The Institute of Chartered Accountants in England and Wales

Principles of Taxation

Question Bank
For exams in 2024

icaew.com
Principles of Taxation
The Institute of Chartered Accountants in England and Wales
ISBN: 9781 0355 0936 2
Previous ISBN: 9781 0355 0174 8
e-ISBN: 9781 0355 0921 8
First edition 2007
Eighteenth edition 2023
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted in any form or by any means, graphic, electronic or
mechanical including photocopying, recording, scanning or otherwise, without the
prior written permission of the publisher.
The content of this publication is intended to prepare students for the ICAEW
examinations, and should not be used as professional advice.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
Contains public sector information licensed under the Open Government Licence
v3.0
© ICAEW 2023
Contents
The following questions are exam-standard. Unless told otherwise, these questions are the style,
content and format that you can expect in your exam.

Title Page

Question Answer

1 Ethics 1 135

2 Introduction to taxation 7 139

3 Introduction to income tax 11 141

4 Employment income 17 149

5 Trading profits 19 151

6 Capital allowances 21 153

7 Trading profits – basis of assessment 27 159

8 National insurance contributions 33 165

9 Capital gains tax – individuals 37 169

10 Corporation tax 47 177

11 Value added tax 55 185

12 Value added tax – further aspects 75 197

13 Administration of tax 81 201

14 Scenario-based questions: income tax 99 215

15 Scenario-based questions: corporation tax 115 231

Appendix: Mock Exam guidance notes 247

ICAEW 2024 Contents iii

Exam
The Principles of Taxation module exam is 1.5 hours long.
(a) 20% of the marks are allocated to two scenario-based questions. These will each cover a single
syllabus area: income tax and NIC, and corporation tax.
(b) The remaining 80% of the marks are from 40 multiple choice, multi-part multiple choice, multiple
response or numeric entry questions. These questions will cover the remaining areas of the
syllabus.
The objective test questions are of the following types:
• Multiple-choice – select 1 from 4 or 5 options A to D or A to E (see Chapter 1 Q1)
• Multi-part multiple choice – two or more multiple-choice questions, each requiring selection from
2 or 3 options (see Chapter 1 Q2)
• Multiple-response – select 2 or more responses from 4 or more options (see Chapter 1 Q3)
• Numeric entry – enter a figure in a data entry field (see Chapter 3 Q1)
In this Question Bank you will select only one option per question unless told otherwise.
Our website has the latest information, guidance and exclusive resources to help you prepare for this
exam. Find everything you need, from exam webinars, sample exams, errata sheets and the syllabus
to examiner- and tutor-written articles at icaew.com/examresources if you are studying the ACA and
icaew.com/cfabstudents if you are studying ICAEW CFAB.

iv Principles of Taxation ICAEW 2024

Professional skills
Professional skills are essential to accountancy. They are embedded throughout the ACA
qualification, and reflected in this Question Bank.
The level of competency required to pass each module exam will increase as you progress through
the ACA qualification.
You will need to demonstrate each of the four professional skills within your answers. You can find the
full ACA professional skills developments grids at icaew.com/examresources.
Questions in the Principles of Taxation module vary significantly in content and style, as they test a
broad syllabus in both narrative and discursive ways. You will be required to apply your knowledge
of the various taxes to different scenarios and switch between taxes for each different question.
Below are the key skills required in the Principles of Taxation exam that you will need to master.

Professional skills focus: Assimilating and using information

The Principles of Taxation exam requires you to attempt 40 objective test questions and two scenario-
based questions in 90 minutes. You must be able to correctly identify which area of the syllabus is
being tested and draw out the key facts from the scenario to the correctly answer each question.
Being disciplined, reading both the scenario and the requirement carefully and keeping track of time
will mean that you work effectively within time constraints which should offer you the best chance of
passing.

Professional skills focus: Structuring problems and solutions

Each scenario will be different, so you need to practise a wide variety of questions in order to be able
to identify and apply relevant technical knowledge and skills to analyse a specific problem. You need
to ensure that you can complete computational objective test questions quickly and efficiently, so
make sure you learn the relevant pro-forma computations, for example for capital allowances and
each of the taxable benefits.

Professional skills focus: Applying judgement

You should get used to analysing your performance in the questions you attempt in order to ensure
you understand why the correct answer is indeed correct. This will help you to identify relevant
information from the scenario the next time you attempt questions from the same area so that you
are prepared for the exam.

Professional skills focus: Concluding, recommending and communicating

This skill is not examinable in the Principles of Taxation exam apart from communicating in a format
prescribed by the examiner in the scenario-based questions. At this stage of your taxation studies
you will not be required to make recommendations to taxpayers.

ICAEW 2024 Introduction v

vi Principles of Taxation ICAEW 2024
Question Bank
viii Principles of Taxation ICAEW 2024
 Chapter 1: Ethics
1 Which of the following is not a fundamental principle of the ICAEW Code of Ethics?
A Professional behaviour
B Professional intellect
C Integrity
D Objectivity
E Confidentiality
LO 1g

2 Professional accountants must be straightforward and honest in all professional and business
relationships.
Requirements
Select which of the following options correctly identifies this fundamental principle of the ICAEW
Code of Ethics.
A Professional behaviour
B Integrity
A professional accountant must comply with relevant laws and regulations and avoid any action that
discredits the profession.
Select which of the following options correctly identifies this fundamental principle of the ICAEW
Code of Ethics.
C Professional behaviour
D Integrity
E Professional competence and due care
LO 1g

3 Sandra, a chartered accountant, is completing the corporation tax computation for a client company.
She realises that the client company’s sales director, Heather, is a close family friend. Heather asks
Sandra whether she has seen any information from the Financial Director about any planned
bonuses.
Requirement
Which two of the fundamental principles of the ICAEW Code of Ethics may be under threat here?
A Objectivity
B Integrity
C Professional behaviour
D Confidentiality
LO 1g

ICAEW 2024 1: Ethics 1

4 Richard, a chartered accountant who works as a sole trader, is aware that he must adhere to the
fundamental principle of confidentiality of the ICAEW Code of Ethics in respect of information he
acquires in the course of his work.
Requirement
Which of the following describes a situation where Richard does not have to keep such information
confidential?
A When he suspects a client of money laundering
B When his firm no longer acts for the client
C When his firm has not yet been engaged by a prospective client
D When talking to a close friend in a social environment
LO 1g

5 Roger is a chartered accountant and is married to Jennifer, who is also his client. Jennifer runs several
businesses on behalf of her father. Roger knows that Jennifer comes from a wealthy family with
criminal connections. However, Roger has never queried the funding of Jennifer’s businesses as he
trusts her implicitly.
Requirement
Which two of the following options are threats Roger is experiencing according to the ICAEW Code
of Ethics?
A Self-interest threat
B Self-review threat
C Advocacy threat
D Familiarity threat
E Intimidation threat
LO 1g

6 Florence, a chartered accountant, knows that a client, Freddy, has financed his business using the
proceeds of his criminal activities for a number of years. Florence has not reported this and has
instead accepted substantial payments from Freddy which are 10 times her normal fee for
comparable work.
Requirement
Which two of the following statements are correct?
A Freddy is laundering money through his business and as Florence is aware of this she is required
to disclose it to the proper authorities.
B Florence should discuss her decision to go to the authorities with Freddy.
C Florence may be guilty of money-laundering offences as she has assisted Freddy in concealing
the proceeds of crime.
D Florence was justified in increasing her fee for such risky work.
LO 1h

2 Principles of Taxation ICAEW 2024

7 Iqmal is a chartered accountant who has just become suspicious that a client is engaged in money
laundering.
Requirements
Iqmal should report this to the firm’s Money Laundering Reporting Officer:
A Once there is sufficient proof of money laundering
B Now
Any Suspicious Activity Report would be made by:
C Iqmal
D The firm’s Money Laundering Reporting Officer
LO 1h

8 Which of the following is not one of the factors for consideration given in the framework for ethical
conflict resolution in the ICAEW Code of Ethics?
A Ethical issues involved
B Alternative courses of action
C Timescale involved
D Relevant parties
LO 1g

9 Identify in the following scenarios whether the professional accountant is committing an offence
under the anti-money laundering legislation.
Requirements
Stephanie accepts payment from a client in relation to work performed in preparing his personal tax
return. The fee is a percentage of the reduction in the tax payable based on the previous year.
Stephanie strongly suspects that the client has failed to disclose all sources of income. She later
discovers this to be the case.
A Offence committed by Stephanie
B No offence committed by Stephanie
Trevor suspected that a client of his has been receiving income through the operation of a criminal
cartel. He reported this to his firm’s Money Laundering Reporting Officer (MLRO), but has not heard
anything else from the MLRO. Trevor later approaches the client to advise him of his suspicions and
that the firm may have to report this to the authorities.
C Offence committed by Trevor
D No offence committed by Trevor
LO 1h

ICAEW 2024 1: Ethics 3

10 A threat to the fundamental principles may occur when a professional accountant promotes a
particular opinion, compromising subsequent objectivity.
Requirement
This category of threat is known as:
A Self-interest threat
B Self-review threat
C Advocacy threat
D Familiarity threat
LO 1g

11 A threat to fundamental principles may occur when a professional accountant has to re-evaluate a
previous judgement that they made.
Requirement
This category of threat is known as:
A Self-interest threat
B Self-review threat
C Advocacy threat
D Familiarity threat
LO 1g

12 Which of the following statements is correct?

A Tax evasion is illegal and tax avoidance is legal.
B Both tax evasion and tax avoidance are legal.
C Tax evasion is legal and tax avoidance is illegal.
D Both tax avoidance and tax evasion are illegal.
LO 1h

13 Mr Blythe is tendering for some consultancy work. The same work has also been tendered for by
Comp Partners, the accountancy firm which prepares Mr Blythe’s tax returns.
The ethics partner at Comp Partners concludes that the threat from this conflict of interest cannot be
acceptably reduced.
Requirement
According to the ICAEW Code of Ethics, which of the following would be an acceptable course of
action for Comp Partners?
A Inform Mr Blythe of the conflict and notify him that Comp Partners is ceasing to act for him
B Inform Mr Blythe of the conflict and obtain his written consent to continue to act for him
C Inform Mr Blythe of the conflict and continue to act for him
D Continue to act for Mr Blythe and keep the conflict confidential
LO 1h

4 Principles of Taxation ICAEW 2024

14 Toby is a sole trader.
Requirement
Which of Toby’s actions is not an example of tax evasion?
A Claiming £2,000 of personal expenses through the business
B Understating cash sales by £500
C Deliberately postponing the sale of some shares from 5 April until 6 April so that he can use the
following year’s annual exempt amount to reduce his capital gains tax
D Overestimating the value of some property donated to charity
LO 1h

15 William, a chartered accountant, is being threatened by his client, James. James is threatening to
harm William’s family if William refuses to launder money for him.
Requirement
Which of the following options correctly identifies the type of threat William is experiencing
according to the ICAEW Code of Ethics?
A Self-interest threat
B Self-review threat
C Advocacy threat
D Familiarity threat
E Intimidation threat
LO 1g

16 Select which of the following would be offences under UK anti-money laundering legislation:
(1) An accountant alerting a money launderer that a report has been made to the NCA.
(2) An accountant failing to report knowledge of a client’s money-laundering activities.
(3) A taxpayer underpaying tax as the result of a deliberate omission from their tax return.
(4) A taxpayer underpaying tax as the result of an innocent error from their tax return.
(5) The act of tax avoidance.
A All of them
B (1) to (3) only
C (2) and (3) only
D (2), (3) and (5) only
LO 1h

17 Lauren is unhappy with an explanation given to her by a client in relation to the current year’s
accounts. If she accepts the explanation and submits the accounts to HMRC she feels that this will
compromise the principle of integrity.
Requirement
Which of the following factors is she not required to consider in resolving the ethical conflict?
A The facts that she has uncovered
B The relationship that her firm has with the client
C The client’s internal procedures
D Alternative courses of action

ICAEW 2024 1: Ethics 5

 LO 1g

18 A government is considering abolishing the current VAT rules on all food bought in supermarkets
(but not any other shop) and replacing it with the following form of taxation. Each item bought in the
supermarket will be subject to a levy of £0.75. In other words, a person who purchases 10 items of
any value will pay £7.50 in tax.
Requirement
The principle behind the proposed system is the:
A Ability to pay principle
B Value principle
C Unit principle
D Neutrality principle
LO 1b

19 Which of the following is a source of tax law?

A The Budget
B Statutory instruments
C HMRC extra-statutory concessions
D HMRC statements of practice
LO 1f

6 Principles of Taxation ICAEW 2024

 Chapter 2: Introduction to taxation
1 Which of the following items is never a source of UK tax law?
A The annual Finance Act
B HMRC statements of practice
C Case law
D Statutory instruments
LO 1f

2 Pauline used to earn £20,000 and paid £3,000 in income tax per annum. She has recently received a
substantial pay rise and now earns £50,000. Her revised income tax is £10,000.
Requirements
What is the principle on which this tax system is based?
A Progressive taxation
B Regressive taxation
National insurance contributions are an example of:
C Direct taxation
D Indirect taxation
LO 1b

3 One argument proposed in debates about taxation, is that the cost of collecting tax should be low in
relation to the tax raised.
Requirements
The principle behind this argument is the:
A Ability to pay principle
B Efficiency principle
VAT is an example of:
C Direct taxation
D Indirect taxation
LO 1b

4 Wren is an individual who does not have a trade or business of any kind. Wren is an employee
earning £30,000 per year and a shareholder in Firm Ltd. Wren has heard that the following taxes exist
in the UK and is unsure which of them they pay personally:
(1) Capital gains tax
(2) Corporation tax
(3) Income tax
(4) National insurance contributions
(5) Value added tax
Requirement
Which of the following options correctly identifies which taxes Wren could or does suffer personally?
A All of them
B (1), (3) and (4) only

ICAEW 2024 2: Introduction to taxation 7

 C (1), (3), (4) and (5) only
D (1), (2), (3) and (4) only
LO 1e

5 John and Dana operate a VAT-registered partnership, employing a large number of staff.
Requirement
Which of the following options correctly identifies which taxes the partners are jointly and severally
liable for?
(1) Income tax on each partner’s share of profits from the partnership
(2) Income tax of employees deducted under the Pay As You Earn (PAYE) system
(3) Employer and employee national insurance contributions payable in respect of their staff
(4) Capital gains tax on each partner’s share of partnership gains
(5) VAT as a supplier of goods
A All of them
B (1), (2) and (3) only
C (2), (3) and (5) only
D (1), (2), (3) and (5) only
LO 1e

6 Which of the following are functions carried out by HMRC?

(1) Collect and administer direct taxes
(2) Collect and administer indirect taxes
(3) Pay and administer child support payments
(4) Collect repayments of student loans
(5) Pay and administer the state pension
A (1) and (2) only
B (1), (2) and (3) only
C (1), (2) and (4) only
D (1), (2), (3) and (5) only
LO 1e

7 Which of the following options is correct regarding case law, as determined by tax cases in court?
A Case law is purely for guidance when interpreting statutory law
B Case law applies for the 12 months following the date of the particular court case
C Case law can be superseded by further statutory legislation
D Case law sets a precedent meaning the law can never be changed
LO 1f

8 Which of the following options correctly describes a statutory instrument?

A Published by HMRC primarily for the guidance of its own staff
B Sets out HMRC’s interpretation of tax legislation
C Provides a relaxation of the strict legal position of tax legislation
D Tax legislation, commonly in the form of Regulations, containing detailed provisions
LO 1f

8 Principles of Taxation ICAEW 2024

ICAEW 2024 2: Introduction to taxation 9
10 Principles of Taxation ICAEW 2024
 Chapter 3: Introduction to income tax
1 Patrick has net income for 2023/24 of £119,050.
Requirement
What is his personal allowance for 2023/24?
You may enter your answer as a positive or negative number

£
LO 3b

2 In 2023/24, Mackenzie has taxable income (after deducting the personal allowance) of £25,565 (non-
savings income) and £1,100 (savings income).
Requirement
What is Mackenzie’s total income tax liability for 2023/24?

£
LO 3h

3 William and Grainne are married. In 2023/24 William received non-savings income of £7,000. For
many years Grainne has run a small shop and her business has made adjusted trading profits of
£18,000 for 2023/24. The couple have no other sources of income and claimed the marriage
allowance in 2023/24.
Requirements
What is Grainne’s personal allowance in 2023/24?
A £11,250
B £12,570
C £13,750
What is Grainne’s income tax liability in 2023/24?
D £1,338
E £1,086
F £834
LO 3b

4 During 2023/24 Kael had taxable income (after deduction of the personal allowance) of £38,730
(non-savings income) and £5,200 (dividend income). Tax of £7,405 has been deducted from Kael’s
non-savings income. He also paid £720 as a Gift Aid donation to his son’s school (a registered
charity).
Requirement
What is Kael’s income tax payable by self-assessment for 2023/24?
A £1,785
B £1,965
C £2,122
D £9,190
LO 3h

ICAEW 2024 3: Introduction to income tax 11

5 In 2023/24, Paloma has taxable income (after deduction of the personal allowance) of £88,700 (all
dividend income).
Requirement
What is Paloma’s income tax liability for 2023/24?
A £27,940
B £20,512
C £20,424
D £16,181
LO 3h

6 Charlie and Sarah are married. In 2023/24 Charlie and Sarah have net income of £23,000 and
£11,250 respectively.
Requirement
What effect would the marriage allowance have on Charlie and Sarah’s income tax liabilities in
2023/24?
A Both liabilities would decrease.
B Charlie’s liability would decrease and Sarah’s would be unchanged.
C Charlie’s liability would be unchanged and Sarah’s would decrease.
D Both liabilities would remain unchanged.
LO 3b

7 In 2023/24, Glenda has taxable income (after deducting the personal allowance) of £36,500 (non-
savings income) and £2,300 (dividend income).
Requirement
What is Glenda’s total income tax liability for 2023/24?

£
LO 3h

8 In 2023/24 Mabel had taxable income (after deducting the personal allowance) of £42,000, all of
which represented savings income. She paid £1,056 as a Gift Aid donation to the NSPCC (a
registered charity).
Requirement
What is Mabel’s income tax liability for 2023/24?

£
LO 3h

9 During 2023/24 Jacob gave a cash donation of £2,000 to a registered charity. His only income is an
annual salary of £55,000. Identify how Jacob obtains tax relief for his gift.
Requirements
He receives basic rate tax relief:
A At source by deduction from his salary under payroll giving
B At source by paying net of basic rate income tax

12 Principles of Taxation ICAEW 2024

 C By extending the basic rate band
He receives higher rate tax relief:
D At source by deduction from his salary under payroll giving
E At source by paying net of basic rate income tax
F By extending the basic rate band
LO 3h

10 Puneet’s only source of income in 2023/24 is a salary of £102,730.

Requirement
What is his personal allowance for 2023/24?
A £12,570
B £11,205
C £9,840
D £1,365
LO 3b

11 In 2023/24, Pascal had taxable non-savings income (after deducting the personal allowance) of
£3,000, £2,800 of savings income and £500 of dividend income.
Requirement
What is his income tax liability for 2023/24?
A £1,160
B £960
C £643
D £600
LO 3h

12 Margaret is self-employed and has taxable trading profits (after deduction of the personal allowance)
of £37,000 in 2023/24. During 2023/24 Margaret also received dividend income of £9,000.
Requirement
How much of Margaret’s dividend income is subject to tax at 33.75% in 2023/24?
A £6,300
B £8,000
C £8,300
D £9,000
LO 3h

13 In 2023/24, Bussola has taxable non-savings income (after deduction of the personal allowance) of
£210. During 2023/24 she also received taxable savings income of £38,300.
Requirement
What is Bussola’s income tax liability for 2023/24?

£
LO 3h

ICAEW 2024 3: Introduction to income tax 13

14 Manav has taxable income (after deduction of the personal allowance) in 2023/24 of:

Non-savings income £17,015

Savings income £1,800

Requirement
What is Manav’s income tax liability for 2023/24?

£
LO 3h

15 Frederick works as an employee of Wood Ltd. Frederick’s only source of income is employment
income. Frederick’s taxable income (after deduction of the personal allowance) for 2023/24 was
£15,815. During 2023/24 Frederick paid £3,100 in income tax via PAYE.
Requirement
What is Frederick’s income tax payable under self-assessment for 2023/24?

£
LO 3h

16 Darcy is self-employed and has trading profits assessable in 2023/24 of £198,000.

Requirement
What is Darcy’s personal allowance for 2023/24?
You may enter your answer as a positive or negative number

£
LO 3b

17 Dahlia has taxable income in 2023/24 of £133,000 (non-savings income), £27,600 (savings income)
and £15,000 (dividend income).
Requirement
What is Dahlia’s income tax liability for 2023/24?
A £63,757
B £64,376
C £58,326
D £63,982
LO 3h

14 Principles of Taxation ICAEW 2024

18 Diane is self-employed and has trading profits assessable in 2023/24 of £118,000.
Requirement
What is Diane’s personal allowance for 2023/24?
You may enter your answer as a positive or negative number

£
LO 3b

19 Geoff had taxable income (after deduction of his personal allowance) of £14,450 of non-savings
income in 2023/24. His civil partner, Jessica, had no income during 2023/24. Jessica made a
marriage allowance election in 2023/24.
Requirement
What is Geoff’s income tax liability for 2023/24?

£
LO 3h

20 During 2023/24 Leanne was a higher-rate taxpayer (net income of £80,000) but her husband Richard
stayed at home to look after their children, and had no income in 2023/24. Both Leanne and Richard
are aged 40.
Requirement
Which of the following statements about the personal allowance is true?
A Leanne’s personal allowance is reduced because her income exceeds the basic rate band.
B An election can be made to transfer all of Richard’s personal allowance to Leanne.
C An election can be made to transfer £1,260 of Richard’s personal allowance to Leanne.
D No election can be made to transfer any part of Richard’s personal allowance to Leanne.
LO 3b

21 Sarah is married to Arthur. Sarah has net income in 2023/24 of £29,900. Arthur has net income for
2023/24 of £10,000. Wherever possible they claim the marriage allowance.
Requirement
What is Sarah’s taxable income in 2023/24?
A £12,570
B £17,330
C £16,070
D £29,900
LO 3b

ICAEW 2024 3: Introduction to income tax 15

22 Sheila has taxable income after deducting the personal allowance (all non-savings income) in
2023/24 of £40,200. She is married to Alice, who has net income in 2023/24 of £9,000. Wherever
possible they claim the marriage allowance.
Requirement
What is Sheila’s income tax liability for 2023/24?

£
LO 3b

23 Maalik is employed by Artichoke Ltd and has taxable income in 2023/24 of £20,000 (after deduction
of the personal allowance). On 1 December 2023 Maalik paid £420 to a charity under the Gift Aid
provisions.
Requirement
In 2023/24 the Gift Aid payment will:
A Increase Maalik’s income tax liability
B Decrease Maalik’s income tax liability
C Have no impact on Maalik’s income tax liability
D Generate a refund of income tax payable to Maalik
LO 3h

24 Sandra has rental profits assessable in 2023/24 of £128,000.

Requirement
What is Sandra’s personal allowance for 2023/24?
You may enter your answer as a positive or negative number

£
LO 3b

16 Principles of Taxation ICAEW 2024

 Chapter 4: Employment income
1 Mustafa is an employee of Window Ltd with a gross annual salary of £17,000. Mustafa underpaid his
tax for 2021/22 by £910. Mustafa has agreed with HMRC that this underpayment will be collected via
his PAYE code for 2023/24.
Requirement
What is Mustafa’s PAYE code for 2023/24?
A 802L
B 1029L
C 1166L
D 1712L
LO 2b

2 Parminder is an employee of Sales Ltd with a gross annual salary of £50,000. Parminder also has
taxable benefits relating to accommodation worth £17,970 for 2023/24.
Requirement
What is Parminder’s PAYE code for 2023/24?

PAYE code K
LO 2b
Note: Because Parminder’s benefits relate to accommodation, they cannot be taxed via voluntary
payrolling.

3 Jamelia earns £60,000 a year. She is entitled to a basic personal allowance. Her employer, June Ltd,
provides her with a company car with a taxable benefit of £13,195. June Ltd does not use voluntary
payrolling of benefits.
Requirement
What is Jamelia’s PAYE code for 2023/24?
A 62L
B K625
C K62
D K61
LO 2b

4 Jacob earns £15,000 a year. His employer provides him with taxable benefits of £5,630. Jacob’s
employer does not use voluntary payrolling of benefits.
Requirement
What is Jacob’s PAYE code for 2023/24?

L
LO 2b

ICAEW 2024 4: Employment income 17

5 Dana has total income of £51,000 each year. She has underpaid tax of £1,400 in 2021/22 which is
recovered through her PAYE code in 2023/24.
Requirement
What is Dana’s PAYE code for 2023/24?
A 557L
B 907L
C 1117L
D 1257L
LO 2b

18 Principles of Taxation ICAEW 2024

 Chapter 5: Trading profits
1 Which two of the following statements indicate that a trade is being carried on?
A Amy has just sold a house that she bought three months ago. She has spent £40,000 to make
the property more attractive to potential purchasers. Amy has not lived in this house.
B Ben has sold some shares that he has owned for 10 years for substantially more than the original
cost.
C Caitlin, a student, has cash flow problems and sells a car that she bought three months ago.
D Dante has an interest in vintage cars. He has just sold a car that he has been renovating for the
last six months. This is the seventh renovated car that he has sold in the last two years.
LO 3d

2 Which two of the following are not badges of trade?

A The number of transactions
B Provision of own equipment
C Profit seeking motive
D Changes to the asset
E Correction of own work
LO 3d

3 According to the badges of trade, HMRC would probably view the purchase of 1,000,000 toilet rolls
by an individual as being carried out:
A For personal use
B For their aesthetic value
C For long-term investment
D To be sold at a profit
LO 3d

4 Marina has trading receipts in 2023/24 of £1,300 and deductible expenses of £750. She makes all
beneficial claims and elections.
Requirement
What is Marina’s trading income assessment in 2023/24?
A £0
B £250
C £300
D £1,000
LO 3e

5 Penha has a hobby restoring antique furniture. He has just sold a restored antique table that he has
owned for several years. He sold 10 items of restored furniture in 2023/24.
Requirement
Which two of the following badges indicate that Penha is carrying on a trade in relation to this
disposal?
A The number of transactions
B Interval of time between purchase and sale

ICAEW 2024 5: Trading profits 19

 C Changes to the asset
D Correction of own work
LO 3d

6 Julie is a full-time employee working in the fitness industry and earns a salary of £20,000 per year.
She also runs an online fitness and lifestyle blog from which she receives advertising revenue. During
the year ended 5 April 2024 her income from the blog totalled £900 and associated deductible
expenses were £400.
Requirement
What is Julie’s taxable trading income for 2023/24?
A £Nil
B £500
C £900
D £20,500
LO 3e

20 Principles of Taxation ICAEW 2024

 Chapter 6: Capital allowances
1 Nina began trading on 1 January 2023 and prepared accounts for the year ended 31 December
2023. On 1 March 2023 she purchased a photocopier for £2,300 and a car with emissions of 28 g/km
for £2,300. The photocopier and the car are both used for business purposes for 90% of the time.
Requirements
The maximum capital allowances that Nina will receive in respect of the purchase of the photocopier
in the year ended 31 December 2023 are:
A £2,300
B £2,070
C £373
The maximum capital allowances that Nina will receive in respect of the purchase of the car in the
year ended 31 December 2023 are:
D £2,300
E £414
F £373
LO 3e

2 Aasia began trading on 1 March 2023 and prepared accounts for the period ended 31 December
2023. On 15 March 2023 she purchased a photocopier for £3,000 and a car with emissions of 45
g/km for £3,000. The photocopier and the car are only used for business purposes.
Requirements
The maximum capital allowances that Aasia will receive in respect of the purchase of the photocopier
in the period ended 31 December 2023 are:
A £3,000
B £2,500
C £450
The maximum capital allowances that Aasia will receive in respect of the purchase of the car in the
period ended 31 December 2023 are:
D £3,000
E £540
F £450
LO 3e

3 Leona began trading on 1 January 2023, preparing her first accounts to 30 April 2023. On 1 March
2023 she purchased a computer for £5,000 and a car with emissions of 35 g/km for £13,200. Both
assets are only used for business purposes.
Requirements
The maximum capital allowances available on the computer in the period to 30 April 2023 are:
A £5,000
B £1,667
C £300
The maximum capital allowances available on the car in the period to 30 April 2023 are:
D £13,200
E £2,376
F £792

ICAEW 2024 6: Capital allowances 21

 LO 3e

4 Barbara began trading on 1 January 2023. On 1 December 2023 Barbara purchased a van for
£13,200. The van is used by her 80% of the time for business purposes and has CO2 emissions of 42
g/km.
Requirement
What is the maximum capital allowance claim available to Barbara for the year ended 31 December
2023?
A £1,901
B £2,376
C £10,560
D £13,200
LO 3e

5 The following sentences have been included in a draft letter to a client who is about to start a new
business.
Identify whether each statement is correct or incorrect.
Requirements
Expenditure on new cars emitting zero CO2 qualifies for the annual investment allowance (AIA) of
100%.
A Correct
B Incorrect
Capital expenditure is not allowable in computing trading profits but will always result in capital
allowances.
C Correct
D Incorrect
LO 3a

6 Murphy began trading on 1 January 2023 and drew up his first accounts to 31 December 2023.
He made the following purchases of assets.

£
1 July 2023 Machinery 1,014,000
1 September 2023 Motor car (electric) 16,500

Murphy used the motor car only for business purposes.

Requirement
What are Murphy’s maximum capital allowances for the period ended 31 December 2023?

£
LO 3e

22 Principles of Taxation ICAEW 2024

7 Jack has been trading for many years making up accounts to 31 March.
The only asset in the business for the purpose of capital allowances is a car bought in 2015 with CO2
emissions of 109 g/km, which Jack uses 75% for business purposes. The tax written down value of
the car at 1 April 2023 was £15,000.
On 1 September 2023 Jack sold the car for £10,200.
Requirement
What are the maximum capital allowances available to Jack for the year ended 31 March 2024?
A £2,025
B £2,700
C £3,600
D £4,800
LO 3e

8 Mary, who runs a business, purchased the following assets in the year ended 31 December 2023.

£
12 February 2023 Computer 10,000
20 March 2023 New car – emissions of 0 g/km and used wholly for business
purposes 8,000
1 May 2023 Office furniture 2,000

Requirement
What are the maximum capital allowances available to Mary?

Capital allowances £
LO 3e

9 Ming-Na began trading as a sole trader on 1 September 2022 preparing her first set of accounts for
the nine months ended 31 May 2023.
On 1 November 2022 Ming-Na purchased a car with emissions of 40 g/km for £18,000. She uses this
60% for business purposes.
Requirement
What are the maximum capital allowances available for the car for the nine months ended 31 May
2023?

Capital allowances £
LO 3e

ICAEW 2024 6: Capital allowances 23

10 Harry is a sole trader. In the year ended 31 March 2024 he sold a car for £14,500 which had a tax
written down value brought forward at 1 April 2023 of £17,000. Harry used the car 70% for business
purposes.
Requirement
What is the balancing adjustment on disposal of the car in the year ended 31 March 2024?
A Balancing allowance of £2,500
B Balancing charge of £2,500
C Balancing allowance of £1,750
D Balancing charge of £1,750
LO 3e

11 Jack is a sole trader with accounts prepared to 31 May each year. On 31 March 2023 Jack purchased
a car with emissions of 47 g/km for £18,000. The car is driven by one of his employees who uses it
20% of the time for private purposes.
Requirement
What is the maximum amount of capital allowances that can be claimed in the year ended 31 May
2023 relating to this car?

£
LO 3e

12 Pauline began trading as a sole trader on 1 October 2023, preparing her first set of accounts for the
six months ended 31 March 2024. On 1 January 2024 she purchased a new car with emissions of 25
g/km for £16,000 (it is used only for business purposes).
Requirement
What are the maximum amount of capital allowances Pauline may claim for the six months ended 31
March 2024?
A £720
B £1,440
C £2,880
D £16,000
LO 3e

13 Alexa is a sole trader. She has plant and machinery with a tax written down value of £560 on 1 April
2023. During the nine-month accounting period to 31 December 2023, she purchased a computer
for £8,000.
Requirement
What are the maximum amount of capital allowances available to Alexa for the nine months ended
31 December 2023?
A £8,560
B £8,076
C £1,541
D £1,156
LO 3e

24 Principles of Taxation ICAEW 2024

14 Matilda is a sole trader and has prepared accounts for the year to 31 December 2023. At 1 January
2023 the business only owned one asset, a machine. The £12,000 cost of the machine had been put
in the main pool when it was acquired several years ago. The balance on the main pool at 1 January
2023 was £2,300. The machine was sold on 30 June 2023 for £400. Matilda’s business is continuing,
but she now leases all machinery.
Requirement
What are the maximum capital allowances that can be claimed by Matilda for the year ended 31
December 2023?

£
LO 3e

15 Maxine is a sole trader with a year ended 30 September 2023. The balance on the main pool at 1
October 2022 was £25,400. The only capital transaction was the disposal of a machine on 10 August
2023 for £4,300. The machine had cost £3,900 in April 2019.
Requirement
What are the maximum capital allowances that can be claimed by Maxine for the year ended 30
September 2023?

£
LO 3e

16 Peter runs a business and prepared accounts for the six months to 31 March 2024. The tax written
down value of the main pool at 1 October 2023 was £24,000. During the period of account, the
following transaction took place.

£
20 December 2023 – Purchased new low-emission car 9,000

Requirement
What are the maximum capital allowances Peter may claim for the six months ended 31 March 2024?
A £5,940
B £9,000
C £11,160
D £13,320
LO 3e

17 Charlotte, a sole trader, prepared accounts for the five months ended 30 June 2023. On 23 May
2023 she purchased a machine for £530,000.
Requirement
What are the maximum capital allowances that can be claimed in respect of this machine for the
period ended 30 June 2023?
A £530,000
B £437,067
C £425,167
D £416,667
LO 3e

ICAEW 2024 6: Capital allowances 25

18 Which of the following assets will not be in a single asset pool for capital allowance purposes?
A Computer costing £10,000 with 30% private use by the owner of the business
B Car with emissions of 45 g/km costing £14,000 on 10 June 2023 with 20% private use by one of
the employees
C Car with emissions of 45 g/km costing £13,000 on 1 January 2024 with 35% private use by the
owner of the business
D Delivery van costing £15,000 with 10% private use by the owner of the business
LO 3e

19 Jamie is a sole trader with a year ended 31 January 2024. The balance on the main pool at 1
February 2023 was £31,000. The only capital transaction was the disposal of a machine on 10 August
2023 for £5,300. The machine had originally cost £9,900.
Requirement
What are the maximum capital allowances that can be claimed by Jamie for the year ended 31
January 2024?

£
LO 3e

20 Janice is a sole trader with a year ended 31 December 2023. On 1 May 2023 Janice bought a
machine costing £1,020,000.
Requirement
What are the maximum capital allowances that can be claimed by Janice on the machine for the year
ended 31 December 2023?

£
LO 3e

21 Murray and Nuri have been trading in partnership for many years with a year end of 31 March.
The tax written down values of their assets at 1 April 2023 were:

£
Murray’s van – purchased 1 April 2017 Private use 40% 17,000
Nuri’s van – purchased 1 July 2017 Private use 30% 8,000

Nuri’s van was sold on 1 July 2023 for £6,000. Nuri intends to lease a van from this date.
Requirement
What are the partnership’s maximum capital allowances for the year ended 31 March 2024?

£
LO 3e

26 Principles of Taxation ICAEW 2024

 Chapter 7: Trading profits – basis of
assessment
1 Rafael, Samira and Tadeo have been in partnership for many years. The partnership agreement
allocates a salary of £10,000 per annum to Samira and all partners receive 5% per annum on their
capital invested. The balance of any profits is shared equally.
During the year ended 31 March 2024 Rafael’s capital account had a balance of £60,000, Samira’s
balance was £24,000 and Tadeo’s was £38,000. The partnership made tax-adjusted trading profits of
£125,000 in the year ended 31 March 2024.
Requirement
What are the trading profits assessable on Rafael in 2023/24?

£
LO 3f

2 Townshend ceased trading on 30 November 2025. The recent tax-adjusted trading profits of the
business are as follows.

£
Year ended 30 April 2024 38,000
Year ended 30 April 2025 34,000
Period ended 30 November 2025 23,000

Requirements
What is Townshend’s trading profit assessment for 2024/25?
A £34,333
B £34,000
C £38,000
What is Townshend’s trading profit assessment for 2025/26?
D £23,000
E £25,833
F £57,000
LO 3g

3 Jabir and Kadin began trading in partnership on 1 September 2023, sharing profits equally. The
partnership agreement allocates an annual salary to Jabir of £8,000. For the year ended 31 August
2024 the partnership had a tax-adjusted trading profit of £105,000.
Requirement
What are the partners’ assessable trading profits for 2023/24?
A Jabir £56,500; Kadin £48,500
B Jabir £32,958; Kadin £28,292
C Jabir £60,500; Kadin £52,500
D Jabir £35,292; Kadin £30,625
LO 3f, 3g

ICAEW 2024 7: Trading profits – basis of assessment 27

4 Val, Cleo and Frank have been in partnership for many years preparing accounts to 30 September
each year. The partnership agreement indicates that all partners receive 5% per annum on their
capital invested. The balance of any remaining profits is shared equally.
Val’s capital account had a balance of £50,000, Cleo’s balance was £30,000 and Frank’s was £40,000.
The partnership made tax-adjusted trading profits of £150,000 in the year ended 30 September
2024, and £200,000 in the year ended 30 September 2025.
Requirement
What are the trading profits assessable on Cleo in 2024/25?

LO 3f

5 Tom and Dick have been trading in partnership for many years, sharing profits in the ratio 2:1. The
partnership agreement allocates an annual salary to Tom of £10,000. The partnership had the
following results.
Year ended 31 October 2024: £120,000
Year ended 31 October 2025: £150,000
Requirement
What are the partners’ assessable trading profits for 2024/25?
A Tom £80,000; Dick £40,000
B Tom £91,667; Dick £40,834
C Tom £100,000; Dick £50,000
D Tom £103,333; Dick £46,667
LO 3f

6 Raanan ceased trading on 31 December 2024. The recent tax-adjusted trading profits of his business
are as follows.

£
Year ended 31 January 2023 40,000
Year ended 31 January 2024 25,000
Period ended 31 December 2024 15,000

Requirement
What is Raanan’s trading profit assessment for 2024/25?

