ACCA

Taxation (TX – UK) FA2023

Mock Exam 2
Specimen exam updated to FA
2023

Questions

Time allowed 3 Hours

This exam is divided into three sections

Section A – All 15 questions are compulsory and MUST be attempted.
Section B – All 15 questions are compulsory and MUST be attempted.
Section C – All THREE questions are compulsory and MUST be attempted.

DO NOT OPEN THIS EXAM UNTIL YOU ARE READY TO START

UNDER EXAMINATION CONDITIONS

397
398 Taxation (TX – UK) FA2023
 Section A

QUESTIONS
ALL 15 questions are compulsory and MUST be attempted.
1 William is self-employed, and his tax adjusted trading profit for the year ended 5 April 2024 was
£84,050. During the tax year 2023/24, William contributed £5,400 (gross) into a personal pension
scheme.
What amount of Class 4 national insurance contributions (NIC) will William pay for the tax year
2023/24?
 £4,248
 £6,433
 £4,069
 £3,393 (2 marks)

2 You are a trainee chartered certified accountant, and your firm has a client who has refused to
disclose a chargeable gain to HM Revenue & Customs (HMRC).
From an ethical viewpoint, which TWO of the following actions could be expected of your firm?
 Reporting under the money laundering regulations
 Advising the client to make disclosure
 Informing HMRC of the non-disclosure
 Warning the client that your firm will be reporting the non-disclosure (2 marks)

3 Martin is self-employed and for the year ended 5 April 2024 his trading profit was £109,400.
During the tax year 2023/24, Martin made a gift aid donation of £800 (gross) to a national
charity.
What amount of personal allowance will Martin be entitled to for the tax year 2023/24?

£ 8270 (2 marks)

4 For the year ended 31 March 2024, Halo Ltd made a trading loss of £180,000.
Halo Ltd has owned 100% of the ordinary share capital of Shallow Ltd since it began trading on 1
July 2023. For the year ended 30 June 2024, Shallow Ltd will make a trading profit of £224,000.
Neither company has any other taxable profits or allowable losses.
What is the maximum amount of group relief which Shallow Ltd can claim from Halo Ltd in respect
of the trading loss of £180,000 for the year ended 31 March 2024?
 £180,000
 £168,000
 £45,000
 £135,000 (2 marks)

5 For the year ended 31 March 2023, Sizeable Ltd had taxable total profits of £820,000, and for the
year ended 31 March 2024 had taxable total profits of £970,000. The profits accrue evenly
throughout the year.

Questions 399
 Sizeable Ltd has had one associated company for many years.
How will Sizeable Ltd pay its corporation tax liability for the year ended 31 March 2024?
 Nine instalments of £20,500 and a balancing payment of £58,000
 Four instalments of £60,625
 Four instalments of £51,250 and a balancing payment of £37,500
 One payment of £242,500 (2 marks)

6 For the year ended 31 December 2023, Lateness Ltd had a corporation tax liability of £60,000,
which it did not pay until 31 March 2025. Lateness Ltd is not a large company.
How much interest will Lateness Ltd be charged by HM Revenue & Customs (HMRC) in respect of
the late payment of its corporation tax liability for the year ended 31 December 2023?

Pull down list

• £1,950
• £4,875
• £650
• £975
(2 marks)

7 On 26 November 2023, Alice sold an antique table for £8,700. The antique table had been
purchased on 16 May 2014 for £3,800.
What is Alice’s chargeable gain in respect of the disposal of the antique table?
 £4,500
 £1,620
 £4,900
 £0 (2 marks)

8 On 14 November 2023, Jane made a cash gift to a trust of £800,000 (after deducting all available
exemptions). Jane paid the inheritance tax arising from this gift. Jane has not made any other
lifetime gifts.
What amount of lifetime inheritance tax would have been payable in respect of Jane’s gift to the
trust?

£ 118750 (2 marks)

9 During the tax year 2023/24, Mildred made four cash gifts to her grandchildren.
For each of the gifts listed below, click in the box to indicate whether the gift will be exempt or not
exempt from inheritance tax under the small gifts exemption.

