Capital Gains Tax (Day – 1)

175: GINGER AND NIGEL (ADAPTED) (Kaplan Exam-Kit)

You should assume that today’s date is 1 March 2020.

(a) Ginger has a holding of 10,000 £1 ordinary shares in Nutmeg Ltd, an unquoted trading
company, which she had purchased on 13 February 2010 for £2.39 per share. The
current value of the shares as agreed with HM Revenue and Customs is £6.40 per
share, but Ginger intends to sell some of the holding to her daughter at £4.00 per share
during March 2020. Ginger and her daughter will elect to hold over any gain as a gift
of a business asset.
For the tax year 2019/20, Ginger will not make any other disposals, and has therefore
not utilised her annual exempt amount.
Required:
Explain how many £1 ordinary shares in Nutmeg Ltd Ginger can sell to her daughter
for £4.00 per share during March 2020 without incurring any capital gains tax liability
for the tax year 2019/20. 
Your answer should be supported by appropriate calculations. (4 marks)
(b) Innocent and Nigel, a married couple, both have shareholdings in Cinnamon Ltd, an
unquoted trading company with a share capital of 100,000 £1 ordinary shares.
Innocent has been the managing director of Cinnamon Ltd since the company’s
incorporation on 1 July 2010, and she currently holds 20,000 shares (with matching
voting rights) in the company. These shares were subscribed for on 1 July 2010 at their
par value. Nigel has never been an employee or a director of Cinnamon Ltd, and he
currently holds 3,000 shares (with matching voting rights) in the company. These
shares were purchased on 23 April 2014 for £46,200.
Either Innocent or Nigel will sell 2,000 of their shares in Cinnamon Ltd during March
2020 for £65,000, but they are not sure which of them should make the disposal. For
the tax year 2019/20, both Innocent and Nigel have already made disposals which will
fully utilise their annual exempt amounts, and they will each have taxable income of
£80,000.
Required:
Calculate the capital gains tax saving if the disposal of 2,000 shares in Cinnamon Ltd
during March 2020 is made by Innocent rather than Nigel. (6 marks)
(Total: 10 marks)
172: DAVID AND ANGELA BROOK (ADAPTED) (Kaplan Exam-Kit)

David and Angela Brook are a married couple. They disposed of the following assets during
the tax year 2019/20:
Jointly owned property
On 30 September 2019 David and Angela sold a house for £381,900. The house had been
purchased on 1 October 1999 for £86,000.
David and Angela occupied the house as their main residence from the date of purchase until
31 March 2003. The house was then unoccupied between 1 April 2003 and 31
December 2006 due to Angela being required by her employer to work elsewhere in the
United Kingdom.
From 1 January 2007 until 31 December 2013 David and Angela again occupied the house as
their main residence. The house was then unoccupied until it was sold on 30 September 2019.
Throughout the period 1 October 1999 to 30 September 2019 David and Angela did not have
any other main residence.
David Brook
On 5 May 2019 David transferred his entire shareholding of 20,000 £1 ordinary shares in Bend
Ltd, an unquoted trading company, to Angela. On that date the shares were valued at
£64,000. David’s shareholding had been purchased on 21 June 2016 for £48,000.
Angela Brook
On 7 July 2019 Angela sold 15,000 of the 20,000 £1 ordinary shares in Bend Ltd that had been
transferred to her from David. The sale proceeds were £62,400.
Neither David nor Angela has ever worked for Bent Ltd.
On 15 October 2019 Angela disposed of a small business she had been running part time for
many years. The only chargeable asset in the business was a warehouse and this resulted in
a gain of £3,700.
Angela has taxable income of £26,945 for the tax year 2019/20. David does not have any
taxable income.

Required:
Compute David and Angela’s respective capital gains tax liabilities for the tax year
2019/20.  (10 marks)
Income Tax (Day – 2)
92: ARRAY LTD (ADAPTED) (Kaplan Exam- Kit)

Array Ltd provides its employees with various benefits. The following benefits were all provided
throughout the tax year 2019/20 unless otherwise stated.

Alice
Alice was provided with a petrol powered motor car which has a list price of £24,600. The motor car has
an official CO2 emissions rate of 108 grams per kilometre. Alice made a capital contribution of £5,600
towards the cost of the motor car when it was first provided to her by Array Ltd.
Alice was also provided with fuel for her private journeys. The total cost to Array Ltd of fuel for the motor
car during the tax year 2019/20 was £1,500.
During the tax year 2019/20, Alice drove a total of 12,000 miles, of which 8,000 were for business
journeys.

