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ACCA FUNDAMENTALS PAPER F6 (FA 2008)
1 30
Taxation (UK) 2 25
3 20
Question Day - Final Mock Examination 4 15
5 10
Total 100
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 Marker's assessment
Ticks in the left hand boxes indicate a good aspect of your performance. Relevant to
Tick in the right hand boxes highlight areas you need to work on. Question
(Note: Boxes may be left empty if the comments are not applicable to your script)

Approach Good Improvement How to

performance needed improve

Careful reading
Questions correctly interpreted
Review the definitions of
question words
Logical coherent answers Practise planning and full
written answers

Technical content

Understanding of principles Reading your Study Texts

More question practice

Principles applied well to specific required
problems

Computation
Check your workings
High standard of accuracy

Layout your workings clearly

Workings are easy to follow
Label and cross reference

Appearance/Layout Neat handwriting

Use plenty of space
Text layout is clear and easy to follow Use headings and
subheadings
Use short paragraphs

Calculations are easy to follow Neat diagrams and tables

Workings labelled

Written style
Short concise sentences
Concise business style

Think before you write

Answering the question set
ACCA Fundamentals Level
Paper F6 (FA 2008)
Taxation (UK)

Question day Final Mock

(December 2009)

Question Paper

Time allowed

Reading and Planning 15 minutes

Writing 3 hours

ALL FIVE questions are compulsory and MUST be attempted

During reading and planning time only the question paper may be annotated

Instructions:
Please attempt this exam under test conditions and attach the frontsheet complete with your name and address
to your script. The completed package should be sent to BPP Marking Department.
Take a few moments to review the notes on the inside of this page titled, Get into good exam habits now! before
attempting this exam.

DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS
Get into good exam habits now!
Take a moment to focus on the right approach for this exam.

Effective time management

Watch the clock, allocate 1.8 minutes to each mark and move on if you get behind.
Take a few moments to think what the requirements are asking for and how you are going to
answer them.
Remember one mark is usually allocated for each point you give in a discursive question.

Effective planning
This paper is in exactly the same format as the real exam. You should read through the paper and
plan the order in which you will tackle the questions. Always start with the one you feel most
confident about.
Read the requirements carefully: focus on mark allocation, question words (see below) and
potential overlap between requirements.
Identify and make sure you pick up the easy marks available in each question.

Effective layout
Present your numerical solutions using the standard layouts you have seen. Show and reference
your workings clearly.
With written elements try and make a number of distinct points using headings and short
paragraphs. You should aim to make a separate point for each mark.
Ensure that you explain the points you are making ie why is the point a strength, criticism or
opportunity?
Give yourself plenty of space to add extra lines as necessary, it will also make it easier for the
examiner to mark.

Common terminology
State Express, fully or clearly, the details of/facts of
Define Give the exact meaning of
Describe Communicate the key features of
Distinguish Highlight the differences between
Explain Make clear or intelligible/state the meaning of
Identify Recognise, establish or select after consideration
Illustrate Use an example to describe or explain something
Calculate/compute To ascertain or reckon mathematically
Demonstrate To prove with certainty or to exhibit by practical means
Prepare To make or get ready for use
Analyse Examine in detail the structure of
Compare and contrast Show the similarities and/or differences
Discuss To examine in detail by argument
Produce To create or bring into existence
Advise To counsel, inform or notify
Evaluate To appraise or assess the value of
Recommend To advise on a course of action

2
Rates and allowances
The following tax rates and allowances are to be used in answering the questions
Income tax
Savings starting rate 1 2,320 10%
Basic rate 1 34,800 20%
Higher rate 34,801 and above 40%
Personal allowances

Personal allowance 6,035
Personal allowance aged 65 to 74 9,030
Personal allowance aged 75 and over 9,180
Income limit for age-related allowances 21,800
Car benefit percentage
The base level of CO2 emissions is 135 grams per kilometre.
Car fuel benefit
The base figure for calculating the car fuel benefit is 16,900.
Pension scheme limits
Annual allowance 235,000
The maximum contribution that can qualify for tax relief without any earnings is 3,600.
Capital allowances
Plant and machinery
Annual investment allowance 50,000
Writing down allowance 20%
Special rate pool writing down allowance 10%
First year allowance low emission motor cars (CO2 emissions less than 110 g/km) 100%
Industrial buildings
Writing-down allowance 3%
Corporation tax
Financial year 2006 2007 2008
Small companies (SC) rate 19% 20% 21%
Full rate 30% 30% 28%
Lower limit 300,000 300,000 300,000
Upper limit 1,500,000 1,500,000 1,500,000
Marginal relief fraction: 11/400 1/40 7/400
Marginal relief
(M P) I/P marginal relief fraction
Value Added Tax
Registration limit 67,000
Deregistration limit 65,000