400 Taxation (TX – UK) FA2023

 £400 to Alfred EXEMPT NOT EXEMPT

QUESTIONS
£140 to Minnie EXEMPT NOT EXEMPT

A further £280 to Minnie EXEMPT NOT EXEMPT

£175 to Winifred EXEMPT NOT EXEMPT

(2 marks)

10 For the quarter ended 31 March 2024, Zim had standard rated sales of £49,750 and standard
rated expenses of £22,750. Both figures are exclusive of value added tax (VAT).
Zim uses the flat rate scheme to calculate the amount of VAT payable, with the relevant scheme
percentage for her trade being 12%. The percentage reduction for the first year of VAT registration
is not available.
How much VAT will Zim have to pay to HM Revenue & Customs (HMRC) for the quarter ended 31
March 2024?
 £5,970
 £3,888
 £5,400
 £7,164 (2 marks)

11 Which TWO of the following assets will ALWAYS be exempt from capital gains tax?
 A car suitable for private use
 A chattel
 A UK government security (gilt)
 A house (2 marks)

12 Winston invested £8,000 into a cash individual savings account (ISA) during the tax year 2023/24.
Still within tax year 2023/24, Winston wants to invest into a stocks and shares ISA.
What is the maximum possible amount which Winston can invest into a stocks and shares ISA for
the tax year 2023/24?
 £20,000
 £12,000
 £0
 £10,000 (2 marks)

13 Ming is self-employed.
For each of the types of records listed below, click in the box to indicate the date until which Ming
must retain the records used in preparing her self-assessment tax return for the tax year 2023/24.

Questions 401
 Business records 31 JANUARY 2026 31 JANUARY 2030

Non-business records 31 JANUARY 2026 31 JANUARY 2030

(2 marks)

14 Moon Ltd has had the following results:

The company does not have any other income.

Period Profit/(loss)
£
Year ended 31 December 2023 (105,000)
Four-month period ended 31 December 2022 43,000
Year ended 31 August 2022 96,000

How much of Moon Ltd’s trading loss for the year ended 31 December 2023 can be relieved
against its total profits of £96,000 for the year ended 31 August 2022?
 £64,000
 £96,000
 £70,000
 £62,000 (2 marks)

15 Nigel has not previously been resident in the UK, being in the UK for less than 20 days each tax
year. For the tax year 2023/24, he has three ties with the UK.
What is the maximum number of days which Nigel could spend in the UK during the tax year
2023/24 without being treated as resident in the UK for that year?
 90 days
 182 days
 45 days
 120 days (2 marks)

402 Taxation (TX – UK) FA2023

Section B

QUESTIONS
ALL 15 questions are compulsory and MUST be attempted.

Delroy and Marlon

The following scenario relates to Questions 16 to 20.
Delroy and Grant
On 10 January 2024, Delroy made a gift of 25,000 £1 ordinary shares in Dub Ltd, an unquoted
trading company, to his son, Grant. The market value of the shares on that date was £240,000.
Delroy had subscribed for the 25,000 shares in Dub Ltd at par on 1 July 2008. Delroy and Grant
have elected to hold over the gain as a gift of a business asset. Grant sold the 25,000 shares in
Dub Ltd on 18 March 2024 for £240,000. Dub Ltd has a share capital of 100,000 £1 ordinary
shares. Delroy was the sales director of the company from its incorporation on 1 July 2008 until 10
January 2024. Grant has never been an employee or a director of Dub Ltd.
For the tax year 2023/24 Delroy and Grant are both higher rate taxpayers. They have each made
other disposals of assets during the tax year 2023/24, and therefore they have both already
utilised their annual exempt amounts for this year.
Marlon and Alvita
On 28 March 2024, Marlon sold a residential property for £497,000, which he had owned
individually. The property had been purchased on 22 October 2006 for £152,600. Throughout the
period of ownership, the property was occupied by Marlon and his wife, Alvita, as their main
residence. One-third of the property was always used exclusively for business purposes by the
couple. Business asset disposal relief is not available in respect of this disposal.
For the tax year 2023/24, Marlon is a higher rate taxpayer, but Alvita did not have any taxable
income. This will remain the case for the tax year 2024/25. Neither of them has made any other
disposals of assets during the year.

