ALL FIVE questions are compulsory and MUST be attempted

1. Mark Kett
On 31 December 2011 Mark Kett ceased trading as a marketing consultant. He had been self-employed since 6 April 2005, and had always made his accounts up to 5 April. On 1 January 2012 Mark commenced employment as the marketing manager of Sleep-Easy plc. The company runs a hotel. The following information is available for the tax year 20011-12: Self-employment (1) Marks tax adjusted trading profit for the nine-month period ended 31 December 2011 is 19,200. This figure is before taking account of capital allowances. (2) The tax written down values for capital allowances purposes at 6 April 2011 were as follows: General pool Expensive motor car 13,800 14,600

The expensive motor car was used by Mark, and 40% of the mileage was for private purposes. (3) On 15 June 2011 Mark had purchased office furniture for 1,900. All of the items included in the general pool were sold for 18,800 on 31 December 2011. On the cessation of trading Mark personally retained the expensive motor car. Its value on 31 December 2011 was 11,800. Employment (1) Mark is paid a salary of 3,250 (gross) per month by Sleep-Easy plc, from which income tax of 620 per month has been deducted under PAYE. (2) During the period from 1 January 2012 to 5 April 2012 Mark used his private motor car for business purposes. He drove 2,500 miles in the performance of his duties for Sleep-Easy plc, for which the company paid an allowance of 16 pence per mile. The relevant HM Revenue & Customs authorised mileage rate to be used as the basis of an expense claim is 40 pence per mile. (3) On 1 January 2012 Sleep-Easy plc provided Mark with an interest free loan of 80,000 so that he could purchase a new main residence. (4) During the period from 1 January 2012 to 5 April 2012 Mark was provided with free meals in SleepEasy plcs staff canteen. The total cost of these meals to the company was 400. Property income

(1) Mark let out a furnished property throughout the tax year 2011-12. He received gross rents of 8,600, 5% of which was paid to a letting agency. During December 2011 Mark spent 540 on replacing dilapidated furniture and furnishings. (2) From 6 April 2011 to 31 December 2011 Mark let out a spare room in his main residence, receiving rent of 350 per month. Investment income (1) During the tax year 201112 Mark received dividends of 2,880, interest from government stocks (gilts) of 1,900, and interest of 430 from an individual savings account (ISA). These were the actual cash amounts received. (2) On 3 May 2011 Mark received a premium bond prize of 100. Other information (1) On 15 December 2011 Mark made a gift aid donation of 780 (net) to a national charity. (2) Marks payments on account of income tax in respect of the tax year 201112 totalled 11,381. Required: (a)Explain what is meant by the term P11D employees (2 marks) (b)what does the Furnished Holiday Letting means (3 marks (b)Compute the income tax payable by Mark for the tax year 20011-12. (25 marks) (30 marks)

2. Na Style
Na Style commenced self-employment as a hairdresser on 1 January 2009. She had tax adjusted trading profits of 25,200 for the six-month period ended 30 June 2009, and 21,600 for the year ended 30 June 2010. The following information is available for the tax year 201112: Trading profit for the year ended 30 June 2011 (1) Nas profit and loss account for the year ended 30 June 2011 is as follows:

Note Income Expenses Depreciation Motor Expenses Professional expenses Property Expenses Purchases Other Expenses Net Profit 2 3 4 5 6

61300

1300 2200 1650 12900 4700 16550 -39300 22000

(2) Na charges all the running expenses for her motor car to the business. During the year ended 30 June 2011 Na drove a total of 8,000 miles, of which 7,000 were for private journeys. (3) The gure for professional fees consists of 390 for accountancy and 1,260 for legal fees in connection with the grant of a new five-year lease of parking spaces for customers motor cars. (4) Na lives in a at that is situated above her hairdressing studio, and one-third of the total property expenses of 12,900 relate to this at. (5) During the year ended 30 June 2011 Na took goods out of the hairdressing business for her personal use without paying for them, and no entry has been made in the accounts to record this. The goods cost 250, and had a selling price of 450. (6) The gure for other expenses of 16,550 includes 400 for a ne in respect of health and safety regulations, 80 for a donation to a political party, and 160 for a trade subscription to the Guild of small Hairdressers.