Buma
Buma was provided with a loan of £48,000 on 1 October 2017, which she used to renovate her main
residence. Buma repays £1,000 of the capital of the loan to Array Ltd each month, and by 6 April 2019 the
amount of the loan outstanding had been reduced to £30,000. In addition, Buma paid loan interest of
£240 to Array Ltd during the tax year 2019/20.
The taxable benefit in respect of this loan is calculated using the average method.

Claude
On 6 July 2019, Claude was provided with a mobile telephone. The telephone is a smartphone which is
mainly used by Claude for personal internet access. It was purchased by Array Ltd on 6 July 2019 for £600.
On 6 January 2020, Claude was provided with a home entertainment system for his personal use. This was
purchased by Array Ltd on 6 January 2020 for £3,200. The market value of the home entertainment
system on 5 April 2020 was £2,400.

Denise
During May 2019, Array Ltd paid £10,400 towards the cost of Denise’s removal expenses when she
permanently moved to take up her new employment with Array Ltd, as she did not live within a
reasonable commuting distance. The £10,400 covered both her removal expenses and the legal costs of
acquiring a new main residence.
During February 2020, Array Ltd paid for £340 of Denise’s medical costs. She had been away from work
for three months due to an injury, and the medical treatment (as recommended by a doctor) was to assist
her return to work.

Required:

State how employers are required to report details of employees’ taxable benefits to HM Revenue and
Customs following the end of the tax year, and the deadline for submitting this information for the tax
year 2019/20 . (2 marks)

Note: You should assume that the employer has not applied to collect tax on the benefits through PAYE.

Calculate the taxable benefits which Array Ltd will have to report to HM Revenue and Customs in
respect of each of its employees for the tax year 2019/20. 
Note: Your answer should include an explanation for any benefits which are exempt or partially exempt.
(11 marks)
Calculate the class 1A national insurance contributions which Array Ltd would have had to pay in respect
of its employees’ taxable benefits for the tax year 2019/20, and state when this would have been due if
paid electronically.  (2 marks)
(Total: 15 marks)
 Income Tax (Day – 3)

103: SAM WHITE (ADAPTED) (Kaplan Kit)