£
LO 3i

7 Johanna started trading on 1 January 2023, but her business quickly ran into cash flow problems and
she ceased to trade on 28 February 2025. The accounts for the year ended 31 December 2023
showed taxable trading profits of £6,000, and those for the period from 1 January 2024 to 28
February 2025 showed taxable trading profits of £2,800.
Requirement
What is Johanna’s taxable trading profit for 2024/25?
A £2,800
B £2,400

28 Principles of Taxation ICAEW 2024

 C £2,200
D £5,100
LO 3g

8 Trevor’s business ceased trading on 30 April 2024. The recent tax-adjusted trading profits of his
business are as follows.

£
Year ended 30 September 2022 24,000
Year ended 30 September 2023 30,000
Period ended 30 April 2024 25,000

Requirement
What are Trevor’s taxable trading profits for 2024/25?
A £36,429
B £2,083
C £25,000
D £3,571
LO 3g

9 Obed began trading on 1 July 2023, preparing his first accounts to 30 June 2024. The adjusted
trading profits for the year ended 30 June 2024 were £24,000.
Requirement
What is Obed’s assessable trading profit for 2023/24?
A £6,000
B £18,000
C £20,000
D £24,000
LO 3g

10 Belinda began trading on 1 January 2023, preparing her first accounts to 30 June 2024. The adjusted
trading profits for the period ended 30 June 2024 were £42,000.
Requirement
Which of the following statements is correct?
A £28,000 is taxable in 2023/24, representing the period 6 April 2023 to 5 April 2024.
B £28,000 is taxable in 2023/24, representing the year ended 30 June 2024.
C £7,000 is taxable in 2023/24, representing the period 1 January 2023 to 5 April 2024.
D £42,000 is taxable in 2023/24, representing the period to 30 June 2024.
LO 3g

11 Ray began trading on 1 July 2023, preparing his first accounts to 31 December 2023. The adjusted
trading profits for the first two periods were:

ICAEW 2024 7: Trading profits – basis of assessment 29

 £
6 m/e 31 December 2023 60,000
12 m/e 31 December 2024 (estimate) 100,000

Requirement
What is the taxable trading income for 2023/24?

£
LO 3g

12 Audrey and Elaine have been in partnership for many years. Both partners are allocated interest of
5% per annum on their capital invested. The balance of any profits is shared equally.
During the year ended 31 March 2024 Audrey’s capital account had a balance of £50,000, Elaine’s
was £20,000. The partnership made adjusted trading profits of £100,000 in the year ended 31 March
2024.
Requirement
What are the trading profits assessable on Audrey in 2023/24?

£
LO 3f

13 David and Doreen started in partnership together on 1 July 2023 sharing profits in the ratio 2:1. The
partnership taxable trading profit for the year ended 30 June 2024 is £120,000.
Requirement
What is the amount of trading profits taxable on Doreen in 2023/24?
A £80,000
B £60,000
C £40,000
D £30,000
LO 3f, 3g

14 Florian ceased trading on 30 September 2024. The recent tax-adjusted trading profits of his business
are as follows:

£
Year ended 31 January 2023 28,500
Year ended 31 January 2024 21,200
Period ended 30 September 2024 17,430

Requirement
What is Florian’s taxable trading income for 2024/25?

LO 3g

30 Principles of Taxation ICAEW 2024

15 Leroy and Annabelle have been in partnership for many years. The partnership agreement allocates
partners’ interest at 5% pa on capital invested. The balance of any profit is shared in the ratio 2:3.
On 31 March 2023 Leroy’s capital account had a balance of £35,000 and Annabelle’s balance was
£23,000. For the year ended 31 March 2024 the partnership had a tax-adjusted trading profit of
£98,500.
Requirement
What is Leroy’s assessable trading profit for 2023/24?
A £41,150
B £39,990
C £39,400
D £38,240
LO 3f

16 Parminder began trading on 1 January 2023 making up her first set of accounts to 29 February 2024.
Her tax-adjusted profits after capital allowances are as follows.

Period ended 29 February 2024 £53,208

Year ending 28 February 2025 (estimate) £31,740

Requirement
What is Parminder’s taxable trading income for 2023/24?
A £53,208
B £45,607
C £44,451
D £31,740
LO 3g

17 Raeleen began trading on 1 January 2024, preparing her first accounts to 30 June 2024 and she will
prepare them to every following June. The adjusted trading profits are as follows.

£
6 months ended 30 June 2024 10,000
Year ended 30 June 2025 (estimated) 25,000

Requirement
Which two of the following statements are correct?
A Taxable trading profits for 2024/25 are £25,000.
B Taxable trading profits for 2023/24 are £5,000.
C Taxable trading profits for 2023/24 are £22,500.
D Taxable trading profits for 2024/25 are £23,750.
LO 3g

18 Amber and Betty have been trading in partnership for many years, sharing profits in the ratio 2:1. On
1 October 2023 they changed the arrangement so that a salary of £20,000 pa is allocated to Amber
and the remaining profits are shared equally. The partnership made adjusted trading profits of
£240,000 in its year ended 31 March 2024.

ICAEW 2024 7: Trading profits – basis of assessment 31

Requirement
What are the partners’ assessable trading profits for 2023/24?
A Amber £150,000; Betty £90,000
B Amber £140,000; Betty £100,000
C Amber £135,000; Betty £95,000
D Amber £145,000; Betty £95,000
LO 3f

32 Principles of Taxation ICAEW 2024

 Chapter 8: National insurance contributions
Remember that when calculating national insurance contributions (NICs) you should round
mathematically at each step of the computation.

1 Sho has his own business and has tax-adjusted trading profits for the year of £13,100. He also has a
part-time job earning £8,000 each year.
Requirement
Which two of the following types of national insurance contributions must Sho pay for 2023/24?
A Class 1 primary
B Class 1 secondary
C Class 2
D Class 4
LO 1d

2 Roberta, aged 59, is a director of Wagner Ltd, a company in which she owns 50% of the shares. She
takes £50,000 a year out of the company, £20,000 as a salary and the balance as dividends.
The company employs George, aged 63, as Roberta’s personal assistant. His annual salary is £15,000.
The company makes a profit of £80,000 before tax and before accounting for the amounts paid to
Roberta.
Identify which of the following statements concerning NICs is/are correct.
Requirements
Wagner Ltd will pay Class 4 NICs on the profits of £80,000.
A Correct
B Incorrect
George will pay Class 1 primary NICs on his earnings of £15,000.
C Correct
D Incorrect
Wagner Ltd will pay Class 1 secondary NICs on total employee remuneration of £65,000, before
deducting the employment allowance.
E Correct
F Incorrect
LO 1d, 3i

3 Steven has the following details for 2023/24.

£
Salary from employment 15,000
Tax-adjusted trading profits after capital allowances 13,500

Requirement
What are Steven’s Class 4 national insurance contributions for 2023/24?

£
LO 3i

ICAEW 2024 8: National insurance contributions 33

4 Abe has been trading for many years. His adjusted trading profits for 2023/24 are £20,000.
Requirement
What is Abe’s total national insurance contributions liability for 2023/24?
A £669
B £848
C £892
D £1,071
LO 3i

5 During 2023/24 Ball Ltd pays Lena, one of its 25 employees, a salary of £39,067. The company
provides her with a car that has a cash-equivalent benefit of £5,000 and supermarket vouchers which
cost the company £500 pa.
Requirement
What are the Class 1 secondary contributions payable by Ball Ltd in 2023/24 in respect of Lena?
Ignore the employment allowance.

£
LO 3i

6 During 2023/24 Ball Ltd pays Lena, one of its 25 employees, a salary of £39,067. The company
provides her with a car that has a cash-equivalent benefit of £5,000 and supermarket vouchers which
cost the company £500 pa.
Requirement
What are the Class 1A contributions payable by Ball Ltd in 2023/24 in respect of Lena?

£
LO 3i

7 Boris, aged 68, has a part-time job working for Jinx Ltd, earning £9,700 each year.
Identify whether the following statements are correct.
Requirements
Boris will have Class 1 primary contributions deducted from his wages.
A Correct
B Incorrect
Jinx Ltd must pay Class 1 secondary contributions in relation to Boris’s earnings.
C Correct
D Incorrect
LO 1d

8 Cobalt Ltd made a trading profit of £50,000 in its year ended 31 March 2024.
The company employs only one employee, Bain, who is also a director on an annual salary of
£36,000.
Requirement
What is the total national insurance liability of the company for 2023/24?

34 Principles of Taxation ICAEW 2024

 LO 3i

9 During 2023/24 Bat Ltd pays Laura a salary of £45,000 and provides her with benefits totalling
£3,000.
Requirement
What are the national insurance contributions payable by Bat Ltd in 2023/24 in respect of Laura?
Ignore the employment allowance.
A £6,624
B £3,892
C £5,368
D £4,954
LO 3i

10 During 2023/24 Trim Ltd pays Belinda a monthly salary of £3,300. In addition, Trim Ltd paid Belinda a
bonus of £4,000 in December 2023. Belinda also attended the Trim Ltd Christmas party on 18
December 2023 at a cost to Trim Ltd of £200 per head.
Requirement
What are the Class 1 Primary contributions due in respect of Belinda for December 2023?

£
LO 3i

11 During 2023/24 Pirate Ltd pays Sue, aged 19, a salary of £52,000. The company provides her with a
car that has a cash-equivalent benefit of £3,000.
Requirement
What are the Class 1 secondary contributions payable by Pirate Ltd in 2023/24 in respect of Sue?
Ignore the employment allowance.

£
LO 3i

12 During 2023/24 Pirate Ltd pays Sue, aged 19, a salary of £52,000. The company provides her with a
car that has a cash-equivalent benefit of £3,000.
Requirement
What are the Class 1A contributions payable by Pirate Ltd in 2023/24 in respect of Sue?

£
LO 3i

13 Hans is a sole trader employing only one worker, Olga, aged 42, on an annual salary of £46,500.
Requirement
What are the Class 1 secondary contributions payable by Hans in 2023/24 in respect of Olga?

£
LO 3i

ICAEW 2024 8: National insurance contributions 35

14 During 2023/24 Rene Ltd pays Kamal, an apprentice aged 23, a salary of £20,000. He also receives
shopping vouchers with a cash value of £150 per month.
Requirement
What are the Class 1 secondary contributions payable by Rene Ltd in 2023/24 in respect of Kamal?
Ignore the employment allowance.

£
LO 3i

15 During 2023/24 Rene Ltd pays Kamal, an apprentice aged 23, a salary of £20,000. He also receives
shopping vouchers with a cash value of £150 per month.
Requirement
What are the Class 1 primary contributions payable by Kamal for the month of May 2023?

£
LO 3i

16 James has been trading for many years. His tax-adjusted trading profits for the last two years have
been as follows.

£
Year ended 5 April 2023 41,000
Year ended 5 April 2024 58,350

Requirement
What are his Class 4 national insurance contributions for 2023/24?
A £4,686
B £4,120
C £3,555
D £2,559
LO 3i

36 Principles of Taxation ICAEW 2024

 Chapter 9: Capital gains tax – individuals
1 The Quack partnership has recently disposed of an office building. The office building was owned
jointly by all the partners. The office building was sold to a property developer.
Requirement
Who is liable to pay any capital gains tax due on the disposal of the office building?
A Partnership
B Partners jointly
C Property developer
D Partners individually
LO 1e, 4a

2 Jamie entered into a contract with Annabelle to purchase a house. Contracts were exchanged on 15
March 2024. The contracts were completed and legal title therefore passed on 15 April 2024. Once
contracts had been exchanged neither party could withdraw. Payment was not made until 17 April
2024 and Jamie did not physically move into the house until 18 April 2024.
Requirement
On what date will Annabelle be treated as having disposed of the house for capital gains tax
purposes?
A 15 March 2024
B 15 April 2024
C 17 April 2024
D 18 April 2024
LO 1e

3 Which of the following statements about capital gains is true?

A Assets which are inherited are treated as being acquired by the donee at the price originally
paid by the donor.
B Wasting chattels bought and sold for more than £6,000 are chargeable to CGT.
C Stamp duty land tax paid on the purchase of land may be deducted as part of cost on a
subsequent disposal of the land.
D Where an asset is not sold at arm’s length, the proceeds are deemed to equal cost so that no
chargeable gain arises.
LO 4a, 4b

4 Katie purchased an antique vase in January 1990 for £13,000. She sold it for £5,600 in March 2024
and paid auctioneer’s fees of £800 for its sale.
Requirement
What is Katie’s allowable loss on sale?
A £(7,800)
B £(8,200)
C £(7,400)
D £(7,000)
LO 4b

ICAEW 2024 9: Capital gains tax – individuals 37

5 Freddy made two disposals during 2023/24.
For each of the two disposals select how the resulting gains should be treated to determine Freddy’s
total chargeable gains for 2023/24.
Requirements
Gain of £4,500 on the disposal of a caravan.
A Chargeable gain
B Exempt
Gain of £1,000 on the sale of a sculpture. The sculpture originally cost £4,000.
C Chargeable gain
D Exempt
LO 4a

6 Thandie purchased an antique chair in February 2001 for £2,500. She sold it in May 2023 for
£11,150. She paid £560 as commission to the agent who sold the chair for her.
Requirement
What is the chargeable gain on the disposal of the chair?
A £8,650
B £8,583
C £7,650
D £8,090
LO 4b

7 David has net income for 2023/24 of £50,995. David has also made taxable gains of £33,422 for
2023/24.
Select how each of the following items will affect the calculation of David’s capital gains tax liability
for 2023/24, if at all.
Requirements
His unused annual exempt amount from 2022/23:
A Reduces capital gains tax payable
B Increases capital gains tax payable
C Has no effect
Becoming a higher rate taxpayer for the first time:
D Reduces capital gains tax payable
E Increases capital gains tax payable
F Has no effect
LO 4d

8 The Goose partnership has recently disposed of a chargeable asset. The chargeable asset was
owned jointly by all the partners.
Requirement
Who is liable to pay any capital gains tax due on the disposal of the chargeable asset?
A Partners individually
B No capital gains tax is due
C Partnership
D Partners jointly

38 Principles of Taxation ICAEW 2024

 LO 1e

9 In December 1998 Jasmine purchased a house for £176,000. Jasmine has always rented out the
house to tenants. In December 2001 Jasmine installed a new bathroom at a cost of £6,400. In
December 2023 Jasmine sold the house for £642,000. Jasmine also paid stamp duty land tax at 1%
of the purchase price when she bought the house.
Requirement
What is the chargeable gain on disposal of the house?

Chargeable gain £
LO 4b

10 Jed purchased a rare painting in August 2004 for £3,200. He sold it in August 2023 for £14,150. He
paid £142 as commission to the agent who sold the painting for him.
Requirement
What is the chargeable gain on the disposal of the painting?
A £10,808
B £10,950
C £13,583
D £13,347
LO 4a, 4b

11 Which two of the following items are exempt assets for capital gains tax purposes?
A £15,000 of shares in an unquoted trading company
B A diamond necklace purchased for £1,000 and now worth £17,000
C A rare collection of snakes worth £320,000
D £10,000 of National Savings Certificates
LO 4a

12 Which of the following disposals is a chargeable disposal for capital gains tax purposes?
A Bequest of a house in the will of a mother to her daughter
B Gift to a friend of £12,000 in National Savings Certificates
C Gift to a friend of a painting worth £1,000,000
D Gift of a painting to a charity when the painting was worth £300,000
LO 4a

13 Which of the following statements about capital gains is true?

A CGT is chargeable on individuals, partnerships and companies.
B Stamp duty land tax paid on the purchase of land may not be deducted as part of cost on a
subsequent disposal of the land.
C Assets which are inherited are treated as being acquired by the donee at their value at the time
of the donor’s death.
D Where an asset is sold by an individual, any unused personal allowance can be offset against
their chargeable gains.
LO 1e, 4b

ICAEW 2024 9: Capital gains tax – individuals 39

14 Harriet made two disposals during 2023/24.
For each of the disposals, select how the resulting gains should be treated to determine Harriet’s
total chargeable gains for 2023/24.
Requirements
Gain of £2,500 on the disposal of a car:
A Chargeable gain
B Exempt
Gain of £3,000 on the sale of a greyhound, which originally cost £4,000:
C Chargeable gain
D Exempt
LO 4a

15 Which of the following does not pay tax on its capital gains?
A NSPCC, a registered charity
B WFT plc, a quoted company
C George and Bert, who are in partnership together
D Bert, in his own right as an individual
LO 4a

16 Which of the following is not a chargeable disposal made by Gordon?

A The sale of a building used by Gordon’s business, to a third party
B The gift of shares to Gordon’s son
C The loss of a painting valued at £50,000 during a fire at Gordon’s house
D The gift of an antique table valued at £40,000 to Gordon’s daughter on his death
LO 4a

17 Peter purchased a holiday home in July 2003. The holiday home cost £100,000 and he paid
solicitor’s fees of £2,500 relating to the purchase.
During 2005 he spent £2,800 on a garage for the holiday home and £580 on repairs to the plaster
work when there was a flood. Peter anticipates selling the house within the next few months.
Requirement
The total allowable expenditure on the disposal of the holiday home will be:
A £100,000
B £102,500
C £105,300
D £105,880
LO 4b

18 Which two of the following are exempt wasting chattels for the purposes of capital gains tax?
A Office furniture, purchased for use only in Jack’s business office on which he claims capital
allowances
B A racehorse purchased as an investment by Marnie
C Goodwill of a computer manufacturing business with an expected life of 20 years
D A caravan, purchased by David for use on family holidays
LO 4a

40 Principles of Taxation ICAEW 2024

19 Identify whether each of the following disposals will be chargeable or exempt.
Requirements
Javier sold a painting at auction and received £5,900 after deducting auctioneers’ fees of £310. The
painting had originally cost him £3,500.
A Chargeable
B Exempt
Savion received £2,600 for some shares that he sold after deducting £150 of fees. The shares
originally cost him £800.
C Chargeable
D Exempt
LO 4a

20 Lourdes bought an antique brooch for £4,000 in October 2004. In January 2024, she sold it on the
internet and received £6,200 after deduction of £100 fees.
Requirement
What is Lourdes’s chargeable gain?
A £333
B £500
C £2,200
D £2,300
LO 4b

21 Which of the following may result in a chargeable gain?

A A gift of a painting worth £250,000 to a local art gallery
B A sale of shares in Beagle plc by the RSPCA, a registered charity
C A gift of antique jewellery worth £25,000 by Robert, to his daughter as a wedding gift
D Jen sold gilt edged securities valued at £40,000 to her friend Arthur for £27,000
LO 4a

22 On which two of the following disposals must a chargeable gain/allowable loss be calculated?
A A sale of shares in Check plc by Cristiano. The shares were held in an ISA.
B Torey cashed in his National Savings Certificates in order to raise money for his wedding.
C Townsend lost an antique ring valued at £8,000 and received a cheque from the insurance
company for that sum.
D Toshi sold a painting for £5,000. It was given to him several years ago when his grandfather died.
At that time it was worth £6,400.
LO 4a

ICAEW 2024 9: Capital gains tax – individuals 41

23 Fraser sold a diamond brooch at auction in June 2023 and received £7,900 after deduction of
auctioneer’s fees of £300. The brooch had cost him £6,100 in July 2001. Since then he had spent
£250 in August 2002 having it cleaned and repaired. In September 2005 he paid £400 to have
additional diamonds and rubies added to the brooch.
Requirement
What is Fraser’s chargeable gain on disposal of the brooch?

£
LO 4b

24 Identify whether each of the following disposals will be chargeable or exempt.

Requirements
Erwin sold a painting at auction and received £6,100 after deducting auctioneer’s fees of £200. The
painting had originally cost him £3,500.
A Chargeable
B Exempt
Erica received £5,900 for jewellery that she sold. The jewellery originally cost her £5,900 plus
auctioneer’s fees of £200.
C Chargeable
D Exempt
LO 4a

25 Ervin bought an antique vase for £4,000 in October 2007. In January 2024, he sold it for £6,800.
Requirement
Assuming the annual exempt amount is used by other disposals, Ervin’s taxable gain on the vase is:
A £0
B £1,333
C £2,000
D £2,800
LO 4b

26 In February 2006 Ebony purchased a painting for £5,900. She sold it at auction for £5,600 after
deducting £150 of auctioneer’s fees in October 2023.
Requirement
What is the allowable loss on disposal?
A £0
B £(300)
C £(50)
D £(150)
LO 4b

42 Principles of Taxation ICAEW 2024

27 Which two of the following assets are exempt assets for capital gains tax purposes?
A An antique diamond necklace worth £3,000 (cost £2,500)
B A small hotel
C An oil painting worth £12,000 (cost £9,000)
D Fixed plant and machinery sold at a profit
E Shares held in an ISA
LO 4a

28 On 1 December 2023 David sold his holiday cottage for £200,000. He had bought the cottage in
July 2000. The list below shows David’s expenditure on the cottage prior to its sale.
Requirement
Which three of these costs will be deducted in calculating David’s chargeable gain?
A Legal fees on purchase – £800
B Purchase price – £110,000
C Redecoration costs – £2,100
D Cost of building a garage – £7,500
E Replacement of a few roof tiles after a storm – £150
LO 4b

29 Martha has recently made two disposals. For each of the two disposals select how the resulting gains
or losses should be treated in the computation of Martha’s taxable gains.
Requirements
Gain of £3,600 on the sale of goodwill in her ice cream van business.
A Chargeable gain
B Exempt
Loss of £2,000 on the sale of a diamond necklace which had cost £4,000.
C Allowable capital loss
D Exempt
LO 4a

30 Joshua has draft taxable gains of £30,500 for 2023/24 including the two items below.
Select how Joshua’s draft taxable gains will be affected by the correct treatment of each item.
Requirements
A gain of £4,200 on the sale of his 10-year-old racehorse.
A No effect
B Increase
C Decrease
Auctioneer’s fees of £500 have been deducted in arriving at the £13,400 gain on sale of an antique
sculpture at an auction.
D No effect
E Increase
F Decrease
LO 4c

ICAEW 2024 9: Capital gains tax – individuals 43

31 On 1 January 2024 Anna sold an office building for £500,000 before paying legal fees of £24,700.
She had bought the building for £280,000 in July 2010.
Anna made no other disposals of chargeable assets during 2023/24. She had taxable income of
£26,700 in 2023/24 after deduction of her personal allowance.
Requirement
What is Anna’s capital gains tax liability for 2023/24?
A £36,760
B £37,960
C £35,503
D £37,860
LO 4d

32 Becky sold a necklace for £56,000 in January 2024, incurring auctioneer’s fees of £800. Becky had
inherited the necklace from her mother on her mother’s death in May 2007 when it was worth
£20,000. Becky’s mother had bought the necklace for £5,000 in January 1993.
Becky made no other disposals of chargeable assets during 2023/24. She had taxable income of
£60,000 in 2023/24.
Requirement
What is Becky’s capital gains tax liability for 2023/24?
A £5,840
B £8,840
C £7,040
D £6,000
LO 4d

33 Jeremy has made two disposals. For each of the two disposals below, select how the gain or loss
should be treated in the computation of Jeremy’s taxable gains.
Requirements
Gain of £13,000 on shares in an ISA:
A Chargeable gain
B Exempt
Loss of £3,000 on shares held directly by Jeremy which had cost £5,000:
C Allowable capital loss
D Exempt
LO 4a

34 Which of the following may result in a chargeable gain?

A Sale of a vintage car for £20,000 which originally cost £12,000
B Gift of cash of £50,000 from Jamil to his daughter to use as a house deposit
C Sale for £5,000 of the goodwill of a trading business by Jack
D Gift of premium bonds by Lisa to her daughter as a wedding gift
LO 4a

44 Principles of Taxation ICAEW 2024

35 In March 1990, Matthew purchased an office for £641,000. Matthew sold the office in March 2024 for
£1,250,400, incurring £120,000 estate agents’ fees on the sale.
Matthew made no other disposals of chargeable assets during 2023/24. Matthew has taxable income
of £33,330 in 2023/24 after deduction of his personal allowance.
Requirement
What is Matthew’s capital gains tax liability for 2023/24?
A £97,443
B £96,243
C £96,680
D £120,243
LO 4d

36 Jenny owned a set of two antiques which cost her £4,000 in January 1990.
In September 2023, she sold one of the antiques to Helen for £7,000. The other antique was valued
at £8,000 at this time.
In October 2023, she sold the other antique to Helen‘s wife, Shona, for £10,000.
Helen and Shona are connected persons for CGT purposes.
Requirement
What is the cost to be used in the calculation of Jenny’s gain on disposal to Shona in October 2023?
A £4,000
B £2,133
C £2,000
D £1,867
LO 4b

37 Tiny owned a set of two sparkly antiques which they sold to Deborah as follows:

Antique 1 Antique 2 Total

Date of sale 1 July 2023 1 November 2023

Sales proceeds £5,100 £3,200 £8,300

Gain calculated using part disposal £3,100 £1,400 £4,500

formula to determine cost

Requirement
What is the chargeable gain on the disposal of Antique 1?
A £3,833
B £3,100
C £2,355
D £1,917
LO 4b

38 In February 2005 Nuria purchased a painting for £6,700. She sold it at auction for £4,600 after
deducting £200 of auctioneer’s fees in October 2023.
Requirement
What is the allowable loss on disposal?

ICAEW 2024 9: Capital gains tax – individuals 45

 A £(2,300)
B £(2,100)
C £(700)
D £(900)
LO 4b

39 On 1 December 2023 Claire sold a painting for £50,500 which she had bought, unframed, from the
artist for £8,000 in 2003. She had paid £1,300 to have the painting framed before sale.
Claire made no other disposals of chargeable assets during 2023/24. She had taxable income of
£34,700 in 2023/24 after deduction of her personal allowance.
Requirement
What is Claire’s capital gains tax liability for 2023/24?
A £7,040
B £7,940
C £7,000
D £6,740
LO 4d

40 Which of the following statements is correct?

A For individuals and companies there is an annual exempt amount available to reduce the
amount of gains taxable each year.
B A gain made by an individual on the sale of a vintage car at auction will be liable to capital gains
tax.
C Capital gains tax is payable by individuals and companies on their taxable gains.
D Individuals will have a chargeable gain on disposal of goodwill from their business.
LO 1d, 4b

41 Justin entered into a contract with Matthew to purchase a rare art collection. Contracts were
exchanged on 1 August 2023 subject to an independent valuation being done. The valuation took
place on 1 September 2023. Legal title finally passed on 5 September 2023. Payment was not made
until 7 September 2023.
Requirement
On what date will Matthew be treated as having disposed of the art collection for capital gains tax
purposes?
A 1 August 2023
B 1 September 2023
C 5 September 2023
D 7 September 2023
LO 1e

46 Principles of Taxation ICAEW 2024

 Chapter 10: Corporation tax
1 In January 2019, Sink Ltd purchased a property for £250,000. In June 2019 Sink Ltd built an
extension to the property costing £20,000, however this was subsequently demolished in 2020 and
replaced with a larger extension costing £35,000. In September 2023 Sink Ltd sold the property.
Requirement
What is the total allowable cost of the factory in computing Sink Ltd’s chargeable gain?
A £250,000
B £270,000
C £285,000
D £305,000
LO 4b

2 Pineapple plc sold an antique writing desk which had been purchased in January 2018 for £18,000. It
was sold for £3,200 in January 2024. The proceeds were received net of selling fees of £400.
Requirement
What is Pineapple plc’s allowable loss?
A £0
B £(12,400)
C £(15,200)
D £(12,000)
LO 4b

3 Shower plc has made two disposals in its year ended 31 August 2023.
For each of the two disposals select how the resulting gains should be treated in the calculation of
Shower plc’s chargeable gains.
Requirements
Gain of £24,000 on the disposal of a rare African snake which had not been used in the business.
A Chargeable gain
B Exempt
Gain of £1,100 on the sale of an antique chair. The chair originally cost £5,000.
C Chargeable gain
D Exempt
LO 4a

4 Pumpkin Ltd purchased a plot of land in August 2018 for £60,000, incurring legal fees of £3,000 on
acquisition. Work to improve drainage was carried out on the land in 2019 at a cost of £25,000. The
company sold the land in November 2023 for proceeds of £80,000, incurring selling costs of £1,750.
Requirement
What is the chargeable gain or allowable loss on the disposal?
A (£9,750)
B £15,250
C £(8,000)
D £(6,750)

ICAEW 2024 10: Corporation tax 47

 LO 4b

5 Party Ltd purchased a building for investment purposes in January 2018 for £150,000. The property
was redecorated at a cost of £24,000 and the single glazed windows were replaced with double
glazing costing £40,000 in December 2018. The company sold the building in September 2023 for
£425,000.
Requirement
What is the gain in Party Ltd’s corporation tax computation for the year ended 31 December 2023?
A £275,000
B £211,000
C £251,000
D £235,000
LO 4b

6 Tractor Ltd realised a chargeable gain of £16,000 on disposal of a building in January 2024. Tractor
Ltd has augmented profits below the lower limit.
Requirement
What is the tax suffered by Tractor Ltd on its chargeable gain?
A £1,000
B £1,900
C £3,040
D £3,200
LO 4c

7 Lettuce Ltd was incorporated on 11 May 2023. It opened an interest-bearing building society
account on 1 July 2023 and began trading on 1 January 2024. It will make up its first set of accounts
to 30 September 2024 and annually thereafter.
Requirement
What are the dates of Lettuce Ltd’s first accounting period for corporation tax purposes?
A 11 May 2023 – 31 December 2023
B 1 July 2023 – 31 December 2023
C 1 January 2024 – 30 September 2024
D 1 January 2024 – 31 December 2024
LO 5a

8 Which of the following statements about corporation tax is true?

A A company which is centrally managed and controlled in the UK will always be liable to UK
corporation tax on its worldwide profits.
B A company which is incorporated in the UK will only be liable to UK corporation tax on its
worldwide profits if it is also centrally managed and controlled in the UK.
C A company which is incorporated abroad and centrally managed and controlled abroad, will still
be liable to UK corporation tax on its worldwide profits.
D A company which is incorporated abroad will never be liable to UK corporation tax on its
worldwide profits.
LO 5d

48 Principles of Taxation ICAEW 2024

9 Airedale Ltd was incorporated on 11 June 2023. It opened an interest-bearing building society
account on 1 August 2023 and began trading on 1 February 2024. It makes up its first set of accounts
to 30 September 2024 and annually thereafter.
Requirement
What are the dates of Airedale Ltd’s first accounting period for corporation tax purposes?
A 1 August 2023 – 31 July 2024
B 11 June 2023 – 31 January 2024
C 1 February 2024 – 30 September 2024
D 1 August 2023 – 31 January 2024
LO 5a

10 Papillon Ltd has taxable total profits of £150,000 for its three-month accounting period to 31
December 2023. Papillon Ltd did not receive any dividends, and has no associated companies.
Requirement
What is Papillon Ltd’s corporation tax liability for the three months ended 31 December 2023?

Papillon Ltd’s corporation tax liability £

LO 5d

11 Jaffrey Ltd is a UK-resident trading company that made various disposals during the year ended 31
March 2024.
Select how the resulting gains or losses should be treated in the corporation tax computation of
Jaffrey Ltd for the year ended 31 March 2024.
Requirements
Loss of £5,900 on the sale of two cars used in the business; each car cost and was sold for more than
£6,000:
A Chargeable gain
B Exempt
C Allowable capital loss
Gain of £86,000 on the sale of an investment property:
D Chargeable gain
E Exempt
F Allowable capital loss
LO 4a

12 Lam Ltd began trading on 1 February 2022 and had the following periods of account:
• 1 February 2022 to 31 July 2023
• 1 August 2023 to 30 April 2024 (when the trade ceased)
Requirement
Its first corporation tax accounting period was:
A 1 February 2022 to 31 July 2022
B 1 February 2022 to 31 January 2023
C 1 February 2022 to 30 April 2023
D 1 February 2022 to 31 July 2023
LO 5a

ICAEW 2024 10: Corporation tax 49

13 Jam Ltd has taxable total profits of £160,000 for the year ended 31 December 2023. Jam Ltd
received dividends from unconnected companies of £25,000. It has no associated companies.
Requirement
What is the corporation tax payable by Jam Ltd for the year ended 31 December 2023?

Corporation tax payable

LO 5d

14 Drisko Ltd has taxable total profits of £1,450,000 for the year ended 31 March 2024. During the year
ended 31 March 2024 it received exempt dividends from UK companies of £135,000 of which
£20,000 were received from an 80% subsidiary.
Requirement
What are Drisko Ltd’s augmented profits for the year ended 31 March 2024?
A £1,585,000
B £1,565,000
C £1,470,000
D £1,450,000
LO 5b, 5d

15 Lagunilla Ltd has paid its corporation tax in quarterly instalments for many years. It has one 80%
subsidiary. In the year ended 31 December 2023 Lagunilla Ltd has taxable total profits of £550,000.
In December 2023 it received exempt dividends of £300,000 from its subsidiary.
Requirement
By which date is Lagunilla Ltd’s final corporation tax payment due for the year ended 31 December
2023?
A 14 April 2024
B 1 October 2024
C 31 December 2024
D 31 January 2025
LO 5b, 5d

16 Pasta plc sold one of its warehouses on 1 July 2023 for £2,125,000. The warehouse originally cost
£432,000 in February 2018. On disposal Pasta plc paid estate agents fees of £24,969. At acquisition
legal fees were £3,000 and stamp duty land tax was £12,960. During its ownership Pasta plc added a
canteen to the building at a cost of £48,000.
Requirement
What is Pasta plc’s chargeable gain on this disposal?

Chargeable gain £
LO 4b

17 Ardent Ltd bought a factory on 12 February 2019 for £165,000. At acquisition, professional fees were
£2,450 and stamp duty land tax was £1,650. In May 2019 an extension was added to the factory at a
cost of £23,000.
In October 2023 Ardent Ltd sold the factory, which had always been used in its trade, for £312,000.
Prior to the sale, Ardent Ltd repaired water damage on one wall at a total cost of £3,000.

50 Principles of Taxation ICAEW 2024

 Requirement
What is the chargeable gain on the sale of the factory?

Chargeable gain £
LO 4b

18 Rhodes Ltd has taxable total profits for the nine-month period ended 31 March 2024 of £1,088,600.
Rhodes Ltd has no associated companies and received no dividends.
Requirement
What is the corporation tax payable by Rhodes Ltd for the period ended 31 March 2024?

Corporation tax payable

LO 5d

19 In the year ended 31 March 2024, Sky Ltd has taxable total profits of £30,000. It receives dividends of
£12,000 from unconnected companies.
Requirement
What is Sky Ltd’s corporation tax liability for the year ended 31 March 2024?

Corporation tax payable

LO 5d

20 Cloud Ltd has provided the following information for the year ended 31 May 2024:

Adjusted trading profits 42,000

Chargeable gains 10,000

Dividend income 9,000

Charitable donations paid 6,000

Cloud Ltd has no associated companies.

Requirement
What is Cloud Ltd’s corporation tax payable for the y/e 31 May 2024?
A £10,583
B £11,500
C £9,054
D £8,740
LO 5d

21 Storm Ltd has taxable total profits of £190,000 and dividends received from unconnected companies
of £8,000 for its 9-month accounting period to 31 December 2023.
Requirement
What is the corporation tax payable?

Corporation tax payable

LO 5d

ICAEW 2024 10: Corporation tax 51

22 Sun Ltd has taxable total profits of £100,000 in the y/e 31 March 2024, and receives dividends of
£20,000 from unconnected companies. Sun Ltd owns 60% of the shares in Light Ltd, and 45% of the
shares in Dark Ltd.
Requirement
What is the corporation tax liability?
A £25,000
B £24,937
C £19,000
D £23,375
LO 5d

23 Wing Ltd prepared accounts to 31 December 2024. On 1 March 2024 it purchased a print machine
for £90,300 and a hybrid car with emissions of 30 g/km for £35,000. Wing Ltd has no tax written
down value brought forward in the main pool at the start of the year.
Requirement
What are the total capital allowances?
A £96,600
B £22,554
C £125,300
D £90,300
LO 5c

24 Beak Ltd has tax-adjusted trading profits of £250,000 for the y/e 31 March 2024. At 1 April 2023 it
had a tax written down value of £65,000 in the main pool. On 1 May 2023 it purchased a machine for
£19,000.
Requirement
What is Beak Ltd’s trading income for the y/e 31 March 2024?
A £30,700
B £280,700
C £231,000
D £219,300
LO 5c

25 Feather Ltd prepares accounts for an 18-month period to 30 September 2024. The tax written down
value of the main pool at 1 April 2023 was £96,000. Feather Ltd purchased a photocopier on 1 July
2023 for £50,000.
Requirement
What are the capital allowances for each accounting period?
A 12 m/e 31 Mar 24 £67,280, 6 m/e 30 Sep 24 £7,085
B 18 m/e 30 Sep 24 £75,920
C 12 m/e 31 Mar 24 £26,280, 6 m/e 30 Sep 24 £6,275
D 6 m/e 30 Sep 24 £58,640, 12 m/e 30 Sep 24 £12,725
LO 5c

52 Principles of Taxation ICAEW 2024

26 Petal Ltd began trading on 1 January 2023. On 1 May 2023 it purchased a van for £47,000. The van is
used 30% of the time for private use of the managing director, and has CO2 emissions of 40g/km.
Requirement
What is the maximum capital allowance claim available to Petal Ltd for the year ended 31 December
2023?
A £8,640
B £5,922
C £47,000
D £32,900
LO 5c

27 Garage Ltd has a tax written down value brought forward on the main pool of £120,000 at 1 April
2023. During the year ended 31 March 2024 the following transactions took place:
• Purchase of equipment for £45,000
• Sale of machine for £32,000
Requirement
What are the capital allowances available to Garage Ltd for the year ended 31 March 2024?