3
 Capital gains tax
Annual exemption 9,600
Rate of tax for individuals 18%
Entrepreneur's relief
Lifetime limit 1,000,000
Reducing faction 4/9
National insurance (not contracted-out rates)
%
Class 1 employee 1 5,435 per year Nil
5,436 40,040 per year 11.0
40,041 and above per year 1.0
Class 1 employer 1 5,435 per year Nil
5,436 and above per year 12.8
Class 1A 12.8
Class 2 2.30 per week
Class 4 1 5,435 per year Nil
5,436 40,040 per year 8.0
40,041 and above per year 1.0
Rates of Interest
Official rate of interest 6.25%
Rate of interest on underpaid tax 7.5% (assumed)
Rate of interest on overpaid tax 3.0% (assumed)
Calculations and workings need only be made to the nearest .
All apportionments may be made to the nearest month.
All workings should be shown.

4
All FIVE questions are compulsory and MUST be attempted

1 Dee Zyne
(a) On 5 July 2008 Dee Zyne resigned as an employee of Trendy-Wear plc. The company had
employed her as a fashion designer since 2000. On 6 July 2008 Dee commenced self-
employment running her own clothing business, preparing accounts to 5 April. The following
information is available for 2008/09:
Employment
(1) During the period 6 April 2008 to 5 July 2008 Dee's total gross salary from her employment
with Trendy-Wear plc was 26,000. Income tax of 8,530 was deducted from this figure
under PAYE.
(2) During the period 6 April 2008 to 5 July 2008 Trendy-Wear plc provided Dee with a petrol
powered company motor car with a list price of 17,500. The official CO2 emission rate for
the motor car was 218 grams per kilometre. Trendy-Wear plc also provided Dee with fuel
for private journeys. Dee paid 100 per month to Trendy-Wear plc for the use of the motor
car, and she also made a capital contribution of 1,500 towards the cost of the motor car
when it was first provided to her. The motor car was not available to Dee after 5 July 2008.
(3) On 1 January 2008 Trendy-Wear plc had provided Dee with an interest free loan of
60,000 so that she could purchase a yacht. Dee repaid 45,000 of the loan on 5 May
2008, and repaid the balance of the loan of 15,000 on 6 July 2008.
(4) During the period from 6 April 2008 to 5 July 2008 Dee was provided with free meals in
Trendy-Wear plc's staff canteen. The total cost of these meals to the company was 350.
(5) During the period 6 April 2008 to 5 July 2008 Trendy-Wear continued to contribute 5% of
Dee's salary to their occupational pension scheme. Dee contributed 3% of her salary.
Self-employment
(1) Dee's tax adjusted trading loss for the period 6 July 2008 to 5 April 2009 was 12,900.
This figure is before taking account of capital allowances.
(2) Dee purchased the following assets during the nine-month period ended 5 April 2009:

10 July 2008 Computer 1,500
16 August 2008 Office furniture 1,200
13 November 2008 Motor car (1) 10,400
21 January 2009 Motor car (2) 17,800
Motor car (1) purchased on 13 November 2008 is used by an employee, and 15% of the
mileage is for private purposes. Motor car (2) purchased on 21 January 2009 is used by
Dee, and 20% of the mileage is for private purposes.
Other information
(1) During the period 6 April 2008 to 5 July 2008 Dee paid interest of 110 (gross) on a
personal loan taken out on 1 August 2008 to purchase a computer for use in her
employment with Trendy-Wear plc.
(2) Dee's net income for each of the years 2002/03 to 2007/08 was 80,000.
Required
(i) Calculate Dee's trading loss for 2008/09. (5 marks)
(ii) Assuming that Dee claims loss relief against her general income for 2008/09, calculate the
income tax repayable to her for 2008/09. (15 marks)

5
 (b) Dee Zyne is registered for VAT, and her sales are all standard rated. The following information
relates to the her VAT return for the quarter ended 30 June 2009:
(1) Standard rated sales amounted to 120,000. Dee Zyne offers her customers a 5%
discount for prompt payment, and this discount is taken by half of the customers.
(2) Standard rated purchases and expenses amounted to 35,640. This figure includes 480
for entertaining customers.
(3) On 15 June 2009 Dee Zyne wrote off bad debts of 2,000 and 840 in respect of invoices
due for payment on 10 December 2008 and 5 February 2009 respectively.
(4) On 30 June 2009 she purchased a motor car at a cost of 16,450 for the use of a
salesperson, and machinery at a cost of 21,150. Both these figures are inclusive of VAT.
The motor car is used for both business and private mileage.
Unless stated otherwise, all of the above figures are exclusive of VAT. Dee Zyne does not operate
the cash accounting scheme.
Required
Calculate the amount of VAT payable by Dee Zyne for the quarter ended 30 June 2009.
(10 marks)
(Total = 30 marks)

