Taxation UK – Mock Test 2

Full Marks: 80
Pass Marks: 40
Time Allowed: 2 Hours and 30 mins

Exam Summary

This exam is divided into three sections:

Section A
• 15 objective test (OT) questions, each worth 2 marks.
• 30 marks in total.
Section B
• 1 OT cases, each containing a scenario which relates to five OT questions, each worth 2 marks.
• 10 marks in total.
Section C
• Three constructed response questions, each containing a scenario which relates to one or more
requirement(s).
• Each constructed response question is worth 10 or 15 marks in total.
• 40 marks in total.

All questions are compulsory.

 Section A
1) Mike and Delia are a married couple. In the tax year 2024/25, Mike has taxable non savings
income (after deducting his personal allowance) of £13,500. Delia has no income in the tax year
2024/25. Delia has made an election in relation to her personal allowance for the tax year
2024/25. What is Mike’s income tax liability for the tax year 2024/25?
A) £186
B) £2,448
C) £1,440
D) £2,700

2) John is employed by Zebra plc. He was provided with a computer for private use on 6
November 2023. The market value of the computer when first provided to an employee for
private use was £3,600 and the computer had a market value of £2,000 when first provided to
John for private use. Zebra plc gave the computer to John on 5 April 2025 when it had a market
value of £1,000.
What are the total taxable benefits for John in respect of the computer for the tax year 2024/25?
A) £2,880
B) £3,300
C) £1,720
D) £1,833

3) Hana was UK resident in the tax year 2023/24. He worked full time in Egypt in the tax year
2024/25. What is the maximum number of days which Hana can spend in the UK and be treated
as automatically not resident in the UK for the tax year 2024/25?
A) 15
B) 45
C) 90
D) 182

4) For the year ended 31 March 2025, 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 2024.
For the year ended 30 June 2025, 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 2025?
A) £180,000
B) £168,000
C) £45,000
D) £135,000

5) For the year ended 31 March 2024, Sizeable Ltd had taxable total profits of £820,000, and for
the year ended 31 March 2025 had taxable total profits of £970,000. The profits accrue evenly
throughout the year.
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 2025?
A) Nine instalments of £20,500 and a balancing payment of £58,000
B) Four instalments of £60,625
C) Four instalments of £51,250 and a balancing payment of £37,500
D) One payment of £242,500

6) On 26 November 2024, 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?
A) £4,500
B) £1,620
C) £4,900
D) £0
7) Winston invested £8,000 into a cash individual savings account (ISA) during the tax year
2024/25. Still within tax year 2024/25, 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 2024/25?
A) £20,000
B) £12,000
C) £0
D) £10,000
8) Abena has made the following gross contributions to her personal pension scheme over the
past three tax years:

Tax year £

2021/22 22,000

2022/23 45,000

2023/24 48,000
What is the maximum gross contribution which Abena can make to her personal pension scheme
for the tax year 2024/25 without giving rise to an annual allowance charge?
A) £65,000
B) £90,000
C) £85,000
D) £35,000

9) Which of the following statements concerning self-assessment tax returns for individuals is
TRUE?
A) Individuals with tax payable of less than £1,000 for a tax year are not required to file a tax
return.
B) Individuals are only required to file a tax return for a tax year if they receive a notice to
deliver from HM Revenue & Customs (HMRC).
C) All individuals who submit a tax return on time are able to have their tax payable calculated
by HMRC.
D) The tax return for an individual covers income tax, class 1, class 2 and class 4 national
insurance contributions and capital gains tax liabilities.

10) Rajesh is a sole trader. He correctly calculated his self-assessment payments on account for
the tax year 2024/25 and paid these on the due dates.
Rajesh paid the correct balancing payment of £1,200 for the tax year 2024/25 on 30 June 2026.
Indicate, by clicking on the relevant boxes in the table below, what penalties and interest Rajesh
may be charged as a result of his late balancing payment for the tax year 2024/25?

