SBS/ADVTAX/Sem 2 2022
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UNIVERSITY OF SURREY ©
Faculty of Arts and Social Sciences
Undergraduate Programme in Accounting & Finance
Module MAN3102: 15 credits
Advanced Taxation
(Close Book Class Test)
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Level FHEQ6
Time allowed: 1 hour March 2022
Instructions to candidates:
The paper consists of One question.
Question 1
The following information is available for Alpha, Delta, Omicron and Rho
(none of whom are Scottish taxpayers) for the tax year 2021/22:
1. During the tax year Alpha received a retirement pension of £27,100.
2. Alpha received ISA interest of £15,000, Building Society interest of
£100 and net debenture interest of £1,520 during the tax year.
3. Alpha received dividend income of £205,000 in the tax year.
1. Delta receives income from National Savings certificates of £2,200 and
bank interest of £4900.
2. Delta owns a house which she lets to tenants. The house was let
throughout the tax year and rents received during the year were
£28,500. Her deductible expenditure for the year was £9,500. She had
property losses bought forward of £4,800.
1. Omicron commenced self-employment as a consultant on 6 April 2021.
Her tax adjusted trading profit based on draft accounts for the year
ended 5 April 2022 is £120,000.
2. During the tax year Omicron made donations under the gift aid scheme
totalling £800 net to national charities.
3. During the tax year Omicron made net contributions of £12,000 into a
personal pension scheme.
Rho has been trading for many years, preparing annual accounts to the 30
June. Recent trading profits/ (losses), adjusted for tax purposes, are as
Year to 30 June 2019 39,000
Year to 30 June 2020 15,000
Year to 30 June 2021 (13,000)
Rho’s only other income comprises rental income of £12,500 per annum.
a) Calculate the income tax liability for the tax year 2021/22 for Alpha.
b) Calculate the income tax liability for the tax year 2021/22 for Delta.
c) Calculate the income tax liability for the tax year 2021/22 for Omicron.
d) Identify the claims Rho could make in relation to the trading loss
incurred in the year to 30 June 2021. Which of these loss relief claims
would you recommend?
a) Alpha – Income Tax Computation 2021/22
Total Savings Savings Dividend
Retirement pension 27,100 27,100
BSI 100 100
ISA Exempt
Debenture interest
1520 * 100/80 1,900 1,900
Dividend 205,000 205,000
Total Income 234,100 27,100 2,000 205,000
Taxable Income 234,100 27,100 2,000 205,000
Income tax calculation:
27,100 @ 20%= 5,420
2,000 @20%= 400
Dividend Allow. 2,000 @ 0%
37700-27100-2000-2000= 6,600 @ 7.5%= 495
112,300 @ 32.5%= 36,498
205000-2000-6600-112300= 84,100 @ 38.1%= 32,042
Income tax liability 234,100 74,855
Less: tax deducted at source 1520-1900 380
Tax payable 74,475
b) Delta – Total Income calculation 2021/22
W1 Property income
Rental income 28,500
Deductible expenses 9,500
Property income 19,000
Less losses b/fwd 4,800
Delta would not elect to use the £1,000 property income allowance as her
deductible expenses are greater at £9,500.
Total Savings Savings
Rental Income W1 14,200 14,200
Bank interest 4,900 4,900
NS Certificates exempt
Total Income 19,100 14,200 4,900
PA 12,570 12,570
Taxable Income 6,530 1,630 4,900
Income tax liability:
1630 @20% = 326
5000-1630= 3370 @0%
PSA 1000 @0%
4900-4370= 530 @20% = 106
c) Omicron Income Tax Computation 2021/22
Trading Profit 120,000
Net Income 120,000
Less: PA W1 10,570
Taxable Income 109,430
Income Tax
W2 53,700 @ 20% = 10,740
109,430 – 53,700 = 55,730 @ 40% = 22,292
109,430 33,032
£33,032 is both the IT liability and IT payable.
Adjusted net income = 120,000 – 1000 – 15,000 = 104,000
PA 104,000 – 100,000=4000/2= 2,000
PA 12,570 – 2,000 = 10,570
W2 Extended basic rate band
Omicron’s basic rate limit £37,700 is increased by her gift aid donations 800 * 100/80
= 1000 and her private pension contributions 12,000 * 100/80 = 15,000. Giving an
adjusted basic rate limit of 37,700+1,000+15,000 = 53,700
d) Rhos trading income is:
Year Basis period Trading Income Property Inc. PA
2019/20 30.6.2019 39,000 12,500
2020/21 30.6.2020 15,000 12,500 12,500
2021/22 30.6.2021 nil 12,500 12,570
Rho can claim to relieve the trading loss of £13,000 against his total income
for 2021/22 or 2020/21 or both these year or neither of these years.
Rho can also claim to carry the loss forward against future trading profits.
A claim for 2021/22 would only relieve £12,500 of the loss and waste his
2021/22 PA. This is pointless.
A claim for 2020/21 would relieve the entire loss of £13,000 against total
income of £27,500 (£15,000+£12,500) leaving enough income to absorb the
whole of the 2020/21 personal allowance. This is an efficient way of relieving
Faculty of Arts and Social Sciences
Advanced Taxation
Instructions to candidates:
Question 1
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