BELOW ARE 15 MARK QUESTIONS TAKEN FROM PREVIOUS EXAM PAPERS AS ADJUSTED TO

REFLECT THE CURRENT SYLLABUS. PART B OF THE EXAM PAPER HAS THREE 15 MARK
QUESTIONS AND YOU MUST ANSWER TWO.

Question 1:
Mary Devine is employed as a nurse in a private nursing home. In her spare time Mary enjoys making
jewellery. She buys silver from a silversmith and within two weeks turns each piece into a unique
necklace. In 2022 Mary sold 5 pieces of jewellery to her friends, each for €300, making a profit of €250
on each piece. Mary was delighted with the extra income. In recent months Mary has been approached
by other friends to make more jewellery.
Mary is not familiar with the Irish tax system and has now approached you for advice.

Requirement:

(a) Advise Mary, making reference to the Badges of Trade, whether the profit from the sale of
the jewellery would be subject to Income Tax, giving three reasons for your answer.

(b) Outline for Mary how the self-assessment system operates with regard to each of the
following:
(i) Income Tax Returns
(ii) Late Filing Penalties
(iii) Payment of Tax
(15 Marks)

Question 2

You have recently started a job as a trainee accountant in the tax department of Dempsey & Moylan,
Chartered Accountants. Your first task relates to Suzy Flynn, a new client of the firm. Suzy is about to
open a coffee shop in Maynooth and is keen to learn more about the Irish tax system. She intends to
prepare her accounts to the 31st December each year and will employ both part-time and full-time staff
in the shop. The tax manager has asked you to prepare some notes in advance of a meeting with Suzy.

Requirement:

(a) Explain Suzy’s obligations for the tax year 2022 with respect to the payment of her own income
tax and the filing of her tax return under the self-assessment system.

(b) Explain when and how a sole trader must register as an employer under the PAYE system.

(c) Explain the procedures to be undertaken if a taxpayer discovers an error after the submission
of a tax return and wishes to correct this.
(15 Marks)

Question 3

You have recently started your new job as a trainee accountant in the tax department of Forde & Clarke,
Chartered Accountants. Your first task relates to Eleanor Wiley, a new client of the firm. Eleanor is a
sole trader who has just opened a gift shop and is keen to learn more about the Irish tax system. She
intends to prepare her accounts to the 31st December each year and will employ a number of full-time
staff in the shop. The tax manager has asked you to prepare some notes before a meeting with Eleanor.
Requirement:

(a) Set out clearly FIVE types of income that the PAYE system must be applied to.

(b) Explain what is meant by the term “calculating PAYE on a cumulative basis”.

(c) Explain the procedure to be adopted by Eleanor in calculating a PAYE liability if one of
her new employees is taking up employment for the first time and does not have a PPS Number.

(15 Marks)
Question 4

You have recently started a new job as a trainee accountant in the tax department of Flynn & Devine,
Chartered Accountants. Your first task relates to Michael Connors, a client of the firm. In 2020 Michael
left his job with a large firm of solicitors to work as a self-employed solicitor. His business has been
steadily increasing in recent months and he is now considering hiring an office administrator. He knows
that he will have to pay his employees after tax has been deducted but knows little else about the tax
system. He has asked you to help him.
For the purpose of illustrating your answer you can assume that Michael will pay his new employee, (a
single individual), €2,000 per month, that the employee will provide a PPSN but has not yet registered
with the Revenue Commissioners and they will commence work on 1st January 2022.

Requirement:

(a) Give THREE specific examples of the type of income from offices or employment that PAYE
must be applied to.
(b) Explain when PAYE that has been deducted from employees must be paid to the Revenue
Commissioners.
(c) Briefly explain the difference when PAYE is calculated on a:
• Cumulative Basis
• Emergency Basis
Use Michael’s new employee to illustrate the difference in PAYE under each method for the
first two months on their employment.
(15 Marks)

Question 5
You have recently started a new job as a trainee accountant in the tax department of Burke & O’Leary,
Chartered Accountants. Your first task relates to David O’Brien, a client of the firm. He is a sole trader
operating a menswear shop for two years in Ennis. At the end of 2020 he moved premises to the new
retail park and as a result has seen a dramatic increase in business. David has just hired his first
employee, Clare Daly to assist him on a full-time basis in the shop. She has not worked before having
just returned to Ireland from London in December 2020 where she had completed fashion design course.
She commenced work on 2nd January 2021 and will be paid €1,800 (gross) per month. She is not
married, has no other sources of income and does have a PPS No. David has not yet received an RPN
for Clare.
Requirement:

(a) As David has never had an employee before, outline what his responsibilities are at the
commencement of the tax year and the commencement of employment as an employer under
the PAYE system.

(b) Calculate Clare’s net pay for the month of January after the deduction of PAYE and PRSI.
Clearly state the basis for the calculation of PAYE used in your answer.