(1) Sam is self‐employed running a retail clothing shop. His statement of profit or loss for
the year ended 5 April 2020 is as follows:
Notes £ £
Gross profit 190,300
Depreciation 7,600
Motor expenses 2 8,800
Patent royalties 3 700
Professional fees 4 1,860
Other expenses 5 71,340
–––––– (90,300)
–––––––
Net profit 100,000
–––––––
(2) During the year ended 5 April 2020 Sam drove a total of 25,000 miles, of which 5,000
miles were driven when he visited his suppliers in Europe. The balance of the mileage
is 25% for private journeys and 75% for business journeys in the United Kingdom.
(3) During the year ended 5 April 2020 Sam paid patent royalties of £700 in respect of
specialised technology that he uses when altering clothes for customers.
(4) The figure for professional fees consists of £1,050 for legal fees in connection with an
action brought against a supplier for breach of contract and £810 for accountancy.
Included in the figure for accountancy is £320 in respect of personal capital gains tax
advice for the tax year 2019/20.
(5) The figure for other expenses of £71,340 includes £560 for gifts to customers of food
hampers costing £35 each and £420 for gifts to customers of pens carrying an
advertisement for the clothing shop costing £60 each.
(6) Sam uses one of the eight rooms of his home as an office. The total running costs of
the house for the year ended 5 April 2020 were £5,120. This cost is not included in the
expenses in the statement of profit or loss of £90,300.
(7) Sam uses his private telephone to make business telephone calls. The total cost of the
private telephone for the year ended 5 April 2020 was £1,600, and 25% of this related
to business telephone calls. The cost of the private telephone is not included in the
expenses in the statement of profit or loss of £90,300.
(8) During the year ended 5 April 2020 Sam took goods out of the clothing shop for his
personal use without paying for them and no entry has been made in the accounts to
record this. The goods cost £820, and had a selling price of £1,480.
(9) The tax written down values for capital allowance purposes at 6 April 2019 were:
Main pool £14,800
Motor car bought January 2018 £20,200
The motor car is used by Sam (see note 2) and has an official CO2 emission rate of
190g/km.
Required:
Calculate Sam’s tax adjusted trading profit for the year ended 5 April 2020. 
Your computation should start with the net profit of £100,000 and should list all the items
referred to in Notes (1) to (8), indicating with a zero (0) any items that do not require
adjustment. (10 marks)
32: Ashura PRACTICE TEST 1
Ashura has been employed by Rift plc since 1 January 2017. She has also been self-employed since 1 July
2019, preparing her first accounts for the nine-month period ended 5 April 2020. The following
information is available for the tax year 2019/20:
Employment
(1) During the tax year 2019/20, Ashura was paid a gross annual salary of £56,600.
(2) On 1 January 2020, Ashura personally paid two subscriptions. The first was a professional
subscription of £320 paid to an HM Revenue & Customs' (HMRC) approved professional body. The
second was a subscription of £680 to a health club which Ashura regularly uses to meet Rift plc's
clients. Ashura was not reimbursed for the costs of either of these subscriptions by Rift plc.
(3) During the tax year 2019/20, Ashura used her private motor car for business purposes. She drove
3,400 miles in the performance of her duties for Rift plc, for which the company paid her an
allowance of 55 pence per mile.
(4) During the tax year 2019/20, Ashura contributed £2,800 into Rift plc's HMRC registered
occupational pension scheme and £3,400 (gross) into a personal pension scheme.
Self-employment
(1) Ashura's tax adjusted trading loss based on her draft accounts for the nine-month period ended 5
April 2020 is £3,300. This figure is before making any adjustments required for:
(i) Advertising expenditure of £800 incurred during January 2019. This expenditure has not been
deducted in calculating the loss of £3,300.
(ii) The cost of Ashura's office (see note (2) below).
(iii) Capital allowances.
(2) Ashura runs her business using one of the five rooms in her private house as an office. The total
running costs of the house for the nine-month period ended 5 April 2020 were £4,350. No
deduction has been made for the cost of the office in calculating the loss of £3,300.
(3) On 10 June 2019, Ashura purchased a laptop computer for £2,600.
On 1 July 2019, Ashura purchased a motor car for £25,600. The motor car has a CO2 emission rate of
117 grams per kilometre. During the nine-month period ended 5 April 2020, Ashura drove a total of
8,000 miles, of which 2,500 were for self-employed business journeys.
Other information
Ashura's total income for the previous four tax years is as follows:
Tax year Total
income
£
2015/16 11,100
2016/17 10,800
2017/18 48,800
2018/19 54,300
Required
(a) State TWO advantages for Ashura of choosing 5 April as her accounting date rather than a date
early in the
tax year such as 30 April. (2 marks)
(b) Calculate Ashura's revised tax adjusted trading loss for the nine-month period ended 5 April 2020.
 (6 marks)
(c) Explain why it would not be beneficial for Ashura to claim loss relief under the provisions giving
relief to a loss incurred in the early years of trade.
Note. You should assume that the tax rates and allowances for the tax year 2019/20 also applied in
all
previous tax years. (2 marks)
(d) Assuming that Ashura claims loss relief against her total income for the tax year 2019/20, calculate
her taxable income for this tax year. (5 marks)
Total (15 Marks)
Q32

(Sep/ Dec 2020)

 Corporation Tax (Day – 4)