£0 Penalty

£60 Interest

£39

£78

Ans: Penalty : 60
Interest: 39
11) Kate sold a flat in November 2024, realising a gain of £25,500. The flat had always been
rented out to tenants and was the only chargeable asset that Kate owned. Kate had taxable
income of £31,500 in the tax year 2024/25. She made a gross gift aid donation of £800 in
December 2024. What is Kate’s capital gains tax liability for the tax year 2024/25?
A) £5,700
B) £5,028
C) £5,400
D) £4,980

12) For each of the following types of records, select the date until which a self-employed
individual must retain the records used in preparing their self-assessment income tax return for
the tax year 2024/25?
Business records 31 January 2027 31 January 2031
Non-business records 31 January 2027 31 January 2031

13) Which TWO of the following statements are correct about the internal review
procedures?
A. An internal review is a less costly and mere effective way to resolve disputes informally than
a formal appeal.
B. The review is a carried out by the HMRC officer who has previously dealt with the case.
C. HMRC must annually carry out the review within 45 days
D. After the review conclusion is notified, the company cannot make a further appeal.
(2 Marks)
14) Honda Ltd has an accounting reference date of 31 March. The tax written down value of the
company’s special rate pool as at 1 April 2024 is £425,000.
During the year ended 31 March 2025, the company sold equipment for £350,000 which was
originally purchased for £1,400,000 and on which the company had claimed annual investment
allowance on £1,000,000 of the expenditure and 50% FYA on the remaining £400,000.

What is the company’s overall net balancing charge for the year ended 31 March 2025?

A. £42,500
B. £50,000
C. £250,000
D. £350,000

15) Which of the following statements is incorrect?

A. Business records relating to the tax year 2024/25 do not need to be retained after 31
January 2027
B. A taxpayer who submits a tax return 2 months late may receive a penalty of £100
C. An electronic tax return for the tax year 2024/25 should normally be filed by 31 January
2026
D. A taxpayer who submits his 2024/25 tax return electronically on 13 January 2026 has
until 31 January 2027 to amend his return.
 Section B
The following scenario relates to the next five questions.
Hali and Goma are a married couple.
Capital losses brought forward
Hali had capital losses of £39,300 for the tax year 2022/23. He had chargeable gains of £10,000
for the tax year 2023/24.
Goma had capital losses of £9,100 and chargeable gains of £6,900 for the tax year 2023/24. She
did not have any capital losses for the tax year 2022/23.
Ordinary shares in Lima Ltd
On 24 July 2024, Hali sold 5,000 £1 ordinary shares in Lima Ltd, for £4.95 per share. Lima Ltd's
shares have recently been selling for £5.30 per share, but Hali sold them at the lower price
because he needed a quick sale.
Goma had originally subscribed for 30,000 ordinary shares in Lima Ltd at their par value of £1
per share on 28 July 2009. On 18 August 2018, she gave 8,000 ordinary shares to Hali. On that
date, the market value for 8,000 shares was £23,200.
Antique table
On 11 October 2024, an antique table owned by Hali was destroyed in a fire. The table had been
- purchased on 3 June 2010 for £44,000. Hali received insurance proceeds of 62,000 on 12
December 2024, and on 6 January 2025, he purchased a replacement antique table for £63,600.
Hali will make a claim to roll over the gain arising from the receipt of the insurance proceeds.
Disposals by Goma during the tax year 2024/25
Goma disposed of the following assets during the tax year 2024/25, all of which resulted in
gains:
(1) Qualifying corporate bonds sold for £38,300
(2) A car (suitable for private use) sold for £11,600
(3) An antique vase sold for £6,200
(4) A copyright (with an unexpired life of eight years when purchased) sold for £5,400
(5) Quoted shares held within an individual savings account (ISA) sold for £24,700

AEA of TY 2023/24 is 6,000 and of TY 2024/25 is 3,000

1. What amount of unused capital losses do Hali and Goma have brought forward to the tax

A. Option 1
B. Option 2
C. Option 3
D. Option 4
(2 marks)
2. What cost figure and what value per share (disposed value) will be used in calculating the
chargeable gain on Hali’s sale of 5,000 ordinary shares in Lima Ltd?

A. Option 1
B. Option 2
C. Option 3
D. Option 4

(2 marks)
3. What is the amount of chargeable gain for Goma on the 8,000 shares in Lima Ltd given
to Hali?
A. £8,000
B. £15,200
C. £23,200
D. £0
(2 marks)
4. What is the base cost of Hali's replacement antique table for capital gains tax (CGT)
purposes?
A. £62,000
B. £63,600
C. £45,600
D. £44,000
(2 marks)
(3
5. How many of the five assets disposed of by Goma during the tax year 2023/24 are
exempt assets for the purposes of capital gains tax (CGT)?
A. Three
B. Five
C. Two
D. Four
(2 marks)
 Section C
Question 1

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

Sophie 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 2024/25 will be
£11,379.