2 Zoom plc
Zoom plc is a manufacturer of photographic equipment. The company had profits chargeable to
corporation tax of 860,000 for the year ended 31 March 2009. The summarised profit and loss account
of Zoom plc for the year ended 31 March 2009 is as follows:

Operating profit (note 1) 831,380
Income from investments
Bank interest (note 4) 10,420
Loan interest (note 5) 22,500
Income from property (note 6) 44,680
Dividends (note 7) 49,500
127,100
958,480
Interest payable (note 8) (46,000)
Profit before taxation 912,480
Notes
1 Operating profit
Depreciation of 45,300 has been deducted in arriving at the operating profit of 831,380.
2 Plant and machinery
On 1 April 2008 the tax written down values of plant and machinery were as follows:

Pool 19,600
Expensive motor car 20,200
Short-life asset 3,600

6
 The following transactions took place during the year ended 31 March 2009:
Cost/
(proceeds)

15 April 2008 Purchased equipment 4,600
19 June 2008 Purchased a computer 2,280
29 July 2008 Sold the expensive motor car (24,200)
31 July 2008 Purchased motor car (1) 16,600
3 August 2008 Sold a lorry (9,800)
22 December 2008 Purchased motor car (2) 10,800
1 February 2009 Purchased motor car (3) 14,200
28 February 2009 Sold the short-life asset (800)
The expensive motor car sold on 29 July 2008 for 24,200 originally cost 23,400. The lorry sold
on 3 August 2008 for 9,800 originally cost 17,200. Motor car (3) purchased on 1 February 2009
is a low emission motor car (CO2 emission rate of less than 110 grams per kilometre).
3 Industrial building
On 1 April 2008 Zoom plc purchased a new factory. The factory cost 285,000 (including
100,000 for the land and 40,000 for general offices).
4 Bank interest received
The bank interest was received on 31 March 2009. The bank deposits are held for non-trading
purposes.
5 Loan interest receivable
The loan was made for non-trading purposes on 1 July 2008. Loan interest of 15,000 was
received on 31 December 2008, and interest of 7,500 was accrued at 31 March 2009.
6 Income from property
Zoom plc lets out two unfurnished office buildings that are surplus to requirements.
The first office building was let from 1 April 2008 until 31 January 2009 at a rent of 3,200 per
month. On 31 January 2009 the tenant left owing two months rent which Zoom plc was unable to
recover. This office building was not re-let until May 2009.
The second office building was not let from 1 April 2008 to 31 July 2008. During this period Zoom
plc spent 4,800 on advertising for new tenants, and 5,200 on decorating the office building. On
1 August 2008 the office building was let at an annual rent of 26,400, payable in advance.
Zoom plc insured the two office buildings at a total cost of 3,360 for the year ended 31 December
2008, and 3,720 for the year ended 31 December 2009. The insurance is payable annually in
advance.
7 Dividends received
The dividends were all received from unconnected UK companies. The figure of 49,500 is the
actual cash amount received.
8 Interest payable
The interest is in respect of a debenture loan that has been used for trading purposes. Interest of
23,000 was paid on 30 September 2008 and again on 31 March 2009.
9 Other information
Zoom plc made quarterly instalment payments in respect of its corporation tax liability for the year
ended 31 March 2009.
Zoom plc has three associated companies.

7
 For the year ended 31 March 2008 Zoom plc had profits chargeable to corporation tax of
780,000.
Required
(a) (i) Calculate the amount of capital allowances and industrial buildings allowance that Zoom
plc can claim for the year ended 31 March 2009. (12 marks)
(ii) Prepare a computation for the year ended 31 March 2009 reconciling Zoom plcs profit
before taxation with its profits chargeable to corporation tax. Your reconciliation should
commence with the profit before taxation figure of 912,480, clearly identify the tax
adjusted trading income and the amount of property business income, and end with the
figure of 860,000 for profits chargeable to corporation tax. (7 marks)
(b) Explain why Zoom plc was required to make quarterly instalment payments in respect of its
corporation tax liability for the year ended 31 March 2009. (3 marks)
(c) Calculate Zoom plcs corporation tax liability for the year ended 31 March 2009, and explain how
and when this will have been paid. You should assume that the companys profits chargeable to
corporation tax of 860,000 accrued evenly throughout the year. (3 marks)
(Total = 25 marks)

