Question 01

This scenario relates to two requirements.

Up to and including the tax year 2021/22, Dill was always resident in the United Kingdom (UK), being in
the UK for more than 300 days each tax year. She was also resident in the UK for the tax year
2023/24. However, during the tax year 2022/23, Dill was overseas for 305 days, spending just 60
days in the UK. Dill has a house in the UK and stayed there on the 60 days which she spent in the UK.
She also has a house overseas. For the tax year 2022/23, Dill did not have any close family in the UK, did
not do any work in the UK and was not treated as working full‐time overseas.
On 6 April 2023, Dill returned to the UK and started employment with Herb plc as the IT manager. She
also set up a small technology business, which she ran on a self‐employed basis, but this business failed
and Dill ceased self‐employment on 5 April 2024. The following information is available for the tax year
2023/24:
Employment
1. During the tax year 2023/24, Dill was paid a gross annual salary of £330,000.
2. In addition to her salary, Dill has been paid the following bonuses by Herb plc:
Amount
Date of payment Date of entitlement In respect of the four
£
months ended
16,200 31 December 2023 1 November 2023 31 July 2023
29,300 30 April 2024 1 March 2024 30 November 2023
3. Throughout the tax year 2023/24, Dill had the use of Herb plc’s company gym which is only
open to employees of the company. The cost to Herb plc of providing this benefit was £780.
4. Throughout the tax year 2023/24, Herb plc provided Dill with a home entertainment system
for her personal use. The home entertainment system cost Herb plc £5,900 on 6 April 2023.
5. During the tax year 2023/24, Dill’s three‐year‐old son was provided with a place at Herb
plc’s workplace nursery. The total cost to the company of providing this nursery place was
£7,200 (240 days at £30 per day).
6. On 1 June 2023, Herb plc provided Dill with an interest‐free loan of £80,000, which she used
to renovate her main residence. No loan repayments were made before 5 April 2024.
7. On 25 January 2024, Herb plc paid a health club membership fee of £990 for the benefit of Dill.
8. During the tax year 2023/24, Dill used her private car for both private and business journeys.
The total mileage driven by Dill throughout the tax year was 16,000 miles, with all of this
mileage reimbursed by Herb plc at the rate of 25p per mile. However, only 14,500 miles
were in the performance of Dill’s duties for Herb plc.
9. During the tax year 2023/24, Dill contributed the maximum possible tax relievable amount
into Herb plc’s money purchase occupational pension scheme. The company also
contributed £9,000 on her behalf. Dill first became a member of a personal pension scheme
in the tax year 2022/23 and had an unused annual allowance brought forward of £19,000.
Self‐employment
For the tax year 2023/24, Dill’s self‐employed business made a tax adjusted trading loss of £58,000. Dill will
claim relief for this loss against her total income for the tax year 2023/24.
Other income
1. On 1 November 2023, Dill received a premium bond prize of £1,000.
2. On 28 February 2024, Dill received interest of £1,840 on the maturity of savings
certificates from NS&I (National Savings and Investments).
Required:
1. Explain why Dill was treated as not resident in the United Kingdom for the tax year
2022/23. (12 marks)
2. Calculate Dill’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. (12 marks)
(Total: 15 marks)
Answers:

(a) Dill was resident in the UK during the three previous tax years, and was in the UK between 46 and
90 days, so did not meet any of the automatic tests in the tax year 2022/23.
She had two UK ties, which are having a house in the UK (which she made use of in the tax year
2022/23) and being in the UK for more than 90 days during the previous two tax years.
Dill was therefore not resident in the UK in the tax year 2022/23 because she had fewer than three UK ties.
(b) Dill – taxable income

£
Employment income
Salary 330,000
Employer’s pension contribution 0
Occupational pension contribution (W1) (14,000)
Bonuses (£16,200 + £29,300) 45,500
Company gym 0
Home entertainment system (£5,900 × 20%) 1,180
Workplace nursery 0
Beneficial loan (£80,000 × 2.25% × 10/12) 1,500
Health club membership 990
Mileage allowance (W2) (1,625)
–––––––
363,545
Premium bond prize 0
Interest from savings certificate 0
–––––––
Total income 363,545
Less: Loss relief (58,000)
–––––––
305,545
Less: PA (0)
–––––––
Taxable income 305,545
–––––––

