Taxation UK – Full Mock Test 1

Full Marks: 100

Pass Marks: 50
Time Allowed: 3 Hours and 15 mins

Exam Summary

This exam is divided into three sections:

Section A
• 15 objective test (OT) questions, each worth 2 marks.
• 30 marks in total.
Section B
• Three OT cases, each containing a scenario which relates to five OT questions, each worth 2
marks.
• 30 marks in total.
Section C
• Three constructed response questions, each containing a scenario which relates to one or more
requirement(s).
• Each constructed response question is worth 10 or 15 marks in total.
• 40 marks in total.

All questions are compulsory.

 Section A
1) Mike and Delia are a married couple. In the tax year 2023/24, Mike has taxable non-savings
income (after deducting his personal allowance) of £13,500. Delia has no income in the tax year
2023/24. Delia has made an election in relation to her personal allowance for the tax year
2023/24. What is Mike’s income tax liability for the tax year 2023/24?
A) £186
B) £2,448
C) £1,440
D) £2,700

2) Tom and Zoya are a married couple.

They jointly own a residential property which is let to tenants. In the tax year 2023/24 the
property business income from the property is £20,000. Tom owns 25% of the property and Zoya
owns the other 75%. No election has been made in relation to the ownership of the property.
Zoya earns employment income of £65,000 and Tom receives £1,788 of child benefit in the tax
year 2023/24. Tom has no other income.
Which TWO of the following statements are true in relation to Zoya’s income tax liability for the
tax year 2023/24?
A) Zoya’s taxable income is £62,430

B) Zoya can reduce her income tax liability by claiming the transferable personal allowance
(the “marriage allowance”)
C) It would be beneficial to Zoya if the couple were to make a joint election to HM Revenue
and Customs (HMRC) specifying their actual ownership share in the residential property
D) A child benefit charge of £1,788 will be added to Zoya’s income tax liability
(Ans: A and D- Kaplan 2)
3) John is employed by Zebra plc. He was provided with a computer for private use on 6
November 2022. The market value of the computer when first provided to an employee for
private use was £3,600 and the computer had a market value of £2,000 when first provided to
John for private use. Zebra plc gave the computer to John on 5 April 2024 when it had a market
value of £1,000.
What are the total taxable benefits for John in respect of the computer for the tax year 2023/24?
A) £2,880
B) £3,300
C) £1,720
D) £1,833
(Ans: B (3300)- BPP Kit-Q no 47)
4) Hana was UK resident in the tax year 2022/23. He worked full time in Egypt in the tax year
2023/24. What is the maximum number of days which Hana can spend in the UK and be treated
as automatically not resident in the UK for the tax year 2023/24?
A) 15
B) 45
C) 90
D) 182
(Ans: C)

5) William is self-employed, and his tax adjusted trading profit for the year ended 5 April 2024
was £84,050. During the tax year 2023/24, William contributed £5,400 (gross) into a personal
pension scheme. What amount of Class 4 national insurance contributions (NIC) will William
pay for the tax year 2023/24?
A) £4,248
B) £6,433
C) £4,069
D) £3,393
Ans: C (4069)- BPP Mock 2

6) You are a trainee chartered certified accountant, and your firm has a client who has refused to
disclose a chargeable gain to HM Revenue & Customs (HMRC). From an ethical viewpoint,
which TWO of the following actions could be expected of your firm?
A) Reporting under the money laundering regulations
B) Advising the client to make disclosure
C) Informing HMRC of the non-disclosure
D) Warning the client that your firm will be reporting the non-disclosure
Ans :(A and B)

7) For the year ended 31 March 2024, Halo Ltd made a trading loss of £180,000. Halo Ltd has
owned 100% of the ordinary share capital of Shallow Ltd since it began trading on 1 July 2023.
For the year ended 30 June 2024, Shallow Ltd will make a trading profit of £224,000.
Neither company has any other taxable profits or allowable losses.
What is the maximum amount of group relief which Shallow Ltd can claim from Halo Ltd in
respect of the trading loss of £180,000 for the year ended 31 March 2024?
A) £180,000
B) £168,000
C) £45,000
D) £135,000
Ans: D (135000)