3 Harold Butcher
Harold Butcher is 38 and has provided you with the following information in connection with his 2008/09
tax return:
(1) On 30 September 2008 he sold 20,000 shares in QRC plc (a public quoted company) at 5 per
share. He had purchased 10,000 shares at 4 per share on 5 April 1990. In January 2006 he
purchased a further 10,000 shares at 3 per share and then in December 2006 took up his full
entitlement to a rights issue of 1 for 2 shares held at 2 per share.
(2) In March 2009 he sold his 10% shareholding in his fathers family trading company for 300,000.
The shares had been given to him by his father in June 2006 at which time they had a market
value of 60,000. He and his father had jointly elected under gift relief to hold-over the gain of
59,000.
(3) In June 2008 he sold a vintage car for 30,000. He had purchased the car in August 2000 for
25,000.
(4) In November 2008 he received 45,000 from an insurance company in respect of a painting that
had been destroyed in a fire in May 2008. He had purchased the painting in June 2001 for
30,000. He spent 40,000 on a replacement painting. He makes a claim to defer as much of the
gain as possible.
(5) In October 2008 he sold a statue for 1,000 which he had purchased in January 2000 for 5,000.
(6) On 1 February 2009 Harold sold his principal private residence for 270,000 before estate agents
fees of 3,150. He bought the property on 1 June 1990 for 125,000. He lived in the property until
1 August 2000 when he moved out to live with his ailing mother. The property was let from
1 August 2000 until it was sold.
Harold had capital losses brought forward at 6 April 2008 of 50,000.
Required
Calculate Harolds net chargeable gains for 2008/09 and his Capital Gains Tax liability. (20 marks)

8
4 Fiona
Fiona, who is 35, lives on her own. She has been running her own business for many years. She has
agreed with HMRC that her profits for 2008/09 are 27,000.
During the tax year she received the following investment income:

UK dividends 8,000
NatEast bank interest (amount received) 3,200
UK Treasury Stock interest 300
Premium bond winnings 8,000
Property income See below
Fiona owns three properties which are let out unfurnished:
A 5 Arnold Avenue
B 17 Barry Road
C 27 Charter Road.
A This was let until 5 July 2008 at an annual rental of 1,200. On 6 October 2008, it was let out to a
new tenant on a 10-year lease agreement. The annual rental is 800. The tenant paid a premium
of 5,000 on 6 October 2008.
B This was let throughout 2008/09. The annual rental was 3,100. The rental due on 6 March 2009
was not received until 12 April 2009.
C This was let from 6 July 2008 at an annual rental of 600.
All the rents are payable monthly on the 6th of each month in advance.
Expenditure in connection with the properties was as follows:
A B C

Agent's commission 1 May 2008 25 35 10
1 November 2008 25 35 10
Repairs (note) 100 1,800
Advertising for new tenants 10 July 2008 50
Note. The repairs in respect of property C are analysed as follows:

Installation of new kitchen equipment 300
Retiling part of the roof after damage in May 2008 1,500
1,800
She makes an annual donation of 1,600 to charity with a Gift Aid declaration.
Required
Calculate Fiona's tax payable for 2008/09. (15 marks)

9
5 Half-Life Ltd
Half-Life Ltd commenced trading on 1 April 2005 and ceased trading on 30 June 2009. The companys
results for all its periods of trading are as follows:
Year ended Year ended Year ended Period ended Year ended
31 March 2006 31 March 2007 31 March 2008 30 June 2008 30 June 2009

Trading 224,000 67,400 25,200 (48,700) (308,800)
profit/(loss)
Property business 8,200 12,200 6,500 4,400
profit
Capital gains 5,600 23,700
Gift Aid donations (1,200) (1,000) (700)
Half-Life Ltd does not have any associated companies.
Required
(a) Assuming that Half-Life Ltd claims the maximum possible relief for its trading losses, calculate the
companys profits chargeable to corporation tax for the years ended 31 March 2006, 2007 and
2008, the three-month period ended 30 June 2008, and the year ended 30 June 2009. Your
answer should clearly identify the amounts of any losses and Gift Aid donations that are
unrelieved. (9 marks)
(b) State the dates by which Half-Life Ltd must make the loss relief claims in part (a). (1 mark)
Assume that the FY 2008 rates and allowances continue to apply in later years.
(Total = 10 marks)

10
Student self-assessment
Having completed this paper take a few minutes to consider what you did well and what you found difficult. Use
this as a basis to focus your future study on effectively improving your performance.