(W1) Occupational pension contribution

As Dill has adjusted income in excess of £312,000 she is only entitled to an
annual allowance for the tax year 2023/24 of the minimum amount of £4,000.
The maximum contribution before incurring an annual allowance charge is
therefore:
£
Brought forward annual allowance from 2022/23 19,000
Current year annual allowance 4,000
––––––
23,000
Less: Employer’s contribution (9,000)
––––––
Maximum employee contribution 14,000
 ––––––
(W2) Mileage allowance
The mileage allowance received will be tax‐free, and Dill can make the
following expense claim:
£
Approved mileage allowance:
10,000 miles at 45p 4,500
4,500 miles at 25p 1,125
––––––
5,625
Less: Mileage allowance received (16,000 at 25p) (4,000)
––––––
Allowable deduction 1,625
––––––

Marking scheme
Marks
(a) Automatic tests not met 1.0
Two UK ties 0.5
Identification of ties (0.5 each) 1.0
Not UK resident as less than 3 ties 0.5
––––
3.0
––––
(b) Employment income
Salary 0.5
Occupational pension contribution 2.0
Bonuses 1.0
Gym 0.5
Home entertainment system 1.0
Workplace nursery 0.5
Beneficial loan 1.5
Health club membership 0.5
Mileage allowance 1.5
Premium bond 0.5
Interest from savings certificate 0.5
Loss relief 1.5
PA 0.5
––––
12.0
––––
Total 15.0
––––
Question 02

This scenario relates to three requirements.

Up to and including the tax year 2021/22, Tonie was resident in the UK for tax purposes, spending more
than 300 days in the UK each year. Tonie understands that for the tax year 2023/24, she will again
automatically be treated as resident in the UK, but is unsure of her residence status for the tax year
2022/23. For this tax year, Tonie was neither automatically resident in the UK nor automatically not
resident. Throughout the tax year 2022/23, Tonie was travelling around the world and did not stay in
any one country for longer than 30 days, although she did spend a total of 50 days in the UK. Tonie has
a house in the UK, but it was let out throughout the tax year 2022/23. She is single, has no children, and
stayed with a friend on the 50 days that she spent in the UK. Tonie did not do any substantive work in
the UK during the tax year 2022/23.
The following information is available for the tax year 2023/24:
Employment
On 6 April 2023, Tonie, who is a software developer, accepted a one‐year contract to maintain
websites for Droid plc. Droid plc treated the contract as one of employment, with the payments to
Tonie being subject to PAYE. However, Tonie thought that, because she was working from home, her
employment status should instead have been one of self‐ employment.
1 For the term of the contract, from 6 April 2023 to 5 April 2024, Tonie was paid a fixed
gross amount of £6,200 a month. During the term of the contract, Tonie was not
permitted to work for any other clients. She was required to do the work personally,
not being permitted to sub‐contract the work to anyone else.
2 During the term of the contract, Tonie worked from home, but had to attend weekly
meetings at Droid plc’s offices to receive instructions regarding the work to be
performed during the following week. During the period 6 April 2023 to 5 April 2024,
Tonie used her private car for business visits to Droid plc’s clients. She drove 2,300
miles, for which Droid plc paid an allowance of 60 pence per mile.
3 During the term of the contract, Tonie leased computer equipment at a cost of £180
a month. This was used 100% for business purposes.
Property income
1 Tonie owns a freehold house which is let out (this is not a furnished holiday letting).
The total amount of rent received during the tax year 2023/24 was £10,080.
2 Tonie partly financed the purchase of the property with a repayment mortgage,
paying mortgage interest of £4,200 during the tax year 2023/24.
3 During May 2023, Tonie purchased a new washer‐dryer for the property at a cost of
£640. This was a replacement for an old washing machine which was scrapped, with
nil proceeds. The cost of a similar washing machine would have been £380.
4 During November 2023, Tonie purchased a new dishwasher for the property at a cost
of £560. The property did not previously have a dishwasher.
5 The other expenditure on the property for the tax year 2023/24 amounted to £1,110,
and this is all allowable.
6 During the tax year 2023/24, Tonie rented out one furnished room of her main
residence. During the year, she received rent of £8,580 and incurred allowable
expenditure of £870 in respect of the room. Tonie always uses the most favourable
basis as regards the tax treatment of the furnished room.
Other income
1 On 1 July 2023, Tonie inherited £100,000 (nominal value) of gilts paying interest at
the rate of 3%. The inheritance was valued at £120,000. Interest is paid half‐
yearly on 30 June and 31 December based on the nominal value. Tonie sold the
gilts on 30 November 2023 for £121,250 (including accrued interest).
2 On 31 January 2024, Tonie received a premium bond prize of £100.
3 On 31 March 2024, Tonie received interest of £520 on the maturity of savings
certificates from NS&I (National Savings and Investments).

