ACCA MOCK

TAXATION(TX-UK)

MARCH 21

Time allowed
3 hours and 15 minutes
All questions are compulsory and MUST be attempted
This paper is divided into two sections:
Section A: 3 objective test case questions
5 questions worth 2 marks per case
Section B: 2 × 20 mark questions (mainly scenario based)

IPRO EDUCATION
 IPRO EDUCATION

TAX RATES AND ALLOWANCES

Tax rates and allowances will be produced in the examination for TX for
March 2021 sittings which will contain the following information.
SUPPLEMENTARY INSTRUCTIONS
1 Calculations and workings need only be made to the nearest £.
2 All apportionments should be made to the nearest month.
3 All workings should be shown in Section C.

INCOME TAX
Normal rates Dividend rates
Basic rate £1 – £37,500 20% 7.5%
Higher rate £37,501 – £150,000 40% 32.5%
Additional rate £150,001 and over 45% 38.1%
Savings income nil
rate band – -- Basic rate taxpayers £1,000
– Higher rate taxpayers £500
Dividend nil rate band £2,000
A starting rate of 0% applies to savings income where it falls within the first
£5,000 of taxable income.

Personal allowance
Personal allowance £12,500
Transferable amount £1,250
Income limit £100,000
Where adjusted net income is £125,000 or more, the personal allowance is
reduced to zero
 Residence status
Days in UK Previously resident Not previously
resident
Less than 16 Automatically not resident Automatically not
resident
16 to 45 Resident if 4 UK ties (or more) Automatically not
resident
46 to 90 Resident if 3 UK ties (or more) Resident if 4 UK ties
91 to 120 Resident if 2 UK ties (or more) Resident if 3 UK ties (or
more)
121 to 182 Resident if 1 UK tie (or more) Resident if 2 UK ties (or
more)
183 or more Automatically resident Automatically resident

Child benefit income tax charge

Where income is between £50,000 and £60,000, the charge is 1% of the
amount of child benefit received for every £100 of income over £50,000.

Car benefit percentage

The relevant base level of CO2 emissions is 95 grams per kilometre.
The percentage rates applying to petrol cars (and diesel cars meeting the
RDE2 standard) with CO2 emissions up to this level are:

50 grams per kilometre or less 16%

51 grams to 75 grams per kilometre 19%
76 grams to 94 grams per kilometre 22%
95 grams per kilometre 23%
 Car fuel benefit
The base figure for calculating the car fuel benefit is £24,100.

Company van benefits

The company van benefit scale charge is £3,430, and the van fuel benefit is
£655.
Individual Savings Accounts (ISAs)
The overall investment limit is £20,000.

Property income
Basic rate restriction applies to 75% of finance costs relating to residential
properties.

Pension scheme limits

Annual allowance £40,000

Minimum allowance £10,000
Income limit £150,000
The maximum contribution that can qualify for tax relief without any
earnings is £3,600.

Approved mileage allowance: cars

Up to 10,000 miles 45p

Over 10,000 miles 25p
 Capital allowances: rates of allowance
Plant and machinery
Main pool 18%
Special rate pool 6%
Motor cars
New cars with CO2 emissions up to 50 grams per kilometre 100%
CO2 emissions between 51 and 110 grams per kilometre 18%
CO2 emissions over 110 grams per kilometre 6%
Annual investment allowance
Rate of allowance 100%
Expenditure limit £1,000,000
Cash basis
Revenue limit £150,000

Cap on income tax reliefs

Unless otherwise restricted, reliefs are capped at the higher of £50,000

or 25% of income.
CORPORATION TAX
Rate of tax – Financial year 2019 19%
– Financial year 2018 19%
– Financial year 2017 19%
Profit threshold £1,500,000
VALUE ADDED TAX
Standard rate 20%
Registration limit £85,000
Deregistration limit £83,000
 INHERITANCE TAX: nil rate bands and tax rates
Nil rate band £325,000
Residence nil rate band £150,000
Rate of tax on excess – Lifetime rate 20%
– Death rate 40%
Inheritance tax: taper relief
Years before death Percentage reduction
More than 3 but less than 4 years 20%
More than 4 but less than 5 years 40%
More than 5 but less than 6 years 60%
More than 6 but less than 7 years 80%