Common problems Future emphasis if you answer Yes

Timing and planning

Did you finish too early? Y/N Focus your planning time on generating more ideas.
Did you overrun? Y/N Focus on allocating your time better.
Practise questions under strict timed conditions.
If you get behind leave space and move on.
Did you waffle? Y/N Focus your planning time on developing a logical structure to
your answer.

Layout
Was your answer difficult to follow? Y/N Use headings and subheadings.
Use numbering sequences when identifying points.
Leave space between each point.
Did you fail to explain each point? Y/N Show why the point identified answers the question set.
Were some of your workings unclear? Y/N Give yourself time and space to make the marker's job easy.

Content
Did you struggle with:
Interpreting the questions?
Understanding the subject?
Remembering the notes/text?
Y/N Learn the meaning of question words (inside front cover).
Learn subject jargon (study text glossary).
Read questions carefully noting all the parts.
Practise as many questions as possible.
Y/N Review your notes/text.
Work through easier examples first.
Contact a tutor for help.
Y/N Quiz yourself constantly as you study. You need to develop your
memory as well as your understanding of a subject.

11
12

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ACCA Fundamentals Level
Paper F6 (FA 2008)
Taxation (UK)

Question day Final Mock

(December 2009)
Guidance, Marking scheme and
Suggested solutions

ACF6FM09(D)
Guidance on improving your exam performance
Which questions to do first?
It is important for you to decide which order to attempt the questions. Each question will carry different marks so
you may prefer to attempt the question with the most marks first or, instead, you may prefer to attempt the topic
you are more confident about first. This means you will build up marks early on giving you a solid base to tackle
the harder questions later.
Whichever you choose, do not spend too long on the questions you are confident about as you need to spend an
appropriate amount of time on them all. You can work out how much time you should spend on each by looking
at the mark allocation and multiplying by 1.8 (as you have 1.8 minutes per mark, not including reading time). For
instance, you must not spend more than 18 minutes on a 10-mark question. Remember, you cannot pass the
exam answering two or three questions well and the rest poorly.
An alternative strategy is to answer all questions in strict order. You could use the time saved choosing the order
by starting to plan your answers. You may prefer to use this method if you find yourself spending too long on
your favourite questions as it forces you to spend an appropriate amount of time on each before moving on.

Strategy
Make sure your answers are easy to follow. The focus of the exam is computations, so make sure you use the
correct proformas and show your workings, referenced in clearly.
If there is a written element to a question do write full sentences, even if you are using bullet points.

Time management
Use the reading time to make sure that you get as many of the marks as possible. This is your opportunity to
brainstorm areas that you are less confident with and even to make a brief outline of the proformas you are going
to use in your answers.
Whatever notes/plans you make, use them when writing up your answer when the writing time begins. Tick off
each item as you complete it. If you do not use your planning notes it was a waste of time doing them in the first
place.
Never overrun on any question; once the time is up move on to the next one.

2
1 Dee Zyne
Marking scheme
Marks
(a) Revised loss 1
Capital allowances Pool 1
Motor car 2
Capital allowances AIAs 1
5
(b) Salary
Car benefit Relevant percentage 1
Capital contribution
Calculation 1
Private use contributions
Fuel benefit 1
Beneficial loan Average method 1
Strict method 2
Staff canteen
Pension contributions employer 1
employee 1
Loan interest 1
Loss relief 1
Personal allowance
Income tax 1
Tax suffered at source
15
(c) Output VAT
Sales @ 17.5% 1
Discount 1
Input VAT
Expenses/ purchases 1
Blocked VAT (customer entertaining) 1
Bad debts 2
Car (blocked) 1
Machinery (VAT inclusive) 1
Output VAT less Input VAT 1
10
30

Suggested solution
Text references. Self-employment aspects are covered in Chapters 7 to 10, and employment aspects
are dealt with in Chapters 3 and 4. VAT is dealt with in Chapters 25 and 26.
Top tips. When considering the use of a trading loss, look at the marginal rates of tax saved by using the
loss.
Easy marks. The capital allowances computation was not difficult in part (a) and the income tax
computation in part (b) was also relatively straightforward. The VAT calculation in part (c) would also yield
easy marks.