8) For the year ended 31 March 2023, Sizeable Ltd had taxable total profits of £820,000, and for
the year ended 31 March 2024 had taxable total profits of £970,000. The profits accrue evenly
throughout the year.
Sizeable Ltd has had one associated company for many years.
How will Sizeable Ltd pay its corporation tax liability for the year ended 31 March 2024?
A) Nine instalments of £20,500 and a balancing payment of £58,000
B) Four instalments of £60,625
C) Four instalments of £51,250 and a balancing payment of £37,500
D) One payment of £242,500
Ans: B (Installment date- first payment : 14th day of the 7th month after the start of accounting
period and the last payment due on the14th day of the 4th month after the accounting period end)

9) On 26 November 2023, Alice sold an antique table for £8,700. The antique table had been
purchased on 16 May 2014 for £3,800.
What is Alice’s chargeable gain in respect of the disposal of the antique table?
A) £4,500
B) £1,620
 C) £4,900
D) £0
(Ans: A (4500)

10) Winston invested £8,000 into a cash individual savings account (ISA) during the tax year
2023/24. 12 Still within tax year 2023/24, Winston wants to invest into a stocks and shares ISA.
What is the maximum possible amount which Winston can invest into a stocks and shares ISA
for the tax year 2023/24?
A) £20,000
B) £12,000
C) £0
D) £10,000
Ans: B

11) Abena has made the following gross contributions to her personal pension scheme over the
past three tax years:

Tax year £
2020/21 42,000

2021/22 27,000
 2022/23 28,000

Abena is entitled to an annual allowance of £40,000 in all tax years from 2020/21 to 2023/24.
What is the maximum gross contribution which Abena can make to her personal pension scheme
for the tax year 2023/24 without giving rise to an annual allowance charge?
A) £63,000
B) £40,000
C) £65,000
D) £35,000
Ans: C (65000)

12) Which of the following statements concerning self-assessment tax returns for individuals is
TRUE?
A) Individuals with tax payable of less than £1,000 for a tax year are not required to file a tax
return.
B) Individuals are only required to file a tax return for a tax year if they receive a notice to
deliver from HM Revenue & Customs (HMRC).
C) All individuals who submit a tax return on time are able to have their tax payable calculated
by HMRC.
D) The tax return for an individual covers income tax, class 1, class 2 and class 4 national
insurance contributions and capital gains tax liabilities.
(Ans: C) (Why not D- Class 1 NIC is not a part of self-assessment system)
13) Rajesh is a sole trader. He correctly calculated his self-assessment payments on account for
the tax year 2023/24 and paid these on the due dates.
Rajesh paid the correct balancing payment of £1,200 for the tax year 2023/24 on 30 June 2025.
Indicate, by clicking on the relevant boxes in the table below, what penalties and interest Rajesh
may be charged as a result of his late balancing payment for the tax year 2023/2

£0 Penalty

£60 Interest

£33

£78

Ans: Penalty : 60
Interest: 33
14) Kate sold a flat in November 2023, realising a gain of £25,500. The flat had always been
rented 3 out to tenants and was the only chargeable asset that Kate owned. Kate had taxable
income of £31,500 in the tax year 2023/24. She made a gross gift aid donation of £800 in
December 2023. What is Kate’s capital gains tax liability for the tax year 2023/24?
A) £4,840
B) £6,440
C) £3,200
D) £4,760
Ans: D (4760)

15) Ronald is self-employed. He purchased a house and lived in it for two years. The house was
then unoccupied for five years because Ronald went to work outside the UK. He then lived in the
house for three years. Ronald then went to live with his mother and the house was unoccupied
for six and a half years. Finally, Ronald lived in the house for the last six months of his
ownership. How many months of Ronald’s 17-year period of ownership of the house will be
exempt for the purposes of private residence relief?
A) 66 months
B) 150 months
C) 153 months
D) 165 months
Ans: C (153 months)