Capital allowances
LO 5c

ICAEW 2024 10: Corporation tax 53

54 Principles of Taxation ICAEW 2024
 Chapter 11: Value added tax
1 Clementine orders some goods from Forty-Niner plc on 1 May. They are dispatched on 8 May. On 4
June Clementine receives the respective invoice dated 2 June. Her payment arrives at the company
on 7 June. Forty-Niner plc does not operate the cash accounting scheme.
Requirement
Which of the following options is the tax point for the transaction?
A 1 May
B 8 May
C 2 June
D 7 June
LO 6d

2 Matilda has been a VAT-registered trader for a number of years and has recently purchased various
items for use in her trade.
Requirement
Select the item on which Matilda cannot recover the input tax.
A Van accessories purchased a year ago
B Fixed partitions for use in the office
C A motorcycle for business deliveries
D Entertaining costs of UK business customers
LO 6e

3 Bob, who is not registered for VAT, has just completed 12 months’ trading, the turnover details for
the past year being as follows:

£
Exempt supplies 28,000
Standard-rated supplies 58,000
Zero-rated supplies 29,000

Requirement
Which of the following options correctly identifies Bob’s liability to register for VAT?
A He is not required to register.
B He must register, based on turnover of exempt and standard-rated supplies.
C He must register, based on turnover of standard and zero-rated supplies.
D He must register, based on turnover of exempt, standard and zero-rated supplies.
LO 6c

ICAEW 2024 11: Value added tax 55

4 Charlene, a VAT-registered trader, invoices Bronco Ltd in November 2023 for standard-rated supplies
of £1,000, excluding VAT.
The following settlement discounts are offered.

Payment within Discount

7 days 10%
14 days 5%
21 days 2.5%

Bronco Ltd, whose normal credit term is 21 days, agrees beforehand to settle the invoice within 14
days, but actually takes 28 days.
Requirement
How much VAT is Bronco Ltd required to pay?
A £180
B £195
C £190
D £200
LO 6e

5 Viking Raiders Ltd began trading on 1 January 2023. Details of the company’s recent taxable
turnover are as follows.

2023 £ 2024 £
January 720 January 12,970
February 1,220 February 13,960
March 2,250 March 10,770
April 2,490 April 11,860
May 3,890
June 4,620
July 5,870
August 5,890
September 5,920
October 7,170
November 9,800
December 10,270

Requirement
By what date must Viking Raiders Ltd notify HMRC of its liability to register?
A 29 February 2024
B 30 March 2024
C 31 March 2024
D 1 April 2024
LO 6c

56 Principles of Taxation ICAEW 2024

6 Paint Ltd incurred the following capital expenditure (including VAT).

£
New car for salesman 12,810 (80% business use)
New motor van 9,450
Second-hand container lorry 23,100

Requirement
How much VAT can be reclaimed in respect of the above?
A £3,850
B £5,425
C £7,133
D £7,560
LO 6e

7 Tariq ordered some goods from Rumpole Ltd, which issued a VAT invoice on 1 February. As payment
for the goods, Tariq sent a cheque which Rumpole Ltd received on 3 February. The goods were
dispatched on 8 February and received by Tariq on 10 February. Rumpole Ltd is not a member of the
cash accounting scheme.
Requirement
Which of the following options is the tax point for the supply?
A 1 February
B 3 February
C 8 February
D 10 February
LO 6d

8 Quentin, who is registered for VAT, supplies computer hardware and related support services.
On 28 March 2024 he gave a new laptop to his sister. The laptop cost the business £2,500 (excluding
VAT) in January 2024 but the same model could have been purchased for £2,000 on 28 March 2024
(excluding VAT).
Requirement
How much output VAT should Quentin include in his VAT return in respect of the above transaction?
A £333.33
B £400.00
C £416.67
D £500.00
LO 6e

ICAEW 2024 11: Value added tax 57

9 Valerie is a sole trader running two separate businesses – a wholesale fabric business and a clothes
retail business. She is also senior partner in a firm of interior designers. All three businesses have a
taxable turnover in excess of £100,000.
Requirement
What is the maximum number of VAT registrations to which Valerie will be a party?
A One
B Two
C Three
D She may elect for two or three
LO 6c

10 Cross plc issues an invoice for standard-rated goods in February 2024 as follows.

£
Goods excluding VAT 1,800
Less trade discount (180)
Cash discount (only available if the invoice is settled within 30 days) (108)
Cash to pay within 30 days 1,512

Requirement
How much VAT will be paid overall if the customer pays within 30 days?
A £360.00
B £338.40
C £302.40
D £324.00
LO 6e

11 Priscilla started trading in the winter of 2022 but did not register for VAT because she expected that
her turnover would be below the registration limits. On 31 May 2023 she realised that her future
taxable turnover would exceed £85,000 in the next 30 days alone.
Requirements
By what date must Priscilla notify HMRC that she is liable to be registered for VAT?
A 31 May 2023
B 29 June 2023
C 1 July 2023
From what date must Priscilla charge VAT on her taxable supplies?
D 31 May 2023
E 30 June 2023
F 1 July 2023
LO 6c

58 Principles of Taxation ICAEW 2024

12 Paola, who is registered for VAT, runs a chauffeur-driven car hire service. In the quarter ended 31
March 2024 she lent a car and chauffeur to her cousin, to drive him to the airport. In the same quarter
Paola arranged for a car and chauffeur to drive her to the church for her wedding.
Requirement
Which of these, if any, will be treated as a supply of services for VAT purposes?
A Neither
B Loan of car to her cousin only
C Use of car for her wedding only
D Both
LO 6a

13 Diane, a VAT-registered trader who is not a member of the cash accounting scheme, supplies some
goods to a customer. The goods are dispatched on 27 March. Diane’s VAT accounting period ends
on 31 March. An invoice is issued on 2 April and payment is received on 4 April.
Requirement
What is the tax point?
A 27 March
B 31 March
C 2 April
D 4 April
LO 6d

14 Walton Ltd, a manufacturing company which is registered for VAT, purchased a motor car for £10,470
(which included £160 for vehicle excise duty) inclusive of VAT. The car is used by one of the
employees for business and private use.
Requirement
What amount should be included in the capital allowance computation as the acquisition cost of this
vehicle?
A £8,592
B £8,725
C £10,310
D £10,470
LO 6b

15 Which of the following is always a condition which must be fulfilled if input tax on the purchase of
goods from a VAT-registered person is to be recovered?
A The goods must be standard-rated or zero-rated.
B A tax invoice is held.
C The supplier has been paid.
D The goods have been resold to a customer.
LO 6e

ICAEW 2024 11: Value added tax 59

16 Parminder runs two separate businesses. The first business is a clothes repair service which has
taxable supplies of £35,000 per annum. The second business is a carwash service which has taxable
supplies of £245,000 per annum. Both businesses are run by Parminder as a sole trader.
Requirement
Which of the businesses is relevant in determining whether Parminder should register for VAT?
A Both businesses
B The clothes repair service
C The carwash service
D Neither business
LO 6c

17 Sheep plc began trading on 1 December 2023. On 1 March 2024 it won a contract to supply goods
on 15 March 2024 worth £350,000.
Requirements
By what date must Sheep plc notify HMRC that it is liable to be registered for VAT?
A 1 April
B 30 March
C 30 April
From what date must Sheep plc charge VAT on its taxable supplies?
D 1 March
E 31 March
F 1 April
LO 6c

18 Gobble plc made the following two standard-rated supplies during July 2023:
Clothes (exclusive of VAT) = £400
Material (inclusive of VAT) = £514
Requirement
What is the total amount of output VAT collected?
A £169.47
B £165.67
C £182.80
D £152.33
LO 6e

19 From the following list of purchases, select two items for which the input VAT is always wholly
irrecoverable.
A UK client entertaining
B Fuel in company pool cars
C Capital item still used exclusively for business use but purchased two months pre-registration
D Gifts of goods to customers
E Company car for employee use which is a taxable benefit for income tax purposes
LO 6e

60 Principles of Taxation ICAEW 2024

20 In his first year of trading to 31 December 2022 Wayne’s taxable turnover from his business was
£3,700 each month.
For the first seven months of 2023 his taxable turnover was as follows:

2023 £
January 6,100
February 7,800
March 8,500
April 12,400
May 13,700
June 14,900
July 13,000

Requirement
By what date must Wayne notify HMRC of his liability to register for VAT?
A 30 May 2023
B 30 June 2023
C 30 July 2023
D 30 August 2023
LO 6c

21 Benedict began trading on 1 August 2023 repairing electrical equipment and applied to register for
VAT with effect from 1 December 2023. Prior to registration he had incurred VAT as follows.

£
Van purchased on 3 May 2023 still in use at 30 November 2023 500
Accountancy fees on invoice dated 5 September 2023 30
Stock of spare parts as at 30 November 2023 240

Requirement
How much VAT can Benedict reclaim in respect of these items?
A £770
B £740
C £270
D £240
LO 6e

22 Which of the following statements about VAT is true?

A A trader who makes only exempt supplies may register for VAT.
B VAT is charged on zero-rated supplies.
C VAT on standard-rated supplies is always charged at 5%.
D A trader making taxable supplies may only register for VAT once supplies exceed the VAT
registration threshold.
LO 6b, 6c

ICAEW 2024 11: Value added tax 61

23 Michaela began trading as a cabinet maker on 1 October 2022. Her quarterly turnover (spread
evenly over the quarter) is as follows.

Quarter ended £
31 December 2022 12,000
31 March 2023 13,200
30 June 2023 19,500
30 September 2023 26,700
31 December 2023 32,700
31 March 2024 35,000

Requirement
By what date must Michaela notify HMRC of her liability to register for VAT?
A 30 December 2023
B 31 December 2023
C 30 January 2024
D 31 January 2024
LO 6c

24 Miranda’s taxable sales have dropped to £30,000 pa and forecast annual sales are expected to be
between £30,000 and £40,000.
Requirement
Which of the following options correctly identifies the VAT implications for Miranda?
A Miranda must deregister and will need to pay output VAT on the deemed supply of stock and
capital items still held at deregistration.
B Miranda must deregister and will need to pay output VAT on the deemed supply of stock and
capital items still held at deregistration where the output VAT exceeds £1,000.
C Miranda may choose to deregister but would then need to pay output VAT on the deemed
supply of stock and capital items still held at deregistration if the output VAT exceeds £1,000.
D Miranda may choose to deregister but would then need to pay output VAT on the deemed
supply of stock and capital items still held at deregistration.
LO 6c

25 Which of the following is not a deemed supply for VAT purposes?

A Sale of goods on hire purchase
B Gifts of business assets worth £100 each to a customer
C Gifts of services worth £100 to a customer
D Drawings of stock by the proprietor of a business
LO 6a

62 Principles of Taxation ICAEW 2024

26 Kevin is a VAT-registered trader who has suffered input tax as follows on purchases in the past month.

£
Television for Kevin’s wife 350
Machine for business use (Kevin has lost the VAT receipt) 989
Office stationery 256

Requirement
How much input tax may Kevin recover on these items?
A £256
B £989
C £1,245
D £1,595
LO 6e

27 Which of the following statements about VAT is true?

A Where discounts are offered VAT should be calculated based on those discounts offered, rather
than actually obtained.
B A gift of business services is not a taxable supply.
C A supply of a business asset used for private purposes is not a taxable supply.
D Input VAT is recoverable on company cars to the extent they are used for business purposes.
LO 6b, 6e

28 Flight plc is VAT-registered but is not a member of the cash accounting scheme. A major customer of
Flight plc went into liquidation today and there is little hope of its debt being recovered. The invoice
was issued on 1 August 2023 with a credit agreement of payment by the end of the month. The
associated output VAT was paid to HMRC in the quarter ended 31 October 2023 return. The debt will
be written off in Flight plc’s accounts on 31 March 2024.
Requirement
Assuming it is now 1 January 2024, what is the earliest date the output VAT could be reclaimed from
HMRC?
A 1 January 2024
B 1 February 2024
C 29 February 2024
D 31 March 2024
LO 6e

ICAEW 2024 11: Value added tax 63

29 Sunil ordered some goods from Grumpy Ltd, which issued a VAT invoice on 1 September. Sunil sent
a cheque for the goods which Grumpy Ltd received on 3 September. The goods were dispatched on
8 September and received by Sunil on 10 September. Grumpy Ltd is not a member of the cash
accounting scheme.
Requirement
What is the tax point for the supply?
A 1 September
B 3 September
C 8 September
D 10 September
LO 6d

30 Tien orders some goods on sale or return from Spice Ltd on 1 October. They are dispatched on 9
October. Tien adopts the goods on 1 November. Tien then receives the invoice for the goods dated
20 November. Spice Ltd receives payment for the goods on 29 December. Tien and Spice Ltd are not
members of the cash accounting scheme.
Requirement
What is the actual tax point of the transaction?
A 1 October
B 9 October
C 1 November
D 20 November
LO 6d

31 Ahsan orders some goods from Land Ltd on 1 October. They are dispatched on 18 October. Ahsan
then receives the invoice for the goods dated 29 October. Land Ltd receives payment for the goods
on 7 December. Ahsan is not a member of the cash accounting scheme.
Requirement
What is the actual tax point of the transaction?
A 1 October
B 18 October
C 29 October
D 7 December
LO 6d

32 Disco Ltd intends to register voluntarily for VAT.

Requirement
Which of the following statements is correct?
A Disco Ltd must be expecting to be in a repayment position.
B Disco Ltd must not be making any exempt supplies.
C Disco Ltd must be making or intending to make some taxable supplies.
D Disco Ltd must be expecting to exceed the VAT threshold within the next 12 months.
LO 6c

64 Principles of Taxation ICAEW 2024

33 Tambourine Ltd makes standard-rated supplies. At the end of October 2023 its taxable turnover in
the previous 12 months exceeds £85,000 for the first time. Its turnover is expected to rise gradually.
Requirements
The company is required to notify HMRC of its liability to register by:
A 1 November 2023
B 30 November 2023
C 1 December 2023
Registration takes effect from:
D 1 November 2023
E 30 November 2023
F 1 December 2023
LO 6c

34 Arthur, who is not registered for VAT, has just completed 12 months’ trading. The turnover for the
trading year is as follows.

£
Exempt supplies 14,300
Taxable supplies 69,250

Additionally Arthur sold an item of machinery (standard-rated) for £14,000.

Requirement
Based on the above information, does Arthur have any liability to register for VAT?
A Yes, based on exempt and taxable supplies of normal trading
B Yes, based on taxable supplies of normal trading, plus the sale of machinery
C No, based on taxable supplies of normal trading
D Yes, based on exempt and taxable supplies of normal trading, plus the sale of machinery
LO 6c

35 Abida is a salesman who incurred the following expenditure during his work.

Net VAT Gross

£ £ £
Hotel accommodation reimbursed to him by his employer 320 64 384
Meals paid out of his salary 200 40 240

In addition his employer purchased a laptop computer for Abida to use as an essential part of his
job. The employer agreed 10% personal use for this equipment which had cost £1,080 (including
VAT of £180).
Requirement
How much may be shown as net deductible input tax on the employer’s VAT return?
A £226
B £244
C £266
D £284
LO 6e

ICAEW 2024 11: Value added tax 65

36 Books Ltd incurred the following capital expenditure (including VAT).

£
Car for salesman used for business and private purposes 15,750
Delivery van 10,080

Requirement
How much VAT can be reclaimed in respect of the above?
A £2,016
B £1,680
C £2,625
D £4,305
LO 6e

37 Identify whether the following are correct conditions for the reclaim of output tax as bad debt relief.
Requirements
A period of six months has elapsed since the goods were supplied.
A Correct
B Incorrect
Tax on the supply has been accounted for and paid.
C Correct
D Incorrect
The bad debt claim must be made within six years of becoming eligible for relief.
E Correct
F Incorrect
LO 6e

38 Music Ltd has just received the following invoice from a supplier with a delivery of equipment (all
figures exclude VAT).

£
Musical equipment 6,400
Less 10% discount for settlement within 14 days (640)
Cash to pay if settled within 14 days 5,760

If payment is made within 21 days the discount is reduced to 5%.

Music Ltd has a policy of paying one week after being invoiced.
Requirement
What is the correct amount of VAT that Music Ltd will pay?
A £960
B £1,152
C £1,216
D £1,280
LO 6e

66 Principles of Taxation ICAEW 2024

39 Peter purchases goods from Jemima. Peter paid for the goods when he ordered them on 3 April.
Jemima made the goods available to Peter on 7 April, but Peter did not collect them until 11 April.
Jemima issued the invoice on 16 April.
Requirement
What is the actual tax point for this supply?
A 3 April
B 7 April
C 11 April
D 16 April
LO 6d

40 Identify whether each of the following is a taxable supply for VAT purposes.
Requirements
Steve, who is registered for VAT, runs a plant hire company. In the quarter ended 31 March 2024 he
let his brother use a digger at no charge.
A Taxable
B Not taxable
In the quarter to 30 June 2024 he used the same digger to help dig the foundations for the
extension being built onto his house.
C Taxable
D Not taxable
LO 6a

41 Block Ltd, a building company which is registered for VAT, purchased a motor car for use by the sales
director for £25,380 (including £705 for the factory fitted satellite navigation), inclusive of VAT. The
car is used 20% privately by the sales director.
Requirement
What is the cost to the company of the vehicle for capital allowance purposes?
A £25,380
B £24,675
C £21,150
D £20,563
LO 6b

42 Charlie has a shop selling women’s clothing. She gave a coat that she had bought for £120 to her
sister. She would have sold the coat in the shop for £200. All figures are VAT-inclusive.
Requirement
What is the value of the coat for VAT purposes?
A £200.00
B £166.67
C £120.00
D £100.00
LO 6b

ICAEW 2024 11: Value added tax 67

43 Gertrude has a quarter ended 31 March 2024. Her normal payment terms are one calendar month
after invoice date. Identify whether bad debt relief can be claimed in respect of the following
amounts owed to Gertrude as at 31 March 2024.
Requirements
Wood Ltd still owes £5,000 from an invoice issued on 30 June 2023. Gertrude still believes that the
amount will be paid in full and so it has not been written off in the accounts.
A Bad debt relief can be claimed
B Bad debt relief cannot be claimed
Trees Ltd owes £2,000 from an invoice issued on 15 September 2023. Gertrude does not expect
payment of this debt and has written it off in the accounts.
C Bad debt relief can be claimed
D Bad debt relief cannot be claimed
LO 6e

44 Identify whether each of the following statements is correct.

Requirements
A business making £48,000 of standard-rated supplies and £38,000 of exempt supplies is required
to register for VAT.
A Correct
B Incorrect
A business making £86,000 of zero-rated supplies only does not have to become VAT registered.
C Correct
D Incorrect
LO 6c

45 Lancashire Ltd began trading on 1 January 2023. The company’s taxable turnover was £4,900 per
month for the first six months, rising to £7,700 per month for the next six months. In January 2024 the
turnover increased to £14,400 per month.
Requirement
Lancashire Ltd must start to charge VAT on its supplies from
A 31 January 2024
B 29 February 2024
C 1 March 2024
D 2 March 2024
LO 6c

46 Yorks Ltd began trading on 1 January 2024, anticipating taxable turnover of £86,000 per month.
Requirements
It must notify HMRC of its liability to register for VAT by:
A 1 January 2024
B 30 January 2024
C 31 January 2024
The company’s VAT registration is effective from:
D 1 January 2024

68 Principles of Taxation ICAEW 2024

 E 30 January 2024
F 31 January 2024
LO 6c

47 Maddie is registered for VAT and makes standard-rated supplies only. Maddie sold some goods to
Julie for £76 without charging any VAT because Maddie believed that the goods were exempt from
VAT.
Maddie has now discovered that VAT should have been charged on this sale.
How much VAT is payable on this sale and by whom?
Requirements
The amount of VAT payable is:
A £12.67
B £15.20
The VAT is payable by:
C Maddie
D Julie
LO 1d, 6e

48 Harry began trading on 1 September 2023. His monthly turnover for the first 18 months of trade is as
follows:

Per month
(excluding VAT)
Turnover £
Standard-rated supplies 4,600
Zero-rated supplies 1,900
Exempt supplies 500
6,000

On 1 May 2024, Harry sold surplus office machinery for £3,500 (excluding VAT).
Select whether the following supplies should be included in order to determine when the VAT
registration limit of £85,000 is first exceeded by Harry’s business.
Requirements
Exempt supplies:
A Include
B Do not include
Supply of surplus office machinery:
C Include
D Do not include
LO 6c

49 Skating Ltd is a VAT-registered company that only makes standard-rated supplies.

Select the extent to which the input tax is recoverable on the following VAT-inclusive costs incurred
by Skating Ltd.

ICAEW 2024 11: Value added tax 69

 Requirements
£15,000 for the purchase of a new machine. The VAT invoice has been lost and cannot be replaced.
A Fully recoverable
B Partially recoverable
C Not recoverable
Purchase of a car for a salesman for £20,000. The car is used 60% for business purposes.
D Fully recoverable
E Partially recoverable
F Not recoverable
LO 6e

50 Jack is a VAT-registered trader making only standard-rated supplies. Jack received an order from a
customer on 20 February 2024 and dispatched the goods on the same day. Included with the order
was payment of a 10% deposit of £1,150 including VAT.
An invoice for the full amount of £11,500 including VAT was issued on 1 March 2024. The balancing
payment of £10,350 was received on 10 April 2024.
Assuming that Jack does not operate the cash accounting scheme, calculate how much output tax (to
the nearest £1) must be accounted for on the following VAT returns:
Requirements
Quarter to 29 February 2024:
A £0
B £192
C £1,150
Quarter to 31 May 2024:
D £0
E £1,725
F £1,917
LO 6e

51 David is registered for VAT. David sold goods to George for £100 without charging any VAT. George
had assured him that the goods were exempt from VAT. David later discovered that the standard rate
of VAT should have been charged on this sale.
Requirements
The amount of VAT payable is:
A £16.67
B £20.00
The VAT is payable by:
C David
D George
LO 1d, 6e

52 Which two of the following statements are correct in relation to registering for VAT?
A A trader can voluntarily register for VAT if they make only exempt supplies.
B A trader can voluntarily register for VAT if they make only zero-rated supplies.

70 Principles of Taxation ICAEW 2024

 C A trader making both zero-rated and standard-rated supplies is required to register only if the
level of taxable supplies exceeds the VAT registration limit.
D A trader making exempt supplies must register for VAT if their supplies exceed the VAT
registration limit.
LO 6c

53 Branimir is registered for VAT and is preparing his VAT return for the three-month period ended 31
March 2024. During this period he made zero-rated supplies of £23,000 and standard-rated supplies
of £29,560. These figures are VAT exclusive.
Branimir incurred input tax related to the zero-rated supplies of £2,130 and input tax related to the
standard-rated supplies of £900. Branimir also paid salaries of £5,800 for the three-month period
which relate to the business as a whole.
Requirement
How much output VAT should Branimir account for on his VAT return for the three months ended 31
March 2024?

Output VAT £
LO 6e

54 Branimir is registered for VAT and is preparing his VAT return for the three-month period ended 31
March 2024. During this period he made zero-rated supplies of £23,000 and standard-rated supplies
of £29,560. These figures are VAT exclusive.
Branimir incurred input tax related to the zero-rated supplies of £2,130 and input tax related to the
standard-rated supplies of £900. Branimir also paid salaries of £5,800 for the three-month period
which relate to the business as a whole.
Requirement
How much input VAT should Branimir account for on his VAT return for the three months ended 31
March 2024?

Input VAT £
LO 6e

55 Eloise started in business as a sole trader on 1 January 2023 making only taxable supplies. Her
turnover in the first 18 months of trade was as follows.
• 1 January 2023 to 31 August 2023 = £6,150 per month
• September and October 2023 = £11,500 per month
• From November 2023 onwards = £13,000 per month
Requirement
By what date should Eloise have notified HMRC that she was required to become VAT registered in
order to avoid a late registration penalty?
A 1 January 2023
B 30 November 2023
C 30 December 2023
D 30 January 2023
LO 6c

ICAEW 2024 11: Value added tax 71

56 Joanne is employed by Aqua Ltd. She is provided with a car with CO2 emissions of 185 g/km and
petrol for business and private use.
The VAT-inclusive quarterly scale rate for a car with CO2 emissions between 185 g/km and 189 g/km
is £497.
Requirement
What is the output VAT due for the quarter to 31 January 2024?
A £497
B £99.40
C £82.83
D £248.50
LO 6d

57 James, a trader, wishes to register voluntarily for VAT.

Requirement
What must James do, in addition to notifying HMRC, in order to be VAT-registered?
A Demonstrate to HMRC that he intends to make taxable supplies
B Demonstrate to HMRC that he will make only zero-rated supplies
C Demonstrate to HMRC that he will make only exempt supplies
D Demonstrate to HMRC that his sole intention for registering is to recover input tax
LO 6c

58 Where a supply is made, a taxable person can, in respect of a default by a debtor, claim a refund of
the relevant VAT if certain conditions are fulfilled.
Requirement
Which of the following options is not one of the conditions required?
A The debtor must be formally insolvent.
B A period of six months must have elapsed since the time of the supply and due date of payment.
C Output tax on the supply has been accounted for and paid.
D The debt has been written off as a bad debt in the accounts.
LO 6e

59 Priti purchases goods from Kuldip as follows.

(1) Kuldip receives payment for goods on 4 May
(2) Kuldip dispatches the goods on 8 May
(3) Priti receives the goods on 12 May
(4) Kuldip issues an invoice on 17 May
Kuldip does not operate the cash accounting scheme.
Requirement
What is the tax point for this supply?
A 4 May
B 8 May
C 12 May
D 17 May
LO 6d

72 Principles of Taxation ICAEW 2024

60 Christine, who is registered for VAT, runs a large computer programming business in Stafford. During
the quarter ended 30 June 2023 she spent £240 on her lunches taken locally and £480 on her
lunches taken in Cornwall while staying away from home on business trips there. Both figures include
VAT.
Requirement
How much VAT may Christine claim as input tax?
A £0
B £40
C £80
D £120
LO 6e

61 Cow plc has been trading for many years and has always been VAT registered. On 1 March 2024 it
ceased to make zero-rated supplies. Cow plc is now a wholly exempt trader with annual supplies of
£86,000 on average.
Requirement
What action must Cow plc now take in relation to its VAT registration?
A No action need be taken as the company is still making supplies in excess of £85,000
B Deregistration will be effective immediately and must be notified by 2 March 2024
C Deregistration will be effective immediately and must be notified by 30 March 2024
D No action need be taken as the company is still making supplies in excess of £83,000
LO 6c

62 In December 2023, Moo plc makes a standard-rated supply of goods and issues an invoice for
£1,000 plus VAT to Ferdinand. A 4% discount is offered if payment is received within 17 days of the
invoice date. Ferdinand took 16 days to pay.
Requirement
What is the correct amount of output VAT paid by Ferdinand overall?

£
LO 6e

63 Jacob, who is VAT-registered, opened a new shop selling electrical supplies. He took goods valued
at £230 for use in his own house and sent out a sample worth £12 to each of 200 potential new
customers.
Requirement
Which of the following statements is correct?
A Only the goods used in Jacob’s house are a taxable supply.
B Only the samples sent to potential customers are a taxable supply.
C Both are taxable supplies.
D Neither are taxable supplies.
LO 6a

64 Which two of the following statements are correct in relation to VAT invoices?

ICAEW 2024 11: Value added tax 73

A A VAT invoice must be issued to all taxable and non-taxable customers.
B A VAT invoice must contain certain details including the VAT registration number, the total VAT
chargeable and a description of the goods supplied.
C A simplified invoice may be issued if the VAT-inclusive sale proceeds are less than £500.
D The VAT invoice is the usual record used to support a recovery of input VAT.
LO 1d

74 Principles of Taxation ICAEW 2024

 Chapter 12: Value added tax – further
aspects
1 Lavender Ltd has prepared its VAT return for the quarter ended 31 March 2024.
Requirements
By what date should Lavender Ltd submit its VAT return for the quarter ended 31 March 2024?
A 31 March 2024
B 30 April 2024
C 7 May 2024
By what date should Lavender Ltd pay its VAT relating to the quarter ended 31 March 2024?
D 31 March 2024
E 30 April 2024
F 7 May 2024
LO 2d

2 Cornflower plc had an annual VAT liability in 2023 of £3,000,000. Its VAT liability for the quarter
ended 31 March 2024 is £900,000.
Requirement
Which of the following options correctly identifies Cornflower plc’s required VAT payments for the
quarter ended 31 March 2024?
A A single payment of £900,000
B Three separate payments of £300,000 each
C Two payments of £250,000 each and a balancing payment of £400,000
D Two payments of £125,000 each and a balancing payment of £650,000
LO 6f

3 What is the maximum invoice value if a trader wishes to issue a simplified VAT invoice?
A £50
B £100
C £250
D £1,000
LO 1d

4 Dilara has a business with a year ended 31 December 2023. Dilara uses the annual accounting
scheme.
Requirement
Which of the following statements is correct?
A She pays all of her VAT in one payment and submits her return by 7 February 2024.
B She pays all of her VAT in one payment and submits her return by 29 February 2024.
C She pays her VAT in nine monthly instalments starting in April 2023 with a balancing payment
and the return submitted by 7 February 2024.
D She pays her VAT in nine monthly instalments starting in April 2023 with a balancing payment
and the return submitted by 29 February 2024.
LO 6f

ICAEW 2024 12: Value added tax – further aspects 75

5 Duffey operates the annual accounting scheme for his VAT payments. He opted to make nine
monthly payments during the year. His total VAT liability in the year ended 31 March 2023 was
£20,000 and in the year ended 31 March 2024 is £22,500.
Requirement
What is the final balancing payment of his VAT for the year ended 31 March 2024 and when is it due?
A £2,500 by 7 May 2024
B £2,500 by 31 May 2024
C £4,500 by 7 May 2024
D £4,500 by 31 May 2024
LO 6f

6 Michael is registered for VAT. He issues full invoices for goods sold for more than £250, and
simplified invoices for goods sold for less than £250.
Requirement
In relation to which of these invoices, if either, is Michael required to retain copies?
A Neither
B Detailed invoices only
C Simplified invoices only
D Both
LO 1d

7 What is the maximum permitted annual taxable turnover for a trader to join the annual accounting
scheme?
A £100,000
B £1,350,000
C £1,600,000
D £150,000
LO 6f

8 Which of the following statements about the VAT payments on account scheme for substantial
traders is true?
A Under the payments on account scheme VAT is paid in quarterly instalments.
B Under the payments on account scheme VAT is paid in instalments every other month (ie, six
payments per annum).
C Each payment on account is 1/24 of the total VAT liability of the previous year.
D The balancing amount for the year, if any, is payable two months after the year end.
LO 6f

9 Which two of the following statements about VAT are true?

A Businesses with taxable turnover greater than £2.3 million must join the VAT payments on
account scheme.
B Businesses operating the flat rate scheme apply their sector percentage to total (both taxable
and exempt) VAT-inclusive turnover.

76 Principles of Taxation ICAEW 2024

 C HMRC may grant exemption from registration to zero-rated traders that have negligible amounts
of input VAT.
D Businesses operating the annual accounting scheme must still file VAT returns every quarter.
E Businesses operating the cash accounting scheme cannot also join the annual accounting
scheme.
LO 6f

10 Which two of the following statements concerning cash accounting are true?
A VAT is accounted for on the basis of cash paid and received rather than on invoices.
B Bad debt relief is available six months from the date the debt was due to be received.
C The scheme is advantageous for businesses making only zero-rated supplies.
D The scheme is advantageous for businesses offering extended credit to customers.
E Businesses in the scheme must leave if taxable supplies in the previous 12 months exceed £1.35
million.
LO 6f

11 Major plc had a VAT liability of £3 million in its year ended 31 October 2023. The VAT liability for the
quarter to 30 April 2024 is £800,000.
Requirement
Assuming the correct payments on account have been made, how much is due by 31 May 2024?
A £800,000
B £550,000
C £300,000
D £125,000
LO 6f

12 Which of the following is a feature of the annual accounting scheme?

A VAT must be paid in quarterly or monthly instalments.
B Automatic bad debt relief is given.
C The VAT return is due two months and seven days after the end of the year.
D You cannot join the annual accounting scheme if you have previously left the scheme.
LO 6f

13 Which of the following is a feature of the flat rate scheme?

A Businesses calculate VAT due as a flat rate percentage of their VAT exclusive turnover.
B A limited cost trader may not join the flat rate scheme.
C Businesses issue normal tax invoices to customers.
D In the first year a trader must use 16.5% as the flat rate.
LO 6f

14 Giovanna makes standard-rated supplies. She voluntarily registered for VAT from her first day of
trading and simultaneously joined the flat rate scheme. The flat rate percentage she must use is 11%.
She has now been trading for two years. For her latest trading quarter Giovanna had total turnover of
£8,500 (exclusive of VAT). Giovanna’s total purchases were £2,400 (exclusive of VAT).

ICAEW 2024 12: Value added tax – further aspects 77

 Requirement
How much VAT is payable to HMRC for Giovanna’s latest trading quarter?
A £671
B £805
C £935
D £1,122
LO 6f

15 Gordon, a VAT-registered trader who is a member of the cash accounting scheme, supplies some
goods to a customer. The order is received from the customer on 5 May and the goods are
despatched on 13 May. An invoice is issued on 16 May and payment is received from the customer
on 4 June.
Requirement
What is the tax point of the supply?
A 5 May
B 13 May
C 16 May
D 4 June
LO 6d, 6f

16 Tony has been VAT-registered for many years, making only standard-rated supplies. He is a member
of the flat rate scheme for VAT. The flat rate percentage based on his trade sector is 8%.
In the quarter ended 31 March 2024 Tony made sales of £17,000 (exclusive of VAT). This figure
includes £2,500 in respect of the sale of a computer that had been used in Tony’s business.
Requirement
How much VAT is payable to HMRC for the quarter ended 31 March 2024?
A £1,160
B £1,360
C £1,392
D £1,632
LO 6f

17 Which two statements about the flat rate scheme are correct?
A A trader can join if they expect total net turnover for the next 12 months not to exceed £230,000.
B A trader using the flat rate scheme may also be authorised to use the annual accounting scheme.
C The flat rate is applied to the VAT-exclusive turnover.
D Where a customer requires an invoice, a flat rate trader who makes wholly standard-rated
supplies will issue a VAT invoice showing 20% output tax.
LO 6f

18 Which two statements about the cash accounting scheme for VAT are correct?
A A VAT return is completed once a year.
B Automatic bad debt relief is given.
C Output VAT is accounted for when cash is received from the customer.

78 Principles of Taxation ICAEW 2024

 D Output VAT is calculated by applying a flat rate percentage to the VAT-inclusive turnover.
E VAT is paid over to HMRC each month by direct debit.
LO 6f

19 How does a limited cost trader using the flat rate scheme calculate VAT due?
A 20% of VAT-inclusive turnover.
B 16.5% of VAT-inclusive turnover.
C 20% of VAT-exclusive turnover.
D 16.5% of VAT-exclusive turnover.
LO 6f

20 A trader may join the annual accounting scheme where the taxable turnover in the following year is
not expected to exceed:

£
LO 6f

21 Florence Ltd is a VAT-registered business which operates the cash accounting scheme. During the
quarter ended 31 December 2023 it made the following purchases:

Goods received Date paid Input VAT suffered

£
Artwork for reception 30 November 2023 15 December 2023 1,150
Spare machinery parts 1 December 2023 13 January 2024 242
Marketing literature 1 September 2023 1 October 2023 858

Requirement
How much input tax can Florence Ltd recover on these items in the VAT return for the quarter ended
31 December 2023?
A £1,150
B £1,392
C £2,008
D £2,250
LO 6f

ICAEW 2024 12: Value added tax – further aspects 79

80 Principles of Taxation ICAEW 2024
 Chapter 13: Administration of tax
1 Camilla began trading in January 2023. Camilla’s profit for the year ended 31 December 2023 was
£56,000. She has not informed HMRC that she has begun to trade and has never been issued with or
completed a self-assessment return.
Requirement
What is the latest date by which Camilla should have contacted HMRC to obtain a self-assessment
return?
A 5 October 2023
B 31 October 2023
C 31 January 2024
D 5 October 2024
LO 2c

2 Anne received her self-assessment return relating to the year 2023/24 on 15 December 2024.
Requirement
What is the latest date by which Anne should submit her return online?
A 31 December 2024
B 31 January 2025
C 15 March 2025
D 31 March 2025
LO 2d

3 Andrew is an employee (not a director) of Toes Ltd with an annual salary of £50,000 and bank
interest of approximately £1,500 per year.
Requirements
What type of self-assessment return is Andrew required to file each year?
A Andrew may file a short tax return.
B Andrew must file a full tax return.
Assuming Andrew were to leave his employment to set up in business with a turnover of £10,000 per
annum, what type of self-assessment return would he then be required to file each year?
C Andrew may file a short tax return.
D Andrew must file a full tax return.
LO 2c

4 Edward is an employee of Theatre Ltd with an annual salary of £66,000. In addition, Edward has run
his own business for a number of years with an average annual profit of about £25,000.
What is the end of the statutory retention period for Edward’s records relating to the tax year ended
5 April 2024?
A 31 January 2029
B 31 January 2030
Justine is an employee of Stage Ltd with an annual salary of £45,000. She also owns a number of
shares on which she receives dividend income in excess of £10,000 per year.

ICAEW 2024 13: Administration of tax 81

 What is the end of the statutory retention period for Justine’s records relating to the tax year ended 5
April 2024?
C 31 January 2026
D 31 January 2027
LO 2a

5 Beatrice received her tax return for the tax year 2022/23 in April 2023 and filed it on 31 March 2024.
She has now realised that she made a mistake in the return and wishes to amend it accordingly.
Requirement
What is the latest date by which the amendment can be made?
A 5 April 2025
B 30 April 2025
C 31 January 2025
D 31 March 2025
LO 2c

6 Eugenie is a higher rate taxpayer. She is an employee and has run her own business as a sole trader
with profits in excess of £100,000 per annum for a number of years.
Requirement
When is Eugenie’s income tax not deducted at source payable for the year 2023/24?
A 31 January 2024 and 31 July 2024
B 31 January 2024, 31 July 2024 and 31 January 2025
C 31 July 2024 and 31 January 2025
D 31 January 2025
LO 2d

7 Harry’s total income tax liability for 2022/23 was £15,000 and his Class 4 NIC liability was £2,000.
During 2022/23 £6,000 of his income tax liability was paid via tax deducted at source. Harry’s capital
gains tax liability for 2022/23 was £2,500.
Requirement
What is Harry’s first payment on account for 2023/24?