3
(a) (i) Trading loss

Trading loss before CAs (12,900)
Less: CAs (W) (6,060)
Trading loss (18,960)
Working
Capital allowances
AIA Pool Car Allowances

Additions not qualifying for AIAs
Car (1) (N1) 10,400
Car (2) (N2) 17,800
10,400 17,800
WDA @ 20% 9/12 (N3) (1,560) 1,560
WDA restricted 9/12 (N3) (2,250) @ 80% 1,800
Additions qualifying for AIAs
Computer 1,500
Office furniture 1,200
2,700
AIA (max 50k x 9/12) (N3) (2,700) 2,700
TWDV c/f 8,840 15,550
Allowances 6,060
Notes
(1) Cheap car (ie < 12,000) enters the pool. No AIAs given. No restriction necessary for
private use by employee (he will be taxed on the benefit of using the car for private use).
(2) Expensive car (ie > 12,000) has its own column. Maximum allowance is 3,000 for 12
month period. However, private use by the proprietor of the business will require the
restriction of the writing down allowance to give relief only for the business proportion.
(3) WDA and AIA restricted for short period of account.
(ii) Tax repayment
Non-savings
income

Employment income (W1) 27,939
Trading income 0
Total income 27,939
Less deductible interest (110)
Less current year loss relief (18,960)
Net income 8,979
Less PA (6,035)
Taxable income 2,944

Tax on non-savings income: 2,944 x 20% 588

Tax liability 588
Less PAYE (8,530)
Income tax repayable (7,941)

4
 Workings
1 Employment income

Salary 26,000
Company car (W2) 2,250
Interest free loan (W3) 469
Meals in staff canteen exempt
Employer's contribution to pension scheme exempt
Total employment income 28,719
Less: employee pension contributions 3% x 26,000 (780)
Employment income 27,939
2 Company car
Round CO2 emissions down to nearest 5, ie 215
215 135 = 80g/km
Divided by 5 = 16
Taxable percentage = 15% + 16% = 31%

List price 17,500
Less capital contribution (1,500)
Revised list price 16,000
Benefit 16,000 31% 3/12 1,240
Less private use contributions (300)
Car benefit 940
Fuel benefit 16,900 31% 3/12 1,310
Total benefit 2,250
Note. As the motor car was only available until 5 July 2008, both the car and fuel benefit
must be time apportioned.
3 Interest free loan
60,000 + 15,000
(i) Average = 37,500 6.25%
2
= 2,344 3/12
Benefit = 586
(ii) Strict

6.4.08 5.5.08 60,000 @ 6.25% 1/12 = 313
6.5.08 5.7.08 15,000 @ 6.25% 2/12 = 156
Benefit 469
Therefore Dee should elect for the strict method of calculating the loan.
(b)

Output tax
120,000 95% = 114,000 17.5% 19,950
Input tax
(35,640 480) = 35,160 17.5% 6,153
2,000 17.5% (bad debt over 6 months old) 350
21,150 7/47 (no input tax recoverable on car) 3,150 (9,653)
VAT payable 10,297

5
2 Zoom plc
Marking scheme
Marks
(a) (i) P&M
Pool 3
AIA 2
Car sold 1
SLA 1
Car acquired 1
FYA 1
IBA land
offices 1
WDA
12
(ii) Depreciation
Income from investments
Interest payable
CAs
Trading income
Interest income 1
Property business income rent 1
irrecoverable debt 1
expenses 1
7
(b) Large companies 1
Associates 1
No exception large last year 1
3
(c) CT 1
Instalments 1
Due dates 1
3
25

Suggested solution
Text references. Chapters 8 and 19 to 24 are essential reading for this question.
Top tips. In this question, you were told the correct figure for PCTCT so you should have made sure that
your answer matched that figure; hence in our model answer there is a profit reconciliation. The question
requirements are broken down so you can clearly see where the marks are to be found. Lots of marks
here for capital allowances so take your time and work carefully.
Easy marks. The profit reconciliation in part (ii) was straightforward and the examiner helpfully gave the
correct figures to use in part (c) so there were easy marks for the calculation of tax and instalments.