Section B
1) Avery and Baylor
The following scenario relates to Questions 16 to 20.
Avery and Baylor are a married couple.
Avery
Avery disposed of various assets during the tax year 2023/24, with these disposals resulting in
chargeable gains of £98,600 qualifying for business asset disposal relief and other chargeable
gains of £76,800. None of the gains are in respect of disposals of residential property.
Avery is an additional rate taxpayer and has unused capital losses of £24,400 brought forward
from the tax year 2019/20.
Investment property
On 19 July 2023, Baylor transferred an investment property to Avery. On that date, the property
was valued at £340,000.
Baylor’s mother had originally purchased the property on 25 August 2009 for £156,000. Baylor’s
mother died on 6 October 2018 and the property was inherited by Baylor. On that date, the
property was valued at £213,000. Baylor added a basement extension to the property during
March 2020 at a cost of £51,000.
Ordinary shares in Sala plc
On 18 August 2023, Baylor sold her entire shareholding of £1 ordinary shares in Sala plc. Prior
to the disposal, she had the following transactions in the ordinary shares of Sala plc:
Cost/(proceeds) £
12 April 2013 Purchased 38,000 shares 98,800 (98,000)
23 October 2016 Sold 6,000 shares (19,200)
1 November 2016 Purchased 8,000 shares 24,800

Ordinary shares in Alas Ltd

On 11 November 2023, Baylor sold her entire holding of £1 ordinary shares in Alas Ltd, an
unquoted trading company, to her son for £180,000. The market value of the shares on that date
was £220,000. The shares had been purchased on 1 August 2009 for £55,000. Baylor’s son sold
the entire shareholding on 28 March 2024 for £210,000.
An election will be made to hold over as much as possible of the gain as a gift of a business
asset.
16) What is Avery’s capital gains tax liability for the tax year 2023/24 assuming that this is
calculated on the most favorable basis?
A) £20,340
B) £19,140
C) £29,000
D) £22,180
(Ans: B)

(
17) What is Avery’s base cost for the investment property which was transferred from Baylor on
19 July 2023?
A) £340,000
B) £264,000
C) £207,000
D) £213,000 (2
marks)
Ans: B (213000+51000)

18) What cost figure will have been used by Baylor when calculating the chargeable gain on her
disposal of ordinary shares in Sala plc on 18 August 2023?
A) £104,400
B) £108,000
C) £107,478
D) £105,000 (2 marks)
Ans: D

19) How much of the gain arising on Baylor’s sale of the ordinary shares in Alas Ltd to her son
can be held over by making a gift holdover relief claim?
A) £40,000
B) £165,000
C) £125,000
D) £30,000 (2
marks)
Ans: A
 20) By what date will an election have to be made in order to hold over Baylor’s gain on the
sale of the ordinary shares in Alas Ltd to her son, and who must make the claim?

Ans: C
2) DEUTSCH LTD
Deutsch Ltd has held shares in four trading companies for a number of years. All four companies
prepare accounts to 31 March.
Year ended 31 March 2024
The following information is available for the year ended 31 March 2024:

In the year ended 31 March 2024 Deutsch Ltd had a tax adjusted trading profit of £277,700 and
no other income or gains.
Zwei Ltd
The remaining 80% of the Zwei Ltd shares are held by Berlin Ltd.
On 15 March 2024 Zwei Ltd sold a building for its market value of £500,000 to an independent
third party. It had acquired the building for £200,000 in May 2008. The indexed cost of the
building at 15 March 2024 was £281,400. On 1 August 2023 Zwei Ltd acquired a factory at a
cost of £460,000.

21) Which of the four trading companies will be treated as associated companies of Deutsch Ltd?
You can tick more than one box.

Ans: Eins Ltd, Drei Lts and Vier Co

22) What is the maximum amount of group relief that Deutsch Ltd can claim for the year ended
31 March 2024?
A) £64,700
B) £52,700
C) £139,500
D) £47,430
Ans: A
23)
What is the amount of gain arising on the sale of the building by Zwei Ltd that can be rolled over
into the acquisition of the factory?

Ans: 178600

24) If instead of selling the building to an independent third party Zwei Ltd had sold it to Berlin
Ltd for £450,000 on 15 March 2024, what would have been the capital gains base cost of the
building for Berlin Ltd?
A) £281,400
B) £500,000
C) £200,000
D) £450,000
Ans: A
 25) What are the dates by which Deutsch Ltd must make a group relief claim in respect of the
year ended 31 March 2024 and Zwei Ltd must make a rollover relief claim in respect of the
disposal of the building in the year ended 31 March 2024?