Required:
(a) Explain why Tonie was treated as not resident in the UK for the tax year 2022/23.
(2 marks)
(b) List FOUR factors which are indicators of Tonie being treated as employed in
relation to her contract with Droid plc rather than as self‐employed.
Note: You should confine your answer to the information given in the question. (2 marks)
(c) On the basis that Tonie is treated as employed in relation to her contract with Droid plc,
calculate her 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. (11 marks)
(Total: 15 marks)
Answers:

(a) Tonie was previously resident and was in the UK between 46 and 90 days. She therefore
needed three UK ties or more to be treated as UK resident.
Tonie only had two UK ties, which were being in the UK for more than 90 days during the
previous tax year, and spending more time in the UK than in any other country during 2022/23.
(b) The contract was for a relatively long period of time.
Tonie did not take any financial risk.
Tonie only worked for Droid plc.
Tonie was required to do the work personally.
Droid plc exercised control over Tonie via the weekly meetings
and instructions
(c) Tonie – Taxable income 2023/24
£
Employment income
Salary (£6,200 × 12) 74,400
Mileage allowance (2,300 at 15p (60p – 45p)) 345
Leasing costs (£180 × 12) (2,160)
Property income (W) 9,670
Savings income (£100,000 at 3% × 5/12) 1,250
Premium bond prize 0
Interest from savings certificate 0
–––––––
83,505
Personal allowance (12,570)
–––––––
Taxable income 70,935
–––––––

Working – Property income

£
Rent received 10,080
Mortgage interest 0
Replacement furniture relief
Washing machine (380)
Dishwasher 0
Other expenses (1,110)
–––––––
8,590
Furnished room (£8,580 – £7,500) 1,080
–––––––
Property income 9,670
–––––––
 Marking scheme
Marks
(a) Residence 2.0
––––
(b) Factors 2.0
––––
(c) Salary 0.5
Mileage allowance 1.0
Leasing costs 1.0
Savings income 1.0
Premium bond 1.0
Interest from savings certificate 1.0
Rent received 1.0
Mortgage interest 1.0
Washing machine 1.0
Dishwasher 0.5
Other expenses 0.5
Room 1.0
PA 0.5
––––
11.0
––––
Total 15.0
––––
Question 03

This scenario relates to three requirements.

Na Style ceased self‐employment as a hairdresser on 31 January 2024. Na’s trading profit for the final
ten‐month period of trading from 1 April to 31 January 2024 was £33,215. This figure is before taking
account of capital allowances.

The tax written down value of the capital allowances main pool at 1 April 2023 was £2,200. On 10
August 2023, Na purchased a laptop computer for £1,700.

On the cessation of trading, Na personally retained the laptop computer. Its value on 31 January 2024
was £1,200. The remainder of the items included in the main pool were sold for £800 on 31 January
2024.

Other information
1. During the tax year 2023/24 Na received dividends of £5,200, building society
interest of £700, interest of £310 from an individual savings account (ISA), interest of
£1,100 on the maturity of a NS&I savings certificate, and interest of £370 from
government stocks (gilts).
2. Na’s payments on account of income tax in respect of the tax year 2023/24 totalled
£3,200.

Required:
(a) Calculate the amount of trading profit that will have been taxed on Na Style for the tax
year 2023/24. (5 marks)
(b)
1. Calculate the income tax payable by Na Style for the tax year 2023/24. (6 marks)
2. Calculate Na Style’s balancing payment for the tax year 2023/24 and her payments on
account for the tax year 2024/25, stating the relevant due dates.
You should ignore national insurance contributions. (3 marks)
3. State the penalty that will be payable if Na Style does not submit her income tax
return for the tax year 2023/24 until 31 March 2025. (1 mark) (Total: 15 marks)
Answers:

(a) Taxable trading profits

£
Period ended 31 January 2024 33,215
Balancing allowance (working) (1,900)
––––––
31,315
––––––

Working – Capital allowances

Main pool
£

TWDV brought forward 2,200

Addition – Laptop computer 1,700
Proceeds (£1,200 + £800) (2,000)
–––––––
Balancing allowance (1,900)
–––––––

(b)
1. Income tax computation – 2023/24
£
Trading profit 31,315
Building society interest 700
Interest from ISA (exempt) 0
Interest from NS&I savings certificate (exempt) 0
Interest from government stocks 370
Dividends 5,200
––––––
Total income 37,585
Less: PA (12,570)
––––––
Taxable income 25,015
––––––

Analysis of income (Note)

Dividends = £5,200
Savings (£700 + £370) = £1,070
Non‐savings income (£31,315 – £12,570) = £18,745
Income tax £
£
18,745 × 20% (non‐savings income) 3,749
1,000 × 0% (savings income) 0
 70 × 20% (savings income) 14
1,000 × 0% (dividend income) 0
4,200 × 8.75% (dividend income) 368
––––––
25,015
–––––– ––––––
Income tax payable 4,131
––––––

2. Tax payments
Na’s balancing payment for the tax year 2023/24 due on 31 January 2025 is £931 (£4,131 – £3,200).
Her payments on account for the tax year 2024/25 will be £2,066 and £2,065 (£4,131 × 50%). These will be
due on 31 January 2025 and 31 July 2025.

