit
Rate of tax

18%
28%
11,000
10,000,000
10%

National insurance contributions

(Not contracted out rates)
Class 1

Employee

1 7,956 per year

7,957 41,865 per year
41,866 and above per year

Nil
12%
12%

Class 1

Employer

1 7,956 per year

7,957 and above per year
Employment allowance

Nil
138%
2,000

Class 1A
Class 2
Class 4

138%
275 per week
Small earnings exemption limit
1 7,956 per year
7,957 41,865 per year
41,866 and above per year

5,885
Nil
9%
2%

Rates of interest (assumed)

Official rate of interest
Rate of interest on underpaid tax
Rate of interest on overpaid tax

325%
3%
05%

Section A ALL 15 questions are compulsory and MUST be attempted

Please use the grid provided on page two of the Candidate Answer Booklet to record your answers to each multiple
choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.
Each question is worth 2 marks.
1

On 10 January 2015, a freehold property owned by Winifred was damaged by a fire. The property had been
purchased on 29 May 2002 for 73,000. Winifred received insurance proceeds of 37,200 on 23 February 2015,
and she spent a total of 41,700 during March 2015 restoring the property. Winifred has elected to disregard the
part disposal.
What is the base cost of the restored freehold property for capital gains tax purposes?
A
B
C
D

68,500
77,500
114,700
35,800

Which TWO of the following items of expenditure are deductible in the calculation of an individuals taxable
income?
(1)
(2)
(3)
(4)

A
A
A
A

contribution into a personal pension scheme

charitable gift aid donation
contribution into an employers HM Revenue and Customs registered occupational pension scheme
charitable donation made under the payroll deduction scheme

A
B
C
D

3
1
2
1

and
and
and
and

4
2
3
4

Benjamin died on 30 November 2014 leaving an estate valued at 890,000. Inheritance tax of 276,000 was paid
in respect of the estate. Under the terms of his will, Benjamin left 260,000 to his wife, a specific legacy of
120,000 (free of tax) to his brother, and the residue of the estate to his grandchildren.
What is the amount of inheritance received by Benjamins grandchildren?
A
B
C
D

614,000
510,000
354,000
234,000

Yui commenced trading on 1 April 2014, and registered for value added tax (VAT) from 1 January 2015. Her first
VAT return is for the quarter ended 31 March 2015. During the period 1 April 2014 to 31 March 2015, Yui incurred
input VAT of 110 per month in respect of the hire of office equipment.
How much input VAT in respect of the office equipment can Yui reclaim on her VAT return for the quarter ended
31 March 2015?
A
B
C
D

660
990
330
1,320

[P.T.O.

Since 6 April 2014, Nicolas has let out an unfurnished freehold office building. On that date, the tenant paid Nicolas
a premium of 82,000 for the grant of a 15-year lease.
How much of the premium of 82,000 will Nicolas include when calculating his property business profit for the
tax year 201415?
A
B
C
D

59,040
22,960
82,000
5,467

Wan ceased trading on 31 December 2014, having been self-employed since 1 January 2002. On 1 January 2014,
the tax written down value of her plant and machinery main pool was 6,200. On 10 November 2014, Wan
purchased a computer for 1,600. All of the items included in the main pool were sold for 9,800 on 31 December
2014.
What is the balancing charge which will arise upon the cessation of Wans trade?
A
B
C
D

4,716
3,404
2,000
3,600

For the year ended 30 June 2014, Forgetful Ltd had a corporation tax liability of 166,250, which it did not pay until
31 July 2015. Forgetful Ltd is not a large company.
How much interest will Forgetful Ltd be charged by HM Revenue and Customs (HMRC) in respect of the late
payment of its corporation tax liability for the year ended 30 June 2014?
A
B
C
D

1,801
2,909
5,403
1,662

Mammoth Ltd commenced trading on 1 January 2012. The companys augmented profits have been as follows:
Period
Year ended 31 December 2012
Year ended 31 December 2013
Year ended 31 December 2014

524,000
867,000
912,000

Throughout all of these periods, Mammoth Ltd had one associated company.
What is the first year for which Mammoth Ltd will be required to pay its corporation tax liability by quarterly
instalments?
A
B
C
D

Year ended 31 December 2013

None of the years ended 31 December 2012, 2013 or 2014
Year ended 31 December 2014
Year ended 31 December 2012

On 31 March 2015, Jessica sold a copyright for 28,800. The copyright had been purchased on 1 April 2009 for
21,000 when it had an unexpired life of 15 years.
What is Jessicas chargeable gain in respect of the disposal of the copyright?
A
B
C
D