£
LO 2d

8 Sophie made the following payments of tax relating to 2023/24.

£
1st payment on account 15 February 2024 22,000
2nd payment on account 31 August 2024 15,000
Balancing payment 30 April 2025 11,000

Requirement
Which of the following statements in relation to Sophie’s payments is correct?

82 Principles of Taxation ICAEW 2024

 A All of the payments were made late and will be liable to a penalty at 5%.
B All of the payments were made late and will be liable to interest from the due date to the day
before payment plus those made more than 30 days late will be liable to a penalty at 5%.
C All of the payments were made late and will be liable to interest from the due date to the day
before payment but only the balancing payment is liable to a penalty at 5%.
D All of the payments were made late and will be liable to interest from the due date to the day
before payment plus a penalty at 5%.
LO 2e

9 Albert began trading as a sole trader on 1 July 2023.

Requirement
What is the latest date by which Albert should have contacted HMRC to obtain a self-assessment
return?
A 30 September 2023
B 5 October 2023
C 5 October 2024
D 31 January 2027
LO 2c

10 A notice to make a 2023/24 tax return was issued to Cuthbert on 30 September 2024.
Requirement
Which two of the following statements correctly identify when Cuthbert must file the return?
A The option to file a paper return is no longer available
B By 31 October 2024 if he submits a paper return
C By 31 December 2024 if he submits a paper return
D By 31 December 2024 if he submits the return online
E By 31 January 2025 if he submits the return online
LO 2d

11 Fred submitted his 2023/24 tax return on 1 September 2024. HMRC discovered on 1 October 2025
that Fred did not disclose a source of taxable income. HMRC believes that this was a genuine mistake
(ie, not careless or deliberate) by Fred and that he did not intend to avoid paying tax on the income.
Requirement
If HMRC wishes to collect the unpaid tax, it must raise an assessment by:
(Enter a year in the format 20XX)

5 April
LO 2c

12 Harriet’s income tax liability was £28,450 for 2022/23 and £29,750 for 2023/24. Tax deducted at
source was £23,400 in 2022/23 and £23,500 in 2023/24.
Requirement
What payment on account of her 2023/24 tax liability should Harriet have paid on 31 July 2024?
A £0

ICAEW 2024 13: Administration of tax 83

 B £2,475
C £2,525
D £3,125
LO 2d

13 Ivanka’s tax position for 2023/24 and the previous year is as follows.

2022/23 2023/24
£ £
Total income tax liability 15,500 17,000
Class 4 NICs 3,200 3,500
Paid under PAYE 3,800 3,900
Payments on account made 13,000

Requirement
On 31 January 2024, to avoid interest charges under self-assessment, Ivanka should have paid tax of:
(Ignore Class 2 NIC)

£
LO 2d

14 Kurt had an income tax liability of £9,500 and a capital gains tax liability of £2,300 for 2022/23. The
tax payable under self-assessment for 2021/22 was £8,000.
Kurt has made the following payments towards his 2022/23 tax liability.

Cash paid
£
15 February 2023 3,500
29 July 2023 4,500
15 March 2024 3,800
11,800

Requirement
What late payment penalties are payable by Kurt relating to his 2022/23 liability?
A £365
B £190
C £380
D £590
LO 2e

15 Martha filed her 2022/23 tax return online on 5 January 2024. On 31 March 2024 HMRC amended
the return to show additional tax due of £1,500. Martha paid the tax on 15 May 2024.
Which of the following statements are true?

84 Principles of Taxation ICAEW 2024

 Requirements
Interest will run on the additional liability of £1,500 from 1 April 2024 to 14 May 2024.
A True
B False
A late payment penalty of £75 is payable by Martha.
C True
D False
LO 2e

16 Which of the following statements about the appeals procedure are true?
Requirements
An appeal against a discovery assessment must be made in writing within a calendar month of the
date of the assessment.
A True
B False
The taxpayer must first apply for an internal review before making an appeal to the First-tier Tribunal.
C True
D False
A taxpayer can appeal against and apply to postpone the tax due under an assessment raised as a
result of an enquiry into a tax return.
E True
F False
LO 2f

17 Andrea’s only source of income is from employment and she does not normally complete a tax
return. On 1 May 2023 she sold a painting generating a chargeable gain of £100,000.
Requirement
By what date is she required to notify HMRC of the chargeable gain?
A 1 May 2024
B 5 October 2024
C 31 October 2024
D 31 January 2025
LO 2c

18 Ethel submitted her 2023/24 tax return on 1 December 2024. She deliberately omitted to include
rental income from an overseas property to save tax, as she did not think that HMRC would find out
about the income.
Requirement
Until what date can HMRC raise a discovery assessment to collect tax on the undisclosed income?
A 5 April 2028
B 5 April 2030
C 5 April 2044
D 5 April 2045
LO 2c

ICAEW 2024 13: Administration of tax 85

19 Felicity owes unpaid income tax to HMRC. HMRC is seeking to recover the debt directly from
Felicity’s bank account.
Requirement
Which two of the following statements are correct?
A HMRC can recover the debt in this way only if exceeds £5,000.
B Before the debt is recovered, there will be period when Felicity can object to the recovery.
C Felicity must be left with at least £1,000 in her accounts after the debt recovery.
D HMRC must be satisfied that Felicity is aware that the sum is due.
LO 2c

20 Greg’s tax position for 2023/24 and the previous year is as follows:

2022/23 2023/24
£ £
Total income tax liability 23,200 24,300
Paid under PAYE 19,000 19,200
Capital gains tax 3,200 1,200

Requirement
How much tax should Greg have paid on account on 31 July 2024?
A £0
B £2,550
C £2,100
D £3,700
LO 2d

21 Harold’s tax position for 2023/24 and the previous year is as follows.

2022/23 2023/24
£ £
Total income tax liability 12,100 13,250
Class 4 NIC 3,400 3,550
Tax deducted at source 300 500

As at 30 July 2024 Harold has paid £5,500 on account of his 2023/24 tax liability.
Requirement
Harold is due to make a payment on 31 July 2024. To minimise any interest charges you would
advise that he makes a payment on that date of:

£
LO 2d

86 Principles of Taxation ICAEW 2024

22 Ingrid had tax payable under self-assessment for 2021/22 of £8,500. She submitted her income tax
return for 2022/23 online on 15 February 2024. The return showed an income tax liability of £10,100
and a capital gains tax liability of £1,200. On the same date she paid the outstanding tax of £2,800.
Ingrid had made two equal payments on account totalling £8,500 on 15 January 2023 and 31 August
2023 in respect of 2022/23.
Requirement
What is the amount of any penalties payable by Ingrid in respect of 2022/23?
A £0
B £100
C £240
D £2,900
LO 2e

23 A notice to submit a 2023/24 tax return was issued to Laura on 30 November 2024. When must Laura
file the return by if:
Requirements
She intends to submit a paper return?
A 31 October 2024
B 31 January 2025
C 28 February 2025
She intends to submit the return online?
D 31 October 2024
E 31 January 2025
F 28 February 2025
LO 2d

24 Asha received trading income of £60,000 in 2023/24. She also received property income of £700 per
month from an investment property she has owned for many years. On 10 September 2024 Asha
submitted her self-assessment tax return for 2023/24.
Requirements
By when must Asha pay the balancing payment of tax due for 2023/24?
A 31 January 2025
B 10 June 2025
C 10 September 2025
D 31 January 2026
By when must HMRC correct any obvious errors in Asha’s 2023/24 return?
E 31 January 2025
F 10 June 2025
G 10 September 2025
H 31 January 2026
LO 2c, 2d

25 Roof Ltd has yet to pay its PAYE due for the last month of 2022/23. It has also failed to submit its
P11D forms relating to 2022/23.

ICAEW 2024 13: Administration of tax 87

 Requirements
What is the due date for payment of the PAYE relating to the final month of 2022/23?
A 17 April 2023
B 22 April 2023
What is the due date for the submission of P11D forms relating to 2022/23?
C 31 May 2023
D 6 July 2023
LO 2d

26 Which of the following correctly identifies a P45 form?

A End of year form recording details of benefits provided to employees
B Form issued when an employee leaves employment
Which of the following correctly identifies a P60 form?
C End of year summary of tax and NICs for all employees for submission to HMRC
D End of year summary of tax and NICs per employee to be issued to each employee
LO 2b

27 What is the maximum penalty for filing an incorrect P11D form, where the error was not deliberate?
A 30% potential lost revenue
B 70% potential lost revenue
What is the maximum initial penalty for the late filing of a P11D form?
C £300 per return
D £3,000 per return
LO 2e

28 By which date must an employer provide a completed Form P60 to an employee?

A 6 July
B 31 May
C 19 May
D 30 April
LO 2d

29 Soap Ltd employs 30 people in the manufacture of bathroom products. Remuneration packages
offered to employees include company cars and private medical insurance in addition to a basic
salary and bonuses.
By what date must Soap Ltd submit each of the following PAYE returns for 2023/24 to its employees
or HMRC?
Requirements
Form P11D:
A 6 July 2024
B 19 July 2024
Form P60:
C 19 May 2024

88 Principles of Taxation ICAEW 2024

 D 31 May 2024
LO 2d

30 Abacus plc filed its corporation tax return for the year ended 31 December 2022 on time. It has now
realised that an error was made and it wishes to rectify this via a claim for ‘overpayment relief’ as it
will otherwise result in an overpayment of tax.
Requirement
What is the latest date by which the claim must be made?
A 31 December 2023
B 31 December 2024
C 31 December 2026
D 31 December 2028
LO 2c

31 Azure plc filed its corporation tax return for the year ended 31 December 2022 on 29 February 2024.
HMRC wishes to conduct an enquiry into the corporation tax return.
Requirement
What is the latest date by which HMRC may give notice of its intention to enquire?
A 31 December 2024
B 28 February 2025
C 31 March 2025
D 30 April 2025
LO 2f

32 Ebony plc submitted its corporation tax return for its year ended 31 August 2022 on 1 July 2024.
Ebony plc paid the corporation tax liability relating to this return on 1 April 2024. Ebony plc has
submitted previous corporation tax returns on time.
Requirements
What is the fixed penalty for failing to file its corporation tax return on time?
A £100
B £200
What is the tax-geared penalty for failing to file its corporation tax return on time?
C 10% of tax unpaid at 29 February 2024
D 20% of tax unpaid at 29 February 2024
LO 2e

33 Blunt Ltd manufactures stationery and has prepared its corporation tax return for the year ended 31
March 2024.
Jim is a sole trader. He has been a retailer of stationery for many years and has just finished
preparing his accounts to 31 December 2023.
What is the latest date for which Blunt Ltd and Jim must keep their business records for tax
purposes?
Requirements
Blunt Ltd:

ICAEW 2024 13: Administration of tax 89

 A 31 March 2025
B 31 March 2029
C 31 March 2030
Jim:
D 31 January 2025
E 31 January 2030
F 31 January 2031
LO 2a

34 Edmund is a trader whose taxable supplies exceeded the VAT-registration threshold 10 months ago.
His friend explains to him that he should have registered for VAT. Edmund registers and pays the
outstanding tax immediately.
Requirement
What is the minimum penalty HMRC could impose for Edmund’s late registration?
A 30% of potential lost revenue
B 20% of potential lost revenue
C 10% of potential lost revenue
D £0
LO 2e

35 Which two of the following statements are correct?

A Amy’s VAT return for the quarter to 29 February 2024 should have been submitted by 30 March
2024.
B Bob & Ciarra’s partnership income tax return for 2023/24 received on 3 November 2024 should
be submitted online by 31 January 2025.
C Daniel’s full income tax return for 2023/24 received on 4 July 2024 should be submitted to
HMRC by 31 October 2024, if he submits a paper return.
D Eagle Ltd’s corporation tax return for the year ended 31 December 2023 should be submitted by
1 October 2024.
E Frank Ltd’s P11Ds for 2023/24 should be submitted to HMRC by 6 July 2024.
LO 2d

36 Talia submitted her VAT return for the quarter to 31 March 2025 online 25 days late and paid the VAT
due of £10,000 on that day. All previous returns and payments had been made on time. She had not
proposed any Time to Pay arrangement.
Requirements
Talia’s late payment penalty is:
A £0
B £200
C £400
Talia’s late filing penalty in respect of the quarter ended 31 March 2025 will be:
D £0
E £200
LO 2e

90 Principles of Taxation ICAEW 2024

37 Young Ltd had a VAT liability for the quarter ended 30 April 2025 of £450,000. It paid this amount 45
days late. It had not proposed a Time to Pay arrangement with HMRC.
Requirement
What late payment penalty will apply to Young Ltd in respect of its late paid VAT?
A £9,000
B £18,000
C £740
D £18,740
LO 2e

38 Due to cash flow problems, Old Ltd was unable to pay its VAT liability for the quarter ended 31 March
2025 of £250,000 on the due date. It paid £50,000 of the liability 20 days after the due date and at
that time applied to HMRC for a Time to Pay arrangement in respect of the balance. This was
subsequently agreed and the final payment was made 70 days late.
Requirement
Which TWO of the following will apply to the late payment of VAT by Old Ltd?
A A late payment penalty of 2% of £250,000
B A late payment penalty of 4% of £200,000
C A late payment penalty of 2% of £50,000
D Late payment interest on £50,000 for 20 days only
E Late payment interest on £50,000 for 20 days and on £200,000 for 70 days
LO 2e

39 John, a sole trader, completed a VAT return for the quarter to 31 December 2023 showing output tax
of £120,000 and input tax of £70,000.
In June 2024 John’s accountant discovered that the input tax on the VAT return had been overstated
by £45,000. This was the first error that John had made on his VAT returns. HMRC was notified and
the outstanding tax paid.
Requirements
Which of the following correctly describes the error?
A Careless
B Deliberate but not concealed
C Deliberate and concealed
What is the minimum penalty HMRC could charge John for the error?
D 30% of potential lost revenue
E 15% of potential lost revenue
F 0% of potential lost revenue
LO 2e

40 Glitch plc’s VAT returns have always been accurate, but the return to 31 December 2023 contains an
error. Turnover is correctly stated at £5.6 million, but input tax is overstated by £52,700.
Requirement
Which of the following statements is correct?
A A correction can be made in the next VAT return because the error is less than 1% of turnover.

ICAEW 2024 13: Administration of tax 91

 B A correction cannot be made in the next VAT return because the error exceeds £2,000.
C A correction cannot be made in the next VAT return because the error exceeds £10,000.
D A correction cannot be made in the next VAT return because the error exceeds £50,000.
LO 6e

41 Ethel submitted her 2023/24 tax return on 1 December 2024. She did not include rental income of
£15,000 as she did not think that HMRC would find out about the income. Ethel is a higher rate
taxpayer.
HMRC conducts an enquiry into Ethel’s return and in reply Ethel makes a disclosure of the rental
income.
Requirement
What is the minimum penalty that could be charged by HMRC on Ethel for her error?
A £6,000
B £4,200
C £2,100
D £1,200
LO 2e

42 Shed Ltd has failed to pay its PAYE due of £4,600 for the month ended 5 February 2024 on time.
Payment was made on 17 March 2024. It had also failed to pay PAYE on time on two other occasions
during 2023/24.
Requirement
What is the amount of any penalty payable by Shed Ltd for late payment of PAYE for the month
ended 5 February 2024?
A £92
B £0
C £138
D £46
LO 2e

43 A taxpayer may be able to appeal against an information notice.

A True
B False
A taxpayer may be able to appeal against an inspection notice.
C True
D False
LO 2e

44 Krone Ltd has augmented profits of £45 million in the year ended 31 December 2023.
Requirements
By which date must the corporation tax return in respect of the year ended 31 December 2023 be
filed?
A 31 December 2024
B 31 January 2025

92 Principles of Taxation ICAEW 2024

 C 31 December 2025
By which date must the final payment of corporation tax be made in respect of the year ended 31
December 2023?
D 14 December 2023
E 14 April 2024
F 1 October 2024
LO 2d

45 Barbara has been trading as a self-employed beautician for many years. She prepares accounts to 31
December each year.
She submitted her tax return for 2023/24 on 1 November 2024.
Requirement
Until what date must she retain her business records for the year to 31 December 2023?
A 31 December 2028
B 31 December 2029
C 31 January 2029
D 31 January 2030
LO 2a

46 Emily is an employee of Door Ltd with a gross annual salary of £26,000. In addition Emily has taxable
benefits worth £5,278. Emily underpaid her tax for 2021/22 by £246. Emily has agreed with HMRC
that this underpayment will be collected via her PAYE code for 2023/24.
Door Ltd does not use voluntary payrolling of benefits.
Requirement
What is Emily’s PAYE code for 2023/24?
A 606L
B 704L
C 667L
D 1661L
LO 2b

47 Elaine submitted her 2023/24 tax return online on 1 December 2024. The return was issued on 6 May
2024.
Requirement
Which two of the following statements are correct?
A Elaine can amend her tax return on 15 December 2025.
B HMRC can correct an arithmetic error in her return on 29 September 2025.
C Elaine can make a claim for overpayment relief because there is an error in her return on 31
December 2027.
D HMRC can give notice of an enquiry into her return on 20 December 2025.
LO 2c

48 John’s income tax and capital gains tax liabilities for 2022/23 were £18,200 and £4,200 respectively.
He paid £5,000 PAYE and payments on account for 2022/23 of £6,000.
His income tax liability for 2023/24 is £19,500 and his capital gains tax liability is £6,500.

ICAEW 2024 13: Administration of tax 93

 Requirement
What payment on account of his 2023/24 tax liability should John have paid on 31 July 2024?
A £9,750
B £7,250
C £6,600
D £3,000
LO 2d

49 Indigo plc filed its corporation tax return for the year ended 31 December 2022 on 30 November
2023. HMRC wishes to correct some obvious errors in the return.
Requirement
What is the latest date by which HMRC may make such corrections?
A 31 August 2024
B 30 September 2024
C 30 November 2024
D 31 December 2024
LO 2c

50 Pilot Ltd prepares accounts to 30 April each year.

Year end Corporation tax due Date return filed Date tax paid

30 April 2022 £35,000 12 October 2023 15 December 2023

Pilot Ltd also submitted its two previous corporation tax returns late.
Requirement
What is Pilot Ltd’s liability to penalties for the late filing of its corporation tax return for the year
ended 30 April 2022?
A £200 fixed penalty and no tax-geared penalty
B £200 fixed penalty and 10% tax-geared penalty
C £1,000 fixed penalty and no tax-geared penalty
D £1,000 fixed penalty and 10% tax-geared penalty
LO 2e

51 Rand submitted his VAT return for the quarter to 30 June 2025 online, 10 days late and paid the VAT
due of £5,000 on that day. The only other time that he has ever submitted a VAT return late was in his
quarter to 31 March 2025.
Requirements
Indicate whether the following statements are true or false in relation to Rand’s exposure to VAT
penalties
Rand will incur a late payment penalty of 2% unless he had applied for a Time To Pay arrangement
A True
B False
Rand will incur a VAT late filing penalty if he submits two more late returns
C True
D False
LO 2e

94 Principles of Taxation ICAEW 2024

52 Karli set up her business on 1 January 2022. Due to the amount of work she undertook she should
have been VAT registered from 30 June 2023 but she did not notify HMRC until 16 November 2024.
The unpaid VAT between 30 June 2023 and 16 November 2024 was £10,800. HMRC does not
consider being too busy a reasonable excuse for failure to register on time.
Requirement
The minimum penalty payable by Karli (assuming HMRC deems the failure to notify not to be
deliberate) for late registration is
A £0
B £1,080
C £2,160
D £3,240
LO 2e

53 Which of the following would definitely not constitute a reasonable excuse for late filing of a return?
A Serious illness leading up to the filing date
B Postal disruption
C Failure of a taxpayer’s IT systems close to the filing date
D Insufficient funds to pay the tax due
LO 2e

54 An employer can use voluntary payrolling to report beneficial loans.

A True
B False
An employer can use voluntary payrolling to report company car benefits.
C True
D False
An employer can use voluntary payrolling to report employer provided living accommodation
benefits.
E True
F False
LO 2b

55 Companies may keep information to show that they have prepared a complete and correct tax return
electronically.
Requirement
A True
B False
LO 2a

56

56.1 Basket Ltd started trading in February 2023, but failed to notify its liability to corporation tax as
there was a misunderstanding between the company and its accountants.
Requirement
Would this constitute a reasonable excuse?

ICAEW 2024 13: Administration of tax 95

 A Yes
B No
56.2 Basket Ltd received a letter from HMRC reminding it of the need to register. Basket Ltd then
notified HMRC of its liability to register for corporation tax. Notification was made six months
late.
Requirement
What is the minimum penalty that Basket Ltd will be liable for?

%
LO 2c

57 Pen Ltd started trading on 1 July 2023; it had no sources of income prior to this date.
Requirement
What is the latest date that Pen Ltd should notify HMRC that it has come within the charge to
corporation tax?

LO 2c

58 Paper Ltd prepares accounts to 30 September.

Requirement
By what date should the corporation tax return for the year ended 30 September 2023 be
submitted?

LO 2d

59 Novel Ltd has prepared its corporation tax return for the year ended 31 May 2023. It shows taxable
total profits of £800,000. Novel Ltd also received dividends from unconnected companies of
£200,000.
Requirement
By what date should its corporation tax be paid?

LO 2d

60 Manchester Ltd has prepared its VAT return for the quarter ended 31 August 2023. It is not required
to make payments on account.
Requirement
What date is the VAT return due to HMRC?

LO 2d

61 Liverpool Ltd had an annual VAT liability of £3 million for the year ended 31 December 2023.

96 Principles of Taxation ICAEW 2024

 Requirement
State the amount of VAT due and the due date for the first payment in relation to the quarter ended
31 March 2024.

Due date:

Payment: £
LO 2d

62 Reading Ltd uses the annual accounting scheme and has done so for many years, making monthly
payments. For the year ended 31 March 2023, its return showed a VAT liability of £100,000, and for
the year ended 31 March 2024 it was £120,000.
Requirements
What is the due date for the VAT return for the year ended 31 March 2024?

LO2d
State the due date for the first payment in relation to the year ended 31 March 2024.

LO 2d

63 Thorn Ltd, a newly incorporated company, started trading on 1 September 2023. It prepared its first
set of accounts for the 12 months to 31 August 2024. Its corporation tax liability for this period is
£120,000.
Requirement

Thorn Ltd must notify its chargeability to corporation tax by

Thorn Ltd was 10 months late in notifying HMRC of the company’s chargeability to tax as it was
unaware of its obligation.
Requirement

The maximum penalty for this failure to notify chargeability is £

LO 2e

64 Jamal started trading on 1 August 2022, making standard-rated supplies. Due to the value of his
supplies, he should have notified HMRC of his requirement to be registered by 31 December 2022.
However, he omitted a number of sales from his records as he did not want to be VAT-registered.
HMRC have been tipped off and have written to Jamal about this.
Requirement
What is the minimum penalty to which Jamal will be liable for late notification of liability for
registration?

% of potential lost revenue

LO 2e

65 Stem Trading Ltd makes up accounts to 31 August each year. It is not required to pay corporation tax
by instalments.

ICAEW 2024 13: Administration of tax 97

 For the year to 31 August 2022, it had a corporation tax liability of £200,000. Stem Trading Ltd
submitted its tax return and paid its corporation tax for this period on 1 January 2024. This is the
fourth consecutive late return.
Requirement
What is the maximum penalty payable by Stem Trading Ltd for the late filing of its corporation tax
return?
A £1,000
B £200
C £20,000
D £20,200
LO 2e

66 Garage Ltd prepares accounts to 31 January each year, and does not pay corporation tax by
instalments. For the year to 31 January 2022, it had a corporation tax liability of £200,000.
Garage Ltd submitted its tax return and paid its corporation tax for this period on 1 January 2023.
Requirement
What is the interest payable by Garage Ltd? Assume an interest rate of 6.75% on late paid
corporation tax.

LO 2e

67 Red Ltd is a small company with 12 employees. It submitted its Full Payment Submission for the
month of April 2023 two months late.
Requirement
What is the penalty payable in relation to this late submission?

LO 2e

68 G Ltd files its corporation tax return for the year ended 31 March 2022 on 31 March 2023. The return
shows taxable total profits of £560,000. On reviewing the return, you discover a transposition error,
and the taxable total profits should have been shown as £650,000. G Ltd has no associated
companies.
Requirement
What is the maximum penalty that HMRC could charge G Ltd for this error?

£
LO 2e

98 Principles of Taxation ICAEW 2024

 Chapter 14: Scenario-based questions:
income tax
1 Mildred
During 2023/24, Mildred received interest income of £100 on a loan she had made to her friend,
Dot.
Mildred has been employed part-time by ABC Ltd since 2008. She received the following
remuneration package in 2023/24:
• salary £15,000 per year;
• free meals offered to all staff in the work canteen, which cost the company £560 for Mildred;
• pension advice (available to all employees) at a cost to ABC Ltd of £300; and
• use of a RDE2 compliant diesel company car since 1 July 2023 with CO2 emissions of 115 g/km.
ABC Ltd paid £16,000 for the car although it has a list price of £18,000. Mildred pays for all her
private fuel.
Mildred received £18,900 of dividends in January 2024 from a UK company.
Mildred has also run her own business as a sole trader for many years. Mildred has calculated her
taxable trading profits for 2023/24 to be £30,700.
In arriving at her taxable trading profits, Mildred deducted the following amounts:
• £2,000 for legal and professional fees relating to the acquisition of a new five-year lease of
business premises;
• £170 accountancy fees for preparation of annual accounts;
• Mildred’s class 2 national insurance liability of £179; and
• £150 of irrecoverable VAT relating to the purchase of stock for which Mildred has lost the VAT
invoice.
Requirement
Using the standard format below, compute Mildred’s taxable income for 2023/24.
You should enter a number in each relevant box. If an amount is not taxable enter a zero or a dash
into the relevant box.
Mildred’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Interest from loan to Dot

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

ICAEW 2024 14: Scenario-based questions: income tax 99

 £

Trading profits

Legal and professional fees

Accountancy fees

Class 2 NIC

VAT re stock purchase

Tax-adjusted trading profits

2 Employment income

Salary

Free meals

Pension advice

Car

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

2 Elan
Elan received £100 interest income from a building society ISA during 2023/24.
Elan has been employed part-time by DEF Ltd for many years. He received the following
remuneration package in 2023/24:
• salary £21,000 per year;
• a bonus of £1,250 in respect of the year ended 31 March 2023, paid on 31 May 2023;
• mobile phone, costing DEF Ltd £240 per annum; and
• use of a petrol company car which has CO2 emissions of 102 g/km, and a list price of £20,000.
The company also paid for all of Elan’s private fuel.
Elan received £112,000 of dividends in January 2024 from a UK company.
Elan has also run his own business as a sole trader for many years. Elan has calculated his taxable
trading profits for 2023/24 to be £44,100. In arriving at his taxable trading profits, Elan deducted the
following amounts:
• £1,200 written off as a bad debt because a customer has gone into liquidation;
• £50 parking fines incurred by an employee while visiting a customer;
• £600 in respect of entertaining clients at a summer party; and
• £50 paid to a local charity for which Elan received an advertisement for his business in the
charity’s newsletter.
Requirement
Using the standard format below, compute Elan’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.

100 Principles of Taxation ICAEW 2024

Elan’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

ISA interest

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Bad debt written off

Parking fine

Entertaining clients

Donation to charity

Tax-adjusted trading profits

2 Employment income

Salary

Bonus

Mobile phone

Car

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

ICAEW 2024 14: Scenario-based questions: income tax 101

3 Becky
Becky received £175 of bank interest income during 2023/24.
Becky has been employed part-time by GHI Ltd for several years. She received the following
remuneration package in 2023/24:
• salary £16,000 per year;
• pension advice, costing £125 in respect of Becky, and offered to all employees;
• use of a bicycle which cost GHI Ltd £280 for business and private journeys, as provided to all
employees; and
• provision of a house owned by GHI Ltd, with an annual value of £12,000. The house cost the
company £200,000 in 2016. The official rate of interest on 6 April 2023 was 2.25%.
Becky received £7,500 of dividends in December 2023 from an overseas company.
Becky has also run her own business as a sole trader for many years. Becky has calculated her draft
taxable trading profits for 2023/24 to be £19,000. In arriving at her draft taxable trading profits, no
account has been taken of the following amounts as Becky was unsure of the correct treatment:
• £20 parking fine incurred by Becky when visiting a client;
• £80 Gift Aid donation to a national charity;
• overdraft interest of £160 on Becky’s business bank account; and
• professional fees of £300 incurred in collecting debts from customers who were slow in paying.
Requirement
Using the standard format below, compute Becky’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.
Becky’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Bank interest

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Draft adjusted profits

Fine

Donation

Overdraft interest

Professional fees

102 Principles of Taxation ICAEW 2024

 £

Tax-adjusted trading profits

2 Employment income

Salary

Pension advice

Bicycle

Accommodation

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

4 Mandy
During 2023/24, Mandy received interest of £120 from a National Savings and Investments Direct
Saver account.
Mandy has been employed part-time by JKL Ltd since 2009. She received the following
remuneration package in 2023/24:
• salary £25,000 per year;
• gift of a painting from a client worth £60;
• eye test, costing £20, offered to all employees who use display screen equipment; and
• from 1 October 2023, use of a van for 20% work, 80% private use, with CO2 emissions of 150
g/km. The van had a list price of £9,000 and JKL Ltd paid for all Mandy’s private fuel.
Mandy received £9,000 of dividends in March 2024 from an ISA.
Mandy has also run her own business as a sole trader for many years. Mandy has calculated her
taxable trading profits for 2023/24 to be £34,000. In arriving at her taxable trading profits, Mandy
deducted the following amounts:
• £300 for the cost of gifts of a bottle of wine (£20 per bottle) to 15 clients;
• £375 for redecorating the office;
• a donation to a UK political party of £250; and
• legal fees of £800 for the review of employment contracts.
Requirement
Using the standard format below, compute Mandy’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.
Mandy’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Direct Saver interest

Dividends

ICAEW 2024 14: Scenario-based questions: income tax 103

 Non-savings Savings Dividend
income income income
£ £ £

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Gifts

Redecorating

Donation

Legal fees

Tax-adjusted trading profits

2 Employment income

Salary

Gift from client

Eye test

Van

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

5 Jorge
Jorge received £500 of premium bond winnings during 2023/24.
Jorge has been employed part-time by MNO Ltd since 2013. He received the following
remuneration package in 2023/24:
• salary £55,000 per year;
• private medical insurance, costing MNO Ltd £500;
• a parking space at the office of MNO Ltd, which saved Jorge £500 pa; and
• Use of recording equipment owned by MNO Ltd, which was worth £8,720 when it as first
provided to Jorge. Jorge pays MNO Ltd £50 per month for use of the equipment.
Jorge received £950 of dividends in June 2023 from a UK company.
Jorge has also run his own business as a sole trader for many years. Jorge has calculated his draft
taxable trading profits for 2023/24 to be £112,000. In arriving at his draft taxable trading profits, no
account has been taken of the following costs as Jorge was unsure of the correct treatment:
• £800 for a staff party for two employees;
• £2,000 for stock donated to a local school;

104 Principles of Taxation ICAEW 2024

• £5,000 on salary for himself; and
• £1,500 written off on a loan to a former employee.
Requirement
Using the standard format below, compute Jorge’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.
Jorge’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Premium bond winnings

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Staff party

Stock donation

Salary

Loan write off

Tax-adjusted trading profits

2 Employment income

Salary

Private medical insurance

Parking space

Recording equipment

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

ICAEW 2024 14: Scenario-based questions: income tax 105

6 Leanne
During 2023/24, Leanne received interest income of £60 on a National Savings and Investments
investment account.
Leanne has been employed part-time by STU Ltd for many years. She received the following
remuneration package in 2023/24:
• salary £18,500 per year;
• pension contribution by the company of £925;
• from 1 October 2023, use of a RDE2 compliant diesel car with CO2 emissions of 72 g/km. STU Ltd
paid £20,000 for the car although it has a list price of £23,000. Leanne pays for all her private fuel;
and
• a medical check-up with a private doctor which cost the company £500 and would have cost
Leanne £600 is she had paid for it herself.
Leanne received £500 of dividends in March 2024 from a UK company.
Leanne has also run her own business as a sole trader for many years. Leanne has calculated her draft
taxable trading profits for 2023/24 to be £19,500. In arriving at her draft taxable trading profits, no
account has been taken of the following amounts as Leanne was unsure of the correct treatment:
• £6,000 for building work to extend the office in which Leanne works;
• £230 interest payable on loan to extend office;
• accountancy fees of £500 for payroll services; and
• £100 of irrecoverable VAT relating to the cost of advertising in the local newspaper for which
Leanne has lost the VAT invoice.
Requirement
Using the standard format below, compute Leanne’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.
Leanne’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Investment account

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Building work

Interest

106 Principles of Taxation ICAEW 2024

 £

Accountancy fees

VAT re advertising

Tax-adjusted trading profits

2 Employment income

Salary

Pension contribution

Car

Medical

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

7 Simon
During 2023/24, Simon received £15 of income tax repayment interest, which related to overpaid
income tax from 2021/22.
Simon has been employed part-time by VWX Ltd for many years. He received the following
remuneration package in 2023/24:
• salary £10,000 per year;
• bonus of £200 in respect of the year ended 31 March 2023, paid on 31 July 2023.
• vouchers for a supermarket which can be used to buy £1,000 of goods, and which cost VWX Ltd
£950; and
• private use of a camera from 1 July 2023, when the company acquired it for £1,500. Simon paid
£90 during 2023/24 towards the use of the camera.
Simon received £1,000 of dividends in May 2023 from an overseas company.
Simon has also run his own business as a sole trader for many years. Simon has calculated his taxable
trading profits for 2023/24 to be £29,600. In arriving at his taxable trading profits, Simon deducted
the following amounts:
• costs of redecorating his office of £500;
• £2,000 fine for breach of Health and Safety regulations;
• £1,500 being a contribution to his personal pension scheme; and
• £200 fee to arrange an overdraft on his personal bank account to pay for materials.
Requirement
Using the standard format below, compute Simon’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.

ICAEW 2024 14: Scenario-based questions: income tax 107

Simon’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Repayment interest

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Decorating

Fine

Pension contribution

Overdraft fee

Tax-adjusted trading profits

2 Employment income

Salary

Bonus

Vouchers

Camera

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

108 Principles of Taxation ICAEW 2024

8 Finlay
Finlay received £300 of interest on Treasury stock during 2023/24.
Finlay has been employed part-time by YZZ Ltd since 2010. He received the following remuneration
package in 2023/24:
• salary £15,000 per year;
• meal vouchers of £4 per day for 240 days;
• from 1 January 2024, provision of living accommodation, a flat, which was rented by the company
for £12,000 pa. The annual value of the flat was £13,000 and market value was £200,000. Finlay
paid £300 to the company for use of the flat in 2023/24; and
• attendance at the annual summer party for staff, which cost YZZ Ltd £120 per employee.
Finlay received £810 of dividends in March 2024 from an ISA.
Finlay has also run his own business as a sole trader for many years. Finlay has calculated his draft
taxable trading profits for 2023/24 to be £50,000. In arriving at his draft taxable trading profits, no
account has been taken of the following amounts as Finlay was unsure of the correct treatment:
• £2,100 for a contribution into an occupational pension scheme for Finlay’s employee;
• £1,700 on registering a patent to use in Finlay’s business;
• £1,000 on customer gifts of diaries, costing £10 each and bearing the name of Finlay’s business;
and
• £190 subscription to the local Chamber of Commerce.
Requirement
Using the standard format below, compute Finlay’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.
Finlay’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Treasury stock interest

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Pension contribution

Patent

Diaries

ICAEW 2024 14: Scenario-based questions: income tax 109

 £

Subscription

Tax-adjusted trading profits

2 Employment income

Salary

Meal vouchers

Accommodation

Summer party

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

9 Victoria
Victoria received lottery winnings of £17,000 during 2023/24.
Victoria has been employed part-time by ABC Ltd since 2012. She received the following
remuneration package in 2023/24:
• salary £122,770 per year;
• attendance at a football match with a client, with ticket costing £60 paid by the client;
• use of childcare facilities at her place of work, costing ABC Ltd £5,000 in respect of Victoria’s
daughter; and
• use of a company car with CO2 emissions of 95 g/km. The car‘s list price was £31,000, and ABC
Ltd paid a further £500 on 6 April 2023 for accessories for the car. Victoria pays £1,000 towards
the use of the car. Victoria pays for all her private petrol.
Victoria received £5,000 of dividends in January 2024 from a UK company.
Victoria has also run her own business as a sole trader for many years. Victoria has calculated her
taxable trading profits for 2023/24 to be £19,000. In arriving at her taxable trading profits, Victoria
deducted the following amounts:
• £1,000 Gift Aid donation to a national charity;
• £800 repairs to the roof of her office building;
• £1,500 legal fees in relation to a new lease over a storage unit; and
• £900 for the purchase of goods which Victoria then took from the business for her own use,
without recording the withdrawal. The goods could have been sold for £1,200.
Requirement
Using the standard format below, compute Victoria’s taxable income for 2023/24. You should enter a
number in each relevant box. If an amount is not taxable enter a zero or a dash into the relevant box.
Victoria’s total taxable income for 2023/243

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

110 Principles of Taxation ICAEW 2024

 Non-savings Savings Dividend
income income income
£ £ £

Lottery winnings

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Donation

Repairs

Legal fees

Goods

Tax adjusted trading profits

2 Employment income

Salary

Football match

Childcare

Car

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

10 Sandra
Sandra received bank interest income of £100 during 2023/24.
Sandra has been employed part-time by PQR Ltd, which operates a cookery school, since 2010.
She received the following remuneration package in 2023/24:
• Salary £20,000 per year;
• Attendance at a health and safety annual course for people working with catering equipment,
costing the company £80;
• Assets for private use being a television with a market value of £825 when first provided in 2017,
and a mobile phone with contract costs for 2023/24 of £150; and
• Free cookery classes for her son. A member of the public would have paid £500 to attend the
classes.
– PQR Ltd spent an extra £100 on ingredients for Sandra’s son to attend.