Ans: C

3) Rosie and Sam

You should assume that today’s date is 15 February 2024.
Rosie
Rosie has recently been promoted to managing director at Hornburg plc. During the tax year
2023/24, Rosie will be paid gross director’s remuneration of £260,000 and she has received
dividend income of £500,000. She had income of £130,000 in 2020/21, 2021/22 and 2022/23.
She has made the following gross personal pension contributions:

Rosie has been a member of a pension scheme since the tax year 2021/22 and Hornburg plc
makes an employer’s contribution of £10,000 per year.
Sam
In September 2021, Sam invested £7,000 in a flexible cash ISA. In May 2023, he invested a
further £6,000 in that cash ISA. He withdrew £5,000 from the cash ISA in October 2023. Sam is
now considering investing more cash into the cash ISA before 5 April 2024. He also invested
£4,000 in premium bonds and government securities (‘gilts’) in the tax year 2023/24.

26) What is the total pension scheme annual allowance that Rosie has available for the tax year
2023/24?
A) £74,000
B) £38,000
C) £114,000
D) £78,000
Ans: B (38,000)

Adjusted Income:
27) Use ONE of the following to complete the sentence below:
If Rosie makes pension contributions in excess of her available annual allowances, there will

be a charge to income tax at ▼ % on the excess contributions.

Pull down list
A) 20
B) 25
C) 45
D) 55
Ans: 45% (C)
28) What are the tax consequences for Rosie if she takes pension benefits under flexible access
drawdown?

Ans: D

29) What is the maximum amount that Sam can invest into the cash ISA for the tax year 2023/24
in addition to his investments already made?

Pull down list

• £12,000
• £14,000
• £15,000
• £19,000

Ans: 19,000
30) Match the income tax and capital gains tax treatments of Sam’s investments in premium
bonds and government securities.

Ans: (Income from NSI certificate and Premium Bond winnings are exempt from Income Tax)
 Section C
Question 1

You should assume that today’s date is 1 March 2023.

Sophie is currently self-employed. If she continues to trade on a self-employed basis, her total
income tax liability and national insurance contributions (NIC) for the tax year 2023/24 will be
£11,379.

However, Sophie is considering incorporating her business on 6 April 2023. The forecast taxable
total profits of the new limited company for the year ended 5 April 2024 will be £50,000 (before
taking account of any director’s remuneration). Sophie will pay herself gross director’s
remuneration of £30,000 and dividends of £10,000. The balance of profits will remain undrawn
within the new company.

Requirement:

Determine whether or not there will be an overall saving of tax and national insurance
contributions (NIC) for the year ended 5 April 2024 if Sophie incorporates her business on
6 April 2023.

Notes:
1. You are expected to calculate the income tax payable by Sophie, the class 1 NIC payable by
Sophie and the new limited company, and the corporation tax liability of the new limited
company for the year ended 5 April 2024.

2. The new limited company will not be entitled to the NIC annual employment allowance.

3. You should assume that the rates of corporation tax remain unchanged. (10 marks)

Solution
(a) The total tax and NIC cost if Sophie incorporate her business: Marks

Income tax
W1 4,274
Employee class 1 NIC
W2 2,092
Employer class 1 NIC
W2 2,884
Corporation tax W3 3,252
Total tax 12,501 0.5
Less: tax as sole trader -11,379 0.5
Excess if incorporated 1,122 0.5

Therefore, if Sophie incorporated her business there would be an

overall increase in tax and NIC of £1,122 compared to continuing on a 1
self-employed basis.

Workings
(W1) Sophie’s income tax payable
 £
Director’s remuneration 30,000 0.5
Dividends 10,000 0.5
40,000
Less: Personal Allowance -12,570 0.5
Taxable income 27,430

Income tax
£ £
NSI:BRB
17,430 20% 3,486 0.5
DI:NR
1,000 0% - 0.5
DI: BRB
9,000 8.75% 788 0.5
4,274
27,430

(W2) National Insurance contribution

£
Employee class 1: (£30,000 - £12,570) *12%
2,092 1
Employer’s class 1: (£30,000 - £9,100) *13.8%
2,884 1

(W3) Corporation tax liability

Trading profit 50,000 0.5

Director’s remuneration -30,000 0.5
Employer’s class 1 NIC -2,884 0.5
Taxable Total profit 17,116
Corporation tax at 19% 3,252 1
Question 2
This scenario relates to three requirements.