However, Sophie is considering incorporating her business on 6 April 2024. The forecast taxable
total profits of the new limited company for the year ended 5 April 2025 will be £50,000 (before
taking account of any director’s remuneration). Sophie will pay herself gross director’s
remuneration of £30,000 and dividends of £10,000. The balance of profits will remain undrawn
within the new company.

Requirement:

Determine whether or not there will be an overall saving of tax and national insurance
contributions (NIC) for the year ended 5 April 2025 if Sophie incorporates her business on
6 April 2024.

Notes:
1. You are expected to calculate the income tax payable by Sophie, the class 1 NIC payable by
Sophie and the new limited company, and the corporation tax liability of the new limited
company for the year ended 5 April 2025.

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. (10 marks)

Solution

(a) The total tax and NIC cost if Sophie incorporate her business: Marks

Income tax W1 4,317

Employee class 1 NIC W2 1,394
Employer class 1 NIC W2 2,884
Corporation tax W3 3,252
Total tax 11,848 0.5
Less: tax as sole trader (11,379) 0.5
Excess if incorporated 469 0.5

Therefore, if Sophie incorporated her business there would be an

overall increase in tax and NIC of £469 compared to continuing on a 1
self-employed basis.
Workings
(W1) Sophie’s income tax payable
£
Director’s remuneration 30,000 0.5
Dividends 10,000 0.5
40,000
Less: Personal Allowance (12,570) 0.5
Taxable income 27,430

Income tax
£ £
NSI:BRB 17,430 20% 3,486 0.5
DI:NR 500 0% - 0.5
DI: BRB 9,500 8.75% 831 0.5
27,430 4,317

(W2) National Insurance contribution

£
Employee class 1: (£30,000 - £12,570) *8% 1,394 1
Employer’s class 1: (£30,000 - £9,100) *13.8% 2,884 1

(W3) Corporation tax liability

Trading profit 50,000 0.5

Director’s remuneration 0.5
(30,000)
Employer’s class 1 NIC 0.5
(2,884)
Taxable Total profit 17,116
Corporation tax at 19% 3,252 1
Question 2
This scenario relates to three requirements.

Buddy ceased employment with Curly plc on 31 December 2024, having been employed since 1
January 2017. Buddy is also self-employed and prepares accounts for his business to 31 March
each year. The following information is available for the tax year 2024/25:

Self-employment
Buddy’s tax adjusted trading profit based on his draft accounts for the year ended 31 March 2025
is £29,800. This figure is before making any adjustments required for:

Advertising expenditure of £1,300 incurred during November 2024 to promote Buddy’s

•
business
• Expenditure incurred on client entertaining of £560
• The cost of Buddy’s office (see note (1) below)
• Capital allowances (see note (2) below)

Notes
(1) Buddy runs his business using one of the six rooms in his private house as an office. The total
running costs of the house for the year ended 31 March 2025 were £2,400. No deduction has
been made for the cost of the office in calculating the profit of £29,800.

(2) Capital allowances

The tax written down value of both the main pool and the special rate pool as at 1 April 2024 is
nil.

On 1 January 2025, Buddy purchased a laptop computer for £1,200. This laptop computer was
sold on 20 March 2025 for £400. Buddy had elected for this laptop computer to be treated as a
short-life asset. A replacement laptop computer was purchased on the same day for £2,700.

On 1 May 2024, Buddy brought his private car into his business at its market value of £14,000.
The car has a CO2 emission rate of 39 grams per kilometre. The car is used 80% for business
journeys in his self-employment.

Employment
During the period from 6 April to 31 December 2024, Buddy was paid a gross monthly salary of
£5,400.

During the period from 6 April to 31 December 2024, Buddy contributed a total of £2,340 into
Curly plc’s occupational pension scheme.

Buddy used his private car for business purposes. During the period from 6 April to 31
December 2024, he drove 16,400 miles in the performance of his duties for Curly plc, for which
the company paid an allowance of 30 pence per mile.

On 10 May 2024, Buddy spent £460 on a replacement suit which he only wore when meeting
clients of Curly plc. The suit was scrapped, with nil proceeds, on 31 December 2024.

Other income
On 31 May 2024, Buddy received a premium bond prize of £500.
During the tax year 2024/25, Buddy received interest of £270 from UK Government securities
(gilts).

On 30 November 2024, Buddy received interest of £1,030 on the maturity of savings certificates
from NS&I (National Savings and Investments).

