60 Fredericka stopped trading on 31 March 2020.

Her tax adjusted profits for the last two periods of

account were:
y/e 31.1.20 £10,000
p/e 31.3.20 £2,500
Fredericka had £1,000 of overlap profit when she started trading.
What is Fredericka's taxable trading income for the tax year 2019/20?
 £12,500
 £11,500
 £9,833
 £1,500 (2 marks)
61 Renee commenced trading on 1 January 2019. She prepared her first set of accounts for the
18 month period to 30 June 2020.
What is Renee's basis period for the tax year 2019/20?
 1 July 2019 to 30 June 2020
 6 April 2019 to 5 April 2020
 1 January 2019 to 31 December 2019
 1 January 2019 to 5 April 2019 (2 marks)

62 Clive 27 mins
Clive starts a business as a sole trader on 1 January 2020.
His business plan shows that his monthly profits are likely to be as follows.
January 2020 to June 2020 (inclusive) £800 a month
July 2020 to December 2020 (inclusive) £1,200 a month
Thereafter £2,000 a month
Clive is considering two alternative accounting dates, 31 March and 30 April, in each case commencing
with a period ending in 2020.
Required
Show the taxable trading profits which will arise for each of the first four tax years under each of the two
alternative accounting dates, and recommend an accounting date. (15 marks)

63 Fiona 27 mins
Fiona started to trade as a baker on 1 January 2020 and prepared her first accounts to 30 April 2021.
Adjusted profits before capital allowances are as follows.
£
Period to 30 April 2021 47,030
Year to 30 April 2022 24,787
Fiona incurred the following expenditure on plant and machinery.
Date Item £
1.1.20 Desk and other office furniture 2,625
4.1.20 General plant 8,070
1.3.20 Second-hand oven 5,300
25.3.20 Delivery van 5,450
15.4.20 General plant 8,555
15.5.20 Car for Fiona 6,600
30.1.20 General plant 10,000
30.4.20 Mixer 1,200
The private use of the car is 35%. The car has CO2 emissions of 103g/km.

Practice question bank 415

 Required
Calculate the taxable profits for the first four tax years and the overlap profits carried forward. Assume that
the capital allowances rates applicable in 2019/20 apply throughout. (15 marks)

Trading losses MCQs 4 mins each

64 Which TWO of the following statements about trading loss relief for an individual are correct?
(1) A claim to set a trading loss against general income can be restricted so that the individual
has enough net income to use the personal allowance.
(2) A trading loss carried forward must be set against the first available profits of the same trade.
(3) A trading loss carried forward can only be used in the following six tax years.
(4) A trading loss claim for relief against general income must be made by 31 January 22
months after the end of the tax year of the loss.
 1 and 2
 1 and 3
 3 and 4
 2 and 4 (2 marks)
65 Shelley has been a sole trader for many years, preparing accounts to 31 January each year. In the
year to 31 January 2019 she made a profit of £9,000 and in the year to 31 January 2020 she made
a loss of £24,000. In 2018/19 she had property business income of £4,000. She has no other
income in 2019/20.
How much of the loss of the tax year 2019/20 remains to carry forward to the tax year 2020/21 if
Shelley makes a loss relief claim against general income for the tax year 2018/19?
 £22,000
 £11,000
 £20,000
 £15,000 (2 marks)
66 William has been a sole trader for many years, preparing accounts to 31 March each year. In the
year to 31 March 2019, William made a profit of £15,000 and in the year to 31 March 2020 he
made a loss of £180,000. William has property business income of £260,000 in the tax year
2018/19. He has no other income in 2019/20.
What is the amount of the loss that William can set against his general income for the tax year
2018/19?
 £65,000
 £50,000
 £83,750
 £68,750 (2 marks)

67 Morgan 18 mins
Morgan has been in business as a sole trader for many years. He has the following expected results.
Year ending 5 April £
2020 Profit 15,000
2021 Loss (42,300)
2022 Profit 45,000
In addition to his trading income, Morgan has savings income of £13,150 a year.