6
(a) (i) Capital allowances
AIA/FIA Pool Car (1) SLA Car (2) Allowances

TWDV b/f 19,600 20,200 3,600
Additions
15.4.08 equipment 4,600
19.6.08 computer 2,280
31.7.08 car 16,600
22.12.08 car 10,800
30,400
Disposals
29.7.08 car (restrict to cost) (23,400)
3.8.08 lorry (9,800)
28.2.09 SLA (800)
6,880 20,600
AIA (max 50k) (6,880) 6,880

BC (3,200) (3,200)
BA 2,800 2,800
WDA @ 20%/3,000 (4,120) (3,000) 7,120
16,480 13,600
Addition
1.2.09
Low emission 14,200
car
FYA @ 100% (14,200) 0 14,200
TWDV c/f/Allowances 16,480 13,600 27,800
Industrial buildings allowance
Factory

Cost (general office allowable as less than 25% of cost) 185,000
WDA 3% x 185,000 = 5,550
(ii) Profit reconciliation

Profit before taxation 912,480
Add depreciation 45,300
957,780
Less income from investments 127,100
capital allowances 27,800
IBAs 5,550 (160,450)
Trading income 797,330
Interest income bank interest 10,420
loan interest 22,500
32,920
Property business income (W) 29,750
PCTCT 860,000

7
 Working
Property business income

Rent receivable office 1 3,200 10 32,000
office 2 26,400 8/12 17,600
49,600
Irrecoverable debts 3,200 2 6,400
Advertising 4,800
Decorating 5,200
Insurance 3,360 9/12 + 3,720 3/12 3,450
(19,850)
Property business income 29,750
(b) Zoom plc is a large company since it pays corporation tax at the full rate (3 associated companies
so upper limit is 1,500,000 4 = 375,000) and also paid the full rate in the last year.
Large companies have to pay their corporation tax in quarterly instalments.
(c) Zoom plc's corporation tax for y/e 31 March 2009 is 860,000 30% = 258,000.
This will have to be paid as follows:

14 October 2008 64,500
14 January 2009 64,500
14 April 2009 64,500
14 July 2009 64,500
258,000

8
3 Harold Butcher
Marking scheme
Marks
Shares
Matching rules 1
Share pool 1
Rights issue 1
Gain 1
Family company shares
Gain 1
Base cost (original gift relief) 1
Entrepreneur's relief 1
Car exempt 1
Painting compensation
Gain 1
Deferral 1
Gain remaining chargeable 1
Statue exempt (chattels rule) 1
PPR
Gain 1
PPR relief 2
Letting relief 2
Set off loss brought forward 1
Annual exemption 1
CGT payable 1
20

Suggested solution
Text references. Chapters 13 to 17 deal with CGT.
Top tips. Set capital losses off against gains with the least amount of taper relief (i.e. the most gain
remaining chargeable) first.
Easy marks. There were easy marks for stating that the car was an exempt asset and the gain on the
statue was exempt under the chattel rules.

Summary

QRC plc (W1) 40,000
Fathers gifted shares (W3) 166,111
Car (W4)
Insurance proceeds (W5) 5,000
Statue (W6) _
Residence (W7) 1,796
212,907
Less losses b/f (50,000)
Gain 162,907
Less annual exemption (9,600)
Taxable gain 153,307

Tax Calculation: @ 18% 27,595

9
Workings
1 QRC plc shares
Disposal September 2008 Identified with Share Pool (W2)

Proceeds (20,000 x 5) 100,000
Less cost (W2) (60,000)
Gain 40,000

2 Share Pool
No. of shares Cost

5 April 1990 Purchase 10,000 40,000
Jan 2006 purchase 10,000 30,000
December 2006 Rights 1:2 @ 2 10,000 20,000
30,000 90,000
30 September 2008 Disposal (20,000) (60,000)
Carried forward 10,000 30,000
3 Fathers gifted shares

Proceeds 300,000
Cost (MV of gift) 60,000
Gain held over (59,000)
(1,000)
299,000
Less: entrepreneur's relief 4/9 (132,889)
166,111
4 Vintage car exempt
5 Insurance proceeds

Proceeds 45,000
Less cost (30,000)
Gain 15,000
Less deferred (balancing figure) (10,000)
Gain chargeable now (note) 5,000

Note. As Harold has replaced the painting he can claim to defer the gain. However, as he has not
spent all of the money, any money he has not spent is chargeable to CGT immediately, ie
(45,000 40,000 =) 5,000.
6 Statue
Proceeds and cost both < 6,000 therefore exempt (chattels rules)
7 Principal private residence

Proceeds 270,000
Less: estate agents fees (3,150)
Less: cost (125,000)
Gain 141,850
Less: PPR 158/224 x 141,850 (100,054)

Less: letting relief lower of

(1) 40,000 (de minimus limit)
(2) 100,054 (PPR relief)
(3) 66/224 x 141,850 = 41,795 (gain in letting period) (40,000)
1,796

10
Period of ownership 1 June 1990 1 February 2009 = 224 months
Occupation Letting

1 June 1990 31 July 2000 122
1 August 2000 31 January 2006 66
1 February 2006 31 January 2009 36
158 66

11
4 Fiona
Marking scheme
Marks
Trading income
Property income
Premium 1
Rental income 1
Expenses 1
Capital expenditure 1
Dividends 1
Interest 1
Treasury stock interest (gross) 1
Premium bond winnings exempt
PA 1
Tax bands 2
Extend BRB 1
Tax rates 1
Deduct tax credits 1
15

Suggested solution
Text references. Property income is covered in Chapter 6. The tax computation is dealt with in Chapter
2.
Top tips. Income from all properties is pooled to arrive at the property income (or loss) figure for the year.
Easy marks. There were easy marks for stating the trading income, dividends and interest and also the
exemption for premium bond winnings.