(7) Na uses her private telephone to make business telephone calls. The total cost of the private telephone for the year ended 30 June 2011 was 1,200, and 20% of this related to business telephone calls. The cost of the private telephone is not included in the profit and loss account expenses of 39,300. (8) Capital allowances for the year ended 30 June 2008 are 810. Other information (1) During the tax year 2011-12 Na received dividends of 1,080, building society interest of 560, interest of 310 from an individual savings account (ISA), interest of 1,100 on the maturity of a savings certificate from the National Savings & Investments Bank, and interest of 370 from government stocks (gilts). These were the actual cash amounts received in each case. (2) Nas payments on account of income tax in respect of the tax year 2011-12 totalled 3,200. Required: (a) Calculate the amount of trading profits that will have been assessed on Na Style for the tax years 200809, 200910 and 201011 respectively, clearly identifying the amount of any overlap profits. (8 marks) (b) Calculate Na Styles tax adjusted trading profits for the year ended 30 June 2011. Note: your computation should commence with the net profit figure of 22,000, and should list all of the items referred to in notes (1) to (8) indicating by the use of zero (0) any items that do not require adjustment. (10 marks) (c) Calculate the income tax payable by Na Style for the tax year 20011-12. (7 marks) (25 marks)

3. Li Fung
Li Fung commenced in self-employment on 1 October 2007. She initially prepared accounts to 30 June, but changed her accounting date to 31 March by preparing accounts for the nine-month period to 31 March 2011. Lis trading profits since she commenced self-employment have been as follows: Nine-month period ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Nine-month period ended 31 March 2011 Year ended 31 March 2012 Required: (a) State the qualifying conditions that must be met for a change of accounting date to be valid. (3 marks) (b) Compute Lis trading income assessments for each of the five tax years 200708, 200809, 2009 10, 201011 and 201112. (9 marks) (c) Advise Li of the advantages and disadvantages for tax purposes of changing her accounting date from 30 June to 31 March. (3 marks) (15 marks) 18,600 24,900 22,200 16,800 26,400

4. Samantha Fabrique
Samantha Fabrique has been a self-employed manufacturer of clothing since 2001. She has the following gross income and chargeable gains for the tax years 2010-11 to 2012-13: 2010/11 2011/12 2012/13 21600 -34000 10500 2100 3800 1500 23300 -3400 11000

Trading profit/(Loss) Building Society Interest Chargeable gain/(loss)

The chargeable gains do not qualify for Entrepreneurs Relief Required: (a) State the factors that will influence an individuals choice of loss relief claims. (3 marks) (b) Calculate Samanthas taxable income and taxable gains for each of the tax years 2010-11, 2011-12, and 2012-13 on the assumption that she relieves the trading loss for the tax year 2011-12 on the most favourable basis. You should assume that the tax allowances for the tax year 2011-12 apply throughout. (12 marks) (15 marks)

5. ANN, BASIL & CHLOE

You are a trainee accountant and your manager has asked for your help regarding three taxpayers who have all made personal pension contributions during the tax year 2011-12 Ann Peach Ann, aged 30, is self-employed as an estate agent. Her trading profit for the year ended 5 April 2012 was 48,000. Ann made contributions of 52,000 (gross) into a personal pension scheme during the tax year 2011-12. Basil Plum Basil, aged 42, is employed by the Banana Bank plc as a fund manager. During the tax year 2011-12 Basil was paid a gross salary of 120,000. Basil made monthly contributions of 40,000 (gross) into a personal pension scheme during the tax year 2011-12. He is not a member of Banana Bank plcs occupational pension scheme but the bank contributed to Basils personal pension in 2011-12. Chloe Pear Chloe, aged 54, lets out unfurnished property. For the tax year 200708 her property business profit was 23,900. Chloe made contributions of 8,200 (gross) into a personal pension scheme during the tax year 2011-12. Neither Ann nor Basil nor Chloe has any other income. Required: For each of the three taxpayers Ann Peach, Basil Plum and Chloe Pear, state, giving reasons the amount of personal pension contributions that will have qualified for tax relief for the tax year 2011 12, and calculate their income tax liabilities for that year. Note: marks are allocated: Ann Peach 3 marks; Basil Plum 5 marks; and Chloe Pear 2 marks. (10 marks) (b) Explain the consequences of Banana Bank plc contributing 100000 into Basils personal pension in 2011-12 and the purpose of the annual allowance (5 marks) (15 marks)