Nil
20,400
16,200
7,800

10 Lorna has the choice of being either employed or self-employed. If employed, Lornas gross annual salary for the tax
year 201415 will be 36,000. If self-employed, Lornas trading profit for the year ended 5 April 2015 will be
36,000.
How much more national insurance contributions will Lorna suffer for the tax year 201415 if she chooses to be
employed rather than self-employed?
A
B
C
D

841
937
698
1,080

11 Heng is a wealthy 45 year old who would like to reduce the potential inheritance tax liability on her estate when she
dies.
Which of the following actions will NOT achieve Hengs aim of reducing the potential inheritance tax liability on
her estate when she dies?
A
B
C
D

Changing the terms of her will so that the residue of her estate goes to her grandchildren rather than her children
Making lifetime gifts to trusts up to the value of the nil rate band every seven years
Changing the terms of her will so that the residue of her estate goes to her husband rather than her children
Making lifetime gifts to her grandchildren early in life

12 Which of the following companies will be treated as resident in the UK for corporation tax purposes?
(1)
(2)
(3)
(4)

A Ltd, a company incorporated in the UK, with its central management and control exercised in the UK
B Ltd, a company incorporated overseas, with its central management and control exercised in the UK
C Ltd, a company incorporated in the UK, with its central management and control exercised overseas
D Ltd, a company incorporated overseas, with its central management and control exercised overseas

A
B
C
D

1 only
1, 2, 3 and 4
2 and 3 only
1, 2 and 3 only

13 Taxes can be either capital taxes or revenue taxes, although some taxes are neither type of tax.
Which is the correct classification for the following three taxes?

A
B
C
D

Value added
tax
Neither type
Revenue tax
Capital tax
Neither type

Inheritance
tax
Revenue tax
Capital tax
Neither type
Capital tax

National insurance
contributions
Capital tax
Neither type
Revenue tax
Revenue tax

[P.T.O.

14 During the year ended 31 March 2015, Luck Ltd received the following dividends:
From unconnected companies
From a company in which Luck Ltd has a 80% shareholding
From a company in which Luck Ltd has a 45% shareholding

4,680
3,870
1,260

These figures are the actual cash amounts received.

What is the amount of Luck Ltds franked investment income (FII) for the year ended 31 March 2015?
A
B
C
D

6,600
10,900
5,940
5,200

15 For the tax year 201415, what are the latest dates by which a taxpayer, who does not wish to incur a penalty,
should file a self-assessment tax return on paper or online?
A
B
C
D

Paper tax return

31 October 2015
31 October 2015
31 October 2016
31 October 2016

Online tax return

31 January 2017
31 January 2016
31 January 2016
31 January 2017
(30 marks)

Section B ALL SIX questions are compulsory and MUST be attempted

Please write your answers to all parts of these questions on the lined pages within the Candidate Answer Booklet.
1

You should assume that todays date is 1 March 2015.

(a) On 27 August 2014, Ruby disposed of an investment property, and this resulted in a chargeable gain of
45,800.
For the tax year 201415, Ruby has taxable income of 17,600.
Required:
Calculate Rubys capital gains tax liability for the tax year 201415 if this is her only disposal in that tax
year.
(2 marks)
(b) In addition to the disposal already made on 27 August 2014, Ruby is going to make one further disposal during
the tax year 201415. This disposal will be of either Rubys holding of 1 ordinary shares in Pola Ltd, or her
holding of 50p ordinary shares in Aplo plc.
Shareholding in Pola Ltd
Pola Ltd is an unquoted trading company, in which Ruby has a 10% shareholding. The shareholding was
purchased on 14 July 2007 for 23,700 and could be sold for 61,000. Ruby has been an employee of
Pola Ltd since 2005.
Shareholding in Aplo plc
Aplo plc is a quoted trading company, in which Ruby has a shareholding of 40,000 50p ordinary shares. Ruby
received the shareholding as a gift from her father on 27 May 2010. On that date, the shares were quoted on
the stock exchange at 212224. There were no recorded bargains on that date. The shareholding could be
sold for 59,000.
Neither entrepreneurs relief nor holdover relief is available in respect of this disposal.
Required:
Calculate Rubys revised capital gains tax liability for the tax year 201415 if, during March 2015, she also
disposes of either (1) her shareholding in Pola Ltd; or alternatively (2) her shareholding in Aplo plc.
Note: The following mark allocation is provided as guidance for this requirement:
Pola Ltd
Aplo plc

(4.5 marks)
(3.5 marks)
(8 marks)
(10 marks)

[P.T.O.