ICAEW 2024 14: Scenario-based questions: income tax 111

Sandra received £540 of dividends in February 2024 from a UK company.
Sandra has also run her own business as a sole trader for many years. Sandra has calculated her
taxable trading profits for 2023/24 to be £28,400.
In arriving at her taxable trading profits, Sandra deducted the following amounts:
• £1,600, which was the cost of leasing, for business use only, a new car with CO2 emissions of 150
g/km from 1 May 2023 until the end of 2023/24;
• Employer’s national insurance contributions of £567, paid in respect of Sandra’s employee;
• Legal fees of £1,000 in respect of the renewal of a five-year lease over an industrial unit Sandra
uses for her business; and
• £150 for depreciation of office equipment used for Sandra’s business.
Requirement
Using the standard format below, compute Sandra’s taxable income for 2023/24.
You should enter a number in each relevant box. If an amount is not taxable enter a zero or a dash
into the relevant box.
Sandra’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £

Trading income (W1)

Employment income (W2)

Bank interest

Dividends

Net income

Personal allowance

Taxable income

WORKINGS
1 Trading income

Trading profits

Car lease

Employer’s NIC

Legal fees

Depreciation

Tax-adjusted trading profits

2 Employment income

Salary

Health and safety course

Assets for private use

112 Principles of Taxation ICAEW 2024

 £

Cookery classes

Total employment income

LOs 3a, 3c, 3e, 3h

Total: 10 marks

ICAEW 2024 14: Scenario-based questions: income tax 113

114 Principles of Taxation ICAEW 2024
 Chapter 15: Scenario-based questions:
corporation tax
1 Kennedy Ltd
1.1 Kennedy Ltd, an unquoted trading company, prepares accounts to 31 December and has no
associated companies.
The draft accounting profits for the year ended 31 December 2023 are £1,595,000.
The following items have been added or deducted in arriving at the draft accounting profit:

Note £
Depreciation 202,400
Loan interest payable 1 1,000
Qualifying donation 2 6,000
Exempt dividends received 3 18,000
Bank interest receivable 3,000

Notes
1 Interest payable on a loan to buy an investment property.
2 The qualifying donation of £6,000 in the accounts comprises £3,800 paid during the
accounting period and an accrual of £2,200 that the company had agreed to pay but was
not paid until 10 January 2024.
3 Exempt dividends received from unrelated UK companies.
In addition, the following items have not yet been included in the accounts:
• Car leasing charges of £4,200 were incurred for a car used by the managing director
– The car has emissions of 165 g/km and is used 20% for private purposes.
• Gifts of trade samples worth £60 each to 100 customers
• Gifts of sparkling wine to customers at Christmas. The wine was worth £25 per bottle and
150 customers were sent a bottle.
Requirement
Using the standard format below, compute Kennedy Ltd’s taxable total profits for the year
ended 31 December 2023.
You should enter a number in each relevant box. If an amount is not taxable or no adjustment
is required you must enter a zero or a dash into the relevant box.
(8 marks)
Kennedy Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Qualifying donation Taxable total profits1,772,030

Taxable total profits

WORKING
Trading income

ICAEW 2024 15: Scenario-based questions: corporation tax 115

 £

Draft accounting profits

Depreciation

Loan interest payable

Qualifying donation

Exempt dividends received

Bank interest receivable

Car leasing charges

Trade samples

Gifts to customers

Trading income

1.2 In the year ended 31 December 2024 Kennedy Ltd expects taxable total profits of £1,490,000
and is expected to receive exempt dividends of £20,000 from unrelated UK companies and
£5,000 of exempt dividends from an unrelated French company.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 31 December 2024. Input the date in the format
DD/MM/YYYY (eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

First payment of corporation tax due date for Y/E 31/12/2024 is

LOs 5b, 5c, 5d
Total: 10 marks

2 Sigil Ltd
2.1 Sigil Ltd, an unquoted trading company, prepares accounts to 31 March and has no associated
companies. The draft accounting profits for the year ended 31 March 2024 are £125,000. The
following items have been added or deducted in arriving at the draft accounting profit:

Note £
Depreciation 6,300
Loan interest payable 1 2,000
Profit on disposal of asset 2 12,000
Exempt dividends received 3 4,000
Bank interest receivable 5,000
Employee loan interest 4 600

116 Principles of Taxation ICAEW 2024

 Note £
Dividends paid to shareholders 20,000

Notes
1 Interest payable on a loan to buy a small shareholding in an unrelated company.
2 Sigil Ltd sold an asset realising a profit on disposal of £12,000. The chargeable gain arising
is £9,000.
3 Exempt dividends of £3,000 received from unrelated UK companies and £1,000 received
from unrelated German companies.
4 Interest of £600 was received on a loan made to an employee in respect of the nine
months from 1 April 2023 to 31 December 2023. The employee owed a further £200 in
interest as at 31 March 2024.
In addition, the following item has not yet been included in the accounts:
• The company spent £75,000 on repairs to a newly acquired factory to bring it into a fit state
to be used in the business.
Requirement
Using the standard format below, compute Sigil Ltd’s taxable total profits for the year ended
31 March 2024. You should enter a number in each relevant box. If an amount is not taxable or
no adjustment is required you must enter a zero or a dash into the relevant box.
(8 marks)
Sigil Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Chargeable gain

Taxable total profits

WORKING
Trading income

Draft accounting profits

Depreciation

Loan interest payable

Profit on disposal

Exempt dividends received

Bank interest receivable

Employee loan interest

Dividends paid

Repairs

Trading income

ICAEW 2024 15: Scenario-based questions: corporation tax 117

 2.2 In the year ended 31 March 2025 Sigil Ltd expects taxable total profits of £213,000 and is
expected to receive the same amount of dividends as in the year ended 31 March 2024.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 31 March 2025. Input the date in the format DD/MM/YYYY
(eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

Corporation tax due date for Y/E 31/03/2025 is

LOs 5b, 5c, 5d
Total: 10 marks

3 Bryn Ltd
3.1 Bryn Ltd, an unquoted trading company, prepares accounts to 30 September and has one
associated company. The draft accounting profits for the year ended 30 September 2023 are
£890,000. The following items have been added or deducted in arriving at the draft
accounting profit:

Note £
Depreciation 45,500
Loan interest payable 1 9,000
Qualifying donation 2 8,000
Exempt dividends received 3 27,000
Bank interest receivable 4,200
Profit on disposal of asset 5,500
Gift of stock to charity 1,000

Notes
1 Interest payable on a loan to service working capital.
2 The qualifying donation of £8,000 in the accounts comprises £1,600 paid during the
accounting period and an accrual of £6,400 that the company had agreed to pay but was
not paid until 22 December 2023.
3 Exempt dividends received from unrelated UK companies.
In addition, the following item has not yet been included in the accounts:
• Gifts of one bottle of wine costing £10 to each of 30 employees and each of 22 clients.
Requirement
Using the standard format below, compute Bryn Ltd’s taxable total profits for the year ended
30 September 2023. You should enter a number in each relevant box. If an amount is not
taxable or no adjustment is required you must enter a zero or a dash into the relevant box.

118 Principles of Taxation ICAEW 2024

 (8 marks)
Bryn Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Qualifying donation

Taxable total profits

WORKING
Trading income

Draft accounting profits

Depreciation

Loan interest payable

Qualifying donation

Exempt dividends received

Bank interest receivable

Profit on disposal

Gift of stock

Gifts of wine

Trading income

3.2 In the year ended 30 September 2024 Bryn Ltd expects taxable total profits of £980,900 and is
expected to receive exempt dividends of £40,000 from unrelated UK companies and £10,000
from an unrelated Spanish company.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 30 September 2024. Input the date in the format
DD/MM/YYYY (eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

Corporation tax due date for Y/E 30/09/2024 is

LOs 5b, 5c, 5d
Total: 10 marks

ICAEW 2024 15: Scenario-based questions: corporation tax 119

4 Lundy Ltd
4.1 Lundy Ltd, an unquoted trading company, prepares accounts to 31 March and has no
associated companies. The draft accounting profits for the year ended 31 March 2024 are
£2,860,000. The following items have been added or deducted in arriving at the draft
accounting profit:

Note £
Depreciation 148,700
Loan interest payable 1 3,800
Property income 2 25,000
Exempt dividends received 3 9,000
Bank interest receivable 7,000
Staff party for 100 staff 10,000
Gifts of pens to customers 4 8,000

Notes
1 Interest payable on a loan to buy an investment property.
2 Property income relates to an investment property which was rented out to an unrelated
company from 1 October 2023 for £5,000 per month payable in advance. The tenant paid
the rent for March 2024 late on 8 April 2024.
3 Exempt dividends of £6,000 received from unrelated UK companies and £3,000 received
from an unrelated Italian company.
4 The pens cost £10 each and had the company logo printed on them.
In addition, the following item has not yet been included in the accounts:
• During the accounting period, legal fees of £4,300 were incurred, of which £4,000 related
to the investment property purchase and £300 related to debt collection in respect of trade
customers.
Requirement
Using the standard format below, compute Lundy Ltd’s taxable total profits for the year ended
31 March 2024. You should enter a number in each relevant box. If an amount is not taxable or
no adjustment is required you must enter a zero or a dash into the relevant box.
(8 marks)
Lundy Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Property income

Taxable total profits

WORKING
Trading income

Draft accounting profits

Depreciation

120 Principles of Taxation ICAEW 2024

 £

Loan interest payable

Property income

Exempt dividends received

Bank interest receivable

Staff party

Gift of pens

Legal fees

Trading income

4.2 In the year ended 31 March 2025 Lundy Ltd expects taxable total profits of £3,100,000 and is
expected to receive the same amount of dividends as in the year ended 31 March 2024.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 31 March 2025. Input the date in the format DD/MM/YYYY
(eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

Corporation tax due date for Y/E 31/03/2025 is

LOs 5b, 5c, 5d
Total: 10 marks

5 Budding Ltd
5.1 Budding Ltd, an unquoted trading company, prepares accounts to 31 March and has no
associated companies. The draft accounting profits for the year ended 31 March 2024 are
£165,000. The following items have been added or deducted in arriving at the draft
accounting profit:

Note £
Depreciation 13,200
Bonuses 1 25,000
Qualifying donation 2 10,000
Exempt dividends received 3 6,750
Bank interest receivable 8,000
Employee parking fines 4 200
Employer’s national insurance contributions 3,450

ICAEW 2024 15: Scenario-based questions: corporation tax 121

 Notes
1 Bonuses totalling £25,000 were paid in respect of this period on 2 February 2025. These
were the first bonuses paid by the company.
2 The qualifying donation of £10,000 in the accounts comprises £8,300 paid during the
accounting period and an accrual of £1,700 that the company had agreed to pay but was
not paid until 10 June 2024.
3 Exempt dividends received from unrelated UK companies.
4 The parking fines were incurred by the employees whilst they were on business trips.
In addition, the following item has not yet been included in the accounts:
• Legal fees in relation to an issue of share capital (£1,750) and in relation to new
employment contracts (£1,800).
Requirement
Using the standard format below, compute Budding Ltd’s taxable total profits for the year
ended 31 March 2024. You should enter a number in each relevant box. If an amount is not
taxable or no adjustment is required you must enter a zero or a dash into the relevant box.
(8 marks)
Budding Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Qualifying donation

Taxable total profits

WORKING
Trading income

Draft accounting profits

Depreciation

Bonuses

Qualifying donation

Exempt dividends received

Bank interest receivable

Employee parking fines

Employer national insurance contributions

Legal fees

Trading income

5.2 Assume that Budding Ltd has taxable total profits of £400,000 and has not received any
dividends in the eight months ended 30 November 2024.
Requirement
State:

122 Principles of Taxation ICAEW 2024

 • the profits limit for the eight months ended 30 November 2024, that is used to determine
whether Budding Ltd must pay corporation tax by instalments; and
• the first date by which any corporation tax should be paid in relation to the eight months
ended 30 November 2024. Input the date in the format DD/MM/YYYY (eg, 03/04/2023 for 3
April 2023).
(2 marks)
Corporation tax limit and payment date

The profits limit is

First payment of corporation tax due date

LOs 5b, 5c, 5d

Total: 10 marks

6 Pedestal Ltd
6.1 Pedestal Ltd, an unquoted trading company, prepares accounts to 31 December and has no
associated companies.
The draft accounting profits for the six months ended 31 December 2023 are £1,873,000.
The following items have been added or deducted in arriving at the draft accounting profit:

Note £
Depreciation 80,900
HMRC interest payable 1 150
HMRC penalty 1 2,000
Donation 2 10,000
Client entertaining 6,300
Bank interest receivable 7,200
Loss on disposal of asset 3,300

Notes
1 HMRC interest was paid in respect of late corporation tax for the accounting period for the
year ended 30 June 2022. A penalty of £2,000 was also charged.
2 The donation of £10,000 paid during the accounting period related to a national
registered charity (£8,000) and a political party (£2,000).
In addition, the following items have not yet been included in the accounts:
• The company issued £50,000 of debenture loan stock to fund the launch of a new product.
The interest payable in respect of the loan stock was £2,500 for the six months ended 31
December 2023, and the company incurred legal fees in respect of the loan stock issue of
£1,300.
• The company spent the following on its head office:

£
Extension 18,000
Redecoration 5,000

Requirement
Using the standard format below, compute Pedestal Ltd’s taxable total profits for the six
months ended 31 December 2023.

ICAEW 2024 15: Scenario-based questions: corporation tax 123

 You should enter a number in each relevant box. If an amount is not taxable or no adjustment
is required you must enter a zero or a dash into the relevant box.
(8 marks)
Pedestal Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Qualifying donation

Taxable total profits

WORKING
Trading income

Draft accounting profits

Depreciation

HMRC interest payable

HMRC penalty

Donation

Client entertaining

Bank interest receivable

Loss on disposal

Loan stock

Extension

Redecoration

Trading income

6.2 In the year ended 31 December 2024 Pedestal Ltd expects taxable total profits of £1,940,000
and is expected to receive £6,000 in dividends from unrelated UK companies and £1,000 from
an unrelated USA company.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 31 December 2024. Input the date in the format
DD/MM/YYYY (eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

Corporation tax due date for Y/E 31/12/2024 is

LOs 5b, 5c, 5d

124 Principles of Taxation ICAEW 2024

 Total: 10 marks

7 Mayet Ltd
7.1 Mayet Ltd, an unquoted trading company, prepares accounts to 30 June and has no
associated companies. The draft accounting profits for the year ended 30 June 2023 are
£95,000.
The following items have been added or deducted in arriving at the draft accounting profit:

Note £
Depreciation 4,500
Pension cost 1 10,000
Salaries 2 155,000
Qualifying donation 3 14,000
Exempt dividends received 4 11,700
Bank interest receivable 13,000

Notes
1 £8,000 of pension contribution was paid during the year ended 30 June 2023, with £2,000
accrued at the year end.
2 The salaries consist of £55,000 paid to junior staff, and £100,000 paid to a director.
3 The qualifying donation of £14,000 in the accounts represents an amount paid to a charity
in April 2023. A further £2,000 was paid to another charity in July 2022, but this amount
had been accrued in the accounts of the previous accounting period.
4 Exempt dividends received from unrelated UK companies.
In addition, the following item has not yet been included in the accounts:
• The company wrote off a debt of £7,000 which related to an amount owing from a
customer.
Requirement
Using the standard format below, compute Mayet Ltd’s taxable total profits for the year ended
30 June 2023. You should enter a number in each relevant box. If an amount is not taxable or
no adjustment is required you must enter a zero or a dash into the relevant box.
(8 marks)
Mayet Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Qualifying donation

Taxable total profits

WORKING
Trading income

Draft accounting profits

ICAEW 2024 15: Scenario-based questions: corporation tax 125

 £

Depreciation

Pension cost

Salaries

Qualifying donation

Exempt dividends received

Bank interest receivable

Debt write-offs

Trading income

7.2 In the year ended 30 June 2024 Mayet Ltd expects taxable total profits of £100,000 and is
expected to receive exempt dividends of £10,000 from unrelated UK companies and exempt
dividends of £2,000 from an unrelated Icelandic company.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 30 June 2024. Input the date in the format DD/MM/YYYY
(eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

Corporation tax due date for Y/E 30/06/2024 is

LOs 5b, 5c, 5d
Total: 10 marks

8 Fonic Ltd
8.1 Fonic Ltd, an unquoted trading company, prepares accounts to 30 September and has one
wholly owned subsidiary. The draft accounting profits for the year ended 30 September 2023
are £852,000. The following items have been added or deducted in arriving at the draft
accounting profit:

Note £
Depreciation 130,600
Profit on disposal 1 2,000
Property income 2 16,500
Exempt dividends received 3 10,800
Bank interest receivable 4,900
Entertaining 4 6,000

Notes
1 The profit was on disposal of a fixed asset.

126 Principles of Taxation ICAEW 2024

 2 Property income relates to rental of land next to the Fonic Ltd’s factory. The rent received
from 1 October 2022 to 31 August 2023 was £16,500, with a further £1,500 for the month
of September 2023 outstanding as at 30 September 2023.
3 Exempt dividends received from unrelated UK companies.
4 Entertaining costs relate to a staff Christmas party costing £2,000 (£200 per employee) and
client lunches totalling £4,000 (average cost per client £80).
In addition, the following items have not yet been included in the accounts:
• Gift of vouchers to 100 clients. The vouchers were for £50 each and could be used to buy
food hampers.
• Gift of £500 to a local hospice. An article appeared in the local paper including a photo of
the directors handing over a presentation cheque.
Requirement
Using the standard format below, compute Fonic Ltd’s taxable total profits for the year ended
30 September 2023. You should enter a number in each relevant box. If an amount is not
taxable or no adjustment is required you must enter a zero or a dash into the relevant box.
(8 marks)
Fonic Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Property income

Taxable total profits

WORKING
Trading income

Draft accounting profits

Depreciation

Profit on disposal

Property income

Exempt dividends received

Bank interest receivable

Entertaining

Vouchers

Gift to hospice

Trading income

8.2 Assume that Fonic Ltd has taxable total profits of £600,000 and has not received any dividends
in the year ended 30 September 2024.
Requirement
State:
• the profits limit for the year ended 30 September 2024, that is used to determine whether
Fonic Ltd must pay corporation tax by instalments; and

ICAEW 2024 15: Scenario-based questions: corporation tax 127

 • the first date by which any corporation tax should be paid in relation to the year ended 30
September 2024. Input the date in the format DD/MM/YYYY (eg, 03/04/2023 for 3 April
2023).

(2 marks)
Corporation tax limit and payment date

The profits limit is

First payment of corporation tax due date

LOs 5b, 5c, 5d

Total: 10 marks

9 Selby Ltd
9.1 Selby Ltd, an unquoted trading company, prepares accounts to 31 December and has one
wholly owned subsidiary. The draft accounting profits for the year ended 31 December 2023
are £534,000. The following items have been added or deducted in arriving at the draft
accounting profit:

Note £
Depreciation 46,200
Loan interest payable 1 750
Qualifying donation 2 2,000
Pension contributions 3 56,000
Bank interest receivable 6,000
Penalty from HMRC for late payment of corporation tax 4,500
Legal fees 4 52,000
Maintenance costs 3,000

Notes
1 Interest payable on a loan to buy machinery.
2 The qualifying donation of £2,000 in the accounts comprises £1,800 paid during the
accounting period and an accrual of £200 that the company had agreed to pay but was not
paid until 15 January 2024.
3 The pension contributions of £56,000 comprise £34,000 paid by the company during the
year and an additional £22,000 accrued at the year end.
4 The legal fees comprise of £15,000 for the renewal of a 40-year lease of a factory, and
£37,000 in relation to the acquisition of a 10-year lease on an office block.
In addition, the following item has not yet been included in the accounts:
• Professional fees consisting of debt collection fees of £300 and a bank arrangement fee of
£280 regarding the loan to buy the machinery.
Requirement
Using the standard format below, compute Selby Ltd’s taxable total profits for the year ended
31 December 2023. You should enter a number in each relevant box. If an amount is not
taxable or no adjustment is required you must enter a zero or a dash into the relevant box.
(8 marks)

128 Principles of Taxation ICAEW 2024

 Selby Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Qualifying donation

Taxable total profits

WORKING
Trading income

Draft accounting profits

Depreciation

Loan interest payable

Qualifying donation

Pension contributions

Bank interest receivable

Penalty from HMRC

Legal fees

Maintenance costs

Professional fees

Trading income

9.2 In the year ended 31 December 2024 Selby Ltd expects taxable total profits of £480,000 and is
expected to receive no dividends.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 31 December 2024. Input the date in the format
DD/MM/YYYY (eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

Corporation tax due date for Y/E 31/12/2024 is

LOs 5b, 5c, 5d
Total: 10 marks

ICAEW 2024 15: Scenario-based questions: corporation tax 129

10 Knight Ltd
10.1 Knight Ltd, an unquoted trading company, prepares accounts to 31 March and has one wholly
owned subsidiary, Sword Ltd. The draft accounting profits for the year ended 31 March 2024
are £467,000. The following items have been added or deducted in arriving at the draft
accounting profit:

Note £
Depreciation 32,500
Loan interest payable 1 6,400
Property income 2 40,000
Exempt dividends received 3 4,500
Bank interest receivable 5,100
Marketing fees 4 2,000
Fines 5 2,100
Legal fees 6 3,900

Notes
1 Interest payable on a loan to buy factory premises.
2 Property income relates to renting out (for £40,000 pa) spare space in Knight Ltd’s office
building to an unrelated company throughout the accounting period. However, the tenant
has left without paying rent for the period from 1 January 2024 to 31 March 2024 and
Knight Ltd is unable to recover this.
3 Exempt dividends received from Sword Ltd, Knight Ltd’s wholly-owned subsidiary.
4 Marketing fees of £2,000 related to advertising one of the company’s products online
(£1,200) and entertaining prospective customers (£800).
5 Fines consisted of £2,100 for employee parking fines whilst on business trips.
6 The legal fees were in relation to dealing with an HMRC enquiry.

Requirement
Using the standard format below, compute Knight Ltd’s taxable total profits for the year ended
31 March 2024. You should enter a number in each relevant box. If an amount is not taxable or
no adjustment is required you must enter a zero or a dash into the relevant box.
(8 marks)
Knight Ltd’s taxable total profits

Trading income (W1)

Non-trading loans

Dividends

Property income

Taxable total profits

WORKING
Trading income

130 Principles of Taxation ICAEW 2024

 £

Draft accounting profits

Depreciation

Loan interest payable

Property income

Exempt dividends received

Bank interest receivable

Marketing fees

Employee parking fine

HMRC fine

Trading income

10.2 In the year ended 31 March 2025 Knight Ltd expects taxable total profits of £420,000 and is
expected to receive the exempt dividends from Sword Ltd of £10,000.
Requirement
Complete all the boxes below and state the first date by which any corporation tax should be
paid in relation to the year ended 31 March 2025. Input the date in the format DD/MM/YYYY
(eg, 03/04/2023 for 3 April 2023).
(2 marks)
Corporation tax payment date

Taxable total profits

Exempt ABGH distributions

Augmented profits

Corporation tax due date for Y/E 31/3/2025 is

LOs 5b, 5c, 5d
Total: 10 marks

ICAEW 2024 15: Scenario-based questions: corporation tax 131

132 Principles of Taxation ICAEW 2024
Answer Bank
134 Principles of Taxation ICAEW 2024
 Chapter 1: Ethics
1 Correct answer(s):
B Professional intellect
The five fundamental principles of the ICAEW Code of Ethics are:
• Integrity
• Objectivity
• Professional competence and due care
• Confidentiality
• Professional behaviour

2 Correct answer(s):
B Integrity
Correct answer(s):
C Professional behaviour

3 Correct answer(s):
A Objectivity
D Confidentiality
Sandra may be biased in her dealings with the company because of her relationship with Heather,
and this threatens objectivity.
Sandra may acquire information in her work which may be to Heather’s advantage, but she must
respect the confidentiality of such information.

4 Correct answer(s):
A When he suspects a client of money laundering
Richard must inform the NCA (National Crime Agency) if he suspects a client of money laundering.
Confidentiality is required in respect of prospective or former clients, and must be maintained even
in a social environment.

5 Correct answer(s):
A Self-interest threat
D Familiarity threat
Roger is experiencing familiarity threats which occur when, because of a close relationship, a
professional accountant becomes too sympathetic to the interests of others. As Jennifer’s husband,
he is himself also financially involved, which poses a self-interest threat.
(SAMPLE EXAM)

ICAEW 2024 1: Ethics 135

6 Correct answer(s):
A Freddy is laundering money through his business and as Florence is aware of this she is required
to disclose it to the proper authorities.
C Florence may be guilty of money-laundering offences as she has assisted Freddy in concealing
the proceeds of crime.
Florence should not discuss her decision to go to the authorities with Freddy. This would amount to
tipping off which is in itself an offence under money laundering legislation.
Florence may well have felt justified in increasing her fee for such risky work but in the circumstances
this probably amounts to possessing the proceeds of a criminal activity which is another offence.

7 Correct answer(s):
B Now
If he has reasonable suspicion, he should not try to obtain proof before reporting.
Correct answer(s):
D The firm’s Money Laundering Reporting Officer
Iqmal’s responsibility is only to report to the MLRO.

8 Correct answer(s):
C Timescale involved
The other three are explicitly stated in the ICAEW Code of Ethics as factors to consider.

9 Correct answer(s):
A Offence committed by Stephanie
Stephanie has committed an offence under the legislation as she has acquired criminal property, the
criminal property being the proceeds of tax evasion.
Correct answer(s):
C Offence committed by Trevor
Trevor has committed the offence of tipping off as he is aware that a suspicious activity report (SAR)
may have been made by his firm’s MLRO.

10 Correct answer(s):
C Advocacy threat

11 Correct answer(s):
B Self-review threat

12 Correct answer(s):
A Tax evasion is illegal and tax avoidance is legal.

136 Principles of Taxation ICAEW 2024

13 Correct answer(s):
A Inform Mr Blythe of the conflict and notify him that Comp Partners is ceasing to act for him
If the threat cannot be sufficiently reduced, the only acceptable course of action is to cease to act.
(SAMPLE EXAM)

14 Correct answer(s):
C Deliberately postponing the sale of some shares from 5 April until 6 April so that he can use the
following year’s annual exempt amount to reduce his capital gains tax
This is an example of legitimate tax planning so is tax avoidance. The others are all examples of tax
evasion.
(SAMPLE EXAM)

15 Correct answer(s):
E Intimidation threat
William is experiencing intimidation threats which occur when a professional accountant is deterred
from acting objectively by threats, actual or perceived.

16 Correct answer(s):
B (1) to (3) only
An innocent error in a tax return, unlike a deliberate error, would not give rise to proceeds of crime.
Tax avoidance is not a crime and so cannot give rise to the proceeds of crime.

17 Correct answer(s):
B The relationship that her firm has with the client
The other three are explicitly stated in the ICAEW Code of Ethics as factors to consider.

18 Correct answer(s):
C Unit principle
C Unit principle
This is an example of a unit tax as opposed to VAT which is a value based tax. A unit tax is levied at a
flat rate per item regardless of value. It cannot be considered a neutral tax as only supermarkets have
to charge it.

19 Correct answer(s):
B Statutory instruments
While the Budget forms the basis for the Finance Act each year, it is not in itself a form of legislation.
Statutory instruments are the biggest single source of tax law each year. Extra-statutory concessions,
as their name implies, are not statutory documents. Neither are statements of practice.

ICAEW 2024 1: Ethics 137

138 Principles of Taxation ICAEW 2024
 Chapter 2: Introduction to taxation
1 Correct answer(s):
B HMRC statements of practice
A Finance Act is an Act of Parliament and is therefore a source of law. Case law generally sets a
precedent which must be followed unless overruled on appeal or superseded by legislation.
Statutory instruments are a form of delegated legislation which are a form of law. Statements of
practice are merely a statement of HMRC’s interpretation of the law.

2 Correct answer(s):
A Progressive taxation
A system whereby the overall proportion of taxation increases as income rises is known as a
progressive system. Originally income tax represented 15% of Pauline’s income. After her pay rise it
had risen to 20%.
Correct answer(s):
C Direct taxation
National insurance contributions are a form of direct taxation.
(SAMPLE EXAM)

3 Correct answer(s):
B Efficiency principle
The efficiency principle is concerned with the cost (to a government) of collection of tax being low in
relation to the tax raised. The ability to pay principle is concerned with the ability of the taxpayer to
pay the tax.
Correct answer(s):
D Indirect taxation
VAT is a form of indirect taxation.

4 Correct answer(s):
C (1), (3), (4) and (5) only
As an employee, Wren will be liable to income tax and national insurance contributions. As an
individual, Wren could pay capital gains tax on the disposal of an asset. As an individual Wren must
incur VAT in their day-to-day life as the final consumer. As an individual Wren cannot personally pay
corporation tax.

5 Correct answer(s):
C (2), (3) and (5) only
Each partner is liable to tax on their share of income and gains of the partnership, but not for tax on
the shares of income and gains of the other partners.

6 Correct answer(s):
C (1), (2) and (4) only
(SAMPLE EXAM)

ICAEW 2024 2: Introduction to taxation 139

7 Correct answer(s):
C Case law can be superseded by further statutory legislation
Many judgments from tax cases are precedent for future cases which means they must be followed
unless superseded by legislation or the decision of a higher court. Therefore, this is not guidance.
There is also no 12-month time limit and subsequent legislation can change the law.

8 Correct answer(s):
D Tax legislation, commonly in the form of Regulations, containing detailed provisions
HMRC manuals are published by HMRC primarily for the guidance of its own staff.
Statements of practice set out HMRC’s interpretation of tax legislation.
Extra-statutory concessions provide a relaxation of the strict legal position of tax legislation.

140 Principles of Taxation ICAEW 2024

 Chapter 3: Introduction to income tax
1 £ 3,045

£
Personal allowance 12,570
Less (£119,050 – £100,000) = £19,050 × 1/2 (9,525)
Reduced personal allowance 3,045

2 £ 5,133

£
Tax on non-savings income £25,565 × 20% 5,113
Tax on savings income – savings income nil rate band £1,000 × 0% 0
Tax on savings income £100 × 20% 20
Income tax liability 5,133

3 Correct answer(s):
B £12,570
The marriage allowance does not affect Grainne’s personal allowance because it is claimed as a tax
reducer.
Correct answer(s):
F £834

£
Net income 18,000
Personal allowance (12,570)
Taxable income 5,430
Tax at 20% 1,086
Marriage allowance (£1,260 x 20%) (252)
Income tax liability 834

ICAEW 2024 3: Introduction to income tax 141

4 Correct answer(s):
A £1,785
Extend BRB by Gift Aid = £37,700 + (£720 × 100/80) = £38,600

£
Tax on non-savings income
£38,600 × 20% 7,720
£130 × 40% 52
Tax on dividend income
£1,000 × 0% 0
£4,200 × 33.75% 1,418
£43,930 9,190
Less tax already paid
PAYE (7,405)
Tax payable 1,785

5 Correct answer(s):
C £20,424

£
Tax on dividend income
£1,000 × 0% 0
£36,700 × 8.75% 3,211
£51,000 × 33.75% 17,213
£88,700 20,424

6 Correct answer(s):
B Charlie’s liability would decrease and Sarah’s would be unchanged.
Charlie’s liability would be reduced by 20% of £1,260. Sarah’s liability is nil and would remain so
because her income is covered by the personal allowance both with and without the claim for the
marriage allowance.

7 £ 7,739

£
Tax on non-savings income £36,500 × 20% 7,300
Tax on dividend income – dividend nil rate band £1,000 × 0% 0
Tax on dividend income £1,300 × 33.75% 439
Income tax liability 7,739

142 Principles of Taxation ICAEW 2024

 £1,300 of dividend income is taxed at 33.75% as the cumulative income taxed so far is £38,500
(£36,500 + £2,000) which utilises the basic rate band of £37,700.

8 £ 7,896

Taxable income (all savings) = £42,000

£
Tax
£5,000 × 0% 0
£500 × 0% 0
£32,200 × 20% 6,440
£1,320 (£1,056 × 100/80) × 20% (extended band) 264
£2,980 × 40% 1,192
£42,000 ––––
Income tax liability 7,896

9 Correct answer(s):
B At source by paying net of basic rate income tax
Correct answer(s):
F By extending the basic rate band

10 Correct answer(s):
B £11,205

£
Personal allowance 12,570
Less abatement
1/2 × (£102,730 – £100,000) (1,365)
Reduced personal allowance 11,205

11 Correct answer(s):
D £600

£ £
Tax on non-savings income 3,000 × 20% 600
Tax on saving income:
– in savings starting rate band 2,000 × 0% 0
5,000
– savings income nil rate band 800 × 0% 0
5,800

ICAEW 2024 3: Introduction to income tax 143

 £ £
Tax on dividend income:
– dividend nil rate band 500 × 0% 0
6,300 –––
Income tax liability 600

12 Correct answer(s):
B £8,000
Of the £9,000 dividend £700 falls into the basic rate band, albeit covered by the dividend nil rate
band and a further £300 which falls into the higher rate band is covered by the dividend nil rate
band.
£9,000 – £700 – £300 = £8,000.

13 £ 6,806

£ £
Tax on non-savings income 210 × 20% 42
Tax on saving income:
– in savings starting rate band 4,790 × 0% 0
5,000
– savings income nil rate band 500 × 0% 0
– in savings basic rate band 32,200 × 20% 6,440
37,700
– in savings higher rate band 810 × 40% 324
38,510 ––––
Income tax liability 6,806

144 Principles of Taxation ICAEW 2024

14 £ 3,563

£
Tax
£17,015 × 20% 3,403
£1,000 × 0% 0
£800 × 20% 160
Income tax liability 3,563

15 £ 63

Taxable income £15,815

£
20% on £15,815 3,163
Less PAYE (3,100)
Income tax payable 63

(SAMPLE EXAM)

16 £ 0

The personal allowance will be zero for any additional rate taxpayer.

17 Correct answer(s):
D £63,982

£
Non-savings income 133,000
Savings income 27,600
Dividends 15,000
Taxable income 175,600

£37,700 × 20% 7,540

£87,440 × 40% 34,976
£7,860 × 45% 3,537
£133,000

£27,600 × 45% 12,420

ICAEW 2024 3: Introduction to income tax 145

 £
£1,000 × 0% 0
£14,000 × 39.35% 5,509
£175,600
Income tax liability 63,982

Dahlia has no savings income nil rate band as she is an additional rate taxpayer. She does benefit
from the dividend nil rate band.

18 £ 3,570

£
Personal allowance 12,570
Less (£118,000 – £100,000) × ½ (9,000)
Restricted personal allowance 3,570

The personal allowance is abated due to the level of net income.

19 £ 2,638

£
Non-savings income £14,450 × 20% 2,890
Less tax reducer for marriage allowance £1,260 × 20% (252)
Geoff’s income tax liability 2,638

The election is possible because Geoff is a basic rate taxpayer and Jessica pays no income tax.

20 Correct answer(s):
D No election can be made to transfer any part of Richard’s personal allowance to Leanne.
No election can be made to transfer any part of Richard’s personal allowance to Leanne as she is a
higher rate taxpayer.

21 Correct answer(s):
B £17,330
Sarah’s taxable income is her net income less her personal allowance;
ie, £29,900 – £12,570 = £17,330
The marriage allowance does not affect her personal allowance or taxable income, but reduces her
income tax liability by 20% of Arthur’s personal allowance transferred to her.

22 £ 8,540

£
Basic rate £37,700 × 20% 7,540

146 Principles of Taxation ICAEW 2024

 £
Higher rate (£40,200 – £37,700) = £2,500 × 40% 1,000
Less marriage allowance (0)
Income tax liability 8,540

In 2023/24 the marriage allowance is not available to Sheila and Alice because one of them has
income which is taxed in the higher rate band.

23 Correct answer(s):
C Have no impact on Maalik’s income tax liability
C Have no impact on Maalik’s income tax liability
Maalik is a basic rate taxpayer in 2023/24 so increasing the upper limit of his basic rate band will
have no impact on the calculation of his income tax liability.

24 £ 0

With net income exceeding £125,140, the PA is reduced to zero.

ICAEW 2024 3: Introduction to income tax 147

148 Principles of Taxation ICAEW 2024
 Chapter 4: Employment income
1 Correct answer(s):
A 802L

£
Personal allowance 12,570
Less underpaid tax (£910 ×100/20) (4,550)
8,020
PAYE code 802L

2 PAYE code K 539

£
Personal allowance 12,570
Less taxable benefits (17,970)
Net allowances (5,400)
Remove the last digit (gives 540) and deduct 1.
PAYE code K539

3 Correct answer(s):
D K61

£
Personal allowance 12,570
Less taxable benefit (13,195)
Net allowances (625)

Remove the last digit (gives 62) and deduct 1.

4 694 L

£
Personal allowance 12,570
Less taxable benefit (5,630)
Net allowances 6,940

Remove the last digit and add L.

ICAEW 2024 4: Employment income 149

5 Correct answer(s):
B 907L

£
Personal allowance 12,570
Less deduction (£1,400 × 100/40) (3,500)
Net allowances 9,070

Remove the last digit and add L.

(SAMPLE EXAM)

150 Principles of Taxation ICAEW 2024

 Chapter 5: Trading profits
1 Correct answer(s):
A Amy has just sold a house that she bought three months ago. She has spent £40,000 to make
the property more attractive to potential purchasers. Amy has not lived in this house.
D Dante has an interest in vintage cars. He has just sold a car that he has been renovating for the
last six months. This is the seventh renovated car that he has sold in the last two years.
(SAMPLE EXAM)

2 Correct answer(s):
B Provision of own equipment
E Correction of own work

3 Correct answer(s):
D To be sold at a profit
The nature of the asset would suggest a trading motive.

4 Correct answer(s):
C £300
When receipts are greater than £1,000 the taxpayer may use the normal rules for calculating their
tax-adjusted profits (£1,300 – £750 = £550). Alternatively they may elect to treat the trading
allowance as one single allowable deduction which makes Marina’s taxable trading profit £300 (ie,
£1,300 – £1,000).

5 Correct answer(s):
A The number of transactions
C Changes to the asset
Interval of time between purchase and sale – a short length of ownership would indicate trade.
Correction of own work – this is not one of the badges of trade.