16 What is Grant’s capital gains tax (CGT) liability for the tax year 2023/24 in respect of the
disposal of the shares in Dub Ltd?
 £43,000
 £21,500
 £0
 £41,800 (2 marks)

17 Which TWO of the following statements would have been true in relation to the CGT
implications if Delroy had instead sold the 25,000 shares in Dub Ltd himself for £240,000
on 10 January 2024, and then gifted the cash proceeds to Grant?
 Business asset disposal relief would have been available.
 The CGT liability would have been paid later.
 The cash gift would not have been a chargeable disposal.
 The cash gift would have qualified for gift holdover relief. (2 marks)

18 What is Marlon’s chargeable gain for the tax year 2023/24?

 £229,600
 £0
 £114,800
 £344,400 (2 marks)

Questions 403
19 What is the amount of CGT which could have been saved if Marlon had transferred 50%
ownership of the residential property to Alvita prior to its disposal?
 £1,680
 £5,450
 £3,770
 £12,236 (2 marks)

20 What is the payment date for the capital gains tax payable on the disposal of the
residential property on 28 March 2024?

Pull down list

• 27 May 2024
• 31 January 2025
• 31 January 2026
• 31 May 2024
(2 marks)

(Total = 10 marks)

Opal
The following scenario relates to Questions 21 to 25.
You should assume that today’s date is 15 March 2024.
Opal is aged 71 and has a chargeable estate for inheritance tax (IHT) purposes valued at
£950,000. She owns a property which is valued at £374,000 and has an outstanding repayment
mortgage of £160,000. She also holds life insurance on her own life, currently valued at £350,000,
but which will pay proceeds of £442,000 in the event of her death.
Opal owes £22,400 in respect of a personal loan from a bank, and she has also verbally promised
to pay legal fees of £4,600 incurred by her nephew. Opal expects the cost of her funeral to be
£5,200, and this cost will be covered by the £6,000 she has invested in an individual savings
account (ISA). Under the terms of her will, Opal has left all of her estate to her children. Opal’s
husband is still alive.
On 14 August 2014, Opal had made a gift of £100,000 to her daughter, and on 7 November 2023,
she made a gift of £220,000 to her son. Both these figures are after deducting all available
exemptions.
The nil rate band for the tax year 2014/15 is £325,000. You should assume that both the value of
Opal’s estate and the nil rate band will remain unchanged for future years.

21 What is the net value for the property and insurance policy, which will have been included
in the calculation of Opal’s chargeable estate of £950,000?
 £816,000
 £564,000
 £656,000
 £724,000 (2 marks)

404 Taxation (TX – UK) FA2023

22 Which TWO of the following amounts will have been deducted in calculating Opal’s
chargeable estate of £950,000?

QUESTIONS
 Personal loan from a bank of £22,400
 Promise to pay legal fees of £4,600
 Funeral cost of £5,200
 ISA investment of £6,000 (2 marks)

23 What amount of IHT will be payable in respect of Opal’s chargeable estate valued at
£950,000 were she to die on 20 March 2024?
 £250,000
 £338,000
 £378,000
 £335,600 (2 marks)

24 By how much would the IHT payable on Opal’s death be reduced if she were to live for
another seven years until 20 March 2031, compared to if she were to die on 20 March
2024?

Pull down list

• £0
• £128,000
• £40,000
• £88,000
(2 marks)

25 Which TWO of the following conditions must be met if Opal wants to make gifts out of her
income, so that these gifts are exempt from IHT?
 The gifts cannot exceed 10% of income.
 The gifts must be habitual.
 Opal must have enough remaining income to maintain her normal standard of living.
 Opal must make the gifts monthly or quarterly. (2 marks)

(Total = 10 marks)

Glacier Ltd
The following scenario relates to Questions 26 to 30.
The following information is available in respect of Glacier Ltd’s value added tax (VAT) for the
quarter ended 31 March 2024:
(1) Invoices were issued for sales of £44,600 to VAT registered customers. Of this figure, £35,200
was in respect of exempt sales and the balance in respect of standard rated sales. The
standard rated sales figure is exclusive of VAT.

Questions 405
(2) In addition to the above, on 1 March 2024 Glacier Ltd issued a VAT invoice for £8,000 plus VAT
of £1,600 to a VAT registered customer in respect of a contract which will be completed on 15
April 2024.
The customer paid for the contract in two instalments of £4,800 on 31 March 2024 and 30
April 2024.
(3) The managing director of Glacier Ltd is provided with free fuel for private mileage driven in
her company car. During the quarter ended 31 March 2024, the total cost of fuel for business
and private mileage was £720, of which £270 was for private mileage.
The relevant quarterly scale charge is £490. All of these figures are inclusive of VAT.
For the quarters ended 30 September 2022 and 30 June 2023, Glacier Ltd was one month late in
submitting its VAT returns and in paying the related VAT liabilities.
All of the company’s other VAT returns have been submitted on time.