3. Penalty for late submission

If Na’s return is not submitted until 31 March 2025, it will be submitted less than three months late.
There is therefore a fixed penalty of £100.

Marking scheme
Marks
(a) Trading profit year ended 31.1.2024 1.0
Capital allowances – TWDV b/f 1.0
Capital allowances – addition 1.0
Capital allowances – disposal proceeds 1.0
Capital allowances – balancing allowance 1.0
––––
5.0
––––
(b) 1 Income tax computation
Trading profit 0.5
Building society interest 0.5
Individual savings account 0.5
Interest from NS&I savings certificate 0.5
Interest from government stocks 0.5
Dividends 0.5
Personal allowance 0.5
Income tax 2.5
––––
6.0
––––
2 Tax payments
Balancing payment 1.5
Payments on account 1.5
––––
3.0
––––
3 Penalty 1.0
––––
Total 15.0
––––
Question 04

This scenario relates to one requirement.

Richard Tryer is employed by Prog plc as a computer programmer.
Richard has tried to prepare his own income tax computation for the tax year 2023/24, but he has
found it more difficult than expected. Although the sections which Richard has completed are correct,
there are a significant number of omissions. The omissions are marked as outstanding (O/S).
The partly completed income tax computation is as follows:

Income tax computation – 2023/24

Notes £ £
Employment income
Salary 41,030
Car benefit 1 O/S
Fuel benefit 1 O/S
Living accommodation 2 O/S
–––––– O/S
Property income 3 O/S
Building society interest 1,260
Dividends 5,800
––––––
O/S
Personal allowance (12,570)
––––––
Taxable income O/S
––––––
£
37,700 at 20% 7,540
O/S at 40% O/S
O/S at 0% O/S
O/S at 40% O/S
O/S at 0% O/S
O/S at 33.75% O/S
–––––
O/S
––––– ––––––
Income tax liability O/S
Less: PAYE (19,130)
––––––
Income tax payable O/S
––––––

Note 1 – Car and fuel benefits

Throughout the tax year 2023/24, Prog plc provided Richard with a petrol car which has a list price of
£17,900. The car cost Prog plc £17,200, and it has a CO 2 emission rate of 109 grams per kilometre.
During the tax year 2023/24, Richard made contributions of £1,200 to Prog plc for the use of the car.

During the period 1 July 2023 to 5 April 2024, Prog plc also provided Richard with fuel for private
journeys. The total cost of fuel during this period was £4,200, of which 45% was for private journeys.
Richard did not make any contributions towards the cost of the fuel.
Note 2 – Living accommodation
Throughout the tax year 2023/24, Prog plc provided Richard with living accommodation. The
property has been rented by Prog plc since 6 April 2023 at a cost of £1,100 per month. On 6 April
2023, the market value of the property was £122,000, and it has an annual value of £8,600.
On 6 April 2023, Prog plc purchased furniture for the property at a cost of £12,100. The company
pays for the running costs relating to the property, and for the tax year 2023/24 these amounted to
£3,700.
Note 3 – Property income
Richard owns a freehold shop, which is let out unfurnished. The ten year old shop was purchased by
Richard on 1 October 2023. Richard spent £8,400 replacing the building’s roof: the shop was not
usable until this work was completed on 30 November 2023, and this fact was represented by a
reduced purchase price.
On 1 December 2023, the property was let to a tenant, with Richard receiving a premium of £12,000
for the grant of a 30‐year lease. The monthly rent is £664 payable in advance, and during the period
1 December 2023 to 5 April 2024 Richard received five rental payments.
Due to a fire, £8,600 was spent on repairing the ceiling of the shop during February 2024. Only
£8,200 of this was paid for by Richard’s property insurance.
Richard paid insurance of £501 in respect of the property. This was paid on 1 October 2023 and is for
the year ended 30 September 2024.