Required
(a) Calculate Buddy's revised tax adjusted trading profit for the year ended 31 March 2025
assuming Buddy uses the accrual basis.

Note: Your computation should commence with the draft profit per accounts of £29,800,
indicating by the use of zero (0) any item which does not require adjustment.
(6 marks)

(b) Calculate Buddy’s taxable income for the tax year 2024/25.

Note: You should indicate by the use of zero (0) any items which are not taxable or deductible.
(7 marks)

(c) State TWO advantages for an employee if their employer had pay rolled the taxable
benefits provided to the employee.
(2 marks)

(15 marks)
Question 3
This scenario relates to three requirements. (15 Marks)

Gold Ltd owns 100% of the ordinary share capital of Silver Ltd. Gold Ltd has an accounting
reference date of 31 March, whilst Silver Ltd has an accounting reference date of 30 September.
The results of Gold Ltd are as follows

For the year ended 30 September 2023 Silver Ltd had total profits of £149,000 and paid
qualifying charitable donations of £50,000. The company made a tax adjusted trading loss of
£140,000 for the year ended 30 September 2024. No information is available regarding the year
ended 30 September 2025.

(a) Assuming that the tax rates for FY2024 continue into the future and that the maximum
possible claim for group relief is made in respect of Silver Ltd’s tax adjusted trading loss of
£140,000, calculate Gold Ltd’s corporation tax liabilities for the year ended 31 March 2024
and the year ended 31 March 2025. (6 Marks)

(b) Explain the factors that should be considered within a group of companies when
determining how to utilize losses within the group. (3 Marks)

(c) Based on the information available, advise Silver Ltd of the most beneficial way of
relieving its trading loss of £140,000, assuming that Silver Ltd is experiencing cash flow
problems. (6 Marks)
(Total 15 Marks)
Notes:

1 The APs are not coterminous, so both Gold Ltd’s taxable total profits and Silver Ltd’s
tax adjusted trading loss must be time apportioned.

2 For the year ended 31 March 2024 group relief is the lower of Gold Ltd's available
profits of £72,000 (£144,000 × 6/12) and Silver Ltd's available loss of £70,000
(£140,000 × 6/12) i.e. £70,000.

3 For the year ended 31 March 2025 group relief is the lower of Gold Ltd's available
profits of £50,000 (£100,000 × 6/12) and Silver Ltd's available loss of £70,000
(£140,000 × 6/12) i.e. £50,000.

4 The augmented profits threshold is divided by two as there are two associated
companies. The limits are therefore £25,000 (£50,000/2) and £125,000 (£250,000/2).
Gold Ltd is therefore a marginal company in both years.

(b) Factors to consider

– Maximising the tax saving. Saving tax at the marginal rate (26.5%) first, then the main
rate (25%) then the small profits rate (19%) if possible.

– Obtaining relief as soon as possible.

– The extent to which QCD relief will be lost if loss relief is set against the loss-making
company's total profits in the current and previous accounting period.
(c) Most beneficial way to relieve Silver Ltd's trading loss

– To obtain relief as soon as possible Silver Ltd should make a claim to offset the loss
against its total profits in the year ended 30 September 2023. So that the carry back
claim does not result in the wastage of the QCDs the loss offset should be restricted to
£99,000, leaving total profits of £50,000, which the QCDs will reduce to £Nil. This will
result in a repayment of the tax paid in respect of this year and improve the company’s
cash flow position.

– A loss carry back claim itself cannot be restricted (i.e. it is an all or nothing claim
against total profits before QCDs). However, making a group relief claim first will reduce
the loss available for carry back.

– A group relief claim should therefore be made to offset £41,000 of the losses against
the taxable total profits of Gold Ltd for the year ended 31 March 2024. This leaves
losses of £99,000 (£140,000 – £41,000) in Silver Ltd which it can carry back to the year
ended 30 September 2023 (there are no profits in the year ended 30 September 2024
to set the losses against).

– The tax saving in Silver Ltd will be partly at 19% and partly at 25% (as the year end
falls 6 months in FY2022 and 6 months in FY2023). This will result in a repayment of
tax, which will help with the cash flow problems.

– The tax saving in Gold Ltd will all be at 26.5% as the saving all falls in the marginal
band (between the limits of £125,000 and £25,000)

– No group relief claim can be made in respect of the year ended 31 March 2025 as
Silver Ltd’s loss has been fully utilised