Q34: TENTH AND ELEVENTH LTD (ADAPTED) (Practice Test -1) (CBE Practice Platform)
Mable is a serial entrepreneur, regularly starting and disposing of businesses. On 31 July
2019, Tenth Ltd, a company owned by Mable, ceased trading. On 1 October 2019, Eleventh
Ltd, another company owned by Mable, commenced trading. The following information is
available:
Tenth Ltd
(1) For the final four month period of trading ended 31 July 2019, Tenth Ltd had a tax
adjusted trading profit of £52,400. This figure is before taking account of capital
allowances.
(2) On 1 April 2019, the tax written down value of the company’s main pool was
£12,400. On 3 June 2019, Tenth Ltd purchased a laptop computer for £1,800.
On 31 July 2019, the company sold all of the items included in the main pool at the
start of the period for £28,200 and the laptop computer for £1,300. None of the items
included in the main pool was sold for more than its original cost.
(3) On 31 July 2019, Tenth Ltd sold the company’s freehold office building for £179,549.
The building was purchased on 3 May 2013 for £150,100 and its indexed cost on 31
July 2019 was £166,911.
(4) During the four month period ended 31 July 2019, Tenth Ltd let out one floor of its
freehold office building which was always surplus to requirements. The floor was
rented at £1,200 per month, but the tenant left owing the rent for July 2019 which
Tenth Ltd was unable to recover. The total running costs of the office building for the
four month period ended 31 July 2019 were £6,300, of which one third related to the
let floor. The other two thirds of the running costs have been deducted in calculating
Tenth Ltd’s tax adjusted trading profit of £52,400.
(5) During the four‐month period ended 31 July 2019, Tenth Ltd made qualifying
charitable donations of £800.
Eleventh Ltd
(1) Eleventh Ltd’s operating profit for the six month period ended 31 March 2020 is
£122,900. Depreciation of £2,580 and amortisation of leasehold property of £2,000
(see note (2) below) have been deducted in arriving at this figure.
(2) On 1 October 2019, Eleventh Ltd acquired a leasehold office building, paying a
premium of £60,000 for the grant of a 15 year lease. The office building was used for
business purposes by Eleventh Ltd throughout the six month period ended 31 March
2020.
(3) On 1 October 2019, Eleventh Ltd purchased two motor cars. The first motor car cost
£12,600, and has a CO2 emission rate of 110 grams per kilometre. This motor car is
used as a pool car by the company’s employees. The second motor car cost £13,200,
and has a CO2 emission rate of 40 grams per kilometre. This motor car is used by Mable,
and 45% of the mileage is for private journeys.
(4) On 1 October 2019, Mable made a loan of £100,000 to Eleventh Ltd at an annual
interest rate of 5%. This is a commercial rate of interest, and no loan repayments were
made during the period ended 31 March 2020. The loan was used to finance the
company’s trading activities.
Required:
(a) Calculate Tenth Ltd’s taxable total profits for the four month period ended 31 July
2019.  (7 marks)
(b) Calculate Eleventh Ltd’s tax adjusted trading profit for the six month period ended
31 March 2020.  (8 marks)
(Total: 15 marks)
Q36: WRETCHED LTD (ADAPTED) (Practice Test -2) (CBE Practice Platform)

Wretched Ltd commenced trading on 1 August 2019, preparing its first accounts for the
eight month period ended 31 March 2020.
Wretched Ltd is incorporated in the United Kingdom, but its three directors are all non‐
resident in the United Kingdom. Board meetings are always held overseas.
The following information is available:
Trading loss
The trading loss based on the draft accounts for the eight month period ended 31 March
2020 is £141,200. This figure is before making any adjustments required for:
(1) Advertising expenditure of £7,990 incurred during April 2019. This expenditure has not
been deducted in arriving at the trading loss for the eight month period ended 31
March 2020 of £141,200.
(2) The premium which was paid to acquire a leasehold office building on a ten year lease.
(3) Capital allowances.
Premium paid to acquire a leasehold office building
On 1 August 2019, Wretched Ltd paid a premium to acquire a leasehold office building on a
ten year lease. The amount of premium assessed on the landlord as income was £34,440. The
office building was used for business purposes by Wretched Ltd throughout the eight month
period ended 31 March 2020.
Plant and machinery
On 1 August 2019, Wretched Ltd purchased three laptop computers at a discounted cost of
£400 per laptop. The original price of each laptop was £850, but they were sold at the
discounted price because they were ex‐display.
Wretched Ltd also purchased three second hand motor cars on 1 August 2019. Details are:
Cost CO2 emissions rate
£
Motor car (1) 8,300 44 grams per kilometre
Motor car (2) 12,300 110 grams per kilometre
Motor car (3) 18,800 145 grams per kilometre
Property income
Wretched Ltd lets out a warehouse which is surplus to requirements. The warehouse was let
out from 1 August to 31 October 2019 at a rent of £1,400 per month. The tenant left on 31
October 2019, and the warehouse was not re‐let before 31 March 2020.
During the eight month period ended 31 March 2020, Wretched Ltd spent £2,100 on
advertising for tenants.
Due to a serious flood, Wretched Ltd spent £5,900 on repairs during January 2020. The
damage was not covered by insurance.
Loss on the disposal of shares
On 20 March 2020, Wretched Ltd sold its entire 1% shareholding of £1 ordinary shares in
Worthless plc for £21,400. Wretched Ltd had purchased these shares on 5 August 2019 for
£26,200. The indexation factor for the period August 2019 to March 2020 is 0.02.
Other information
Wretched Ltd does not have any 51% group companies. Wretched Ltd will continue to trade
for the foreseeable future.