CAPITAL GAINS TAX

Normal rates Residential property
Lower rate 10% 18%
Higher rate 20% 28%
Annual exempt amount £12,000
Entrepreneurs’ relief – Lifetime limit £10,000,000
– Rate of tax 10%
 NATIONAL INSURANCE CONTRIBUTIONS

Class 1 Employee £1 – £8,632 per year Nil

£8,633 – £50,000 per year 12%
£50,001 and above per year 2%
Class 1 Employer £1 – £8,632 per year Nil
£8,633 and above per year 13.8%
Employment allowance £3,000
Class 1A 13.8%
Class 2 £3.00 per week
Small profits threshold £6,365
Class 4 £1 – £8,632 per year Nil
£8,633 – £50,000 per year 9%
£50,001 and above per year 2%

RATES OF INTEREST (assumed)

Official rate of interest 2.50%
Rate of interest on underpaid tax 3.25%
Rate of interest on overpaid tax 0.50%

STANDARD PENALTIES FOR ERRORS

Taxpayer behaviour Maximum Minimum penalty Minimum penalty
penalty – unprompted – prompted
disclosure disclosure
Deliberate and
concealed 100% 30% 50%
Deliberate but
not concealed 70% 20% 35%
Careless 30% 0% 15%
 SECTION A
ALL 15 questions are compulsory and MUST be attempted. Each
question is worth two marks.
Q1 Ash and Clive have been trading in partnership for many years, sharing
profits in the ratio 2:1. On 1 July 2019 they changed the partnership
agreement so that Ash gets an annual salary of £20,000 and the
remaining profits are shared equally. The partnership made adjusted
trading profits of £240,000 in its year ended 31 December 2018.
What is Ash’s share of profits for the year ended 31 December 2018?
A Ash £120,000
B Ash £160,000
C Ash £135,000
D Ash £145,000

Q2 Jon is employed on an annual salary of £25,000 and his employer has

provided him with a number of benefits during 2019/20.
Which ONE of the following benefits provided by his employer is
taxable?
A A smart phone available for private use
B An interest-free loan of £11,000
C A car parking space at work
D Medical treatment costing £280 paid for by his employer to help Jon
return to work sooner.

Q3 Frank is self-employed and employs his wife Georgia in the business.

Georgia is his only employee and is paid an annual salary of £20,000
and has taxable benefits of £5,000.
How much employer’s national insurance is Frank responsible for
paying in 2019/20 as a result of employing Georgia?
A £450
B £Nil
C £690
D £2,287
Q4 You are a trainee Chartered Certified Accountant and your firm has a
client, Scott, who has refused to disclose a chargeable gain to HM
Revenue and Customs (HMRC).
From an ethical viewpoint, which of the following actions could be
expected of your firm?
(1) Report this to the firm’s money laundering reporting officer.
(2) Advise the client to make disclosure.
(3) Cease to act for the client.
(4) Inform HMRC of the non-disclosure.
(5) Warn the client that your firm will be reporting the non-disclosure.
(6) Notify HMRC that your firm has ceased to act for the client.
A 2, 3 and 5
B 1, 2, 3 and 6
C 2, 3 and 4
D 1, 4, 5 and 6