6 Correct answer(s):
A £Nil
As Julie’s receipts are less than £1,000, the trading allowance applies and her advertising income is
not taxed.

ICAEW 2024 5: Trading profits 151

152 Principles of Taxation ICAEW 2024
 Chapter 6: Capital allowances
1 Correct answer(s):
B £2,070
£2,300 × 90% = £2,070
AIA applies but is apportioned due to Nina’s private use.
Correct answer(s):
F £373
18% × £2,300 × 90% = £373
No AIA applies to cars. WDA is apportioned due to private use.

2 Correct answer(s):
A £3,000
The maximum capital allowances that Aasia will receive in respect of the purchase of the photocopier
in the period ended 31 December 2023 are £3,000 as it is covered by the AIA (pro-rated to
£1,000,000 × 10/12 = £833,333).
Correct answer(s):
F £450
18% × 10/12 × £3,000 = £450

3 Correct answer(s):
A £5,000
The maximum capital allowances available on the computer in the period to 30 April 2023 are
£5,000 as it is covered by the AIA (pro-rated to £1,000,000 × 4/12 = £333,333).
Correct answer(s):
F £792
£13,200 × 18% × 4/12 = £792

4 Correct answer(s):
C £10,560
£13,200 (covered by AIA) × 80% = £10,560

5 Correct answer(s):
B Incorrect
The expenditure qualifies for a first year allowance (FYA) of 100%.
Correct answer(s):
D Incorrect
It will often result in capital allowances but not always (eg, cost of shares)

ICAEW 2024 6: Capital allowances 153

6 £ 1,019,020

FYA Main pool Allowances

Y/e 31.12.23 £ £ £
Acquisitions (FYA):
1.9.23 Low-emission car 16,500
FYA @ 100% (16,500) 16,500
0
Acquisitions (AIA):
1.7.23 Machinery 1,014,000
AIA (1,000,000) 1,000,000
14,000
WDA @ 18% (2,520) 2,520
TWDV c/f 11,480 ––––––––
Allowances 1,019,020

7 Correct answer(s):
C £3,600
The balancing allowance for full business use is £4,800 (£15,000 – £10,200).
This is restricted to the business proportion £3,600 (75% × £4,800).

8 Capital allowances £ 20,000

FYA Main pool Allowances

Y/e 31.12.23 £ £ £
Acquisitions (FYA):
20.3.23 Low-emission car 8,000
FYA @ 100% (8,000) 8,000
0
Acquisitions (AIA):
12.2.23 Computer 10,000
1.5.23 Office furniture 2,000
AIA (12,000) 12,000
TWDV c/f 0
––––––
Allowances 20,000

154 Principles of Taxation ICAEW 2024

9 Capital allowances £ 1,458

Car ≤ 50 g/km Allowances

1.9.22 – 31.5.23 £ £
Addition 18,000
WDA 18% × 9/12 (2,430) × 60% 1,458
15,570

(SAMPLE EXAM)

10 Correct answer(s):
C Balancing allowance of £1,750

y/e 31.3.24 Private use car Allowances

£ £
TWDV brought forward 17,000
Disposal (14,500)
Balancing allowance 2,500 × 70% 1,750

11 £ 3,240

The car has a writing down allowance of 18% per annum as it will go in the main pool. This is not
restricted for private use by an employee: 18% × £18,000 = £3,240.

12 Correct answer(s):
B £1,440

1.10.23 – 31.3.24 (six months) Main pool Allowances

£ £
Addition 16,000
WDA @ 18% × 6/12 (1,440) 1,440
TWDV c/f 14,560

13 Correct answer(s):
A £8,560

Main pool Allowances

1.4.23 – 31.12.23 (9 months) £ £
TWDV b/f 560

Acquisitions (AIA):
Computer 8,000

ICAEW 2024 6: Capital allowances 155

 Main pool Allowances
1.4.23 – 31.12.23 (9 months) £ £
AIA (£1,000,000 × 9/12 = £750,000) (8,000) 8,000
560
Write-off of small pool (£1,000 × 9/12 = £750) (560) 560
TWDV c/f 0
–––––
Allowances 8,560

As the small pool is less than the pro-rated minimum balance of £750, it may be written off in full.

14 £ 342

As the business continues there is no balancing adjustment in the main pool on the disposal of the
machine. (Once the pool drops to £1,000 or less in a later year, the whole pool may be written off.)

Y/e 31.12.23 Main pool Allowances

£ £
TWDV b/f 2,300
Disposal (400)
1,900
WDA @ 18% (342) 342
TWDV c/f 1,558

15 £ 3,870

Y/e 30.9.23 Main pool Allowances

£ £
TWDV b/f 25,400
Disposal (use cost as sale proceeds exceed cost) (3,900)
21,500
WDA @ 18% (3,870) 3,870
TWDV c/f 17,630

16 Correct answer(s):
C £11,160

1.10.23 – 31.3.24 (6 months) FYA Main pool Allowances

£ £ £
TWDV b/f 24,000
WDA @ 18% × 6/12 (2,160) 2,160

156 Principles of Taxation ICAEW 2024

 1.10.23 – 31.3.24 (6 months) FYA Main pool Allowances
£ £ £
Additions (FYA) 9,000
FYA @ 100% (lowemission car) (9,000) –––––– 9,000
TWDV c/f 0 21,840 –––––
Total allowances 11,160

The FYA is not pro-rated for short accounting periods.

Note: Unless you are told otherwise, assume no private use of assets by the owner(s) of a business.

17 Correct answer(s):
C £425,167

Main pool Allowances

1.2.23 – 30.6.23 (5 months) £ £
Acquisitions (AIA):
23.5.23 Machine 530,000
AIA (£1,000,000 × 5/12) (416,667) 416,667
113,333
WDA @ 18% × 5/12 (8,500) 8,500
TWDV c/f 104,833 ––––––
Allowances 425,167

18 Correct answer(s):
B Car with emissions of 45 g/km costing £14,000 on 10 June 2023 with 20% private use by one of
the employees

19 £ 4,626

Y/e 31.1.24 Main pool Allowances

£ £
TWDV b/f 31,000
Disposal (5,300)
25,700
WDA @ 18% (4,626) 4,626
TWDV c/f 21,074

20 £ 1,003,600

ICAEW 2024 6: Capital allowances 157

 Main pool Allowances
Y/e 31.12.23 £ £
Acquisitions (AIA):
1.5.23 Machine 1,020,000
AIA (1,000,000) 1,000,000
20,000
WDA @ 18% (3,600) 3,600
TWDV c/f 16,400 ––––––––
Allowances 1,003,600

21 £ 3,236

£
Murray’s van (£17,000 × 18% × 60%) 1,836
Nuri’s van – balancing allowance (£8,000 – £6,000) × 70% 1,400
3,236

158 Principles of Taxation ICAEW 2024

 Chapter 7: Trading profits – basis of
assessment
1 £ 39,300

y/e 31 March 2024 Total Rafael Samira Tadeo

£ £ £ £
Salary 10,000 10,000
Interest 6,100 3,000 1,200 1,900
Balance 1:1:1 108,900 36,300 36,300 36,300
125,000 39,300 47,500 38,200

Rafael has taxable trading profits of £39,300 for the year ended 31 March 2024. Under the tax year
basis this will be assessable on Rafael in 2023/24.

2 Correct answer(s):
A £34,333
Tax year 2024/25: 6 April 2024–5 April 2025 = (1/12 × 38,000) + (11/12 × 34,000)
Correct answer(s):
E £25,833

Final tax year 2025/26 £

6 April 2025 to 30 November 2025
1/12 × y/e 30 April 2025 2,833
p/e 30 November 2025 23,000
25,833

3 Correct answer(s):
B Jabir £32,958; Kadin £28,292

y/e 31 August 2024 Total Jabir Kadin

£ £ £
Salary 8,000 8,000
PSR 1:1 97,000 48,500 48,500
105,000 56,500 48,500
2023/24 commencement of trade (7/12) 32,958 28,292

First tax year (2023/24)

Assessable period 1 September 2023 to 5 April 2024

4 £57,834

ICAEW 2024 7: Trading profits – basis of assessment 159

 y/e 30 September 2024 Total Val Cleo Frank
£ £ £ £
Interest on capital (5%) 6,000 2,500 1,500 2,000
PSR 1:1:1 144,000 48,000 48,000 48,000
150,000 50,500 49,500 50,000

y/e 30 September 2025 Total Val Cleo Frank

£ £ £ £
Interest on capital (5%) 6,000 2,500 1,500 2,000
PSR 1:1:1 194,000 64,667 64,667 64,667
200,000 67,167 66,167 66,667

Assessable profits in 2024/25 = 6 Apr 2024 to 5 Apr 2025

(6/12 × 49,500) + (6/12 × 66,167) = £57,834

5 Correct answer(s):
B Tom £91,667; Dick £40,834

Y/e 31 October 2024 Total Tom Dick

£ £ £
Salary 10,000 10,000
PSR 2:1 110,000 73,333 36,667
120,000 83,333 36,667

Y/e 31 October 2025 Total Tom Dick

£ £ £
Salary 10,000 10,000
PSR 2:1 140,000 93,333 46,667
150,000 103,333 46,667

Assessable period for 2024/25: 6 April 2024 to 5 April 2025

7/12 × profits for y/e 31 October 2024 + 5/12 × profits for y/e 31 October 2025
Tom: (7/12 × 83,333) + (5/12 × 103,333) = £91,667
Dick: (7/12 × 36,667) + (5/12 × 46,667) = £40,834

6 £ 12,273

Final tax year (2024/25)

£
6 April 2024 to 31 December 2024
9/11 × P/e 31 December 2024 12,273

160 Principles of Taxation ICAEW 2024

7 Correct answer(s):
C £2,200
First tax year (2022/23)
Assessable period 1 January 2023 to 5 April 2023
3/12 × £6,000 = £1,500
Second tax year (2023/24)
Assessable period 6 April 2023 to 5 April 2024
(9/12 × £6,000) + (3/14 × £2,800) = £5,100
Final tax year (2024/25)
Assessable period 6 April 2024 to 28 February 2025
11/14 × £2,800 = £2,200

8 Correct answer(s):
D £3,571
Final tax year (2024/25)

£
Basis of assessment 6 April 2024 to 30 April 2024
1/7 × P/e 30 April 2024 3,571

9 Correct answer(s):
B £18,000
First tax year (2023/24)
Assessable period 1 July 2023 to 5 April 2024 = 9/12 × £24,000 = £18,000

10 Correct answer(s):
A £28,000 is taxable in 2023/24, representing the period 6 April 2023 to 5 April 2024.
12/18 × £42,000 .

11 £ 85,000

First tax year (2023/24)

1 July 2023 to 5 April 2024 = £60,000 + (3/12 × £100,000)

12 £ 50,750

Total Audrey Elaine

£ £ £
Y/e 31 March 2024
Interest on capital (5%) 3,500 2,500 1,000

ICAEW 2024 7: Trading profits – basis of assessment 161

 Total Audrey Elaine
£ £ £
PSR 1:1 96,500 48,250 48,250
100,000 50,750 49,250

13 Correct answer(s):
D £30,000

Total David Doreen

£ £ £
Y/e 30 June 2024
PSR 2:1 120,000 80,000 40,000

First year (2023/24)

1 July 2023 to 5 April 2024
9/12 × £40,000 = £30,000

14 £13,073

2024/25 = 6 April 2024 to 30 September 2024 = 6/8 × £17,430 = £13,073

15 Correct answer(s):
B £39,990

Total Leroy Annabelle

£ £ £
Interest on capital (5%) 2,900 1,750 1,150
Balance (2:3) 95,600 38,240 57,360
Tax adjusted profit 98,500 39,990 58,510

(SAMPLE EXAM)

16 Correct answer(s):
C £44,451
2023/24: 6 April 2023 to 5 April 2024
(11/14 × £53,208) + (1/12 × £31,740) = £44,451
(SAMPLE EXAM)

17 Correct answer(s):
B Taxable trading profits for 2023/24 are £5,000.
D Taxable trading profits for 2024/25 are £23,750.

162 Principles of Taxation ICAEW 2024

 First tax year (2023/24)

Assessable period 1 January 2024 to 5 April 2024

3/6 × £10,000 £5,000

Second tax year (2024/25)

Assessable period 6 April 2024 to 5 April 2025

£
3/6 × 6 m/e 30 June 2024 5,000
9/12 × y/e 30 June 2025 18,750
23,750

18 Correct answer(s):
D Amber £145,000; Betty £95,000

Total Amber Betty

£ £ £
6 months to 30 September
PSR (£120,000) 2:1 120,000 80,000 40,000
6 months to 31 March
Salary (× 6/12) 10,000 10,000
PSR (£110,000) 1:1 110,000 55,000 55,000
240,000 145,000 95,000

ICAEW 2024 7: Trading profits – basis of assessment 163

164 Principles of Taxation ICAEW 2024
 Chapter 8: National insurance contributions
1 Correct answer(s):
C Class 2
D Class 4
Sho’s trading profits are above the lower profits limit and so he must pay Classes 2 and 4 NIC. His
salary is below the primary and secondary NIC thresholds throughout 2023/24 and so no Class 1
NICs are due.

2 Correct answer(s):
B Incorrect
Companies do not pay Class 4 NIC.
Correct answer(s):
C Correct
He is below state pension age and his earnings are above the primary threshold.
Correct answer(s):
F Incorrect
Dividends are not earnings. The company will therefore be liable to secondary Class 1 NICs on
£20,000 + £15,000 = £35,000.

3 £ 84

(£13,500 – £12,570) × 9% = £84

4 Correct answer(s):
B £848

£
Class 2:52 × £3.45 179
Class 4:9% × (£20,000 – £12,570) 669
848

(SAMPLE EXAM)

5 £ 4,204

£
Class 1 secondary (£39,067 + £500 – £9,100) × 13.8% 4,204

Class 1 secondary contributions are not paid on the car benefit but are paid on the vouchers. The car
benefit gives rise to a liability to Class 1A NIC.

ICAEW 2024 8: National insurance contributions 165

6 £ 690

£
Class 1A £5,000 × 13.8% 690

Class 1A contributions are not paid on the vouchers (Class 1 secondary contributions are payable).

7 Correct answer(s):
B Incorrect
Correct answer(s):
C Correct
When an individual reaches state pension age they stop paying Class 1 primary contributions but
their employer must still pay Class 1 secondary contributions.

8 £ 3,712

The only liability is to Class 1 secondary NIC. Cobalt Ltd is not entitled to the employment allowance
as the company has only one director and no other employees.
(£36,000 – £9,100) × 13.8% = £3,712

9 Correct answer(s):
C £5,368

£
Class 1 secondary: (£45,000 – £9,100) × 13.8% 4,954

Class 1A: £3,000 × 13.8% 414

5,368

10 £ 439

£
Class 1 primary – December 2023
(£4,189 – £1,048) × 12% 377
(£7,300 – £4,189) × 2% 62
Total 439

The benefit in respect of the Christmas party is liable to Class 1A NIC on Trim Ltd.
(SAMPLE EXAM)

166 Principles of Taxation ICAEW 2024

11 £ 239

£
Class 1 secondary (aged under 21) (£52,000 – £50,270) × 13.8% 239

Class 1 secondary contributions are not paid on benefits. Taxable benefits (the car) give rise to a
liability to Class 1A NIC.

12 £ 414

£
Class 1A £3,000 × 13.8% 414

13 £ 161

£
Class 1 secondary (£46,500 – £9,100) × 13.8% – £5,000 161

The employment allowance is available even though there is only one employee, as the employer,
Hans, is a sole trader and not a company.

14 £ 0

Kamal is an apprentice under 25 years old and his remuneration (salary and vouchers) do not exceed
the apprentice upper secondary threshold of £50,270.

15 £ 92

£
Class 1 primary ((£20,000/12 + £150) = £1,817 – £1,048) × 12% 92

16 Correct answer(s):
C £3,555

£
9% (£50,270 – £12,570) 3,393
2% (£58,350 – £50,270) 162
3,555

ICAEW 2024 8: National insurance contributions 167

168 Principles of Taxation ICAEW 2024
 Chapter 9: Capital gains tax – individuals
1 Correct answer(s):
D Partners individually
The partnership is not taxable in its own right; rather it is an amalgamation of individuals effectively
taxed as sole traders. Neither are partners taxed jointly. Every individual is liable to capital gains tax
independently. As the asset is owned by all the partners, each partner must declare their share of any
gain on their own self-assessment return.

2 Correct answer(s):
A 15 March 2024
The date of disposal for capital gains purposes is the date on which the contract for disposal
becomes unconditional. In this case the contract became unconditional on the date contracts were
exchanged. The date legal title passes, physical possession is obtained, or payment is made are all
irrelevant.

3 Correct answer(s):
C Stamp duty land tax paid on the purchase of land may be deducted as part of cost on a
subsequent disposal of the land.
Assets which are inherited are treated as being acquired by the donee at their probate value ie, at
their value at the time of the donor’s death. This is sometimes known as the tax-free uplift on death.
Wasting chattels are always exempt from CGT. The £6,000 rule applies to non-wasting chattels.
Where an asset is not sold at arm’s length the proceeds are deemed to be market value at the time of
sale or gift.

4 Correct answer(s):
A £(7,800)
As a non-wasting asset, the chattel rules apply. As it was sold at a loss, actual proceeds are
substituted by deemed proceeds of £6,000 to restrict the loss.

£
Deemed proceeds 6,000
Less auctioneer’s fees (800)
Net sale proceeds 5,200
Less cost (13,000)
Loss (7,800)

5 Correct answer(s):
B Exempt
The caravan is a wasting chattel which is an exempt asset.
Correct answer(s):
D Exempt
The sculpture is a non-wasting chattel, which is a chargeable asset. However, as it was both bought
and sold for less than £6,000, it is specifically exempt.

ICAEW 2024 9: Capital gains tax – individuals 169

6 Correct answer(s):
D £8,090
The chair is a non-wasting asset and is liable to capital gains tax subject to the chattel rules. As it was
purchased for less than £6,000 and sold for more than £6,000 there is a marginal gain. The gain is
the lower of the actual gain and 5/3 × (Gross proceeds – £6,000):
Actual gain = £11,150 – £560 – £2,500 = £8,090
5/3 × (£11,150 – £6,000) = £8,583

7 Correct answer(s):
C Has no effect
An unused annual exempt amount is wasted and cannot be carried forward to the next tax year.
Therefore this will have no effect on David’s capital gains tax liability.
Correct answer(s):
E Increases capital gains tax payable
The rate of his capital gains tax is 20% once he is a higher rate taxpayer. As a basic rate taxpayer to
the extent that there is an amount of the basic rate band remaining after deducting taxable income,
that amount of gains will be taxed at only 10%.

8 Correct answer(s):
A Partners individually
The partnership is not taxable in its own right; rather it is an amalgamation of individuals effectively
taxed as sole traders. Neither are partners taxed jointly. Every individual is liable to capital gains tax
independently. As the asset is owned by all the partners, each partner must declare his share of any
gain on his own self-assessment return.

9 Chargeable gain £ 457,840

£ £
Gross sale proceeds 642,000
Less: original cost (Dec 1998) 176,000
stamp duty land tax (1% × 176,000) 1,760
new bathroom 6,400
(184,160)
Chargeable gain 457,840

10 Correct answer(s):
A £10,808
The painting is a non-wasting chattel and is liable to capital gains tax subject to the chattel rules. As it
was purchased for less than £6,000 and sold for more than £6,000, there is a marginal gain. The gain
is the lower of the actual gain and 5/3 × (Gross proceeds – £6,000):
Actual gain = £14,150 – £142 – £3,200 = £10,808
5/3 × (£14,150 – £6,000) = £13,583

170 Principles of Taxation ICAEW 2024

11 Correct answer(s):
C A rare collection of snakes worth £320,000
D £10,000 of National Savings Certificates
Shares held in an unquoted trading company are not exempt from capital gains. A diamond necklace
is a non-wasting asset and is therefore subject to the chattel rules. It is only fully exempt if it is both
bought and sold for less than £6,000. That clearly would not apply in this case. Snakes are a wasting
chattel and are therefore exempt. National Savings Certificates are specifically exempted.

12 Correct answer(s):
C Gift to a friend of a painting worth £1,000,000
Gifts on death are not chargeable disposals.
National Savings Certificates are an exempt asset. As it is not a chargeable asset, there cannot be a
chargeable disposal.
A gift of any capital asset to a charity is not a chargeable disposal.

13 Correct answer(s):
C Assets which are inherited are treated as being acquired by the donee at their value at the time
of the donor’s death.
CGT is chargeable on individuals and partners in a partnership. Companies pay corporation tax on
their gains.
Stamp duty land tax is an allowable cost on the subsequent disposal of an asset.
The personal allowance can only be used against income, never gains.

14 Correct answer(s):
B Exempt
A car is an exempt asset.
Correct answer(s):
D Exempt
The greyhound is a wasting chattel and is therefore exempt.

15 Correct answer(s):
A NSPCC, a registered charity
Charities are specifically exempt from CGT.

16 Correct answer(s):
D The gift of an antique table valued at £40,000 to Gordon’s daughter on his death

17 Correct answer(s):
C £105,300
Not the repairs as they are not an enhancement expenditure.
£(100,000 + 2,500 + 2,800) = £105,300
(SAMPLE EXAM)

ICAEW 2024 9: Capital gains tax – individuals 171

18 Correct answer(s):
B A racehorse purchased as an investment by Marnie
D A caravan, purchased by David for use on family holidays
An asset used only for business purposes and eligible for capital allowances is specifically treated as
a non-wasting chattel.
Goodwill is not a chattel as it is not tangible moveable property.

19 Correct answer(s):
A Chargeable
This is a disposal of a non-wasting chattel with GROSS sale proceeds of more than £6,000, so
chargeable.
Correct answer(s):
C Chargeable
Shares are not chattels and so not subject to the £6,000 rules.

20 Correct answer(s):
B £500
The brooch is a non-wasting asset and is liable to capital gains tax subject to the chattel rules.
Gain is £(6,200 – 4,000) = £2,200 but restricted to:
(Gross sale proceeds – £6,000) × 5/3 = (£6,300 – £6,000) × 5/3 = £500

21 Correct answer(s):
C A gift of antique jewellery worth £25,000 by Robert, to his daughter as a wedding gift
Disposal to an art gallery is an exempt disposal.
A registered charity is an exempt person.
Gilt-edged securities are an exempt asset.

22 Correct answer(s):
C Townsend lost an antique ring valued at £8,000 and received a cheque from the insurance
company for that sum.
D Toshi sold a painting for £5,000. It was given to him several years ago when his grandfather died.
At that time it was worth £6,400.

23 £ 1,400

£
Gross sale proceeds 8,200
Less auctioneer’s fees (300)
Net sale proceeds 7,900
Less: original cost (July 2001) (6,100)
enhancement expenditure (September 2005) (400)

172 Principles of Taxation ICAEW 2024

 £
Chargeable gain 1,400

The cost of cleaning and repairs is not capital expenditure. As the brooch was both bought and sold
for more than £6,000, the chattel rules do not apply.

24 Correct answer(s):
A Chargeable
This is a disposal of a non-wasting chattel with gross sale proceeds of more than £6,000, so
chargeable.
Correct answer(s):
C Chargeable
The total cost of acquiring the jewellery was more than £6,000 (£5,900 + £200) so the disposal is
chargeable.

25 Correct answer(s):
B £1,333
Gain is (£6,800 – £4,000) = £2,800 but restricted to:
(Gross sale proceeds – £6,000) × 5/3 = (£6,800 – £6,000) × 5/3 = £1,333

26 Correct answer(s):
A £0
Both gross sale proceeds and cost are less than £6,000 so exempt.

27 Correct answer(s):
A An antique diamond necklace worth £3,000 (cost £2,500)
E Shares held in an ISA

28 Correct answer(s):
A Legal fees on purchase – £800
B Purchase price – £110,000
D Cost of building a garage – £7,500

29 Correct answer(s):
A Chargeable gain
Goodwill is not a chattel, so cannot be exempt under the £6,000 rule.
Correct answer(s):
D Exempt
The diamond necklace is a chattel. Gross sale proceeds and cost were less than £6,000.

30 Correct answer(s):
C Decrease

ICAEW 2024 9: Capital gains tax – individuals 173

 The gain arising on the sale of the racehorse is exempt.
Correct answer(s):
D No effect
(SAMPLE EXAM)

31 Correct answer(s):
A £36,760

£
Sale proceeds 500,000
Less legal fees (24,700)
Net sale proceeds 475,300
Less original cost (280,000)
Chargeable gain 195,300
Less annual exempt amount (6,000)
Taxable gain 189,300

CGT liability
(£37,700 – £26,700) £11,000 × 10% 1,100
(£189,300 – £11,000) × 20% 35,660
36,760

32 Correct answer(s):
A £5,840

£
Sale proceeds 56,000
Less auctioneer’s fees (800)
Net sale proceeds 55,200
Less MV on death (20,000)
Chargeable gain 35,200
Less annual exempt amount (6,000)
Taxable gain 29,200

CGT liability
£29,200 × 20% 5,840

33 Correct answer(s):
B Exempt
Gains on shares held in an ISA are exempt.

174 Principles of Taxation ICAEW 2024

 Correct answer(s):
C Allowable capital loss
Shares are not chattels and so not subject to the chattels exemption where gross sale proceeds and
cost are less than £6,000.

34 Correct answer(s):
C Sale for £5,000 of the goodwill of a trading business by Jack
Goodwill is not a chattel so not subject to the exemption where gross sales proceeds and cost are
less than £6,000.
Cash, cars and premium bonds are all exempt assets.

35 Correct answer(s):
B £96,243

£
Sale proceeds 1,250,400
Less estate agents’ fees (120,000)
Net sale proceeds 1,130,400
Less original cost (641,000)
Chargeable gain 489,400
Less annual exempt amount (6,000)
Taxable gain 483,400

CGT liability
(£37,700 – £33,330) £4,370 × 10% 437
(483,400 – £4,370) × 20% 95,806
96,243

(SAMPLE EXAM)

36 Correct answer(s):
B £2,133
Cost for first disposal: £4,000 × £7,000/(£7,000 + £8,000) = £1,867
Cost for second disposal: £4,000 - £1,867 = £2,133

37 Correct answer(s):
C £2,355
Total proceeds £5,100 + £3,200 = £8,300
Actual gains = £3,100 + £1,400 = £4,500
Gain cannot exceed:
5/3 × (£8,300 - £6,000) = £3,833
Pro-rated gains:

ICAEW 2024 9: Capital gains tax – individuals 175

 Antique 1 = £5,100/£8,300 x £3,833 = £2,355
Antique 2 = £3,200/£8,300 x £3,833 = £1,478

38 Correct answer(s):
D £(900)

£
Deemed gross sale proceeds 6,000
Less selling expenses (200)
Less cost (6,700)
Allowable loss (900)

39 Correct answer(s):
D £6,740

£
Sale proceeds 50,500
Less cost plus frame (£8,000 + £1,300) (9,300)
Chargeable gain 41,200
Less annual exempt amount (6,000)
Taxable gain 35,200

CGT liability
(£37,700 – £34,700) £3,000 × 10% 300
(£35,200 – £3,000) × 20% 6,440
6,740

40 Correct answer(s):
D Individuals will have a chargeable gain on disposal of goodwill from their business.
Goodwill is a chargeable asset for individuals (but not for companies).

41 Correct answer(s):
B 1 September 2023
The date of disposal for capital gains purposes is the date on which the contract for disposal
becomes unconditional. In this case the contract became unconditional on the date the valuation
took place. The date contracts are exchanged, legal title passes, physical possession is obtained, or
payment is made are all irrelevant.

176 Principles of Taxation ICAEW 2024

 Chapter 10: Corporation tax
1 Correct answer(s):
C £285,000
Enhancement expenditure is deductible in calculating a chargeable gain only where it is reflected in
the value of the asset being sold. Hence only the cost of the second extension can be deducted as
the first has been destroyed.

2 Correct answer(s):
B £(12,400)
As a non-wasting asset, the chattel rules apply. As it was sold at a loss, actual proceeds are
substituted by deemed proceeds of £6,000 to restrict the loss.

£
Deemed proceeds 6,000
Less selling fees (400)
Net sale proceeds 5,600
Less cost (18,000)
Loss (12,400)

3 Correct answer(s):
B Exempt
The snake is a wasting asset which is an exempt asset unless it was used in the business and was
eligible for capital allowances.
Correct answer(s):
C Chargeable gain
The chair is a non-wasting asset which is chargeable. As it was not bought and sold for less than
£6,000 (sales proceeds must exceed £6,000 for the level of gain), it is chargeable subject to the
chattel rules.

4 Correct answer(s):
A (£9,750)

£
Gross proceeds 80,000
Selling costs (1,750)
Net sale proceeds 78,250
Cost (including legal fees) (63,000)
Enhancement expenditure (drainage) (25,000)
Gain / (loss) (9,750)

(SAMPLE EXAM)

ICAEW 2024 10: Corporation tax 177

5 Correct answer(s):
A £275,000

£
Sale proceeds 425,000
Cost (150,000)
Chargeable gain 275,000

The redecoration and glazing costs are both revenue in nature and therefore would have been
deductible from Party Ltd’s trading profits in 2018.

6 Correct answer(s):
C £3,040
Companies pay corporation tax on gains (at 19% where their profits are below the lower limit).
Companies do not have an annual exempt amount.
19% × £16,000 = £3,040

7 Correct answer(s):
B 1 July 2023 – 31 December 2023
Lettuce Ltd’s first accounting period commences when it first acquires a source of income or begins
to trade, whichever is earlier. In this case opening a building society account means it has acquired a
source of income. This first accounting period will, in this case, end when it commences to trade.
Its second accounting period will run from the next day to, in this case, the end of its period of
account, ie 1 January 2024 to 30 September 2024. Its third accounting period onwards will be the
same as its periods of account.

8 Correct answer(s):
A A company which is centrally managed and controlled in the UK will always be liable to UK
corporation tax on its worldwide profits.
A company which is incorporated in the UK will always be liable to UK corporation tax on its
worldwide profits; it does not matter where its central management and control is exercised.
A company which is incorporated abroad and centrally managed and controlled abroad will never
be liable to UK corporation tax on its worldwide profits.
A company which is incorporated abroad will never be liable to UK corporation tax on its worldwide
profits as long as it is also centrally managed and controlled abroad.
(SAMPLE EXAM)

178 Principles of Taxation ICAEW 2024

9 Correct answer(s):
D 1 August 2023 – 31 January 2024
Airedale Ltd’s first accounting period commences when it first acquires a source of income or begins
to trade, whichever is earlier. In this case opening a building society account means it has acquired a
source of income. This first accounting period will, in this case, end when it commences to trade. Its
first accounting period is 1 August 2023 – 31 January 2024.
Its second accounting period will run from the next day to, in this case, the end of its period of
account ie, 1 February 2024 to 30 September 2024.
Its third accounting period onwards will be the same as its periods of account.

10 Papillon Ltd’s corporation tax liability £ 37,500

Papillon’s revised limits are:

Upper limit: £250,000 × 3/12 = £62,500
Lower limit: £50,000 × 3/12 = £12,500
Therefore, Papillon Ltd pays corporation tax at the main rate.
£150,000 × 25% = £37,500.

11 Correct answer(s):
B Exempt
Correct answer(s):
D Chargeable gain
(SAMPLE EXAM)

12 Correct answer(s):
B 1 February 2022 to 31 January 2023
A corporation tax accounting period cannot exceed 12 months in length.
(SAMPLE EXAM)

13 Corporation tax payable £39,157

Y/e 31 December 2023

£
Taxable total profits 160,000
Exempt dividends received from non-associated companies 25,000
Augmented profits 185,000
Marginal relief applies
Corporation tax payable:
160,000 × 25% 40,000
Less: 3/200 × (250,000 - 185,000) × 160,000/185,000 (843)
Corporation tax payable 39,157

ICAEW 2024 10: Corporation tax 179

14 Correct answer(s):
B £1,565,000
£1,565,000 (£1,450,000 + £135,000 – £20,000)
Drisko Ltd’s augmented profits are taxable total profits plus exempt dividends received from
unrelated companies; ie, from companies not controlled by Drisko Ltd.

15 Correct answer(s):
B 1 October 2024
Lagunilla Ltd has a profits limit of £1,500,000 ÷ 2 = £750,000 because it has an associated company.
Its augmented profits in the year ended 31 December 2023 are £550,000. The dividends received
are not included in the augmented profits because they come from a company that Lagunilla Ltd
controls. It is therefore not ‘large’ for the purposes of determining the corporation tax payment dates
so the whole liability is due on 1 October 2024.

16 Chargeable gain £ 1,604,071

£
Sale proceeds 2,125,000
Less disposal costs (24,969)
Net sale proceeds 2,100,031
Less cost + acquisition costs (£432,000 + £3,000 + £12,960) (447,960)
Less enhancement expenditure (48,000)
Chargeable gain 1,604,071

17 Chargeable gain £ 119,900

£
Proceeds 312,000
Less: cost (165,000)
fees (£2,450 + £1,650) (4,100)
Extension (23,000)
Chargeable gain 119,900

The repair is not enhancement expenditure.

18 Corporation tax payable £272,150

Revised upper limit: £250,000 × 9/12 = £187,500. Therefore, corporation tax is payable at the main
rate.
£1,088,600 × 25% = £272,150

180 Principles of Taxation ICAEW 2024

19 Corporation tax payable £5,700

Taxable total profits 30,000

Exempt dividends 12,000
Augmented profits 42,000

Augmented profits below £50,000, so 19% rate applies. Corporation tax payable = £30,000 × 19% =
£5,700

20 Correct answer(s):
C £9,054

Adjusted trading profits 42,000

Chargeable gains 10,000
Less: charitable donations (6,000)
Taxable total profits 46,000

Taxable total profits 46,000

Exempt dividends 9,000
Augmented profits 55,000

Augmented profits between £50,000 and £250,000 so marginal relief applies.

TTP × 25% 46,000 × 25% 11,500

Less: 3/200 × (UL-AP) × TTP/AP 3/200 × (250,000 – 55,000) × 46,000/55,000 (2,446)
Corporation tax payable 9,054

21 Corporation tax payable £47,500

Taxable total profits 190,000

Exempt dividends 8,000
Augmented profits 198,000

Upper limit 250,000 × 9/12 187,500

Lower limit 50,000 × 9/12 37,500

Augmented profits above the revised upper limit so corporation tax payable at main rate of 25%.
25% × 190,000 = £47,500

22 Correct answer(s):

£
Taxable total profits 100,000
Exempt dividends 20,000

ICAEW 2024 10: Corporation tax 181

 £
Taxable total profits 100,000
Augmented profits 120,000

Sun Ltd is associated with Light Ltd as it holds over 50% of the share capital. Two associated
companies, so limits divided by two.

Upper limit £250,000 ÷ 2 £125,000

Lower limit £50,000 ÷ 2 £25,000

Augmented profits between the revised limits so marginal relief applies.

£
TTP × 25% £100,000 × 25% 25,000
3/200 × (125,000-120,000) ×
Less: 3/200 × (UL-AP) × TTP/AP 100,000/120,000 (63)
Corporation tax payable 24,937

23 Correct answer(s):
A £96,600

FYA Main Pool Allowances

y/e 31 Dec 2024 £ £ £
Additions qualifying
for full expensing:
print machine 90,300
FYA @ 100% (90,300) 90,300
Main pool addition: car 35,000
WDA @ 18% (6,300) 6,300
TWDV c/f 28,700
Allowances 96,600

24 Correct answer(s):
D £219,300

FYA Main Pool Allowances

Y/e 31 Mar 2024 £ £ £
TWDV b/f 65,000
Additions qualifying
for full expensing:
machine 19,000
FYA @ 100% (19,000) 19,000
WDA @ 18% (11,700) 11,700
TWDV c/f 53,300
Allowances 30,700

182 Principles of Taxation ICAEW 2024

 Tax-adjusted profits 250,000
Less: capital allowances (30,700)
Trading income 219,300

25 Correct answer(s):
A 12 m/e 31 Mar 24 £67,280, 6 m/e 30 Sep 24 £7,085

FYA Main Pool Allowances

12 m/e 31 Mar 2024 £ £ £
TWDV b/f 96,000
Addition qualifying for
full expensing:
photocopier 50,000
FYA @ 100% (50,000) 50,000
WDA @ 18% (17,280) 17,280
TWDV c/f 78,720
Allowances 67,280

6 m/e 30 Sep 24
TWDV b/f 78,720
WDA @ 18% x 6/12 (7,085) 7,085
TWDV c/f 71,635 7,085

26 Correct answer(s):
C £47,000
Vans are not cars, so qualify for full expensing. No private use adjustments for companies. So,
maximum capital allowances are the full cost of £47,000.

27 Capital allowances £60,840

FYA Main pool Allowances

Y/e 31 Mar 2024 £ £ £
TWDV b/f 120,000
Purchase qualifying for
full expensing:
equipment 45,000
FYA @ 100% (45,000) 45,000
Disposal (32,000)
88,000
WDA @18% (15,840) 15,840

ICAEW 2024 10: Corporation tax 183

TWDV c/f 72,160
Allowances 60,840

184 Principles of Taxation ICAEW 2024

 Chapter 11: Value added tax
1 Correct answer(s):
B 8 May
The time the goods are made available – invoice not issued within 14 days.

2 Correct answer(s):
D Entertaining costs of UK business customers
Van accessories – business assets – OK.
Partitioning and motor cycle – business assets – OK.
Entertaining – statutory disallowance of input tax except for entertaining employees and foreign
customers.

3 Correct answer(s):
C He must register, based on turnover of standard and zero-rated supplies.
He must register, based on turnover of standard and zero-rated supplies, which exceed £85,000.
Registration limit is in relation to taxable supplies, defined as standard and zero-rated supplies (and
reduced rate supplies if any).

4 Correct answer(s):
D £200
The eventual VAT paid is £1,000 @ 20% because Bronco Ltd does not qualify for any settlement
discounts.

5 Correct answer(s):
B 30 March 2024
First 12-month period in which £85,000 limit exceeded is y/e 29 February 2024.
Total = £85,100
Notification is required 30 days after the end of month in which limit is exceeded, ie, 30 March 2024.