26 What is the amount of output VAT payable by Glacier Ltd in respect of its sales for the
quarter ended 31 March 2024?

Pull down list

• £1,880
• £10,520
• £2,680
• £3,480
(2 marks)

27 Calculate the amounts required to complete the following sentence:

Glacier Ltd will include output VAT of £ and input VAT of

£ on its VAT return for the quarter ended 31 March 2024 in respect of the
managing director’s company car. (2 marks)

28 What penalties will Glacier Ltd be charged if the company is 30 days late in paying its VAT
liability for the quarter ended 31 March 2024?
 2% of the VAT liability and late payment interest
 2% of the VAT liability, daily penalty 4% of the VAT liability and late payment interest
 No penalty
 4% of the VAT liability, daily penalty 4% of the VAT liability and late payment interest
(2 marks)

29 Which TWO of the following statements about late filing penalties are true?
 A business incurs a penalty of £200 for every quarterly return that it submits late.
 Once the threshold is reached, four quarterly returns must be submitted on time to
reset penalty points to zero.
 A business incurs a penalty point once four quarterly returns have been submitted late.
 Penalty points expire after two years unless the threshold of four points has been
reached. (2 marks)

406 Taxation (TX – UK) FA2023

30 Glacier Ltd will be required to issue a VAT invoice in certain circumstances.
Complete the following sentence by matching one of the ‘types of supply’ and one of the

QUESTIONS
‘types of customer’ into each target area.

Glacier Ltd will be required to issue a VAT invoice when (1) ▼ is made to

(2) ▼ .

Pull down list 1

• A standard rated supply
• Any type of supply

Pull down list 2

• A VAT registered customer
• Any customer
(2 marks)

(Total = 10 marks)

Questions 407
 Section C
ALL three questions are compulsory and MUST be attempted.

31 Sarah
You should assume that today’s date is 1 March 2023.
Sarah is currently self-employed. If she continues to trade on a self-employed basis, her total
income tax liability and national insurance contributions (NIC) for the tax year 2023/24 will be
£11,034.
However, Sarah is considering incorporating her business on 6 April 2023. The forecast taxable
total profits of the new limited company for the year ended 5 April 2024 will be £50,000 (before
taking account of any director’s remuneration). Sarah will pay herself gross director’s
remuneration of £30,000 and dividends of £10,000. The balance of the profits will remain
undrawn within the new company.
Required
(a) Determine whether or not there will be an overall saving of tax and national insurance
contributions (NIC) for the year ended 5 April 2024 if Sarah incorporates her business on 6
April 2023.

Notes.
1 You are expected to calculate the income tax payable by Sarah, the Class 1 NIC payable
by Sarah and the new limited company, and the corporation tax liability of the new
limited company for the year ended 5 April 2024.
2 The new limited company will not be entitled to the NIC annual employment allowance.
3 You should assume that the rates of corporation tax remain unchanged. (8 marks)

(b) Advise Sarah as to why her proposed basis of extracting profits from the new limited
company is not optimum for tax purposes, and suggest how the mix of director’s
remuneration and dividends could therefore be improved.
Note. You are not expected to calculate any revised tax or NIC figures. (2 marks)

(Total = 10 marks)

32 Simon
On 6 April 2023, Simon commenced employment with Echo Ltd. He was already in partnership
with Art, preparing accounts to 5 April and he continued this partnership. The following
information is available for the tax year 2023/24:
Employment
(1) During the tax year 2023/24, Simon was paid a gross annual salary of £24,010.
(2) Throughout the tax year 2023/24, Echo Ltd provided Simon with living accommodation. The
company had purchased the property in 2011 for £89,000, and it was valued at £143,000 on
6 April 2023. The annual value of the property is £4,600. The property was furnished by Echo
Ltd during March 2023 at a cost of £9,400. The living accommodation is not job related.
(3) On 1 December 2023, Echo Ltd provided Simon with an interest-free loan of £84,000, which
he used to purchase a holiday cottage.

