Professional Documents
Culture Documents
Question Paper
Time allowed
During reading and planning time only the question paper may be annotated
Instructions:
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
ACF6EFM13(D) Questions
This examination has been prepared for the December 2013 sitting
Get into good exam habits now!
Take a moment to focus on the right approach for this exam.
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 ACF6EFM13(D) Questions
This examination has been prepared for the December 2013 sitting
Tax tables
The following tax rates and allowances are to be used in answering the questions.
Income tax
Normal Dividend
rates rates
Basic rate £1 – £34,370 20% 10%
Higher rate £34,371 – £150,000 40% 32.5%
Additional rate £150,001 and over 50% 42.5%
A starting rate of 10% applies to savings income where it falls within the first £2,710 of taxable income.
Personal allowances
£
Personal allowance standard 8,105
Personal allowance aged 65 to 74 10,500
Personal allowance aged 75 and over 10,660
Income limit for age-related allowances 25,400
Income limit for standard personal allowance 100,000
Car benefit percentage
The base level of CO2 emissions is 100 grams per kilometre.
The percentage rates applying to petrol cars with CO2 emissions up to this level are:
%
75 grams per kilometre or less 5
76 grams to 99 grams per kilometre 10
100 grams per kilometre 11
Car fuel benefit
The base figure for calculating the car fuel benefit is £20,200.
Individual savings accounts (ISAs)
The overall investment limit is £11,280, of which £5,640 can be invested in a cash ISA.
Pension scheme limits
Annual allowance £50,000
The maximum contribution that can qualify for tax relief without any earnings is £3,600.
Authorised mileage allowances: cars
ACF6EFM13(D) Questions 3
This examination has been prepared for the December 2013 sitting
Corporation tax
Financial year 2010 2011 2012
Small profits rate 21% 20% 20%
Main rate 28% 26% 24%
Lower limit £300,000 £300,000 £300,000
Upper limit £1,500,000 £1,500,000 £1,500,000
Standard fraction: 7/400 3/200 1/100
Marginal relief
Standard fraction (U A) N/A
Value Added Tax
Standard rate 20%
Registration limit £77,000
Deregistration limit £75,000
Inheritance tax: tax rates
£1 – £325,000 0%
Excess – death rate 40%
– lifetime rate 20%
Inheritance tax: taper relief
Years before death % reduction
Over 3 but less than 4 years 20
Over 4 but less than 5 years 40
Over 5 but less than 6 years 60
Over 6 but less than 7 years 80
Capital gains tax
Rate of tax for individuals
Lower rate 18%
Higher rate 28%
Annual exempt amount £10,600
Entrepreneurs’ relief
Lifetime limit £10,000,000
Rate of tax 10%
National insurance (not contracted-out rates)
%
Class 1 Employee £1 – £7,605 per year Nil
£7,606 – £42,475 per year 12.0
£42,476 and above per year 2.0
Class 1 Employer £1 – £7,488 per year Nil
£7,489 and above per year 13.8
Class 1A 13.8
Class 2 £2.65 per week
Small earnings exception £5,595
Class 4 £1 – £7,605 per year Nil
£7,606 – £42,475 per year 9.0
£42,476 and above per year 2.0
Rates of Interest
Official rate of interest 4%
Rate of interest on underpaid tax 3% (assumed)
Rate of interest on overpaid tax 0.5% (assumed)
Supplementary information
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 ACF6EFM13(D) Questions
This examination has been prepared for the December 2013 sitting
All FIVE questions are compulsory and MUST be attempted
1 Tracey
(a) Until 30 September 2012, Tracey was employed by Finance Plc when she decided to take a
career break. The following information is available for the tax year 2012/13:
Employment with Finance plc
(1) A monthly salary of £12,000. In addition to her salary, on 12 May 2012 Tracey was paid a
profit related bonus of £5,000. The bonus was based on Finance Plc’s results for the year
end 31 December 2011.
(2) During the period from 6 April 2012 to 30 September 2012 Tracey’s two year old son was
provided with a place at Finance Plc’s work place nursery. The total cost to the company
of providing this nursery place was £9,555 (147 days at £65 per day).
(3) On 1 May 2012 Finance Plc provided Tracey with an interest free loan of £50,000 which
she used to purchase an antique vase. Tracey repaid £10,000 of the loan on 30 June 2012
and repaid the balance of the loan when she ceased employment on 30 September 2012.
(4) Finance Plc provided Tracey with a home entertainment system for her personal use
costing £6,000 on 6 April 2012. The company gave the home entertainment system to
Tracey for free when she left the company on 30 September 2012, although its market
value at that time was £4,500.
(5) During the period 6 April 2012 to 30 September 2012 Finance Plc paid gym membership
fees of £1,234 for Tracey.
(6) Tracey contributed 5% of her monthly gross salary of £12,000 into Finance Plc’s HM
Revenue and Customs registered occupational pension scheme.
(7) Finance plc paid £9,000 PAYE for 2012/13 in relation to Tracey’s employment.