Q5 On 14 November 2019, Sam made a gift to a trust of £780,000 (after

deducting all available exemptions). The trustees agreed to pay the
inheritance tax arising in respect of this gift. Sam has not made any
other lifetime gifts.
What amount of lifetime inheritance tax would have been payable in
respect of Sam’s gift to the trust?
A £89,800
B £112,250
C £113,750
D £91,000
Q6 J plc acquired 100% of the shares in D Ltd on 1 September 2019. J plc
had taxable total profits of £360,000 for the year ended 31 March 2020.
D Ltd had an adjusted trading loss of £240,000 for the year to 31 May
2020.
What is the maximum amount of loss that D Ltd can surrender to J Plc
for the year ended
31 March 2020?
A £140,000
B £240,000
C £120,000
D £210,000
Q7 Joy held 100% of the ordinary share capital of Cloud Ltd before giving
her nephew 350 shares (a 20% holding) on 1 September 2019. Joy died
on 14 March 2020.
Cloud Ltd – Value of an ordinary share:
As at 1 September 2019 £ 14 March 2020 £
As part of a 100% holding 485 570
As part of a 80% holding 400 410
As part of a 20% holding 230 260
What is the value of the shares gifted on 1 September 2019 for
inheritance tax purposes?
A £80,500
B £169,750
C £288,750
D £91,000
Q8 On 14 November 2019, 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?
Q9 Moon Ltd has had the following results:
Period Profit/(loss) £
Year ended 31 December 2019 (105,000)
Four‐month period ended 31 December 2018 43,000
Year ended 31 August 2018 96,000
The company does not have any other income.
How much of Moon Ltd’s trading loss for the year ended 31 December
2019 can be relieved against its total profits of £96,000 for the year
ended 31 August 2018?
A £64,000
B £96,000
C £70,000
D £62,000
Q10 Abena has made the following gross contributions to her personal
pension scheme over the past three tax years:
Tax year £
2016/17 42,000
2017/18 27,000
2018/19 28,000
Abena is entitled to an annual allowance of £40,000 in all tax years from
2016/17 to 2019/20.
What is the maximum gross contribution which Abena can make to her
personal pension scheme for the tax year 2019/20 without giving rise to
an annual allowance charge?
A £63,000
B £40,000
C £65,000
D £35,000
Q 11 Lili Ltd commenced trading on 1 January 2019. The company incurred
the following expenditure prior to 1 January 2019:
£
30 November 2011 Initial market research 15,000
6 June 2014 Research into competitors 12,000
31 July 2018 Entertaining potential
customers and suppliers 8,000
15 December 2018 Donation to local school
fair in exchange for advertising 2,000
What is the amount of Lili Ltd's deductible pre-trading expenditure in
respect of the year ended
31 December 2019?

Q 12 Eva's income tax liability and class 4 national insurance contributions

(NIC) for the tax year 2019/20 are £4,840. Her income tax liability and
class 4 NICs for the tax year 2018/19 were £6,360.
What is the lowest amount to which Eva could make a claim to reduce
each of her payments on account for the tax year 2019/20 without
being charged interest?
Q 13 Hope was provided with a company car by her employer. The company
paid £24,640 for the car in January 2019 after obtaining a discount. The
list price £26,320.
The car emits 43 grams per kilometre of carbon dioxide, runs on diesel
and does not meet the requirements of RDE2.
What is the taxable benefit assessable on Hope for 2019/20 for the
car?
A £5,174
B £5,264
C £5,527
D £4,928

Q 14 For the year ended 31 March 2019, Sizeable Ltd had taxable total profits
of £820,000, and for the year ended
31 March 2020 had taxable total profits of £970,000. The profits accrue
evenly throughout the year.
Sizeable Ltd has had one 51% group company for many years.
How will Sizeable Ltd pay its corporation tax liability for the year ended
31 March 2020?
A Nine instalments of £15,580 and a balancing payment of £28,500
B Four instalments of £46,075
C Four instalments of £38,950 and a balancing payment of £28,500
D One payment of £184,300

Q 15 On 26 November 2019 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
 Section B – All 15 questions are compulsory and must be attempted.
Each question is worth 2 marks.
The following information should be used to answer questions 16-20

On 23 August 2014, Peter made a gift of a furnished house valued at

£420,000 to his son, Jack, as a wedding gift.
Peter died on 15 March 2020, at which time his estate was valued at
£880,000. Under the terms of his will, Peter divided his estate equally
between his wife and son. Peter had not made any gifts during
his lifetime except for the gift of the house to Jack. Peter’s estate does
not include a residential property.

Q 16 Which of the following statements is true?

A The transfer on 23 August 2014 is a CLT which is chargeable in lifetime
and again when Peter dies on 15 March 2020.
B The transfer on 23 August 2014 is a PET which is chargeable in lifetime
and again when Peter dies on 15 March 2020.
C The transfer on 23 August 2014 is a PET which is NOT chargeable in
lifetime but becomes chargeable when Peter dies on 15 March 2020.
D The transfer on 23 August 2014 is a CLT which is NOT chargeable in
lifetime but becomes chargeable when Peter dies on 15 March 2020.