Required:
Calculate the income tax payable by Richard Tryer for the tax year 2023/24. (15 marks)
Answers

Richard Tryer
Income tax computation – 2023/24
Non‐ Savings Dividend Total
savings income income
income
£ £ £ £
Employment income (W1) 69,225 69,225
Property income (W4) 7,375 7,375
Building society interest (per Q) (Note) 1,260 1,260
Dividends (Note 1) 5,800 5,800
––––––– –––––– ––––––– –––––––
76,600 1,260 5,800 83,660
Less: PA (per Q) (12,570) (12,570)
––––––– –––––– ––––––– –––––––
Taxable income 64,030 1,260 5,800 71,090
––––––– –––––– ––––––– –––––––

£
37,700 at 20% (per Q) 7,540
26,330 at 40% 10,532
–––––––
64,030
500 at 0% 0
760 (£1,260 – £500) at 40% 304
1,000 at 0% 0
4,800 (£5,800 – £1,000) at 33.75% 1,620
–––––––
71,090
––––––– –––––––
Income tax liability 19,996
Less: PAYE (per Q) (19,130)
–––––––
Income tax payable 866
–––––––
Workings
(W1) Employment income
£
Salary (per question) 41,030
Car benefit (W2) 3,454
Fuel benefit (W2) 5,421
Living accommodation (W3) 13,200
Furniture (£12,100 × 20%) 2,420
 Running costs 3,700
–––––––
Employment income 69,225
–––––––
(W2) Car and fuel benefits
CO2 emissions = 109 grams per kilometre (rounded down to 105) and available
all year.
%
Petrol 16
Plus: (105 – 55)/5 10
–––
Appropriate percentage 26
–––
£
List price of car 17,900
––––––
£
Car benefit (£17,900 × 26%) 4,654
Less: Contribution for private use (1,200)
––––––
Car benefit 3,454
––––––
Fuel benefit
(£27,800 × 26% × 9/12) 5,421
––––––
(W3) Living accommodation
 The benefit for the living accommodation is the higher of the annual
value of £8,600 and the rent paid of £13,200 (£1,100 × 12).
 There is no additional benefit because Prog plc does not own the
property.

(W4) Property income

£ £
Premium received 12,000
Less: £12,000 × 2% × (30 – 1) (6,960)
–––––––
5,040
Rent received (£664 × 5) 3,320
–––––––
8,360
Roof replacement SBA (£8,400 × 3% × 4/12) 84
Ceiling repairs (£8,600 – £8,200) 400
Insurance paid 501
––––
(985)
–––––––
 7,375

Marking scheme
Marks
Salary 0.5
Car benefit 2.0
Fuel benefit 1.5
Living accommodation 2.0
Furniture 0.5
Running costs 0.5
Taxable amount of premium 1.5
Rent received 1.0
Roof replacement 1.0
Ceiling repairs 0.5
Insurance 1.0
Building society interest & dividends 0.5
Income tax payable 2.5
––––
Total 15.0
––––
Question 05

This scenario relates to two requirements.

Samantha Fabrique has been a self‐employed manufacturer of clothing since 2012. She has the
following income and chargeable gains for the tax years 2022/23 to 2024/25:
2022/23 2023/24 2024/25
(estimated)
£ £ £
Trading profit/(loss) 21,600 (81,900) 11,650
Building society interest 52,100 3,800 1,850
Chargeable gains/(loss) 53,600 (9,700) 12,500
The chargeable gains do not qualify for business asset disposal relief and are not in relation
to residential property.

Required:
(a) State the factors that will influence an individual’s choice of loss relief claims.
(3 marks)
(b) Calculate Samantha’s taxable income and taxable gains for each of the tax years
2022/23 to 2024/25 (inclusive) on the assumption that she relieves the trading loss
of £81,900 for the tax year 2023/24 on the most favourable basis.
Explain your reasoning behind relieving the loss on the most favourable basis.
You should assume that the tax allowances for the tax year 2023/24 apply
throughout. (12 marks)
(Total: 15 marks)
Answers:

(a) Factors influencing choice of loss relief claims

 The rate of income tax or capital gains tax at which relief will be obtained, with
preference being given to income charged at the higher rate of 40% or additional
rate of 45%.
 The timing of the relief obtained, with a claim against total income/chargeable
gains of the current tax year or preceding tax year resulting in earlier relief than a
claim against future trading profits.
 The extent to which personal allowances, the capital gains annual exempt
amount and the savings and dividend nil rate bands may be wasted.

(b) Taxable income 2022/23 2023/24 2024/25

£ £ £
Trading income 21,600 0 11,650
Interest 52,100 3,800 1,850
–––––– ––––– ––––––
73,700 3,800 13,500
Less: Loss relief (0)
– against trading (no restriction) (21,600)
– against other income (restricted) (50,000)
–––––– ––––– ––––––
2,100 3,800 13,500
Less: PA (restricted) (restricted) (12,570)
–––––– ––––– ––––––
Taxable income 0 0 930
–––––– ––––– ––––––