6 Correct answer(s):
B £5,425
VAT may be reclaimed on vehicles (new or second-hand) other than cars used privately.

£
On van (£9,450 × 1/6) 1,575
On lorry (£23,100 × 1/6) 3,850
5,425

ICAEW 2024 11: Value added tax 185

7 Correct answer(s):
A 1 February
The basic tax point is the date that the goods are dispatched to Tariq, ie, 8 February.
However, where the supplier issues an invoice or receives payment before the basic tax point, the
earlier date becomes the actual tax point. So in this case as both the invoice and the payment occur
before the basic tax point, the earlier of these two dates becomes the actual tax point, ie, 1 February
when the invoice is issued.

8 Correct answer(s):
B £400.00
A gift of business assets is a deemed supply for VAT purposes, unless it is a trade sample or the cost
of gifts made to the same person in a 12-month period does not exceed £50.
The gift of the laptop is therefore a deemed supply. The value of the supply is the VAT exclusive cost
Quentin would have had to pay at the time of the supply to replace the laptop, ie, £2,000.
The output VAT to be accounted for by Quentin is £2,000 × 20% = £400.00

9 Correct answer(s):
B Two
A ‘person’ for VAT purposes includes an individual sole trader, partnership, limited company, club,
association or charity. A person’s registration covers all of his business activities, however diverse. It is
the ‘person’ who is registered, not the business.
Therefore, Valerie will register as a sole trader (with two businesses) and the partnership will have a
separate registration.

10 Correct answer(s):
C £302.40
VAT is calculated after both trade discount and cash discounts, as payment is made within the
specified time period. Therefore VAT on invoice is £302.40 (£1,512 @ 20%).

11 Correct answer(s):
B 29 June 2023
Priscilla must notify HMRC by the end of the 30-day period for which it is believed the threshold will
be exceeded.
Correct answer(s):
D 31 May 2023
Under the future prospects test registration takes effect from the beginning of the 30-day period.

12 Correct answer(s):
C Use of car for her wedding only
The gift of services (to the cousin or anyone else) is specifically not a taxable supply, as opposed to a
gift of goods which is a deemed supply.
The private use of goods owned by a business and the private use of services, supplied to the
business by the owner, are taxable supplies.

186 Principles of Taxation ICAEW 2024

13 Correct answer(s):
C 2 April
As an invoice is issued within 14 days of the basic tax point ie, dispatch, the date on which the invoice
is issued becomes the actual tax point. The end of the quarter does not affect this.

14 Correct answer(s):
C £10,310

£
Invoice total including VAT 10,470
Less vehicle excise duty (160)
10,310

VAT on motor cars with any amount of private use is irrecoverable; it is therefore included in the
capital cost for capital allowance purposes.
(SAMPLE EXAM)

15 Correct answer(s):
B A tax invoice is held.
To be recoverable the goods or services must be used for business purposes and the input VAT must
be supported by a VAT invoice. Input VAT on goods which are reduced-rated is recoverable; the
goods do not need to be standard-rated or zero-rated.

16 Correct answer(s):
A Both businesses
A ‘person’ for VAT purposes includes an individual sole trader, partnership, limited company, club,
association or charity. A person’s registration covers all of his or her business activities, however
diverse. It is the ‘person’ who is registered, not the business.
Therefore, Parminder will register as a sole trader with two businesses and will have to charge VAT to
the customers of both businesses.

17 Correct answer(s):
B 30 March
Sheep plc must notify HMRC by the end of the 30-day period for which it is believed the threshold
will be exceeded, ie, by 30 March.
Correct answer(s):
D 1 March
Under the future prospects test registration takes effect from the beginning of the 30-day period.

18 Correct answer(s):
B £165.67
VAT collected = (£400 × 20%) + (£514 × 1/6) = £165.67

ICAEW 2024 11: Value added tax 187

19 Correct answer(s):
A UK client entertaining
E Company car for employee use which is a taxable benefit for income tax purposes
The VAT on UK client entertaining is never recoverable. The VAT on a company car with private use
by an employee is also irrecoverable. For the car to qualify as a taxable benefit there must be private
use.
The VAT on fuel in company pool cars is recoverable. VAT on capital purchases for business use is
always recoverable. As a pre-registration purchase, it must still be owned at registration and have
been purchased within four years pre-registration. VAT on gifts of goods to customers is recoverable
although output VAT must be charged as a deemed supply.

20 Correct answer(s):
C 30 July 2023
Wayne must register for VAT once his taxable turnover for the prior 12 months exceeds the VAT
registration threshold. This happens during the month to 30 June 2023 when his turnover reaches
£85,600. He is therefore liable to notify his liability by 30 July 2023.

21 Correct answer(s):
A £770
VAT may be recovered on all three items. The VAT on the van may be recovered as it is still held in the
business at the time of registration and was purchased within four years of registration. The same
applies to the stock of spare parts. The invoice for accountancy services is dated no more than six
months before the date of registration and is therefore also recoverable.

22 Correct answer(s):
B VAT is charged on zero-rated supplies.
VAT is chargeable on zero-rated supplies, at 0%.
A trader who is wholly exempt may not register for VAT. VAT at the standard rate is charged at 20%. A
trader making taxable supplies may voluntarily register for VAT even where taxable supplies are
below the VAT registration threshold.

23 Correct answer(s):
A 30 December 2023
As Michaela’s turnover is £85,200 for the 12 months ended 30 November 2023, she must notify
HMRC within 30 days, ie, by 30 December 2023.

24 Correct answer(s):
C Miranda may choose to deregister but would then need to pay output VAT on the deemed
supply of stock and capital items still held at deregistration if the output VAT exceeds £1,000.
As Miranda’s taxable supplies are now below the registration threshold and her forecast taxable
turnover is below the deregistration threshold, she may choose to deregister. She may remain
registered if she prefers, as she still makes some taxable supplies.
On deregistration, there is a deemed supply of trade stock and capital items on which VAT has
previously been recovered. Output VAT is payable on this deemed supply subject to it being greater
than £1,000.

188 Principles of Taxation ICAEW 2024

25 Correct answer(s):
C Gifts of services worth £100 to a customer
Gifts of services are never a deemed supply. Gifts of business assets worth less than £50 per annum
per recipient are not a deemed supply.

26 Correct answer(s):
A £256
In order to recover input VAT on purchases the item must be for business purposes and be
supported by a valid VAT invoice. Only the VAT on the office stationery is therefore recoverable.

27 Correct answer(s):
B A gift of business services is not a taxable supply.
Where discounts are available, the overall amount of VAT should be calculated based on discounts
actually taken up, not those offered.
The value of the supply of a business asset used for private purposes is the cost to the taxable
person of providing the asset.
Input VAT is irrecoverable if there is any element of private use of the car.

28 Correct answer(s):
D 31 March 2024
In order to recover output VAT on an unpaid invoice, the debt must be more than six months old and
the debt must have been written off in the accounts. Six months from the due date of payment of 31
August 2023 is 29 February 2024. However, as the debt is not written off in Flight plc’s accounts until
31 March 2024, that becomes the earliest date that Flight plc could make a claim to recover the
unpaid output VAT.

29 Correct answer(s):
A 1 September
The basic tax point is the date that the goods are dispatched to Sunil, ie, 8 September.
However, where the supplier issues an invoice before the basic tax point, ie, on 1 September, this
date becomes the actual tax point.

30 Correct answer(s):
C 1 November
Basic tax point for goods on sale or return is the adoption date (maximum of 12 months later) – so 1
November. Invoice date is more than 14 days later so actual tax point is the basic tax point.

31 Correct answer(s):
C 29 October
Basic tax point is the date the goods are made available to the customer (18 October). However
actual tax point is invoice date (29 October) as it is less than 14 days after the basic tax point.

ICAEW 2024 11: Value added tax 189

32 Correct answer(s):
C Disco Ltd must be making or intending to make some taxable supplies.
The alternative answers are incorrect because:
The company can register if it makes a mixture of taxable and exempt supplies.
It is advantageous to register if expecting to be in a repayment position but it is not required.
The company does not have to be expecting to exceed the VAT threshold.

33 Correct answer(s):
B 30 November 2023
Correct answer(s):
F 1 December 2023
Under the historic turnover test, a trader must notify HMRC within 30 days of the end of the month in
which the threshold was exceeded. Registration is effective from the first of the month after the end
of the month following the threshold being exceeded.

34 Correct answer(s):
C No, based on taxable supplies of normal trading
Include taxable supplies to determine whether the threshold is exceeded, but exclude supplies of
capital assets.

35 Correct answer(s):
B £244

£
Accommodation 64
Laptop (business use) 180
244

The meals are part of salary hence outside the scope. The laptop is provided as part of an
employee’s remuneration package and is a valid expense of the business. Therefore there is no
restriction for private use.

36 Correct answer(s):
B £1,680
VAT is irrecoverable on motor cars where there is private use, hence recoverable on the van only.
(1/6 × £10,080) = £1,680

190 Principles of Taxation ICAEW 2024

37 Correct answer(s):
B Incorrect
A period of six months must have elapsed since the due date for payment.
Correct answer(s):
C Correct
Correct answer(s):
F Incorrect
The bad debt claim must be made within four years of becoming eligible for relief.

38 Correct answer(s):
B £1,152
Actual discount obtained 10% = £5,760 × 20% = £1,152

39 Correct answer(s):
A 3 April
If payment is received before the basic tax point, payment date is the actual tax point.

40 Correct answer(s):
B Not taxable
A gift of services is not a taxable supply.
Correct answer(s):
C Taxable
Goods owned by a business and temporarily used by the owner are a taxable supply.

41 Correct answer(s):
A £25,380
Input tax is not recoverable on cars and accessories fitted when supplied, where the car is not used
100% for business.

42 Correct answer(s):
D £100.00
VAT-exclusive price payable by the person supplying the asset to purchase an identical replacement
(ie, at cost).

43 Correct answer(s):
B Bad debt relief cannot be claimed
Wood Ltd – not written off so not reclaimable
Correct answer(s):
D Bad debt relief cannot be claimed
Trees Ltd – not yet six months since payment due (15 October 2023)

ICAEW 2024 11: Value added tax 191

44 Correct answer(s):
B Incorrect
VAT registration is required if taxable turnover exceeds £85,000 ie, exclude exempt turnover.
Correct answer(s):
C Correct
A business making purely zero-rated supplies can apply for exemption from registration.

45 Correct answer(s):
C 1 March 2024
From the first day after the end of the month following the cumulative turnover exceeding £85,000.
It exceeds the limit at the end of January 2024 (5 × £4,900) + (6 × £7,700) + £14,400 = £85,100. So
VAT registered from 1 March 2024.

46 Correct answer(s):
B 30 January 2024
Future prospects rule – 30 days to notify – 30 January 2024
Correct answer(s):
D 1 January 2024
Future prospects rule – immediate liability to charge VAT – 1 January 2024

47 Correct answer(s):
A £12.67
Correct answer(s):
C Maddie
Maddie is liable for the VAT that should have been paid on the sale. The consideration received by
Maddie is deemed to be VAT-inclusive.
Therefore the amount of output VAT payable is £76 × 1/6 = £12.67

48 Correct answer(s):
B Do not include
Correct answer(s):
D Do not include

49 Correct answer(s):
C Not recoverable
Correct answer(s):
F Not recoverable
(SAMPLE EXAM)

192 Principles of Taxation ICAEW 2024

50 Correct answer(s):
B £192
The tax point for the deposit is 20 February 2024, ie the quarter ended 29 February 2024.
£1,150 × 20/120 = £192
Correct answer(s):
E £1,725
The tax point for the balance of the invoice is the invoice date (1 March 2024 - ie the quarter ended
31 May 2024).
£10,350 × 20/120 = £1,725

51 Correct answer(s):
A £16.67
Correct answer(s):
C David
C David
(SAMPLE EXAM)

52 Correct answer(s):
B A trader can voluntarily register for VAT if they make only zero-rated supplies.
C A trader making both zero-rated and standard-rated supplies is required to register only if the
level of taxable supplies exceeds the VAT registration limit.
(SAMPLE EXAM)

53 Output VAT £ 5,912

£29,560 × 20% = £5,912

(SAMPLE EXAM)

54 Input VAT £ 3,030

£(900 + 2,130)
(SAMPLE EXAM)

55 Correct answer(s):
C 30 December 2023

Turnover £
January to August (£6,150 × 8) 49,200
September/October 23,000
November 13,000
85,200

The VAT registration limit is therefore exceeded at the end of November.

ICAEW 2024 11: Value added tax 193

 (SAMPLE EXAM)

56 Correct answer(s):
C £82.83
The VAT-inclusive quarterly scale rate for a car with CO2 emissions between 185 g/km and 189 g/km
is £497: £497 × 1/6 = £82.83

57 Correct answer(s):
A Demonstrate to HMRC that he intends to make taxable supplies
A person not required to be registered must be registered if he so requests and if HMRC is satisfied
that he makes taxable supplies (standard and/or zero-rated) or is carrying on a business and intends
to make taxable supplies.

58 Correct answer(s):
A The debtor must be formally insolvent.

59 Correct answer(s):
A 4 May
As the payment is received before the basic tax point date (BTPD) ie, dispatch, the date of payment
becomes the actual tax point date. It is worth noting here that the invoice was issued within 14 days
of the BTPD and this would then normally have become the tax point unless payment is made before
the invoice date.

60 Correct answer(s):
C £80
VAT in respect of lunches on business trips is recoverable (£480 × 1/6 = £80)

61 Correct answer(s):
C Deregistration will be effective immediately and must be notified by 30 March 2024
Cow plc must deregister as it is no longer making taxable supplies. A wholly exempt trader cannot
be registered for VAT. The registration will be effective immediately but Cow plc has 30 days in which
to notify HMRC, ie, by 30 March.

194 Principles of Taxation ICAEW 2024

62 £ 192

£1,000 × 96% × 20% = £192

VAT is calculated on the price of the supply less the maximum discount as the discount is taken up
here.

63 Correct answer(s):
A Only the goods used in Jacob’s house are a taxable supply.

64 Correct answer(s):
B A VAT invoice must contain certain details including the VAT registration number, the total VAT
chargeable and a description of the goods supplied.
D The VAT invoice is the usual record used to support a recovery of input VAT.
A VAT invoice must be issued to all taxable customers, but it is not necessary to issue a VAT invoice to
non-taxable customers, although an invoice often is issued in practice.
A simplified invoice may be issued if the VAT-inclusive sale proceeds are not more than £250.

ICAEW 2024 11: Value added tax 195

196 Principles of Taxation ICAEW 2024
 Chapter 12: Value added tax – further
aspects
1 Correct answer(s):
C 7 May 2024
Correct answer(s):
F 7 May 2024
A VAT return is filed electronically and due seven days after the end of the month following the end
of the return period. Payment must also be made electronically and the deadline is the same.

2 Correct answer(s):
D Two payments of £125,000 each and a balancing payment of £650,000
A trader with an annual VAT liability in excess of £2.3 million is known as a ‘substantial trader’ and is
required to make payments on account (POA) during each quarter. The POA are made in months two
and three of each quarter with a balancing payment made one month after the quarter end. The
payments required from Cornflower plc are:

£
29 February 2024 = 1/24 × £3,000,000 125,000
31 March 2024 = 1/24 × £3,000,000 125,000
30 April 2024 = balancing payment for the quarter ended 31 March 2024 650,000
900,000

3 Correct answer(s):
C £250
If a simplified VAT invoice is to be issued, the maximum consideration permitted is £250.

4 Correct answer(s):
D She pays her VAT in nine monthly instalments starting in April 2023 with a balancing payment
and the return submitted by 29 February 2024.

5 Correct answer(s):
D £4,500 by 31 May 2024
Nine payments on account equal to 1/10 of the previous year’s VAT liability are made. Any balancing
payment and the VAT return are due two months after the end of the year.

6 Correct answer(s):
D Both
Taxable persons must keep records of all transactions to support both the output VAT charged and
the claim for recoverable input VAT.

7 Correct answer(s):

ICAEW 2024 12: Value added tax – further aspects 197

 B £1,350,000
The annual accounting scheme is available if the value of taxable supplies (excluding VAT and
supplies of capital items) does not exceed £1,350,000.

8 Correct answer(s):
C Each payment on account is 1/24 of the total VAT liability of the previous year.
Under the VAT payment on accounts scheme, large traders (VAT annual liability > £2.3 million) make
monthly payments on account. Within each quarter, VAT equivalent to 1/24 of the previous year’s VAT
liability is payable in months two and three. One month after the end of each quarter the balance, if
any, for that quarter is payable. Thus for a trader with a March year end, payments will be made from
April to March. The payment for April will relate to the previous quarter and the other 11 payments
will relate to the current year. The seven day extension does not apply to the payments on account
scheme.

9 Correct answer(s):
B Businesses operating the flat rate scheme apply their sector percentage to total (both taxable
and exempt) VAT-inclusive turnover.
C HMRC may grant exemption from registration to zero-rated traders that have negligible amounts
of input VAT.
Businesses with an annual VAT liability in excess of £2.3 million must join the VAT payments on
account scheme.
The main advantage of the annual accounting scheme is the need to only file one annual VAT return.
Businesses operating the cash accounting scheme may also join the annual accounting scheme and
vice versa.

10 Correct answer(s):
A VAT is accounted for on the basis of cash paid and received rather than on invoices.
D The scheme is advantageous for businesses offering extended credit to customers.
Bad debts are relieved automatically under the cash accounting scheme because output VAT is not
paid to HMRC until the debt is received from the customer.
Businesses making zero-rated supplies only reclaim input tax – the reclaim will not be sooner using
cash accounting. Moreover, businesses making only zero-rated supplies can elect to apply normal
VAT accounting in monthly returns in order to receive their recoverable input VAT earlier.
A business must leave the cash accounting scheme if taxable supplies in the previous 12 months
exceed £1.6 million (not £1.35 million).

11 Correct answer(s):
B £550,000
Monthly instalments £3 million/24 = £125,000
Balance due one month after quarter end = £(800,000 – 125,000 – 125,000) = £550,000

12 Correct answer(s):
A VAT must be paid in quarterly or monthly instalments.
Automatic bad debt relief is a feature of the cash accounting scheme, not the annual accounting
scheme.
The VAT return is due two months after the end of the year. There is no seven day extension for the
annual accounting scheme.

198 Principles of Taxation ICAEW 2024

 You can rejoin the scheme but not if you have left within the previous 12 months.

13 Correct answer(s):
C Businesses issue normal tax invoices to customers.
Businesses calculate VAT due as a flat rate percentage of their total VAT inclusive turnover.
A limited cost trader may join the scheme but must use a flat rate of 16.5%.
In the first year of VAT registration a flat rate scheme trader gets a 1% discount on their flat rate, but
there is no obligation to use 16.5% unless the trader is a limited cost trader.

14 Correct answer(s):
D £1,122
The flat rate percentage is applied to the total (both taxable and exempt) turnover of the business
inclusive of VAT, ie, £8,500 × 1.20 × 11% = £1,122.

15 Correct answer(s):
D 4 June
Since Gordon is a member of the cash accounting scheme output VAT is accounted for when the
payment is received from the customer.
(SAMPLE EXAM)

16 Correct answer(s):
D £1,632
Within the flat rate scheme, output VAT is calculated as the relevant business % × VAT-inclusive
turnover, including the sale of capital items. Therefore Tony’s VAT payable to HMRC is £17,000 × 1.20
× 8% = £1,632.

17 Correct answer(s):
B A trader using the flat rate scheme may also be authorised to use the annual accounting scheme.
D Where a customer requires an invoice, a flat rate trader who makes wholly standard-rated
supplies will issue a VAT invoice showing 20% output tax.
(SAMPLE EXAM)

18 Correct answer(s):
B Automatic bad debt relief is given.
C Output VAT is accounted for when cash is received from the customer.
(SAMPLE EXAM)

19 Correct answer(s):
B 16.5% of VAT-inclusive turnover.

20 £ 1,350,000

ICAEW 2024 12: Value added tax – further aspects 199

21 Correct answer(s):
C £2,008
As Florence Ltd operates the cash accounting scheme its tax point is the date of payment to
suppliers or the date of receipt of payment from customers. Hence any input tax which is paid in the
quarter is also recoverable in the quarter. VAT on the artwork and the marketing literature is therefore
recoverable in this quarter. VAT on the spare machinery parts will be recovered in the next quarter.

200 Principles of Taxation ICAEW 2024

 Chapter 13: Administration of tax
1 Correct answer(s):
A 5 October 2023
A taxpayer is required to notify HMRC of the need to complete a self-assessment return by 5 October
following the tax year in which a new source of income is acquired. As Camilla commenced trading in
2022/23 she is required to notify by 5 October 2023.
(SAMPLE EXAM)

2 Correct answer(s):
C 15 March 2025
A taxpayer who wishes to submit a tax return online must do so by the later of 31 January following
the tax year end and three months from the date the return was issued.

3 Correct answer(s):
A Andrew may file a short tax return.
Correct answer(s):
C Andrew may file a short tax return.
A taxpayer who is an employee but not a director, a sole trader with a turnover of less than £85,000
per annum or a pensioner is not required to submit a full tax return each year. The taxpayer may
however, decide to continue to submit a full tax return in any event. This is voluntary and not a
requirement unless the taxpayer is sent a full return by HMRC.

4 Correct answer(s):
B 31 January 2030
Because he has a business, Edward must keep records (on paper, digitally or as part of a software
program) for his 2023/24 tax return until 31 January 2030. Where a taxpayer has a business, records
must be kept for five years from the 31 January following the end of the tax year to which they relate.
Correct answer(s):
C 31 January 2026
Where a taxpayer is not in business (ie, the records are purely personal), the records must be kept for
one year from the 31 January following the end of the tax year to which they relate, ie, 31 January
2026.

5 Correct answer(s):
C 31 January 2025
A return may be amended for any reason within 12 months of when the return should have been
filed, not when it was actually filed. A return relating to 2022/23 should have been filed by 31 January
2024. The amendment must therefore be made by 31 January 2025.

6 Correct answer(s):
B 31 January 2024, 31 July 2024 and 31 January 2025
A sole trader who is not in their first year is required to make payments on account. Eugenie must
therefore make payments on account on 31 January in the tax year and 31 July following the tax year
end. A final balancing payment is made on 31 January following the tax year end.

ICAEW 2024 13: Administration of tax 201

7 £ 5,500

Harry’s payments on account (POA) for 2023/24 will be half of the income tax and Class 4 NICs paid
under self-assessment in 2022/23:

£
Income tax liability for 2022/23 15,000
Less income tax deducted at source (6,000)
9,000
Plus NIC class 4 for 2022/23 2,000
11,000
× 50% 5,500

Payments on account are not due in respect of capital gains tax.

8 Correct answer(s):
C All of the payments were made late and will be liable to interest from the due date to the day
before payment but only the balancing payment is liable to a penalty at 5%.
Sophie’s payments should have been made on 31 January 2024, 31 July 2024 and 31 January 2025.
They were all late and will be liable to interest from the due date to the day before payment. In
addition the balancing payment is potentially liable to a penalty. Where it is paid more than 30 days
late (the penalty date), the penalty is 5%. Where it is paid more than six months after the payment
due date, there is a further penalty of 5%.

9 Correct answer(s):
C 5 October 2024
A taxpayer is required to notify HMRC of the need to complete a self-assessment return by 5 October
following the tax year in which a new source of income is acquired. As Albert commenced to trade in
2023/24 he is required to notify by 5 October 2024.

10 Correct answer(s):
C By 31 December 2024 if he submits a paper return
E By 31 January 2025 if he submits the return online
If the taxpayer submits a paper return the usual deadline is 31 October 2024 but this is extended if
the return is issued after 31 July 2024. In this case the deadline is three months from the issue of the
return, 31 December 2024.
If the taxpayer is to file online, the normal due date for filing the tax return is 31 January following the
end of the tax year.
Where the notice to make a return is issued after 31 October following the end of the tax year, the
deadline is extended to three months after the issue of the notice – not relevant in this case.

11 5 April 2028

Where the taxpayer has made an incomplete disclosure of facts in their tax return, which is not due to
careless or deliberate behaviour, HMRC has until four years after the end of the tax year to raise a
discovery assessment, ie, 5 April 2028 for 2023/24.

202 Principles of Taxation ICAEW 2024

12 Correct answer(s):
A £0
Tax payable for 2022/23

£
Total tax liability 28,450
Paid at source (23,400)
Balance payable under self-assessment 5,050

The balance payable by self-assessment re 2022/23 is 17.75% (£5,050 ÷ £28,450) of the total income
tax liability for that year. As this is less than 20% of the total tax liability, payments on account are not
required in 2023/24.
Therefore no payment on account of Harriet’s 2023/24 tax liability should have been paid on 31 July
2024.

13 £ 9,350

The tax due on 31 January 2024 is calculated as follows.

£ £
Balancing payment for 2022/23
Total tax liability 15,500
Class 4 NICs 3,200
Paid under PAYE (3,800)
Tax paid by self-assessment 14,900
Payments on account (13,000)
1,900

Payment on account for 2023/24

50% of tax paid by self-assessment for 2022/23 (50% × £14,900) 7,450
Tax due on 31 January 2024 9,350

14 Correct answer(s):
B £190
A penalty of 5% of the tax overdue is payable where income tax, Class 4 NICs and capital gains tax
are paid more than 30 days after the due date. Penalties do not, however, apply to payments on
account.
Where the tax is still outstanding six months after the payment due date a further 5% of the tax
overdue is charged.
The balancing payment for income tax paid late is £1,500 (£9,500 – £8,000 POA) and the capital
gains tax of £2,300 is also paid late.
Kurt will therefore be liable for a penalty of £190, being 5% of the total amount paid late of £3,800
(£1,500 + £2,300), which was due on 31 January 2024.
(SAMPLE EXAM)

ICAEW 2024 13: Administration of tax 203

15 Correct answer(s):
B False
Interest runs from the due payment date (31 January 2024 for 2022/23) until the day before the tax is
paid. The first statement is therefore not true.
Correct answer(s):
C True
A penalty of £75, being 5% of £1,500, will apply to the additional tax arising. The second statement is
therefore true.

16 Correct answer(s):
B False
An appeal against a discovery assessment must be made in writing within 30 days of the date of the
assessment. Therefore the statement is not true.
Correct answer(s):
D False
An internal review is optional.
Correct answer(s):
E True
(SAMPLE EXAM)

17 Correct answer(s):
B 5 October 2024
Where HMRC does not issue a tax return it must be notified of chargeable gains arising by 5 October
following the end of the tax year in which the gain arose.

18 Correct answer(s):
C 5 April 2044
HMRC may raise a discovery assessment where full disclosure has not been made either due to
negligence or fraud at any time up until 20 years after the end of the tax year.

19 Correct answer(s):
B Before the debt is recovered, there will be period when Felicity can object to the recovery.
D HMRC must be satisfied that Felicity is aware that the sum is due.
HMRC can recover the debt in this way if it is at least £1,000.
Felicity must be left with at least £5,000 in her accounts after the debt recovery.

20 Correct answer(s):
A £0
Tax payable for 2022/23

£
Total income tax liability 23,200
Paid under PAYE (19,000)
Balance payable under self-assessment 4,200

204 Principles of Taxation ICAEW 2024

 The balance payable by self-assessment re 2022/23 is 18.1% (£4,200 ÷ £23,200) of the total income
tax liability for that year. As this is less than 20% of the total tax liability, payments on account are not
required in 2023/24.
Payments on account are not required in respect of capital gains tax. Capital gains tax is settled via
one payment on the 31 January following the end of the tax year.
Therefore no payment on account of Greg’s 2023/24 liability should have been paid on 31 July 2024.

21 £ 9,700

Tax payable for 2022/23

£
Total income tax liability 12,100
Class 4 NIC 3,400
Tax deducted at source (300)
Balance payable under self-assessment 15,200

Two equal payments on account of 50% of the previous year’s tax paid by self-assessment are due on
31 January 2024 and 31 July 2024 in respect of 2023/24.
By 31 July 2024 Harold should have paid 100% of the previous year’s tax due by self-assessment, ie,
£15,200. As he has only paid £5,500 to date he should pay the balance of £9,700 on 31 July 2024 in
order to minimise any interest charges.

22 Correct answer(s):
B £100
Ingrid should have submitted her 2022/23 tax return on 31 January 2024. A fixed penalty of £100 is
due as it was submitted less than three months late.
The second payment on account was paid on 31 August 2023. The payment was due on 31 July
2023; however, no penalties are due on late payments on account.
Ingrid paid the final balancing payment for 2022/23 on 15 February 2024, 15 days late. Interest will
be due but no penalty is due as the tax was not outstanding more than 30 days after the due date.

23 Correct answer(s):
C 28 February 2025
The normal due date for filing a paper return is 31 October following the end of the tax year.
However, where the notice to make a return is issued after 31 July following the end of the tax year,
the deadline is extended to three months after the issue of the notice ie, 28 February 2025.
Correct answer(s):
F 28 February 2025
The due date for filing online is 31 January following the end of the tax year or three months after the
issue of the notice, ie, 28 February 2025.
(SAMPLE EXAM)

24 Correct answer(s):
A 31 January 2025
The balancing payment is due by the 31 January following the tax year, ie, 31 January 2025.
Correct answer(s):

ICAEW 2024 13: Administration of tax 205

 F 10 June 2025
HMRC may amend the return up to nine months from its actual filing, ie, until 10 June 2025.
(SAMPLE EXAM)

25 Correct answer(s):
B 22 April 2023
PAYE is payable electronically 17 days after the end of each tax month. The last month of the tax year
ends on 5 April 2023. It is therefore due by 22 April 2023.
Correct answer(s):
D 6 July 2023
P11D forms are due to be submitted to both HMRC and given to the employees by 6 July following
the tax year end.

26 Correct answer(s):
B Form issued when an employee leaves employment
Correct answer(s):
D End of year summary of tax and NICs per employee to be issued to each employee
An end of year summary of tax and NICs deducted in the year per employee to be issued to each
employee is a P60.

27 Correct answer(s):
A 30% potential lost revenue
The fine for filing an incorrect P11D, with careless inaccuracies is 30% of potential lost revenue.
Correct answer(s):
C £300 per return
The initial penalty for filing a late P11D is £300 per return.

28 Correct answer(s):
B 31 May

29 Correct answer(s):
A 6 July 2024
Correct answer(s):
D 31 May 2024
(SAMPLE EXAM)

30 Correct answer(s):
C 31 December 2026
A claim for ‘overpayment relief’ must be made within four years of the end of the accounting period.

31 Correct answer(s):
D 30 April 2025

206 Principles of Taxation ICAEW 2024

 Where a return is filed late, HMRC has the right to give notice of its intention to conduct an enquiry
into a return for 12 months from the next quarter date of actual submission. The quarter dates are 31
January, 30 April, 31 July, and 31 October. The return should have been filed within 12 months of the
period of account end, ie, by 31 December 2023. As Azure plc filed its return late on 29 February
2024, the next quarter date is 30 April 2024, so the anniversary of that date is 30 April 2025.

32 Correct answer(s):
B £200
The return should have been filed within 12 months of the end of the accounting period, ie, 31
August 2023. As the return is more than three months late, there is a fixed penalty of £200.
Correct answer(s):
C 10% of tax unpaid at 29 February 2024
There is also a tax-geared penalty as the return was submitted more than 18 months but less than 24
months after the end of the return period and tax was outstanding at the 18-month point. The
penalty is 10% of the unpaid tax.

33 Correct answer(s):
C 31 March 2030
Correct answer(s):
E 31 January 2030
A company must keep its records for six years from the end of the accounting period. An individual
must keep their business records for five years from 31 January following the tax year.
(SAMPLE EXAM)

34 Correct answer(s):
D £0
The failure to register is not deliberate so there is a maximum penalty of 30% of potential lost
revenue.
Edmund registers within 12 months of when he should have and pays the tax due at that time.
Therefore, the penalty may be reduced to zero.

35 Correct answer(s):
C Daniel’s full income tax return for 2023/24 received on 4 July 2024 should be submitted to
HMRC by 31 October 2024, if he submits a paper return.
E Frank Ltd’s P11Ds for 2023/24 should be submitted to HMRC by 6 July 2024.
A VAT return must be submitted electronically seven calendar days after the last day of the month
following the end of the return period, ie, 7 April 2024.
The partnership income tax return has to be submitted online by the later of 31 January following the
tax year or three months from receiving the return – in this case by 3 February 2025.
Eagle Ltd has one year from the end of the period of account to submit its corporation tax return, ie,
by 31 December 2024.

36 Correct answer(s):
B £200
As payment was made more than 16 days late but less than 30 days late, a late payment penalty of
2% will apply.
Correct answer(s):

ICAEW 2024 13: Administration of tax 207

 D £0
No late filing penalty will be due as Talia has not yet reached the points threshold for quarterly
returns of 4 points.

37 Correct answer(s):
D £18,740
Young Ltd will be liable to a first penalty of 2% of the amount outstanding at the end of day 15,
(£450,000) plus a further 2% of the amount outstanding at the end of day 30 (£450,000). As the
payment was made more than 30 days late, a second penalty will arise from day 31 onwards at an
annual rate of 4%.
£450,000 × (2% + 2%) = £18,000
£450,000 × 4% × 15/365 = £740

38 Correct answer(s):
A A late payment penalty of 2% of £250,000
E Late payment interest on £50,000 for 20 days and on £200,000 for 70 days
As Old Ltd did not apply for the TTP arrangement until the VAT was 20 days overdue, the first late
payment penalty will apply to the amount outstanding at Day 15 (£250,000). No further penalty will
arise in respect of the £200,000 outstanding at Day 30 as the TTP arrangement had been applied for
by then (and was subsequently agreed).
Interest applies to late paid VAT irrespective of the existence of a TTP arrangement.

39 Correct answer(s):
A Careless
Correct answer(s):
F 0% of potential lost revenue
The disclosure to HMRC is unprompted and therefore the penalty can be reduced to 0% of potential
lost revenue.
(SAMPLE EXAM)

40 Correct answer(s):
D A correction cannot be made in the next VAT return because the error exceeds £50,000.
The reporting error threshold is the higher of £10,000 and 1% of turnover (£5.6 million @ 1% =
£56,000), subject to an overall maximum of £50,000.
The error must therefore be disclosed to HMRC rather than adjusted for in the next return.

41 Correct answer(s):
C £2,100
Ethel has made a deliberate but not concealed error. The maximum penalty would be 70% of
potential lost revenue.
Ethel’s prompted disclosure means that the penalty can be reduced to 35% of potential lost revenue.
Potential lost revenue is:
£15,000 × 40% = £6,000
Therefore 35% × £6,000 = £2,100
(SAMPLE EXAM)

208 Principles of Taxation ICAEW 2024

42 Correct answer(s):
D £46
As this is the third late payment in the tax year the penalty is 1% of the tax unpaid.

43 Correct answer(s):
A True
Correct answer(s):
D False
A taxpayer has no right of appeal against an inspection notice

44 Correct answer(s):
A 31 December 2024
The filing date for a corporation tax return is 12 months after the end of the accounting period.
Correct answer(s):
D 14 December 2023
Krone Ltd is a very large company for the purposes of corporation tax payments and the earlier
payment dates which apply to such companies mean that for the year ended 31 December 2023,
Krone Ltd will have paid its corporation tax on 14 March 2023, 14 June 2023, 14 September 2023
and 14 December 2023.

45 Correct answer(s):
D 31 January 2030
Five years after the 31 January following 2023/24 (five years after 31 January 2025)

46 Correct answer(s):
A 606L

£
Personal allowance 12,570
Less taxable benefits (5,278)
Less underpaid tax (£246 × 100/20) (1,230)
6,062
PAYE code 606L

47 Correct answer(s):
A Elaine can amend her tax return on 15 December 2025.
C Elaine can make a claim for overpayment relief because there is an error in her return on 31
December 2027.
A taxpayer can amend their tax return any time before 12 months after 31 January following the tax
year, ie, before 31 January 2026 for a 2023/24 return issued on 6 May 2024. Elaine can therefore
amend her tax return on 15 December 2025. HMRC can correct any obvious errors or mistakes in a
taxpayer’s tax return within nine months of the date the return is filed, ie, 1 September 2025 for a

ICAEW 2024 13: Administration of tax 209

 return filed on 1 December 2024. HMRC cannot therefore correct an arithmetical error in Elaine’s
return on 29 September 2025.
A taxpayer can make a claim for overpayment relief within four years of the end of the tax year, ie,
before 5 April 2028 for 2023/24. Elaine can therefore make a claim on 31 December 2027 that there
is an error in her return. HMRC can give notice of an enquiry into a return until 12 months after the
actual filing date of the return ie, 12 months after 1 December 2024. Therefore notice cannot be
given on 20 December 2025.

48 Correct answer(s):
C £6,600

Tax payable for 2022/23

£ £
Total income tax liability 18,200
Paid under PAYE (5,000)
Balance paid by self-assessment 13,200
Payment on account for 2023/24 due 31 July 2024
50% of tax paid by self-assessment for 2022/23
(50% × £13,200) 6,600

Payments on account are not required in respect of capital gains tax. Capital gains tax is settled via
one payment on 31 January following the end of the tax year.

49 Correct answer(s):
A 31 August 2024
HMRC has the right to amend a corporation tax return for obvious errors or omissions for nine
months from the date the return is actually filed, ie, from 30 November 2023.

50 Correct answer(s):
C £1,000 fixed penalty and no tax-geared penalty
The return should have been filed within 12 months of the period of account end, ie, 30 April 2023.
As the return is more than three months late, there would usually be a £200 fixed penalty. However
as this is the third consecutive late return (persistent failure), this is increased to £1,000.
There is no tax-geared penalty as the return was submitted within 18 months of the end of the return
period (31 October 2023). The fact that there was tax unpaid at the 18 month point does not alone
give rise to a late filing penalty.

51 Correct answer(s):
B False
No penalty is payable because Rand paid the VAT in full before it was 15 days late.
Correct answer(s):
D False
Rand’s points threshold is 4, as he files quarterly returns. A late filing penalty will only be incurred if
he files a further late return after having reached the points threshold. He currently has two points, so
another three late returns would be needed (with none of the points having expired) to incur a
penalty.