Required:
(a) State, giving reasons, whether Wretched Ltd is resident or not resident in the United
Kingdom for corporation tax purposes.  (1 mark)
(b) Assuming that Wretched Ltd is resident in the United Kingdom, calculate the
company’s trading loss, property income loss and capital loss for the eight month
period ended 31 March 2020. 
Note: You should assume that the company claims the maximum available capital
allowances. (11 marks)
(c) Explain how Wretched Ltd will be able to relieve its trading loss, property income
loss and capital loss for the eight month period ended 31 March 2020.  (3 marks)
(Total: 15 marks)
Q33 :

(Sep/Dec 2020)
 Value added Tax & Inheritance Tax (Day – 5)

(a) Calculate the IHT payable in respect of Aurora’s estate if she were to die on 6 April 2019 (3 Marks)
(b)Assuming Aurora does not die on 6 April 2019, for each one of her three let properties, calculate the
chargeable gain (after taking account of any available relief, but before deducting the annual exempt
amount) if she sells that property during May 2019. (3 Marks)

(c)Calculate the total amount of income tax relief which Aurora will benefit from as a result of making a
net pension contribution of £40,000 during the tax year 2019-20.

Note: You are not expected to prepare full tax computations. (3 Marks)

(ii) Explain why it is beneficial for Aurora to restrict her net personal pension contribution to £ 40,000 for
each of three tax years 2019-20, 2020-21 and 2021-22. (1 Mark)
Q31: JACK (ADAPTED) (Practice Test -2) (CBE Practice Platform)

You should assume that today’s date is 15 March 2020 and that the tax rates and
allowances for the tax year 2019/20 continue to apply.
Jack, aged 44, is a widower following the recent death of his wife. He has just cashed in a
substantial share portfolio and is now considering what to do with the proceeds.
Gift to a trust
The value of Jack’s estate is in excess of £1,000,000, and he is worried about the amount of
inheritance tax which will be payable should he die. His wife’s nil rate band was fully used
when she died.
Jack is therefore planning to make an immediate lifetime cash gift of £300,000 to a trust with
the funds then being held for the benefit of his two children aged 10 and 12. Jack has not
made any previous lifetime gifts.
Personal pension contribution
The only pension contributions which Jack has made previously are a gross amount of £500
per month which he saves into a personal pension scheme. Jack has continued to make these
contributions throughout the tax year 2019/20. Although Jack has been saving into this
scheme for the previous 15 years, he is concerned that he is not saving enough for his
retirement. Jack therefore wants to make the maximum possible amount of additional gross
personal pension contribution for the tax year 2019/20, but only to the extent that the
contribution will attract tax relief at the higher rate of income tax.
Jack is self‐employed. His trading profit is £100,000 for the tax year 2019/20 and the previous
five tax years. He does not have any other income and expects to make the same level of
profit in future years.
Individual savings account (ISA)
Jack has never invested any amounts in ISAs. During the next 30 days he would like to invest
the maximum possible amounts into stocks and shares ISAs.

Required:
(a) Explain, with supporting calculations where necessary, why it is good inheritance tax
planning for Jack to make the immediate lifetime cash gift of £300,000 to a trust. 
Note: You are not expected to consider taper relief. (3 marks)
(b) (i) Advise Jack of the amount of additional gross personal pension contribution he
can make for the tax year 2019/20 which will benefit from tax relief at the
higher rate of income tax, and explain why this is a tax efficient approach to
pension saving.  (4 marks)
(ii) Calculate the amount of unused pension annual allowances which Jack will be
able to carry forward to the tax year 2020/21 if the contribution in (i) above is
made.  (1 mark)
(c) Advise Jack as to the maximum possible amount which he can invest into stocks and
shares ISAs during the next 30 days.  (2 marks)
(Total: 10 marks)