408 Taxation (TX – UK) FA2023

 Partnership
(1) The partnership’s tax adjusted trading profit for the year ended 5 April 2024 is £29,700. This

QUESTIONS
figure is before taking account of capital allowances.
(2) The only item of plant and machinery owned by the partnership is a car which cost £8,333 on
1 February 2024. The car has a CO2 emission rate of 125 grams per kilometre. It is used by
Art, and 40% of the mileage is for private journeys.
(3) Profits are shared 40% to Simon and 60% to Art. This is after paying an annual salary of
£2,000 to Art.
Property income
(1) Simon owns a freehold house which is let out furnished. The property was let throughout the
tax year 2023/24 at a monthly rent of £660, all of which was received during the tax year.
(2) During the tax year 2023/24, Simon paid council tax and water rates totalling £1,320 in
respect of the property. He also replaced the property’s washing machine during March
2024. The old washing machine was sold for £70, being replaced by a washer-dryer costing
£970. The cost of a similar washing machine would have been £730.
Required
(a) Calculate Simon’s taxable income for the tax year 2023/24. (13 marks)

(b) State the period during which HM Revenue and Customs (HMRC) will have to notify Simon if
they intend to carry out a compliance check in respect of his self-assessment tax return for
the tax year 2023/24 and a possible reason why such a check would be made. (2 marks)

(Total = 15 marks)

33 Naive Ltd
(a) You are a trainee accountant and your manager has asked you to correct a corporation tax
computation which has been prepared by the managing director of Naive Ltd. The
corporation tax computation is for the year ended 31 March 2024 and contains a significant
number of errors:
Naive Ltd – Corporation tax computation for the year ended 31 March 2024

£
Trading profit (working 1) 372,900
Loan interest received (working 2) 32,100
405,000
Corporation tax (405,000 at 19%) 76,950

Workings
(1) Trading profit

£
Operating profit before interest and taxation 274,530
Depreciation 15,740
Donations to political parties 400
Qualifying charitable donations 900
Accountancy 2,300

Questions 409
 £
Legal fees in connection with the issue of loan notes (the loan was used to finance the
company’s trading activities) 5,700
Entertaining suppliers 3,600
Entertaining employees 1,700
Gifts to customers (pens costing £40 each and displaying Naive Ltd’s name) 920
Gifts to customers (food hampers costing £45 each and displaying Naive Ltd’s name) 1,650

Capital allowances (working 3) 65,460

Trading profit 372,900

(2) Loan interest received

£
Loan interest receivable 32,800
Accrued at 1 April 2023 10,600
Accrued at 31 March 2024 (11,300)
Loan interest received 32,100

The loan was made for non-trading purposes.

(3) Capital allowances

Main pool Car Special rate pool Allowances

£ £ £ £

Written down value (WDV) brought forward 12,400 13,600

Additions

Machinery 42,300

Car [1] 13,800

Car [2] __ 14,000

68,500

Annual investment allowance (AIA) (68,500) 68,500

Disposal proceeds (9,300)

4,300

Balancing allowance (4,300) (4,300)

Written down allowance (WDA) – 18% __ (2,520) × 50% 1,260

WDV carried forward 0 11,480 __

Total allowances 65,460

• Car [1] has a CO2 emission rate of 40 grams per kilometre.

• Car [2] has a CO2 emission rate of 125 grams per kilometre. This car is used by the sales
manager and 50% of the mileage is for private journeys.
• All of the items included in the special rate pool at 1 April 2023 were sold for £9,300 during
the year ended 31 March 2024. The original cost of these items was £16,200 and no
enhanced capital allowances were claimed on acquisition.

410 Taxation (TX – UK) FA2023

 Required
Prepare a corrected version of Naive Ltd’s corporation tax computation for the year ended 31

QUESTIONS
March 2024.
Note. Your calculations should commence with the operating profit before interest and
taxation figure of £274,530, and you should indicate by the use of zero (0) any items in the
computation of the trading profit for which no adjustment is required. (12 marks)

(b) The managing director of Naive Ltd understands that the company will have to file its self-
assessment corporation tax returns online, and that the supporting accounts and tax
computations will have to be filed using the inline eXtensible Business Reporting Language
(iXBRL). The managing director is concerned with how the company will be able to produce
the documents in this format.
Required
Explain the options available to Naive Ltd regarding the production of accounts and tax
computations in the iXBRL format. (3 marks)

(Total = 15 marks)

Questions 411