210 Principles of Taxation ICAEW 2024

52 Correct answer(s):
B £1,080
The maximum penalty for a ‘not deliberate’ failure to notify is 30% of potential lost revenue of
£10,800.
As HMRC has been notified of the need to register the penalty can be reduced. The tax was unpaid
for more than 12 months so the penalty can be reduced to a minimum of 10% of £10,800, ie, £1,080.

53 Correct answer(s):
D Insufficient funds to pay the tax due

54 Correct answer(s):
B False
Correct answer(s):
C True
Correct answer(s):
F False
An employer can use voluntary payrolling to report all benefits excluding employer provided living
accommodation and beneficial loans.

55 Correct answer(s):
A True

56

56.1 The correct answer is:

B No

56.2 10 %

Not deliberate, prompted disclosure, <12m = 10% minimum penalty.

57 1 October 2023

Companies must give written notice to HMRC within three months of the start of the first accounting
period.

58 30 September 2024

Corporation tax returns are due within 12 months of the end of the period of account.

59 1 March 2024

Augmented profits are below £1,500,000, so the due date for payment is 9 months and 1 day after
the end of the accounting period.

60 7 October 2023

ICAEW 2024 13: Administration of tax 211

 Payment of quarterly VAT is due one month and seven days after the end of the VAT period ie 7
October 2023.

61 Due date: 29 February 2024

Payment: £ 125,000

Substantial traders are taxable persons with an annual VAT liability in excess of £2.3 million. A
substantial trader must make payments on account of VAT for each quarter. Payment is due at the
end of the second and third months of the quarter, with a balancing payment at the end of the
month following the end of the quarter.
Each payment is 1/24 of the total VAT liability of the previous year. 1/24 × £3 million = £125,000.

62 31 May 2024

Under the annual accounting scheme, the VAT return is due within two months of the end of the year.

31 July 2023

Payments on account are due at the end of month four, and then every month after that.

63 Thorn Ltd must notify its chargeability to corporation tax by 1 December 2023

The maximum penalty for this failure to notify chargeability is £ 36,000

The failure does not appear to be deliberate, so the maximum penalty is 30% of the potential lost
revenue of £120,000.

64 50 % of potential lost revenue

Deliberate and concealed action, prompted disclosure

65 Correct answer(s):
A £1,000
Tax return should have been submitted by 31 August 2023. The return was therefore four months
late. As this is a persistent failure, a fixed penalty of £1,000 applies. The return was not filed more
than 18 months after the end of the return period, so no tax-geared penalty applies.

66 £2,256

Corporation tax due 1 November 2022, paid 1 January 2023, so 61 days late (2 Nov 22 to 1 Jan 23).
Interest 61/365 × £200,000 × 6.75% = £2,256

67 £200

As Red Ltd has between 10 and 49 employees, the late filing penalty will be £200.

68 £ 6,750

212 Principles of Taxation ICAEW 2024

The potential lost revenue as a result of G Ltd’s error is (650,000 - 560,000) × 25% (corporation tax) =
£22,500.
The error is careless so the maximum penalty is 30% × £22,500 = £6,750

ICAEW 2024 13: Administration of tax 213

214 Principles of Taxation ICAEW 2024
 Chapter 14: Scenario-based questions:
income tax
1 Mildred

Marking guide Marks

Income tax computation

Interest from loan to Dot and dividends 1
Personal allowance 1
Working 1 – Trading income
Legal and professional fees 1
Accountancy fees 1
Class 2 NIC 1
VAT re stock purchase 1
Working 2 – Employment income
Free meals 1
Pension advice 1
Car 2
10
Total 10

Mildred’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 32,879
Employment income (W2) 18,780
Interest from loan to Dot 100
Dividends 18,900
Net income 51,659 100 18,900
Personal allowance (12,570)
Taxable income 39,089 100 18,900

WORKINGS
1 Trading income

£
Trading profits 30,700
Legal and professional fees 2,000
Accountancy fees 0
Class 2 NIC 179
VAT re stock purchase 0
Tax-adjusted trading profits 32,879

ICAEW 2024 14: Scenario-based questions: income tax 215

 2 Employment income

£
Salary 15,000
Free meals 0
Pension advice 0
Car 3,780
Total employment income 18,780

Tutorial Note
Be very careful to ensure that you use brackets or a minus sign when inputting numbers which are
deductible – eg, an allowance, deduction or an expense. In this case, the personal allowance must
be input as ‘(12,570)’ not just ‘12,570’.

Pension advice
Pension advice available to all employees and costing up to £500 per tax year is an exempt benefit.
Car benefit
115 – 75 = 40 g/km
40 ÷ 5 = 8%
Taxable percentage 28% (20% + 8% + 0% RDE2 compliant diesel car)
£18,000 × 28% = £5,040
£5,040 × 9/12 = £3,780
The benefit is time apportioned as the car was available from 1 July 2023. List price is used not price
paid for the car.
(SAMPLE EXAM)

2 Elan

Marking guide Marks

Income tax computation

ISA interest and dividend income 1
Personal allowance 1
Working 1 – Trading income
Bad debt written off 1
Parking fines 1
Entertaining 1
Donation to charity 1
Working 2 – Employment income
Bonus 1
Mobile phone 1
Car 2
10
Total 10

Elan’s total taxable income for 2023/24

216 Principles of Taxation ICAEW 2024

 Non-savings Savings Dividend
income income income
£ £ £
Trading income (W1) 44,700
Employment income (W2) 34,200
ISA interest 0
Dividends 112,000
Net income 78,900 0 112,000
Personal allowance 0
Taxable income 78,900 0 112,000

WORKINGS
1 Trading income

£
Trading profits 44,100
Bad debt written off 0
Parking fine 0
Entertaining clients 600
Donation to charity 0
Tax-adjusted trading profits 44,700

2 Employment income

£
Salary 21,000
Bonus 1,250
Mobile phone 0
Car 11,950
Total employment income 34,200

Tutorial Note
Remember that where net income exceeds £125,140 (ie, £100,000 + twice the personal
allowance of £12,570), the personal allowance will be tapered to zero.
You must show this clearly by inputting a zero for the personal allowance.

ISA interest
ISA interest is exempt income.
Parking fine
This is allowable as it was incurred by an employee while on a business activity.
Bonus
The bonus is taxed in the year of receipt, not in the year to which it relates.
Mobile phone
Provision of one mobile phone is an exempt benefit.
Car benefit
100 – 75 = 25 g/km

ICAEW 2024 14: Scenario-based questions: income tax 217

 25 ÷ 5 = 5%
Taxable percentage 25% (20% + 5%)
£20,000 × 25% = £5,000
Fuel benefit
£27,800 × 25% = £6,950
Total car benefit = £5,000 + £6,950 = £11,950

3 Becky

Marking guide Marks

Income tax computation

Bank interest and dividend income 1
Personal allowance 1
Working 1 – Trading income
Fine 1
Donation 1
Overdraft interest 1
Professional fees 1
Working 2 – Employment income
Pension advice 1
Bicycle 1
Accommodation 2
10
Total 10

Becky’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 18,540
Employment income (W2) 30,813
Bank interest 175
Dividends 7,500
Net income 49,353 175 7,500
Personal allowance (12,570)
Taxable income 36,783 175 7,500

WORKINGS
1 Trading income

£
Draft adjusted profits 19,000
Fine 0

218 Principles of Taxation ICAEW 2024

 £
Donation 0
Overdraft interest (160)
Professional fees (300)
Tax-adjusted trading profits 18,540

2 Employment income

£
Salary 16,000
Pension advice 0
Bicycle 0
Accommodation 14,813
Total employment income 30,813

Tutorial Note
Be very careful when you are reading the question to ensure that you know whether the sole
trader has taken account of the items listed in arriving at the draft taxable trading profits figure. In
this question the four items listed had not been included in the draft taxable trading profits figure.
Therefore the fine is disallowed (as incurred by the sole trader, and not an employee), as is the
Gift Aid donation, and so they are not deducted. The overdraft interest and the professional fees
are allowable expenses and are therefore deducted.

Pension advice
Provision of a pension advice is exempt if provided to all employees and less than £500 per tax year.
Bicycle
Provision of a bicycle is exempt if provided to all employees.
Accommodation
Benefit = annual value + additional yearly rent = £12,000 + [(£200,000 – £75,000) × 2.25% = £2,500]
= £14,813

4 Mandy

Marking guide Marks

Income tax computation

Direct Saver interest and ISA dividends 1
Personal allowance 1
Working 1 – Trading income
Gifts 1
Redecorating 1
Donations 1
Legal fees 1
Working 2 – Employment income
Gift from client 1
Eye test 1
Van 2
10

ICAEW 2024 14: Scenario-based questions: income tax 219

 Marking guide Marks

Total 10

Mandy’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 34,550
Employment income (W2) 27,359
Direct Saver interest 120
Dividends 0
Net income 61,909 120 0
Personal allowance (12,570)
Taxable income 49,339 120 0

WORKINGS
1 Trading income

£
Trading profits 34,000
Gifts 300
Redecorating 0
Donation 250
Legal fees 0
Tax-adjusted trading profits 34,550

2 Employment income

£
Salary 25,000
Gift from client 0
Eye test 0
Van 2,359
Total employment income 27,359

220 Principles of Taxation ICAEW 2024

 Dividends
The dividends received by Mandy are exempt as they were received from shares held in an ISA.
Van benefits
Van
£3,960 × 6/12 = £1,980
Fuel
£757 × 6/12 = £379
Total = £1,980 + £379 = £2,359
The benefits are time apportioned as the van was available from 1 October 2023.
Gift of painting
Non-cash gifts from third parties are exempt if worth less than £250.
Eye test
Provision of an eye test under health and safety legislation is an exempt benefit.

5 Jorge

Marking guide Marks

Income tax computation

Premium bond winnings and dividends 1
Personal allowance 1
Working 1 – Trading income
Staff party 1
Stock donation 1
Salary 1
Loan write off 1
Working 2 – Employment income
Private medical insurance 1
Parking space 1
Recording equipment 2
10
Total 10

Jorge’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 109,200
Employment income (W2) 56,644
Premium bond winnings 0
Dividends 950
Net income 165,844 0 950
Personal allowance 0
Taxable income 165,844 0 950

ICAEW 2024 14: Scenario-based questions: income tax 221

 WORKINGS
1 Trading income

£
Trading profits 112,000
Staff party (800)
Stock donation (2,000)
Salary 0
Loan write off 0
Tax-adjusted trading profits 109,200

2 Employment income

£
Salary 55,000
Private medical insurance 500
Parking space 0
Recording equipment 1,144
Total employment income 56,644

Premium bond winnings

Premium bond winnings are exempt income.
Personal allowance
No personal allowance is available as net income exceeds £125,140.
Stock donation
Donation of trading stock to an educational establishment is specifically allowable.
Loan write off
The write-off of a non-trade bad debt is not deductible.
Recording equipment
The use of the recording equipment gives rise to a taxable benefit based on 20% of the market value
of the asset when first provided. £8,720 × 20% = £1,744. The taxable benefit is reduced by the
contribution made by Jorge.
Benefit = £1,744 - (£50 × 12) = £1,144

6 Leanne

Marking guide Marks

Income tax computation

Investment account interest and dividends 1
Personal allowance 1
Working 1 – Trading income
Building work 1
Interest 1
Accountancy fees 1
VAT re advertising 1
Working 2 – Employment income

222 Principles of Taxation ICAEW 2024

 Marking guide Marks

Pension contribution 1
Car 2
Medical 1
10
Total 10

Leanne’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 18,670
Employment income (W2) 20,685
Investment account 60
Dividends 500
Net income 39,355 60 500
Personal allowance (12,570)
Taxable income 26,785 60 500

WORKINGS
1 Trading income

£
Trading profits 19,500
Building work 0
Interest (230)
Accountancy fees (500)
VAT re advertising (100)
Tax-adjusted trading profits 18,670

2 Employment income

£
Salary 18,500
Pension contribution 0
Car 2,185
Medical 0
Total employment income 20,685

Building work
Disallowable as capital in nature.
Interest
Allowable as incurred for business purposes.
VAT re advertising

ICAEW 2024 14: Scenario-based questions: income tax 223

 Allowable as relates to a deductible expense.
Car benefit
Taxable percentage 19% (19% + 0% RDE2 compliant diesel car)
£23,000 × 19% = £4,370
£4,370 × 6/12 = £2,185
The diesel car is RDE2 compliant so is exempt from the diesel supplement. The benefit is time
apportioned as the car was available from 1 October 2023. List price is used not price paid for the
car.
Medical check-up
One medical check-up per tax year is an exempt benefit.

7 Simon

Marking guide Marks

Income tax computation

Repayment interest and dividends 1
Personal allowance 1
Working 1 – Trading income
Decorating 1
Fine 1
Pension contribution 1
Overdraft fee 1
Working 2 – Employment income
Bonus 1
Vouchers 1
Camera 2
10
Total 10

Simon’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 33,100
Employment income (W2) 11,285
Repayment interest 0
Dividends 1,000
Net income 44,385 0 1,000
Personal allowance (12,570)
Taxable income 31,815 0 1,000

WORKINGS
1 Trading income

224 Principles of Taxation ICAEW 2024

 £
Trading profits 29,600
Decorating 0
Fine 2,000
Pension contribution 1,500
Overdraft fee 0
Tax-adjusted trading profits 33,100

2 Employment income

£
Salary 10,000
Bonus 200
Vouchers 950
Camera 135
Total employment income 11,285

Repayment interest
Repayment interest is exempt from income tax.
Pension contribution
This is disallowed as it is an appropriation of profit.
Vouchers
The benefit is the cost to the employer not the face value of the voucher.
Camera
£1,500 × 20% × 9/12 = £225
Benefit = £225 – £90 (employee contribution) = £135
The benefit is time apportioned as the camera was available from 1 July 2023.

8 Finlay

Marking guide Marks

Income tax computation

Treasury stock interest and dividends 1
Personal allowance 1
Working 1 – Trading income
Pension contribution 1
Patent 1
Diaries 1
Subscription 1
Working 2 – Employment income
Meal vouchers 1
Accommodation 2
Summer party 1
10
Total 10

ICAEW 2024 14: Scenario-based questions: income tax 225

Finlay’s total taxable income for 2023/24

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 45,010
Employment income (W2) 18,910
Treasury stock interest 300
Dividends 0
Net income 63,920 300 0
Personal allowance (12,570)
Taxable income 51,350 300 0

WORKINGS
1 Trading income

£
Trading profits 50,000
Pension contribution (2,100)
Patent (1,700)
Diaries (1,000)
Subscription (190)
Tax-adjusted trading profits 45,010

2 Employment income

£
Salary 15,000
Meal vouchers 960
Accommodation 2,950
Summer party 0
Total employment income 18,910

Dividends
The dividends received by Finlay are exempt as they were received from shares held in an ISA.
Meal vouchers
Benefit = £4 × 240 = £960
Living accommodation
Benefit = £13,000 (higher of rental value and annual value) × 3/12 – £300 (employee contribution) =
£2,950
The benefit is time apportioned as the flat was available from 1 January 2024.
Annual summer party
As this is an annual event and the cost in relation to Finlay does not exceed £150 in the tax year, this
is an exempt benefit.

226 Principles of Taxation ICAEW 2024

9 Victoria

Marking guide Marks

Income tax computation

Lottery winnings and dividends 1
Personal allowance 1
Working 1 – Trading income
Donation 1
Repairs 1
Legal fees 1
Goods 1
Working 2 – Employment income
Football match 1
Childcare 1
Car 2
10
Total 10

Victoria’s total taxable income for 2023/243

Non-savings Savings Dividend

income income income
£ £ £
Trading income (W1) 22,700
Employment income (W2) 129,330
Lottery winnings 0
Dividends 5,000
Net income 152,030 0 5,000
Personal allowance 0
Taxable income 152,030 0 5,000

WORKINGS
1 Trading income

£
Trading profits 19,000
Donation 1,000
Repairs 0
Legal fees 1,500
Goods 1,200
Tax adjusted trading profits 22,700

2 Employment income

£
Salary 122,770

ICAEW 2024 14: Scenario-based questions: income tax 227

 £
Football match 0
Childcare 0
Car 6,560
Total employment income 129,330

Lottery winnings
Lottery winnings are exempt from income tax.
Personal allowance
No personal allowance is available as net income exceeds £125,140.
Goods taken for own use
The selling price must be taxed.
Football match
This is an exempt benefit as it was provided by a third party.
Childcare
This is an exempt benefit because the childcare is run by Victoria’s employer.
Car benefit
95 – 75 = 20 g/km
20 ÷ 5 = 4%
Taxable percentage 24% (20% + 4%)
(£31,000 + £500) × 24% = £7,560
£7,560 – £1,000 = £6,560
The benefit is calculated on the list price plus accessories costing more than £100 added later.
The benefit is also reduced for Victoria’s contribution towards the running of the car.

10 Sandra

Marking guide Marks

Income tax computation

Bank interest and dividends 1
Personal allowance 1
Working 1 – Trading income
Car lease 1
Employer’s NIC 1
Legal fees 1
Depreciation 1
Working 2 – Employment income
Health and safety course 1
Assets for private use 2
Cookery classes 1
10
Total 10

Sandra’s total taxable income for 2023/24

228 Principles of Taxation ICAEW 2024

 Non-savings Savings Dividend
income income income
£ £ £
Trading income (W1) 28,790
Employment income (W2) 20,265
Bank interest 100
Dividends 540
Net income 49,055 100 540
Personal allowance (12,570)
Taxable income 36,485 100 540

WORKINGS
1 Trading income

£
Trading profits 28,400
Car lease (£1,600 × 15%) 240
Employer’s NIC 0
Legal fees 0
Depreciation 150
Tax-adjusted trading profits 28,790

2 Employment income

£
Salary 20,000
Health and safety course 0
Assets for private use 165
Cookery classes 100
Total employment income 20,265

Legal fees
Legal fees relating to the renewal of a short lease are allowable.
Health and safety course
Work-related training is an exempt benefit.
Cookery classes
The marginal cost to PQR Ltd is taxable on Sandra.
Assets for private use
The provision of the mobile phone is exempt.
TV £825 × 20% = £165

ICAEW 2024 14: Scenario-based questions: income tax 229

230 Principles of Taxation ICAEW 2024
 Chapter 15: Scenario-based questions:
corporation tax
1 Kennedy Ltd

Marking guide Marks

1.1 Kennedy Ltd’s taxable total profits

Non-trading loans 1
Dividends 1
Qualifying donation 1
Working 1 – Trading income
Depreciation 0.5
Loan interest payable 0.5
Qualifying donation 1
Exempt dividends received 0.5
Bank interest receivable 0.5
Car leasing charges 1
Trade samples 0.5
Gifts to customers 0.5
8
1.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1
2
Total 10

1.1 Kennedy Ltd’s taxable total profits

£
Trading income (W1) 1,773,830
Non-trading loans 2,000
Dividends 0
Qualifying donation Taxable total profits1,772,030 (3,800)
Taxable total profits 1,722,030

WORKING
Trading income

£
Draft accounting profits 1,595,000
Depreciation 202,400
Loan interest payable 1,000
Qualifying donation 6,000
Exempt dividends received (18,000)

ICAEW 2024 15: Scenario-based questions: corporation tax 231

 £
Bank interest receivable (3,000)
Car leasing charges (3,570)
Trade samples (6,000)
Gifts to customers 0
Trading income 1,773,830

Non-trading loans
The interest payable on the loan to buy an investment property is treated as a non-trading
debit.
Net non-trade loan relationship income: £3,000 - £1,000 = £2,000.
Gifts
The gifts of trade samples are specifically allowed regardless of value.
The other gifts to customers are disallowed as they are drinks.
1.2 Corporation tax payment date

£
Taxable total profits 1,490,000
Exempt ABGH distributions 25,000
Augmented profits 1,515,000

First payment of corporation tax due date for Y/E 31/12/2024 is 14/07/2024
(SAMPLE EXAM)

2 Sigil Ltd

Marking guide Marks

2.1 Sigil Ltd’s taxable total profits

Non-trading loans 1
Dividends 1
Chargeable gain 1
Working 1 – Trading income
Depreciation 0.5
Loan interest payable .5
Profit on disposal 1
Exempt dividends received 0.5
Bank interest receivable 0.5
Employee loan interest 1
Dividends paid 0.5
Repairs 0.5
8
2.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1

232 Principles of Taxation ICAEW 2024

 Marking guide Marks

2
Total 10

2.1 Sigil Ltd’s taxable total profits

£
Trading income (W1) 131,700
Non-trading loans 3,800
Dividends 0
Chargeable gain 9,000
Taxable total profits 144,500

WORKING
Trading income

£
Draft accounting profits 125,000
Depreciation 6,300
Loan interest payable 2,000
Profit on disposal (12,000)
Exempt dividends received (4,000)
Bank interest receivable (5,000)
Employee loan interest (600)
Dividends paid 20,000
Repairs 0
Trading income 131,700

Non-trading loans
Bank interest and employee loan interest are non-trade loan relationship income. All interest is
taxed on the accruals basis for companies. The interest payable on the loan to purchase shares
is a non-trade loan relationship expense.
Net non-trade loan relationship income: £5,000 + £600 + £200 - £2,000 = £3,800.
Repairs
Expenditure on a newly acquired asset that is required to bring the asset into use in the
business is treated as capital expenditure and therefore not allowed.

Tutorial Note
Remember that if an item of income is not taxable then you must input a zero into the
relevant box to be awarded the mark available

2.2 Corporation tax payment date

£
Taxable total profits 213,000
Exempt ABGH distributions 4,000

ICAEW 2024 15: Scenario-based questions: corporation tax 233

 £
Augmented profits 217,000

Corporation tax due date for Y/E 31/03/2025 is 01/01/2026

3 Bryn Ltd

Marking guide Marks

3.1 Bryn Ltd’s taxable total profits

Non-trading loans 1
Dividends 1
Qualifying donation 1
Working 1 – Trading income
Depreciation 0.5
Loan interest payable 0.5
Qualifying donation 1
Exempt dividends received 0.5
Bank interest receivable 0.5
Profit on disposal 0.5
Gift of stock 0.5
Gifts of wine 1

8
3.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1
2
Total 10

3.1 Bryn Ltd’s taxable total profits

£
Trading income (W1) 906,500
Non-trading loans 4,200
Dividends 0
Qualifying donation (1,600)
Taxable total profits 909,100

WORKING
Trading income

£
Draft accounting profits 890,000
Depreciation 45,500

234 Principles of Taxation ICAEW 2024

 £
Loan interest payable 0
Qualifying donation 8,000
Exempt dividends received (27,000)
Bank interest receivable (4,200)
Profit on disposal (5,500)
Gift of stock 0
Gifts of wine £10 × 30 = (300)
Trading income 906,500

While gifts are often disallowable, a gift of stock is specifically allowable.

Tutorial Note
Remember that if no adjustment is required then you must input a zero into the relevant
box to be awarded the mark available.

3.2 Corporation tax payment date

£
Taxable total profits 980,900
Exempt ABGH distributions 50,000
Augmented profits 1,030,900

Corporation tax due date for Y/E 30/09/2024 is 14/04/2024

Bryn Ltd has one associated company at the end of the previous accounting period and its
augmented profits exceed the limit of £750,000 so the company is large.
It was also large in the previous accounting period and so quarterly instalment payments are
required, the first being on the 14th day of the seventh month of the accounting period.

4 Lundy Ltd

Marking guide Marks

4.1 Lundy Ltd’s taxable total profits

Non-trading loans 1
Dividends 1
Property income 1
Working 1 – Trading income
Depreciation 0.5
Loan interest payable 0.5
Property income 1
Exempt dividends received 0.5
Bank interest receivable 0.5
Staff party 0.5
Gift of pens 0.5
Legal fees 1

ICAEW 2024 15: Scenario-based questions: corporation tax 235

 Marking guide Marks

8
4.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1
2
Total 10

4.1 Lundy Ltd’s taxable total profits

£
Trading income (W1) 2,971,00
Non-trading loans (£7,000 – £3,800) 3,200
Dividends 0
Property income 30,000
Taxable total profits 3,004,400

WORKING
Trading income

£
Draft accounting profits 2,860,000
Depreciation 148,700
Loan interest payable 3,800
Property income (25,000)
Exempt dividends received (9,000)
Bank interest receivable (7,000)
Staff party 0
Gift of pens 0
Legal fees (300)
Trading income 2,971,200

4.2 Corporation tax payment date

£
Taxable total profits 3,100,000
Exempt ABGH distributions 9,000
Augmented profits 3,109,000

Corporation tax due date for Y/E 31/03/2025 is 14/10/2024

5 Budding Ltd

Marking guide Marks

236 Principles of Taxation ICAEW 2024

 Non-trading loans 1
Dividends 1
Qualifying donation 1
Working 1 – Trading income
Depreciation 0.5
Bonuses 0.5
Qualifying donation 1
Exempt dividends received 0.5
Bank interest receivable 0.5
Employee parking fines 0.5
Employer national insurance contributions 0.5
Legal fees 1

8
5.2 Corporation tax payment date
Profits limit 1
Due date 1
2
Total 10

5.1 Budding Ltd’s taxable total profits

£
Trading income (W1) 196,650
Non-trading loans 8,000
Dividends 0
Qualifying donation (8,300)
Taxable total profits 196,350

WORKING
Trading income

£
Draft accounting profits 165,000
Depreciation 13,200
Bonuses 25,000
Qualifying donation 10,000
Exempt dividends received (6,750)
Bank interest receivable (8,000)
Employee parking fines 0
Employer national insurance contributions 0
Legal fees (1,800)
Trading income 196,650

5.2 Corporation tax limit and payment date

ICAEW 2024 15: Scenario-based questions: corporation tax 237

 £
The profits limit is 1,000,000
First payment of corporation tax due date 01/09/2025

The profit limit is lowered because the period ended 30 November 2024 is eight months long
(ie, less than 12).
The limit is therefore £1,500,000 × 8/12 = £1,000,000.

6 Pedestal Ltd

Marking guide Marks

6.1 Pedestal Ltd’s taxable total profits

Non-trading loans 1
Qualifying donation 1
Working 1 – Trading income
Depreciation .5
HMRC interest payable 0.5
HMRC penalty 0.5
Donation 1
Client entertaining 0.5
Bank interest receivable 0.5
Loss on disposal 0.5
Loan stock 1
Extension 0.5
Redecoration 0.5
8
6.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1
2
Total 10

6.1 Pedestal Ltd’s taxable total profits

£
Trading income (W1) 1,959,650
Non-trading loans (£7,200 – £150) 7,050
Qualifying donation (8,000)
Taxable total profits 1,958,700

WORKING
Trading income

£
Draft accounting profits 1,873,000
Depreciation 80,900

238 Principles of Taxation ICAEW 2024

 £
HMRC interest payable 150
HMRC penalty 2,000
Donation 10,000
Client entertaining 6,300
Bank interest receivable (7,200)
Loss on disposal 3,300
Loan stock (3,800)
Extension 0
Redecoration (5,000)
Trading income 1,959,650

As the loan stock was issued for trading purposes, both the interest and legal fees are trading
expenses.
6.2 Corporation tax payment date

£
Taxable total profits 1,940,000
Exempt ABGH distributions 7,000
Augmented profits 1,947,000

Corporation tax due date for Y/E 31/12/2024 is 14/07/2024

7 Mayet Ltd

Marking guide Marks

7.1 Mayet Ltd’s taxable total profits

Non-trading loans 1
Dividends 1
Qualifying donation 1
Working 1 – Trading income
Depreciation 0.5
Pension cost 0.5
Salaries 1
Qualifying donation 1
Exempt dividends received 0.5
Bank interest receivable 0.5
Debt write-offs 1

8
7.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1
2

ICAEW 2024 15: Scenario-based questions: corporation tax 239

 Marking guide Marks

Total 10

7.1 Mayet Ltd’s taxable total profits

£
Trading income (W1) 83,800
Non-trading loans 13,000
Dividends 0
Qualifying donation (16,000)
Taxable total profits 80,800

WORKING
Trading income

£
Draft accounting profits 95,000
Depreciation 4,500
Pension cost 2,000
Salaries 0
Qualifying donation 14,000
Exempt dividends received (11,700)
Bank interest receivable (13,000)
Debt write-offs (7,000)
Trading income 83,800

7.2 Corporation tax payment date

£
Taxable total profits 100,000
Exempt ABGH distributions 12,000
Augmented profits 112,000

Corporation tax due date for Y/E 30/06/2024 is 01/04/2025

8 Fonic Ltd

Marking guide Marks

8.1 Fonic Ltd’s taxable total profits

Non-trading loans 1
Dividends 1
Property income 1
Working 1 – Trading income
Depreciation 0.5

240 Principles of Taxation ICAEW 2024

 Marking guide Marks

Profit on disposal 0.5

Property income 1
Exempt dividends received .5
Bank interest receivable 0.5
Entertaining 1
Vouchers 0.5
Gift to hospice 0.5
8
8.2 Corporation tax payment date
Limit 1
Due date 1
2
Total 10

8.1 Fonic Ltd’s taxable total profits

£
Trading income (W1) 951,900
Non-trading loans 4,900
Dividends 0
Property income 18,000
Taxable total profits 974,800

WORKING
Trading income

£
Draft accounting profits 852,000
Depreciation 130,600
Profit on disposal (2,000)
Property income (16,500)
Exempt dividends received (10,800)
Bank interest receivable (4,900)
Entertaining 4,000
Vouchers 0
Gift to hospice (500)
Trading income 951,900

8.2 Corporation tax limit and payment date

£
The profits limit is 750,000
First payment of corporation tax due date 01/07/2025

ICAEW 2024 15: Scenario-based questions: corporation tax 241

 The profits limit is divided by two in the year ended 30 September 2024 because Fonic Ltd has
an associated company at the end of the previous accounting period.

9 Selby Ltd

Marking guide Marks

9.1 Selby Ltd’s taxable total profits

Non-trading loans 1
Qualifying donation 1
Working 1 – Trading income
Depreciation 0.5
Loan interest payable 0.5
Qualifying donation 1
Pension contributions 0.5
Bank interest receivable .5
HMRC penalty 0.5
Legal fees 1
Maintenance costs 0.5
Professional fees 1
8
9.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1
2
Total 10

9.1 Selby Ltd’s taxable total profits

£
Trading income (W1) 639,120
Non-trading loans 6,000
Qualifying donation (1,800)
Taxable total profits 643,320

WORKING
Trading income

£
Draft accounting profits 534,000
Depreciation 46,200
Loan interest payable 0
Qualifying donation 2,000
Pension contributions 22,000
Bank interest receivable (6,000)
Penalty from HMRC 4,500

242 Principles of Taxation ICAEW 2024

 £
Legal fees 37,000
Maintenance costs 0
Professional fees (580)
Trading income 639,120

9.2 Corporation tax payment date

£
Taxable total profits 480,000
Exempt ABGH distributions 0
Augmented profits 480,000

Corporation tax due date for Y/E 31/12/2024 is 01/10/2025

Even with an associated company, Selby Ltd’s augmented profits do not exceed the limit
(£750,000) and so quarterly instalment payments are not required.

10 Knight Ltd

Marking guide Marks

10.1 Knight Ltd’s taxable total profits

Non-trading loans 1
Dividends 1
Property income 1
Working 1 – Trading income
Depreciation 0.5
Loan interest payable 0.5
Property income 1
Exempt dividends received 0.5
Bank interest receivable 0.5
Marketing fees 1
1
8
10.2 Corporation tax payment date
Exempt ABGH distributions 1
Due date 1
2
Total 10

10.1 Knight Ltd’s taxable total profits

£
Trading income (W1) 454,600
Non-trading loans 5,100
Dividends 0

ICAEW 2024 15: Scenario-based questions: corporation tax 243

 £
Property income (£40,000 × 9/12) 30,000
Taxable total profits 489,700

WORKING
Trading income

£
Draft accounting profits 467,000
Depreciation 32,500
Loan interest payable 0
Property income (40,000)
Exempt dividends received (4,500)
Bank interest receivable (5,100)
Marketing fees 800
Employee parking fine 0
HMRC fine 3,900
Trading income 454,600

10.2 Corporation tax payment date

£
Taxable total profits 420,000
Exempt ABGH distributions 0
Augmented profits 420,000

Corporation tax due date for Y/E 31/3/2025 is 01/01/2026

Even with one associated company at the end of the previous accounting period, Knight Ltd’s
augmented profits do not exceed the limit (£750,000) and so quarterly instalment payments
are not required.
The dividends from Sword Ltd are not included in augmented profits as they are received from
a 51% subsidiary.

244 Principles of Taxation ICAEW 2024

Appendix
246 Principles of Taxation ICAEW 2024
Mock Exam guidance notes
Suggested structure for Mock Exams in 2024
Exam format
20% of the marks are allocated from two scenario-based questions. These will each cover a single
syllabus area. The remaining 80% of the marks are from 40 objective test questions.

Style of exam questions

The scenario-based questions will each cover a single syllabus area: income tax and NIC, and
corporation tax.
Each objective test question should conform to the style used in the sample exam, ie:
• Multiple Choice Questions (MCQ) (1 from 4 or 5); or
• Multi-Part Multiple Choice Questions (MPMCQ); or
• Multiple Response Questions (MRQ) (2 from 4 or 5, or possibly 3 from 5); or
• 2 MCQ (eg, 2 × ‘adjust or do not adjust’, or 2 × ‘chargeable gain, allowable loss, nil’); or
• 3 MCQ (eg, 3 × ‘income tax or corporation tax, income tax or capital gains tax, corporation tax or
capital gains tax’); or
• Numerical entry.
Also, there should be no more than 5–6 questions which require either simple yes/no or true/false
answers. The Mock Exam should include two numerical entry questions in total, from syllabus section
6e.

Exam coverage and balance

A Mock Exam should have approximately the syllabus coverage and balance set out in the table
below.

Syllabus area Weighting Number of questions

%

(a) Objectives, types of tax and ethics 10% 5

(b) Administration of taxation 20% 10

(c) Income tax and national insurance contributions 24% 7 objective test and 1
scenario-based

(d) Capital gains tax and chargeable gains for 10% 5

companies

(e) Corporation tax 16% 3 objective test and 1

scenario-based

(f) VAT 20% 10

Total 100 40 objective test

and 2 scenario-
based

The following matrix contains three sets of questions, selected from within this Question Bank.
Each one contains an appropriate balance of questions which form a ‘sample exam’ for you to
attempt. Note that the question topics listed here are only examples of the nature of questions which
may be included – the actual exam questions may be on different topics.

ICAEW 2024 Appendix 247

 Question Sample exam 1 Sample exam 2 Sample exam 3

Scenario 1 Scenario-based Scenario-based Scenario-based

questions: income tax questions: income tax Q4 questions: income tax Q1
Q2

Scenario 2 Scenario-based Scenario-based Scenario-based

questions: corporation questions: corporation questions: corporation
tax Q2 tax Q3 tax Q1

1 Ch 1; Q 2 Ch 1; Q 3 Ch 2; Q2

2 Ch 1; Q 6 Ch 1; Q 7 Ch 2; Q6

3 Ch 1; Q 12 Ch 1; Q 11 Ch 1; Q5

4 Ch 2; Q 1 Ch 2; Q 3 Ch 1; Q14

5 Ch 1; Q 18 Ch 2; Q 5 Ch 1; Q9

6 Ch 13; Q 6 Ch 13; Q 4 Ch 13; Q33

7 Ch 4; Q 2 Ch 4; Q 5 Ch 4; Q1

8 Ch 13; Q 3 Ch 13; Q 5 Ch 13; Q1

9 Ch 12; Q 1 Ch 13; Q 25 Ch 13; Q2

10 Ch 13; Q 45 Ch 13; Q 35 Ch 13; Q28

11 Ch 13; Q 8 Ch 13; Q 15 Ch 13; Q27

12 Ch 13; Q 37 Ch 13; Q 38 Ch 13; Q34

13 Ch 13; Q 22 Ch 13; Q 41 Ch 13; Q32

14 Ch 13; Q 39 Ch 13; Q 36 Ch 13; Q14

15 Ch 13; Q 31 Ch 13; Q 43 Ch 13; Q16

16 Ch 3; Q 1 Ch 3; Q 10 Ch 3; Q6

17 Ch 5; Q 3 Ch 5; Q 2 Ch 5; Q1

18 Ch 6; Q 10 Ch 6; Q 13 Ch 6; Q9

19 Ch 7; Q 12 Ch 7; Q 15 Ch 7; Q3

20 Ch 7; Q 10 Ch 7; Q 11 Ch 7; Q4

21 Ch 3; Q 4 Ch 3; Q 5 Ch 7; Q7

22 Ch 8; Q 12 Ch 8; Q 9 Ch 3; Q2

23 Ch10; Q6 Ch9; Q30 Ch 8; Q6

24 Ch 9; Q 11 Ch 9; Q 12 Ch 9; Q5

25 Ch 9; Q 4 Ch 9; Q 6 Ch 10; Q11

26 Ch 9; Q 9 Ch 9; Q 31 Ch 9; Q17

27 Ch 10; Q 2 Ch 10; Q 1 Ch 10; Q4

28 Ch 10; Q 23 Ch 10; Q 24 Ch 9; Q7

29 Ch 10; Q 9 Ch 10; Q 7 Ch 10; Q12

30 Ch 10; Q 10 Ch 10; Q 13 Ch 10; Q8

248 Principles of Taxation ICAEW 2024

 Question Sample exam 1 Sample exam 2 Sample exam 3

31 Ch 11; Q 12 Ch 11; Q 42 Ch 11; Q14

32 Ch 11; Q 5 Ch 11; Q 8 Ch 11; Q3

33 Ch 11; Q 9 Ch 11; Q 11 Ch 11; Q16

34 Ch 11; Q 1 Ch 11; Q 7 Ch 11; Q17

35 Ch 11; Q 6 Ch 11; Q 2 Ch 11; Q13

36 Ch 11; Q 15 Ch 11; Q 10 Ch 11; Q50

37 Ch 11; Q 4 Ch 11; Q 18 Ch 11; Q26

38 Ch 12; Q 4 Ch 12; Q 11 Ch 12; Q2

39 Ch 12; Q 12 Ch 12; Q 5 Ch 12; Q18

40 Ch 12; Q 14 Ch 12; Q 16 Ch 12; Q19

ICAEW 2024 Appendix 249

250 Principles of Taxation ICAEW 2024