Taxable gains 2022/23 2023/24 2024/25

£ £ £
Chargeable gains 53,600 0 12,500
Less: Trading loss relief (10,300)
–––––– ––––– ––––––
43,300 0 12,500
Less: AEA (6,000) (wasted) (6,000)
–––––– ––––– ––––––
37,300 0 6,500
Less: Capital loss b/f (6,500)
–––––– ––––– ––––––
Taxable gains 31,000 0 0
–––––– ––––– ––––––

Loss memorandum
£
 Trading loss in the tax year 2023/24 81,900
Less: Relief against total income
current year (no claim as income covered by PA) (0)
prior year – total claim (71,600)
––––––
Loss remaining 10,300
Less: Relief against chargeable gains in prior year (10,300)
––––––
Loss carried forward 0
––––––
Utilisation of losses Trading loss
Loss relief has been claimed:
 against total income for the tax year 2022/23,
 then against the chargeable gains of the same tax year.
This gives relief at the earliest date and at the highest rates of tax.
Capital loss
The capital loss for the tax year 2023/24 is carried forward and set against the
chargeable gains for the following tax year.
The use of brought forward capital losses is after the annual exempt amount, which
avoids wasting any of the annual exempt amount.
The balance of the loss £3,200 (£9,700 – £6,500) is carried forward against future gains.

Marking scheme
Marks
(a) Rate of tax 1.0
Timing of relief 1.0
Personal allowance, annual exempt amount, nil rate bands 1.0
––––
3.0
––––
(b) Trading income 0.5
Building society interest 0.5
Loss relief against total income 2.0
Personal allowance 0.5
Capital gains 1.5
Loss relief against capital gains 1.0
Capital loss carried forward 1.0
Explanation of most beneficial route 5.0
––––
12.0
––––
Total 15.0
––––
Question 06

This scenario relates to three requirements.

Auy Man and Bim Men have been in partnership since 6 April 2013 as management consultants. The following
information is available for the tax year 2023/24:
Personal information
Auy spent 190 days in the United Kingdom (UK) during the tax year 2023/24. Auy was resident in the UK
during the tax year 2022/23.
Bim spent 100 days in the UK during the tax year 2023/24 living in her holiday home in Devon. Bim also
spent 100 days in the UK in each of the previous five tax years, and was treated as resident in the UK
during each of the previous three years.
Statement of profit or loss for the year ended 5 April 2024
The partnership’s summarised statement of profit or loss for the year ended 5 April 2024 is:
Notes £ £
Sales 143,880
Expenses:
Depreciation 3,400
Other expenses 1 1,800
Wages and salaries 2 50,900
–––––– (56,100)
––––––
Net profit 87,780
––––––
Notes:
1 The figure of £1,800 for other expenses includes £720 for entertaining employees.
The remaining expenses are all allowable.
2 The figure of £50,900 for wages and salaries includes the annual salary of £4,000 paid
to Bim (see the profit sharing note below).
Plant and machinery
On 6 April 2023 the tax written down values of the partnership’s plant and machinery were:
£
Main pool 3,100
Car 1 21,000
The following transactions took place during the year ended 5 April 2024:
Cost
£
8 May 2023 Purchased car 2 10,150
21 November 2023 Purchased car 3 14,200
14 January 2024 Purchased car 4 11,600
Car 1 was purchased in March 2021 and has a CO2 emission rate of 125 grams per
kilometre. It is used by Auy, and 80% of the mileage is for business journeys.
 Car 2 was a new car purchased on 8 May 2023 and has zero CO2 emissions. It is used by
Bim, and 80% of the mileage is for business journeys.
Car 3 purchased on 21 November 2023 has a CO 2 emission rate of 40 grams per kilometre.
Car 4 purchased on 14 January 2024 has a CO2 emission rate of 90 grams per kilometre.
These two cars are used by employees of the business.

Profit sharing
Profits are shared 80% to Auy and 20% to Bim. This is after paying an annual salary of
£4,000 to Bim, and interest at the rate of 5% on the partners’ capital account balances.
The capital account balances are:
£
Auy Man 56,000
Bim Men 34,000

Required:
(a) Explain why both Auy Man and Bim Men will each be treated for tax purposes as
resident in the United Kingdom for the tax year 2023/24. (2 marks)
(b) Calculate the partnership’s tax adjusted trading profit for the year ended 5 April
2024, and the share of the partnership profits for Auy Man and Bim Men.
Your computation should commence with the net profit figure of £87,780, and
should also list all of the items referred to in Notes 1 and 2 indicating by the use of
zero (0) any items that do not require adjustment. (10 marks)
(c) Calculate the class 4 national insurance contributions payable by Auy Man and Bim
Men for the tax year 2023/24. (3 marks)
(Total: 15 marks)
Answer:
(a) Residence status
 Auy will be treated as resident in the United Kingdom (UK) for the tax year
2023/24 as she was present in the UK for 190 days and therefore she meets
the first automatic UK residency test (i.e. in the UK for at least 183 days in the
tax year).
 Bim will be treated as resident in the UK for the tax year 2023/24 as she was
previously resident in the UK, was present here for between 91 and 120 days
and she meets two of the sufficient ties tests.
She has a home in the UK which she makes use of for 100 days during the tax
year (the ‘accommodation’ test) and she has spent 90 days or more in the UK
during both of the previous tax years (the ‘days in UK’ test).
(b) Tax adjusted trading profit – year ended 5 April 2024