(c) List FIVE sources of income that PRSI is payable on.

(15 Marks)

Question 6:

April Smith (age 42) is a self-employed solicitor and is a new client of your accounting firm. She
returned to Ireland a few years ago having spent a number of years working in London. Following a
telephone conversation with one of the tax managers you have been asked to prepare notes in advance
of the meeting with April who has asked for clarification on some tax issues.

• April commenced her business on 1 May 2019. Her taxable profits are as follows:
€
Year ended 30 April 2020 75,000
Year ended 30 April 2021 66,000
Year ended 30 April 2022 50,000

• On 1 November 2021 she purchased a residential property in Kildare for €400,000. She has
sought advice on the Local Property Tax on this property. She intends to rent the property for
2022.
• She has noticed some coverage in the print media about tax evasion and tax avoidance and is
keen to understand these issues further.

Requirement:

(a) Calculate April’s assessable profits for each of the tax years 2019 to 2022 inclusive, clearly
showing all workings and stating the basis of assessment.
(b) Explain April’s obligations for the tax year 2022 with respect to the payment of her own
income tax and the filing of her tax returns under the self-assessment system.

(c) Calculate the LPT payable by April on the property for 2022 and state what payment
options are available and the relevant payment date(s) in accordance with those options for
the payment of any liability. Assume no local adjustment factor for Kildare for 2022.

(d) Explain the difference between tax evasion and tax avoidance.

(15 Marks)
Question 7:

David Dalton has a small property portfolio of residential and commercial units. Details of the
properties held during 2022 are given below.

Property 1

This property is a retail shop in David’s local town. David has owned this property for many years, and
it has been leased to a florist on a 10-year lease. In January 2022 due to difficult trading conditions
David reduced the rent from €2,000 to €1,800, paid monthly in advance. Annual insurance is due on 1
July. The insurance premium paid on 1 July 2021 was €4,000 and 1 July 2022 was €5,000. Interest on
money borrowed to part fund the property purchase amounted to €20,000 for 2022.

Property 2

David purchased this commercial property on 1 March 2022, part funded through a bank loan. Major
structural repairs were carried out at a cost of €20,000 before it was let to tenants on 1 June 2022 on a
16-year lease with an initial premium payable of €36,000. The tenants carried on a trade from the
property. Advertising costs on a local website in May were €500. The annual rent of €24,000 is paid
quarterly and is due on 1 June, 1 September, 1 December and 1 March. Interest paid in 2022 on the loan
to purchase the property amounted to €8,000. Annual insurance amounted to €3,000.
David had purchased this commercial building from a sole trader for €300,000 The vendor had
constructed the property in 2013 when the original construction costs were €200,000 and it had been
used as a manufacturing facility.

Property 3

This residential property was let at an annual rent of €2,500, payable monthly on the first day of the
month. Insurance paid for 12 months on 1 November 2021 amounted to €900. David sold the property
on 15 November 2022. David asked the tenants to leave the property on 15 October to facilitate the
sale. They did not pay any rent in October and as a goodwill gesture for the tenants moving out quickly
and leaving the property in good condition David did not pursue the payment of October’s rent.
David spent €2,000 on painting the exterior of the property in November to prepare it for the market.
Legal fees related to the sale amounted to €1,000.

Property 4

This residential property is rented to tenants €1,000 per month payable on the first of the month. The
last rent they paid was 1 August 2022. Neighbours have constantly complained to David about the
tenants’ noisy behaviour. The tenants moved out on 1 September 2022 but to date have not paid the
outstanding amount. David has hired a solicitor who has been unable to contact them. The legal fees
were €400. In September 2022 he spent €5,000 repairing and redecorating the property. He relet it on 1
October 2022 for €1,200 per month payable in advance on the first of the month. Annual insurance on
the property was €500 and interest for 2022 on money borrowed to purchase the property was €4,000.
David spent €6,000 on furniture for the property in September 2022.

David has registered all his tenancies with the Residential Tenancies Board.

Requirement:

Calculate David’s taxable income for 2022.

(15 Marks)
Question 8:

Anna Kenny is a sole trader operating as a florist. She has decided to hire her first employee. Aideen
Flynn has accepted Anna’s offer of full-time employment, with an agreed annual salary of €30,000. She
will commence employment on 1 September 2022. Aideen ceased her previous employment on 31 July
2022. Details of her earnings up to the date of leaving according to her RPN were €24,000 (PAYE paid
of €2,500 and USC paid of €620). Aideen’s standard rate cut-off is €36,800 per annum and her annual
tax credits are €3,400.

Requirement:

(a) Outline how Anna should register as an employer for PAYE and what are her obligations are as
an employer throughout the year.
(b) Set out clearly FOUR types of income that the PAYE system must be applied to.
(c) Calculate Aideen’s net monthly income for September 2022 after the deduction of PAYE and
USC.
(15 Marks)