416 Practice question bank

Required
(a) Outline the ways in which Morgan could obtain relief for his loss. (5 marks)
(b) Prepare a statement showing how the loss would be relieved assuming that relief were to be
claimed as soon as possible. Assume that the rates and allowances applicable in 2019/20 apply in
later years. Comment on whether this is likely to be the best relief. (5 marks)
(Total = 10 marks)

Partnerships and limited liability partnerships MCQs

4 mins each
68 Jess and Kate have been in partnership for many years preparing accounts to 31 December each
year. Laura joined the partnership on 1 January 2020. From this date, the profits were shared
equally between the three partners. The partnership had a trading profit of £60,000 for the year
ended 31 December 2020.
What is Laura's taxable trading income from the partnership for the tax year 2019/20?
 £15,000
 £5,000
 £20,000
 £10,000 (2 marks)
69 Quayle and Partridge have been in partnership for many years sharing profits equally and preparing
accounts to 31 March each year. From 1 May 2019 the profits were divided 1 part to Quayle and 2
parts to Partridge. The partnership had a trading profit of £96,000 for the year ended
31 March 2020.
What is Quayle's taxable trading income from the partnership for the tax year 2019/20?
 £29,333
 £4,000
 £33,333
 £32,000 (2 marks)
70 Victor is a 50% partner in a partnership which prepares accounts to 5 April each year. In the year
to 5 April 2020, the partnership makes a loss of £(180,000) and Victor has other income of
£60,000 in 2019/20.
What is the amount of loss relief that Victor can claim against general income in 2019/20?
 £15,000
 £50,000
 £60,000
 £90,000 (2 marks)

Anne, Betty and Chloe 4 mins each

The following scenario relates to questions 71 to 75.
Anne and Betty had been in partnership since 1 January 2013. Anne was entitled to a salary of £6,000 per
year and the remainder of the profits were shared 30% to Anne and 70% to Betty. On 30 September 2019
Betty resigned as a partner and was replaced on 1 October 2019 by Chloe. From that date, profits were
shared 60% to Anne and 40% to Chloe with no salaries being payable.
The partnership's taxable trading profits/(losses) are as follows:
£
Year ended 31 December 2019 60,000
Year ended 31 December 2020 42,000
Year ended 31 December 2021 (estimated) (18,000)
As at 6 April 2019 Anne and Betty each had unrelieved overlap profits of £3,000.

Practice question bank 417

 71 What is Anne's taxable trading profit for the period between 1 January 2019 and
30 September 2019?
 £12,150
 £21,150
 £16,650
 £17,700 (2 marks)
72 What is Betty's taxable trading profit for the tax year 2019/20?
 £25,350
 £28,500
 £28,350
 £39,000 (2 marks)
73 What is Chloe's taxable trading profit for the tax year 2019/20?
 £4,200
 £6,000
 £16,800
 £10,200 (2 marks)
74 How can Anne relieve her trading loss for the tax year 2021/22?
(1) Against general income of 2021/22 and/or 2020/21
(2) Carry forward against future trading income of the partnership
(3) Carry back against trading income of 2020/21, 2019/20 and 2018/19 later years first
(4) Carry back against general income of 2018/19, 2019/20 and 2020/21 earlier years first
 1 and 2
 2 and 3
 1, 2 and 3
 1, 2 and 4 (2 marks)
75 How can Chloe relieve her trading loss for the tax year 2021/22?
(1) Against general income of 2021/22 and/or 2020/21
(2) Carry forward against future trading income of the partnership
(3) Carry back against trading income of 2020/21, 2019/20 and 2018/19 later years first
(4) Carry back against general income of 2018/19, 2019/20 and 2020/21 earlier years first
 1, 2 and 4
 1, 2 and 3
 1 and 2
 2 and 4 (2 marks)

National insurance contributions MCQs 4 mins each

76 Natalie is a sole trader and has taxable trading profits of £42,000 for her period of account ended
31 August 2019.
What is the TOTAL amount of national insurance contributions (NIC) that Natalie has to pay for the
tax year 2019/20?
 £3,003
 £3,936
 £3,159
 £4,160 (2 marks)