(a) Inheritance tax legislation does not actually contain a definition of who is, and who is not, a chargeable person.
Required:
(i)

Explain whether or not a married couple is treated as a chargeable person for inheritance tax purposes.
(1 mark)

(ii) State the special inheritance tax measures which are applicable to married couples.

(2 marks)

(b) Marcus died on 10 March 2015. He had made the following gifts during his lifetime:
(1) On 14 January 2006, Marcus made a chargeable lifetime transfer of 290,000 to a trust. The trustees paid
the lifetime inheritance tax of 3,000 which arose in respect of this gift.
(2) On 3 February 2012, Marcus made a chargeable lifetime transfer of 420,000 to another trust. In addition
to the gift, Marcus paid the related lifetime inheritance tax of 96,250 on this gift.
(3) On 17 March 2012, Marcus made a gift (a potentially exempt transfer) of 30,000 1 ordinary shares in
Scarum Ltd, an unquoted investment company, to his daughter.
Before the transfer, Marcus owned all of Scarum Ltds issued share capital of 100,000 1 ordinary shares.
On 17 March 2012, Scarum Ltds shares were worth 5 each for a holding of 30%, 9 each for a holding
of 70%, and 12 each for a holding of 100%.
The nil rate band for the tax year 200506 is 275,000, and for the tax year 201112 it is 325,000.
Under the terms of his will, Marcus left his entire estate to his wife.
Required:
Calculate the inheritance tax which will be payable as a result of Marcuss death.
Note: You should ignore the inheritance tax annual exemption.

(7 marks)
(10 marks)

10

Smart Ltd commenced trading on 1 September 2014. The companys sales for the first four months of trading were
as follows:
2014
September
October
November
December

26,000
47,000
134,000
113,000

On 1 November 2014, the company signed a contract valued at 86,000 for completion during November 2014.
All of the above figures are stated exclusive of value added tax (VAT). Smart Ltd only supplies services and all of the
companys supplies are standard rated.
Smart Ltd allows its customers 60 days credit when paying for services, and it is concerned that some customers will
default on the payment of their debts. The company pays its purchase invoices as soon as they are received.
Smart Ltd does not use either the VAT cash accounting scheme or the annual accounting scheme.
Required:
(a) State, giving reasons, the date from which Smart Ltd was required to register for value added tax (VAT), and
by when it was required to notify HM Revenue and Customs (HMRC) of the registration.
(3 marks)
(b) State how and when Smart Ltd will have to submit its quarterly VAT returns and pay any related VAT liability.
Note: You are not expected to cover substantial traders or the election for monthly returns.

(2 marks)

(c) State the circumstances when a VAT registered business like Smart Ltd, which is not using the VAT cash
accounting scheme, would still have to account for output VAT at the time that payment is received from a
customer.
(2 marks)
(d) Advise Smart Ltd as to why it should be beneficial for the company to use the VAT cash accounting scheme.
(3 marks)
(10 marks)

11

[P.T.O.

(a) Amanda, Beatrice and Claude have been in partnership since 1 November 2008, preparing accounts to
31 October annually. Daniel joined as a partner on 1 May 2014. Profits have always been shared equally. The
partnerships recent tax-adjusted trading profits are as follows:

147,000
96,000
180,000

Year ended 31 October 2013

Year ended 31 October 2014
Year ended 31 October 2015 (forecast)
Required:

Calculate Daniels trading income assessment for the tax year 201415.

(3 marks)

(b) Francine is employed by Fringe plc. On 1 August 2014, Fringe plc provided Francine with a loan of 96,000 to
help her purchase a holiday cottage. On 1 October 2014, the loan was increased by a further 14,000 so that
Francine could renovate the cottage. Francine pays interest at an annual rate of 15% on this loan.
The taxable benefit in respect of this loan is calculated using the average method.
Required:
Calculate Francines taxable benefit for the tax year 201415 in respect of the loan from Fringe plc.
(3 marks)
(c) Gregor has been self-employed since 6 April 2001. He has the following income and chargeable gains for the
tax years 201314 and 201415:

Trading profit/(loss)
Business property profit/(loss)
Building society interest (gross)
Chargeable gain/(loss)

201314

14,700
4,600
1,300
(2,900)

201415

(68,800)
(2,300)
900
17,400

Required:
On the assumption that Gregor relieves his trading loss of 68,800 as early as possible, calculate the amount
of trading loss carried forward to the tax year 201516.
Note: You should assume that the tax allowances for the tax year 201415 apply throughout.