Buddy ceased employment with Curly plc on 31 December 2023, having been employed since 1
January 2017. Buddy is also self-employed and prepares accounts for his business to 31 March
each year. The following information is available for the tax year 2023-24:

Self-employment
Buddy’s tax adjusted trading profit based on his draft accounts for the year ended 31 March 2024
is £29,800. This figure is before making any adjustments required for:

Advertising expenditure of £1,300 incurred during November 2023 to promote Buddy’s

•
business
• Expenditure incurred on client entertaining of £560
• The cost of Buddy’s office (see note (1) below)
• Capital allowances (see note (2) below)

Notes
(1) Buddy runs his business using one of the six rooms in his private house as an office. The total
running costs of the house for the year ended 31 March 2024 were £2,400. No deduction has
been made for the cost of the office in calculating the profit of £29,800.

(2) Capital allowances

The tax written down value of both the main pool and the special rate pool as at 1 April 2023 is
nil.

On 1 January 2024, Buddy purchased a laptop computer for £1,200. This laptop computer was
sold on 20 March 2024 for £400. Buddy had elected for this laptop computer to be treated as a
short-life asset. A replacement laptop computer was purchased on the same day for £2,700.

On 1 May 2023, Buddy brought his private car into his business at its market value of £14,000.
The car has a CO2 emission rate of 39 grams per kilometre. The car is used 80% for business
journeys in his self-employment.

Employment
During the period from 6 April to 31 December 2023, Buddy was paid a gross monthly salary of
£5,400.

During the period from 6 April to 31 December 2023, Buddy contributed a total of £2,340 into
Curly plc’s occupational pension scheme.

Buddy used his private car for business purposes. During the period from 6 April to 31
December 2023, he drove 16,400 miles in the performance of his duties for Curly plc, for which
the company paid an allowance of 30 pence per mile.

On 10 May 2023, Buddy spent £460 on a replacement suit which he only wore when meeting
clients of Curly plc. The suit was scrapped, with nil proceeds, on 31 December 2023.

Other income
On 31 May 2023, Buddy received a premium bond prize of £500.
During the tax year 2023-24, Buddy received interest of £270 from UK Government securities
(gilts).

On 30 November 2023, Buddy received interest of £1,030 on the maturity of savings certificates
from NS&I (National Savings and Investments).

Required
(a) Calculate Buddy's revised tax adjusted trading profit for the year ended 31 March
2024.

Note: Your computation should commence with the draft profit per accounts of £29,800,
indicating by the use of zero (0) any item which does not require adjustment.
(6 marks)

(b) Calculate Buddy’s taxable income for the tax year 2023-24.

Note: You should indicate by the use of zero (0) any items which are not taxable or deductible.
(7 marks)

(c) State TWO advantages for an employee if their employer had payrolled the taxable
benefits provided to the employee.
(2 marks)

(15 marks)
Ans:
Question 3
This scenario relates to two requirements. (15 Marks)

Empire Ltd was incorporated on 20 July 2022, and commenced trading on 1 December 2022.
The following information is available for the sixteen-month period from 1 December 2022 to
31 March 2024. The net profit in the statement of profit or loss of Empire Ltd for the sixteen-
month period ended 31 March 2024 is £532,600.
The following information have already been considered in arriving at net profit in the profit
or loss.

1. Advertising expenses of £4,700 (incurred during September 2022), depreciation of

£14,700, and amortization of £9,000.
The amortization relates to a premium which was paid on 1 December 2022 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 Empire Ltd
throughout the period ended 31 March 2024.

2. Empire Ltd purchased the following assets during the period 20 July 2022 to 31 March
2024:
£
17-Mar-23 Motor car (Co2 47gm/km) 12,800
10-Apr-23 Computer 6,300
20-Apr-23 Integral features 41,200
25-May-23 Office equipment 32,900
31-Mar-24 Motor car (Co2 67gm/km) 10,000

The integral features of £41,200 are in respect of expenditure on electrical systems,

ventilation system and lifts which are integral to a freehold office building owned by
Empire Ltd.