Q 17 Which of the following exemptions would be available to set against

the gift of the house to Jack on 23 August 2014?
A The annual exemptions for 2013/14 and 2014/15 only
B A marriage exemption of £2,500 plus the annual exemptions for
2013/14 and 2014/15
C A marriage exemption of £5,000 plus the annual exemptions for
2013/14 and 2014/15
D A marriage exemption of £5,000 plus the annual exemption for
2014/15 only
Q 18 What is the rate of taper relief that will apply to the transfer on 23
August 2014?
A 20%
B 40%
C 60%
D 80%
Q 19 How much inheritance tax will be payable on the death estate of
Peter?
A £88,000
B £176,000
C £352,000
D £222,222

Q 20 Which of the following is true about the tax payable on the lifetime
transfer as a result of Peter’s death?
A Jack will pay the inheritance tax which is due on 30 September 2020
B The executors of the estate will pay the inheritance tax which is due
on 15 September 2020
C Jack will pay the inheritance tax which is due on 15 September 2020
D The executors of the estate will pay the inheritance tax which is due
on 30 September 2020
 The following scenario relates to Questions 21 to 25.
You should assume that today's date is 15 March 2020.
Opal is aged 71 and has a chargeable estate for inheritance tax (IHT)
purposes valued at £950,000.
She owns two investment properties respectively valued at £374,000
and £442,000. The first property has an outstanding repayment
mortgage of £160,000, and the second property has an outstanding
endowment mortgage of £92,000.
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 2010, Opal had made a gift of £100,000 to her daughter,
and on 7 November 2019, 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 2010/11 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.
Q 21 What is the net value for the two properties, and related mortgages,
which will have been included in the calculation of Opal's chargeable
estate of £950,000?
A £816,000
B £564,000
C £656,000
D £724,000
Q 22 Which TWO of the following amounts will have been deducted in
calculating Opal's chargeable estate of £950,000?
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

Q 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 2020?
A £250,000
B £338,000
C £378,000
D £335,600
Q 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 2027, compared to
if she were to die on 20 March 2020?
A £88,000
B £40,000
C £128,000
D £0

Q 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?
A The gifts cannot exceed 10% of income.
B The gifts must be habitual.
C Opal must have enough remaining income to maintain her normal
standard of living.
D Opal must make the gifts monthly or quarterly.
The following scenario relates to Questions 26 to 30.
Ardent Ltd was incorporated on 1 April 2019 and commenced trading on
1 January 2020. The company voluntarily registered for valued added tax
(VAT) on 1 January 2020, preparing its first VAT return for the quarter
ended 31 March 2020. Ardent Ltd's sales have been as follows:
Standard rated Zero-rated
£ £
2020 January 24,800 30,100
February 42,600 28,700
March 58,300 22,700
---------------- -----------------
125,700 81,500
----------------- -----------------
Where applicable, the above figures are stated exclusive of VAT.
During the period 1 April to 31 December 2019, Ardent Ltd incurred
input VAT of £120 each month in respect of payments made for
advertising services. The company also incurred input VAT totalling £400
(£200 each) in respect of the purchase of two laptop computers on 10
July 2019. One of the laptop computers was scrapped on 30 November
2019 at a nil value, and the other laptop was not used until Ardent Ltd
commenced trading on 1 January 2020.

During the quarter ended 31 March 2020, Ardent Ltd received standard
rated invoices totalling £56,400 (inclusive of VAT) in respect of purchases
and expenses. As at 31 March 2020, £11,400 (inclusive of VAT) of the
purchases were unsold and therefore included in inventory
Ardent Ltd was late in submitting its VAT return for the quarter ended
31 March 2020, and in paying the related VAT liability. The company
currently does not use either the VAT cash accounting scheme or the
annual accounting scheme.
Q 26 From what date would Ardent Ltd have been required to be
compulsorily registered for VAT?
A 1 February 2020
B 1 March 2020
C 1 April 2020
D 1 May 2020
Q 27 What amount of pre-registration input VAT was Ardent Ltd able to
recover in respect of the inputs incurred prior to it registering for VAT
on 1 January 2020?
A £920
B £1,120
C £1,480
D £1,280
Q 28 Ignoring pre-registration input VAT, what amount of VAT should
Ardent Ltd have paid to HM Revenue & Customs in respect of the
quarter ended 31 March 2020?
£17,640
£32,040
£13,860
£15,740
Q 29 How and by when should Ardent Ltd have filed its VAT return for the
quarter ended 31 March 2020?
Either on the HMRC website or by using Making Tax Digital software
by 30 April 2020
Using Making Tax Digital software by 7 May 2020
Using Making Tax Digital software by 30 April 2020
Either on the HMRC website or by using Making Tax Digital software
by 7 May 2020
Q 30 Which of the following is the correct definition of an extra-statutory
concession?
A provision for the relaxation of the strict application of the law
where it would lead to anomalies or cause hardship
Supplementary information providing additional detail in relation to
the general principles set out in legislation
HM Revenue & Customs' interpretation of tax legislation
Guidance provided to HM Revenue & Customs' staff in interpreting
and applying tax legislation
 SECTION C
BOTH questions are compulsory and MUST be attempted