(4 marks)
(10 marks)

12

Samson and Delilah are a married couple. Samson was born on 24 June 1964 and Delilah was born on 6 May 1962.
They are both employed by Rope plc, and Delilah is also a partner in a partnership. The following information is
available in respect of the tax year 201415:
Samson
During the tax year 201415, Samson was paid a gross annual salary of 112,000 in respect of his employment
with Rope plc.
Delilah
(1) During the tax year 201415, Delilah was paid a gross annual salary of 184,000 in respect of her employment
with Rope plc.
(2) Throughout the tax year 201415, Rope plc provided Delilah with a petrol powered motor car which has a list
price of 67,200, and an official CO2 emission rate of 207 grams per kilometre. Rope plc does not provide
Delilah with any fuel for private journeys. Delilah was unable to drive her motor car for a period during the tax
year 201415 because of a skiing accident, and during this period Rope plc provided her with a chauffeur at a
total cost of 9,400.
(3) Delilah pays an annual professional subscription of 450 which is relevant to her employment with Rope plc.
Delilah also pays an annual membership fee of 1,420 to a golf club which she uses to entertain Rope plcs
clients. Rope plc does not reimburse Delilah for either of these costs.
(4) During the tax year 201415, Delilah donated 250 (gross) per month to charity under the payroll deduction
scheme operated by Rope plc.
(5) Delilah has been in partnership with Esther and Felix for a number of years. The partnerships tax adjusted
trading profit for the year ended 31 December 2014 was 93,600. Esther is paid an annual salary of 8,000,
with the balance of profits being shared 40% to Delilah, 30% to Esther and 30% to Felix.
(6) During the tax year 201415, Delilah paid interest of 6,200 (gross) on a personal loan taken out to purchase
her share in the partnership.
(7) During the tax year 201415, Delilah made charitable gift aid donations totalling 6,000 (gross).
Joint income Building society deposit account
Samson and Delilah have savings in a building society deposit account which is in their joint names. During the tax
year 201415, they received building society interest totalling 9,600 (gross) from this joint account.
Required:
(a) Calculate Samson and Delilahs respective income tax liabilities for the tax year 201415.
Note: The following mark allocation is provided as guidance for this requirement:
Samson
Delilah

(3.5 marks)
(9.5 marks)
(13 marks)

(b) Calculate Samsons income tax saving for the tax year 201415 if the building society deposit account had
been in Delilahs sole name instead of in joint names for the entire year.
(2 marks)
(15 marks)

13

[P.T.O.

Lucky Ltd was incorporated on 20 July 2014, and commenced trading on 1 December 2014. The following
information is available for the four-month period 1 December 2014 to 31 March 2015:
(1) The operating profit for the four-month period ended 31 March 2015 is 532,600. Advertising expenditure of
4,700 (incurred during September 2014), depreciation of 14,700, and amortisation of 9,000 have been
deducted in arriving at this figure.
The amortisation relates to a premium which was paid on 1 December 2014 to acquire a leasehold warehouse
on a 12-year lease. The amount of premium assessed on the landlord as income was 46,800. The warehouse
was used for business purposes by Lucky Ltd throughout the period ended 31 March 2015.
(2) Lucky Ltd purchased the following assets during the period 20 July 2014 to 31 March 2015:
19
22
31
17

August 2014
January 2015
January 2015
March 2015

Computer
Integral features
Office equipment
Motor car

6,300
141,200
32,900
12,800

The integral features of 141,200 are in respect of expenditure on electrical systems, a ventilation system and
lifts which are integral to a freehold office building owned by Lucky Ltd.
The motor car has a CO2 emission rate of 82 grams per kilometre.
(3) Lucky Ltd made a loan to another company for non-trading purposes on 1 February 2015. Loan interest income
of 700 was accrued at 31 March 2015.
Required:
(a) State when an accounting period starts for corporation tax purposes.

(2 marks)

(b) Calculate Lucky Ltds corporation tax liability for the four-month period ended 31 March 2015.
Note: Your computation should commence with the operating profit of 532,600, and should also indicate by
the use of zero (0) any items referred to in the question for which no adjustment is required.
(11 marks)
(c) Advise Lucky Ltd as to how long it must retain the records used in preparing its self-assessment corporation
tax return for the four-month period ended 31 March 2015, and the potential consequences of not retaining
the records for the required period.
(2 marks)
(15 marks)

End of Question Paper

14