£ £
Net profit 87,780
Depreciation 3,400
Entertaining employees (Note 1) 0
Appropriation of profit (Note 2) 4,000
Capital allowances (W) 12,938
–––––– ––––––
95,180 12,938
(12,938) ––––––
––––––
Tax adjusted trading profit 82,242
––––––

Allocation of profits – year ended 5 April 2024

Total Auy Man Bim Men

£ £ £
Salary 4,000 4,000
Interest (£56,000/£34,000 at 5%) 4,500 2,800 1,700
Balance (80%/20%) 73,742 58,994 14,748
–––––– –––––– ––––––
82,242 61,794 20,448
–––––– –––––– ––––––
 Working – Capital allowances
Main Car 1 Special Allowances
pool rate pool
£ £ £ £ £
TWDV b/f 3,100 21,000
Additions (no AIA)
Car 3 14,200
Car 4 11,600
–––––– –––––– ––––––
17,300 21,000 11,600

WDA @ 18% (3,114) 3,114

WDA @ 6% (1,260) × 80% 1,008
WDA @ 6% (696) 696
Addition (with FYA)
Car 2 10,150
FYA @ 100% (10,150) × 80% 8,120
––––––– 0
–––––– –––––– –––––
TWDV c/f 14,186 19,740 10,904
–––––– –––––– ––––– ––––––
Total allowances 12,938
––––––

(c) Class 4 national insurance contributions – 2023/24

Auy Man
£
(£50,270 – £12,570) × 9% 3,393
(£61,794 – £50,270) × 2% 230
–––––
3,623
–––––
Bim Men
(£20,448 – £12,570) × 9% 709
–––––
 Marking scheme
Marks
(a) Auy Man 1.0
Bim Men 1.0
––––
2.0
––––
(b) Trading profit
Depreciation 0.5
Entertaining employees 0.5
Appropriation of profit 0.5
Deduction of capital allowances 0.5
Capital allowances – Main pool 1.0
– Car 1 1.5
– Special rate pool 1.5
– FYA 1.5
Partnership profit share
Salary 0.5
Interest on capital 1.0
Balance of profits 1.0
––––
10.0
––––
(c) Auy Man 2.0
Bim Men 1.0
––––
3.0
––––
Total 15.0
––––
Question 07

You should assume that today’s date is 1 March 2024.

(a) This scenario relates to one requirement.

Ginger has a holding of 10,000 £1 ordinary shares in Nutmeg Ltd, an unquoted trading company,
which she had purchased on 13 February 2014 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 2024. Ginger and her daughter will elect to
hold over any gain as a gift of a business asset.
For the tax year 2023/24, 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 2024 without incurring any capital gains tax liability for the tax year 2023/24.
Your answer should be supported by appropriate calculations. (4 marks)
(b) This scenario relates to one requirement.
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 2014, and she currently holds 20,000 shares (with matching voting rights) in the company. These
shares were subscribed for on 1 July 2014 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 from an existing shareholder on 23 April 2018 for £46,200.
Either Innocent or Nigel will sell 2,000 of their shares in Cinnamon Ltd during March 2024 for
£65,000, but they are not sure which of them should make the disposal. For the tax year 2023/24,
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
2024 is made by Innocent rather than Nigel. (6 marks)
(Total: 10 marks)
Answers:

(a) Ginger

 The disposal is at an undervalue, so only the ‘gift’ element of the gain can be
held over.
 The consideration paid for each share will be immediately chargeable to capital
gains tax to the extent that it exceeds the allowable cost.
 The chargeable amount is therefore £1.61 (£4.00 – £2.39) per share.
 Ginger’s annual exempt amount for the tax year 2023/24 is £6,000.
 She can therefore sell 3,727 shares (£6,000/£1.61) to her daughter without this
resulting in any capital gains tax liability for the tax year 2023/24.

calculation:
£
MV of shares (3,727 × £6.40) 23,853
Less: Cost (3,727 × £2.39) (8,908)
––––––
Capital gain 14,945
Less: Gift holdover relief (3,727 × (£6.40 – £4.00)) (8,945)
––––––
Chargeable gain (3,727 × (4.00 – £2.39)) (excess actual proceeds received) 6,000
Less: Annual exempt amount (6,000)
––––––
Taxable gain 0
––––––