3. Empire Ltd made a loan to another company for non-trading purposes on 1 January 2023.
Loan interest income receivable that has been accounted by the company is as follows:
Received on 31 March 2023 £5,500
Received on 30 September 2023 £11,000
Accrued on 30 November 2023 £3,667
Received on 31 March 2024 £11,000

4. Empire Ltd made the following donations during the period 1 December 2022 to 31
March 2023:

On 19 December 2022, Toys given to a local children’s hospice as Christmas gifts worth
£274.
On 22 February 2023, online donation of £835 to a registered national charity chosen by
the employees of Empire Ltd.

5. Empire Ltd lets out a warehouse which is surplus to its requirements. The building was
empty from 1 December 2022 to 31 July 2023, but was let from 1 August 2023 onwards.
 The following income and expenditure were received or incurred for the sixteen- months
period ended 31 March 2024:
Date received/paid
1 April 2023: Insurance for the year ended 31 March 2024 – (£920)
1 August 2023: Rent for the six months ended 31 January 2024 £7,800
1 August 2023: Security deposit equal to two months’ rent- £2,600
1 March 2024: Rent for the six months ended 31 July 2024: £7800

Required:

Calculate Empire Ltd.’s corporation tax liability for the relevant period.
Note: Your calculation should commence with the profit of £532,600 and should also
indicate by the use of zero (0) for any items referred in the questions for which no
adjustment is required. Ignore VAT. (15 marks)

Solution

Marks
Empire Ltd – Corporation tax
computation
12 m/e
30 Nov 4 m/e 31
2023 March 2024
£ £ £
Profit before tax as per Statement of Profit 532,60
or loss 0 0.5
Tax Adjustment: 0.5
Advertising expense (Allowed as pre trading
expense) - 0.5
14,70
Depreciation
0 0.5
9,00
Amortization
0 0.5
(5,20
Deduction for lease premium (W1)
0)
(27,50
Interest Income
0) 0.5
(9,48
Property Income (W3)
0)
Donation to local charity
- 0.5
83
Donation to national charity
5 0.5
Tax adjusted trading profit before capital 514,95
allowance 5 386,216 128,739 0.5
Less: Capital Allowances (W3)
(82,704) (830)
Trading profit
303,512 127,909
Interest income (5500+11000+3667) (11000- 7,333 0.5
3667) 20,167
Property Income (W3)
4,587 4,893
Total Profit
328,266 140,135
Less: QCD relief
(835) - 0.5
Taxable Total Profit
327,431 140,135
Corporation tax:

FY 2022: (327,431*4/12* 19%) 20,737 1

FY 2023: (327,431 * 8/12 * 25%) 54,572 1
FY 2023: (140,135 *25%) 35,034 1
Total corporation tax liabilities 75,309 35,034

Lower limit: 50,000 *4/12 16,667

Upper limit: 250,000 *4/12 83,333

Workings
(W1) Deduction for lease premium
(46,800/12*16/12) 5,200 1

W2: Property income

12 m/e 4 m/e 31
30 Nov March
2023 2024
£ £

Rent receivable 5,200 5,200 1

Security deposit - - 0.5
Less: insurance (613) (307) 0.5

Property business income 4,587 4,893

W3: Capital Allowances

Main Special rate
Allowanc
Pool pool
es
£ £ £ £
y/e 30 November 2023
TWDV b/f - -
Addition qualifying for super deduction and
AIA:
41,20
Integral feature
0
(41,20
AIA (max 1000,000) 41,200
0) 1
-
6,30
Computer
0
 32,90
Office equipment
0
39,20
0
(39,20
AIA 39,200
0) 1
-
Addition not qualifying AIA and FYA:
12,80
Motor car (CO2 = 47 gm/km)
0
WDA 12800 *18% 2,304
(2,304) 1
10,49
TWDV c/f -
6
Total capital allowances 82,704

4 m/e 31 March 2024

TWDV b/f 10,496

Addition not qualifying AIA and FYA - Car CO2 =
67gm/km 10,000

10,496 10,000

WDA (630) (200) 830 1

TWDV c/f