12
 Non-savings Savings Dividend
income income income

Trading income 27,000
Property income (W1) 6,560
UK dividends (8,000 100/90) 8,889
Bank interest (3,200 100/80) 4,000
Gilt interest (gross) 300
Net income 33,560 4,300 8,889
Less personal allowance (6,035)
Taxable income 27,525 4,300 8,889

Tax
27,525 20% 5,505
4,300 20% 860
4,975 10% 497
36,800 (W3)
(8,889 4,975) 32.5% 1,272
Tax liability 8,134
Less tax deducted on:
dividends (889)
interest (800)
Tax payable 6,445
Workings
1 Property income
A B C

Premium taxed as income (W2) 4,100
Rental income
(3/12 1,200 + 6/12 800) 700
3,100
(9/12 600) 450
Expenditure:
Agent's commission:
1 May 2008 (25) (35) (10)
1 November 2008 (25) (35) (10)
Repairs (100) (1,500)
Advertising (50)
4,700 2,930 (1,070)
Net rents = 6,560
Note. Installation of new kitchen equipment is a capital not a revenue expense.
2 Lease premium

Premium 5,000
Less 2% (10 1) 5,000 (900)
Taxed as property income 4,100

3 Basic rate band extension:

34,800 + (1,600 100/80) = 36,800
Notes
(1) Premium Bond winnings are tax free.

13
5 Half-Life Ltd
Marking scheme
Marks
(a) Trading income
Property business income
Capital gains
Loss relief period ended 30 June 2007 2
year ended 30 June 2008 2
Gift Aid donations 1
Unrelieved trade losses 1
Unrelieved Gift Aid donations 1
9
(b) Period ended 30 June 2007 claim
Year ended 30 June 2008 claim
1
10

Suggested solution
Text references. Chapter 21 for CT loss relief.
Top tips. The key to this question is adopting the correct layout for showing the effect of trading losses.
Deal with the chargeable gains separately as they occur in a later year. Your layout should mirror the
layout used by the examiner in the questions.
Easy marks. Copying the figures given in the question into your proforma to answer part (a) would score
easy marks without you even having to think! The use of the losses should have been simple enough with
the only complication being that one of the loss periods was only 3 months long. Stating the dates for the
loss relief claim in part (b) was an easy mark.

(a) Half Life Ltd PCTCT

Period Year
ended ended
Year ended 31 March 30 June 30 June
2006 2007 2008 2008 2009

Trading income 224,000 67,400 25,200 0 0
Property business
income 8,200 12,200 6,500 4,400 0
Capital gains 0 0 5,600 0 23,700
232,200 79,600 37,300 4,400 23,700
Less: current period
loss relief (4,400)
Less: carry back
loss relief (174,150) (79,600) (37,300) 0 (23,700)
58,050 0 0 0 0
Less Gift Aid (1,200) 0 0 0 0
PCTCT 56,850 0 0 0 0
Unrelieved Gift Aid
donations 1,000 700
Loss memorandum
Period ended 30 June 2008
Loss can be set off against profits of current year and then the previous 12 months.

14

Loss period ended 30 June 2008 48,700
Used in c/y (4,400)
c/b to year ended 31 March 2008 (37,300)
Loss unrelieved 7,000
Year ended 30 June 2009
Loss can be set off against profits of current year and then the previous 36 months (1 July 2005 to
30 June 2008) as this is a loss on cessation.

Loss y/e 30.6.09 308,800
Used y/e 30.6.09 (23,700)
Used p/e 30.6.08 -
Used y/e 31.3.08 -
Used y/e 31.3.07 (79,600)
Used y/e 31.3.06
(1.7.05 31.3.06 only)
9/12 232,200 (174,150)
Loss unrelieved 31,350
(b) Loss period ended 30 June 2008 claim within two years of end of accounting period in which
loss arose, ie by 30 June 2010.
Loss year ended 30 June 2009 same principle applies, ie claim by 30 June 2011.

15


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16
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