(b) Innocent and Nigel

 If Innocent makes the disposal, then her CGT liability for 2023/24 will be:
£
Disposal proceeds 65,000
Less: Cost (2,000 × £1) (2,000)
––––––
Chargeable gain 63,000
––––––
Capital gains tax (£63,000 × 10%) 6,300
––––––
Innocent pays CGT at 10% as the disposal qualifies for BADR.
 If Nigel makes the disposal, then his CGT liability for 2023/24 will be:
£
Disposal proceeds 65,000
 Less: Cost (£46,200 × 2,000/3,000) (30,800)
––––––
Chargeable gain 34,200
––––––
Capital gains tax (£34,200 × 20%) 6,840
––––––
Nigel pays CGT at 20% because he is a higher rate taxpayer and the disposal
does not qualify for BADR or investors’ relief.
 The capital gains tax saving if Innocent makes the disposal rather than Nigel is
therefore £540 (£6,840 – £6,300).
Question 08

You should assume that today’s date is 1 March 2024.

(a) This scenario relates to one requirement.

On 27 August 2023, Ruby disposed of a residential investment property, and this resulted in a
chargeable gain of £41,500.
At the point of the disposal, Ruby had not made any other disposals and expected to have a remaining
basic rate band of £14,185 for the tax year 2023/24.

Required:
Calculate Ruby’s capital gains tax liability in respect of the above disposal and state when the tax
will be paid. (2 marks)
(b) This scenario relates to one requirement.
In addition to the disposal already made on 27 August 2023, Ruby is going to make one further
disposal during the tax year 2023/24. This disposal will be of either Ruby’s 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 2014 and could be sold at a gain of £37,300. Ruby has been an employee
of Pola Ltd since 2012.
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 2017. On that date, the
shares were quoted on the stock exchange at £2.12–£2.24. The shareholding could be sold for
£59,000.
No capital gains tax reliefs are available in respect of this disposal.

Required:
Calculate Ruby’s final capital gains tax payable or repayable for the tax year 2023/24 if, during
March 2024, 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 (4.5 marks)
Aplo plc (3.5 marks) (8 marks)
(Total: 10 marks)
Answer:

(a) Ruby – Capital gains tax liability re residential property

£
Chargeable gain on investment property 41,500
Less: AEA (6,000)
––––––
35,500
£ ––––––
14,185 × 18% 2,553
21,315 × 28% 5,968
––––––
35,500
––––––
––––––
Capital gains tax liability 8,521
––––––
Due date
26 October 2023 (60 days after the disposal).

(b) Disposal of shareholding in Pola Ltd

Qualifying Not qualifying
for BADR for BADR
£ £
Ordinary shares in Pola Ltd 37,300
Residential investment property 41,500
Less: AEA (0) (6,000)
––––––– –––––––
Taxable gains 37,300 35,500
––––––– –––––––
(£37,300 × 10%) 3,730
(£35,500 × 28%) 9,940
–––––––
CGT liability 13,670
Less: Payment on account (8,521)
–––––––
CGT payable 5,149
–––––––
Disposal of shareholding in Aplo plc
£ £
Ordinary shares in Aplo plc
Sale proceeds 59,000
 Cost (W) (87,200)
–––––––
Capital loss (28,200)
Chargeable gain on residential investment property 41,500
–––––––
Net chargeable gains 13,300
Annual exempt amount (6,000)
–––––––
Taxable gains 7,300
–––––––
Capital gains tax liability
(£7,300 × 18%) 1,314
Less: Payment on account (8,521)
–––––––
CGT repayable (7,207)
–––––––
Working – Cost of shares in Aplo plc
Average of the two quoted prices: (£2.12 + £2.24) × 1/2 = £2.18
£2.18 × 40,000 = £87,200

Marking scheme
Marks
(a) Ruby – Capital gains tax liability
Annual exempt amount 0.5
Capital gains tax at 18% 0.5
Capital gains tax at 28% 0.5
Due date 0.5
––––
2.0
––––
(b) Disposal of shareholding in Pola Ltd
Gains on Pola shares and residential property 0.5
AEA 1.0
Capital gains tax at 10% 1.0
Capital gains tax at 28% 1.0
Deduct payment on account 0.5
Disposal of shareholding in Aplo plc
Cost of shares 1.0
Loss on shareholding in Aplo plc 1.0
Gain on residential property 0.5
AEA 0.5
Capital gains tax at 18% 0.5
Deduct payment on account 0.5
––––
8.0
––––
Total 10.0
––––