Q 31 John has provided the following information is available for the tax year
2019/20.
(1) He is employed by S plc as a sales director. During the tax year
2019/20, he was paid gross director’s remuneration of £110,000.
(2) During the tax year 2019/20, John contributed £28,000 into S plc’s HM
Revenue and Customs’ registered occupational pension scheme. The
company contributed a further £8,000 on his behalf. Both John and S plc
have made exactly the same contributions for the previous five tax years.
(3) During the period 6 April to 31 December 2019, John used his private
motor car for both private and business journeys. He was reimbursed by
S plc at the rate of 60p per mile for the following mileage:
Miles
Normal daily travel between home and S plc’s offices 1,180
Travel between S plc’s offices and the premises of
S plc’s clients 4,270
Travel between home and the premises of S plc’s
clients (none of the client’s premises were located
near the offices of S plc) 510
_____
Total mileage reimbursed by S plc 5,960
_____
(4) During the period from 1 November 2019 to 5 April 2020, S plc
provided John with a petrol powered motor car which has a list price of
£28,200 and an official CO2 emission rate of 188 grams per kilometre. S
plc also provided John with fuel for both his business and private
journeys.
(5) During 2018 S plc provided John with a loan which was used to
purchase a yacht. The amount of loan outstanding at 6 April 2019 was
£84,000. John repaid £12,000 of the loan on 31 July 2019, and then
repaid a further £12,000 on 31 December 2019. He paid loan
interest of £1,270 to S plc during the tax year 2019/20 The taxable
benefit in respect of this loan is calculated using the average method.
(6) During the tax year 2019/20, John made personal pension
contributions up to the maximum amount of available annual
allowances, including any unused amounts brought forward from
previous years. These contributions were in addition to the
contributions he made to S plc’s occupational pension scheme
(see Note (2)). John has not made any personal pension contributions in
previous tax years.
(7) John owns a holiday cottage which is let out as a furnished holiday
letting, although the letting does not qualify as a trade under the
furnished holiday letting rules. The property business profit for the year
ended 5 April 2020 was £6,730.

Required:
Calculate John‘s income tax liability for the tax year 2019/20
(20 marks)
Q 32 Part (a)
‘A trader may decide to change from one accounting date to another
accounting date.’
Required:
List the qualifying conditions which must be met for a change of
accounting date by an unincorporated business to be recognised
for tax purposes by HM Revenue and Customs. (5 marks)
Part (b)
Meung Nong commenced in self-employment on 1 May 2016. She
initially prepared accounts to 30 April, but will
change her accounting date to 30 June by preparing accounts for the
14-month period to 30 June 2019 .
Meung’s trading profits (after taking account of capital allowances) for
the first two years of trading were as follows:
£
Year ended 30 April 2017 50,400
Year ended 30 April 2018 37,200
Meung’s trading profit for the 14-month period ended 30 June 2019
will be £61,500. This figure is before taking account of capital
allowances. The tax written down value of her capital allowances main
pool at 1 May 2018 was £10,400, and there will be no additions or
disposals during the 14-month period ended 30 June 2019 .
Meung’s business will continue for the foreseeable future.
Required:
Calculate the amount of trading profit that will be assessed on Meung
Nong for each of the tax years 2016–17, 2017–18, 2018–19 and 2019-
20.
Note: You should assume that the capital allowance rates for the tax
year 2019-20 apply throughout. (8 marks)
Part (c)
Opal Ltd has prepared accounts for the 14-month period ended 31 May
2019, and its trading profit for this period is £434,000. This figure is
before taking account of capital allowances.
The tax written down value of Opal Ltd’s capital allowances main pool at
1 April 2018 was £62,000. On 10 April 2019, Opal Ltd purchased
machinery for £38,200 and integral features of £55,000. Opal Ltd is in a
group with other companies and as such does not have any AIA to use
against these purchases.

Required:
Calculate Opal Ltd’s taxable total profits for each of the accounting
periods covered by the 14-month period of account ended 31 May
2019.
Note: You should assume that the capital allowance rates and
allowances for the financial year 2019 apply throughout.
(7 marks)

(20 marks)