418 Practice question bank

77 Nigel is an employee earning £36,000 a year, payable in equal monthly amounts. In February 2020
he received a bonus of £8,000.
What are Nigel's class 1 (employee's) national insurance contributions (NIC) in respect of
February 2020?
 £1,234
 £551
 £354
 £414 (2 marks)
78 Gina was paid an annual salary of £45,000 during 2019/20. In addition, her employer provided her
with a computer for private use for which the taxable benefit is £300.
What are the national insurance contributions (NIC) liabilities?
 Class 1 employee's and employer's contributions on £45,000
 Class 1 employee's contributions on £45,000, Class 1 employer's contributions on £45,300
 Class 1 employee's contributions on £45,300, Class 1 employer's contributions on £45,000,
Class 1A contributions on £300
 Class 1 employee's contributions on £45,000, Class 1 employer's contributions on £45,000,
Class 1A contributions on £300 (2 marks)

Derek and Denise 4 mins each

The following scenario relates to questions 79 to 83.
Derek
Derek is the sole employee of Rose, a sole trader. In the tax year 2019/20, Derek was paid a salary of
£56,000. He was also provided with a car from 6 November 2019. The car was available for private use
and had a list price of £12,000 and had CO2 emissions of 46 g/km. Derek was not provided with any fuel.
Denise
Denise started business on 6 January 2020 as a designer dressmaker. She prepared her first set of
accounts for the four month period to 5 May 2020 and had taxable profits of £15,000. There are 14
contribution weeks in the period from 6 January 2020 to 5 April 2020 and five contribution weeks in the
period from 6 April 2020 to 5 May 2020.
79 What are the employee's Class 1 national insurance contributions payable by Derek for 2019/20?
 £4,964
 £5,684
 £3,843
 £5,084 (2 marks)
80 What are the employer's Class 1 national insurance contributions payable by Rose for 2019/20?
 £3,537
 £2,684
 £6,537
 £2,829 (2 marks)
81 What are the Class 1A national insurance contributions payable by Rose for 2019/20?
 £159
 £110
 £96
 £265 (2 marks)

Practice question bank 419

 82 What are the Class 2 contributions payable by Denise in 2019/20 and by when are they payable?
 £42 by 31 January 2021
 £57 by 31 July 2020
 £42 by 31 July 2020
 £57 by 31 January 2021 (2 marks)
83 What are the Class 4 contributions payable by Denise in 2019/20?
 £573
 £314
 £236
 £1,012 (2 marks)

84 Sasha 27 mins
Sasha is a computer programmer. Until 5 April 2019 she was employed by Net Computers plc, but since
then has worked independently from home. Sasha's income for the year ended 5 April 2020 is £60,000. All
of this relates to work done for Net Computers plc. Her expenditure for the year ended 5 April 2020 is as
follows:
(1) The business proportion of light, heat and telephone for Sasha's home is £880.
(2) Computer equipment was purchased on 6 April 2019 for £4,000.
(3) A motor car was purchased by Sasha on 6 April 2019 for £10,000 with CO2 of 105g/km. Motor
expenses for the year ended 5 April 2020 amount to £3,500, of which 40% relate to journeys
between home and the premises of Net Computers plc. The other 60% relate to private mileage.
Required
(a) List eight factors that will indicate that a worker should be treated as an employee rather than as
self-employed. (4 marks)
(b) (i) Calculate the amount of taxable trading profits if Sasha is treated as self-employed during
2019/20.
(ii) Calculate the amount of Sasha's taxable earnings if she is treated as an employee during
2019/20. (7 marks)
(c) (i) Calculate Sasha's liability to Class 2 and Class 4 NIC if she is treated as self-employed
during 2019/20.
(ii) Calculate Sasha's liability to Class 1 NIC if she is treated as an employee during 2019/20.
(4 marks)
(Total = 15 marks)

Computing chargeable gains MCQs 4 mins each

85 Which TWO of the following assets will ALWAYS be exempt from capital gains tax?
(1) A qualifying corporate bond (QCB)
(2) Investments held in individual savings accounts (ISAs)
(3) A plot of land
(4) A decoration for bravery
 1 and 2
 2 and 3
 2 and 4
 1 and 4 (2 marks)

420 Practice question bank