Property income
(1) Tracy purchased a house, Redacre, on 1 September 2012, which she let it out
(unfurnished) from 1 October 2012 to 5 April 2013 at a monthly rent of £1,500, payable in
advance. During September 2012 Tracey spent £1,275 on advertising for tenants. For the
period 1 September 2012 to 5 April 2013 she paid interest of £3,700, in respect of a loan
that was taken out to purchase Redacre, and buildings insurance of £413.
(2) Tracy also owned another house, Bluewater, which was let out (furnished) until 31 December
2012 at a monthly rent of £800, payable in advance. On 31 December 2012 the tenant left
owing two months’ rent which Tracey was unable to recover. Bluewater was not re-let before 5
April 2013. During March 2013 Tracey spent £1,500 repairing the roof of Bluewater. Tracy paid
buildings insurance of £400 for the year from 1 January 2012 and £448 for the year from 1
January 2013.
(3) Where possible, Tracey claims the wear and tear allowance.
Other information
(1) During the tax year 2012/13 Tracey received building society interest of £2,280 and
dividends of £1,890. These were the actual cash amounts received.
(2) On 4 August 2012 Tracey received a premium bond prize of £100.
Required
Calculate the income tax payable by Tracey for the tax year 2012/13. (19 marks)
ACF6EFM13(D) Questions 5
This examination has been prepared for the December 2013 sitting
(b) In 2011, Tracey purchased a luxury yacht for her own use. Many of her friends wanted to borrow it
for special occasions and in July 2013, she began charging £1,000 per day for the use of the
yacht. Tracy has been advised that the hiring out of the yacht has resulted in taxable profits, but
she has said that she does not wish to disclose them to HM Revenue and Customs.
Required
(i) Briefly explain the difference between tax evasion and tax avoidance, and how
HM Revenue and Customs would view the situation if Tracey does not disclose her
taxable profits in respect of the yacht. (3 marks)
(ii) Briefly explain from an ethical viewpoint how you, as a trainee Chartered Certified
Accountant, should deal with the suggestion from Tracey that no disclosure is made to HM
Revenue and Customs. (3 marks)
(Total: 25 marks)
2 Brandon Ltd
(a) Brandon Ltd is a United Kingdom resident manufacturing company. The company’s statement of profit or
loss for the year ended 31 March 2013 is as follows:
Note £ £
Gross profit 811,400
Operating expenses
Depreciation 95,000
Amortisation of leasehold property 1 8,000
Gifts and donations 2 2,650
Professional fees 3 17,000
Other expenses 4 250,250
(372,900)
Operating profit 438,500
Income from investments
6 ACF6EFM13(D) Questions
This examination has been prepared for the December 2013 sitting
Note 3 – Professional fees
Professional fees are as follows:
£
Legal fees in connection with the renewal of a 25-year property lease in respect of a 2,500
warehouse
Legal fees in connection with the issue of loan stock (see note 8) 14,500
17,000
Note 4 – Other expenses
The figure of £250,250 for other expenses includes £7,590 for entertaining clients and £5,000 for
entertaining employees.
Note 5 – Bank interest received
The bank interest was received on 31 March 2013. There is no accrual at 31 March 2013. The bank
deposits are held for non-trading purposes.
Note 6 – Dividends received
During the year ended 31 March 2013 Brandon Ltd received dividends of £25,000 from Dunedin Ltd, a
100% UK subsidiary company, and dividends of £45,000 from Canon Ltd, an unconnected UK company.
Both figures are the actual cash amounts received.
Note 7 – Profit on disposal of shares
The profit on disposal of shares is in respect of a 5% shareholding that was sold on 25 September 2012.
The disposal resulted in a chargeable gain of £35,006. This figure is after taking account of indexation.
Note 8 – Other information
The interest payable is in respect of the company’s 5% loan stock that was issued on 1 April 2012. The
proceeds of the issue were used to finance the company’s trading activities. Interest of £25,500 was paid
on 30 September 2012 and again on 31 March 2013.
Note 9 – Plant and machinery
On 1 April 2012 the tax written down values of plant and machinery were as follows:
£
Main pool 20,500
Special rate pool 15,200
The following transactions took place during the year ended 31 March 2013:
Cost/(Proceeds)
£
10 June 2012 Purchased equipment 1,000
15 June 2012 Purchased motor car (1) 10,200
CO2 emissions 150 g/km
25 September 2012 Purchased motor car (2) 14,500
CO2 emissions 105 g/km
7 November 2012 Purchased a lorry 21,500
27 February 2013 Sold equipment (4,200)
The equipment sold on 27 February 2013 for £4,200 was originally purchased in 2010 for £9,200.
Required
(i) Calculate Brandon Ltd’s tax adjusted trading profit for the year ended 31 March 2013, after
deducting capital allowances. Your computation should commence with the profit before taxation
figure of £550,000, and should list all of the items referred to in notes (1) to (9) indicating by the
use of zero (0) any items that do not require adjustment. (15 marks)
(ii) Calculate Brandon Ltd’s corporation tax liability for the year ended 31 March 2013 and state the
date of payment. (5 marks)
ACF6EFM13(D) Questions 7
This examination has been prepared for the December 2013 sitting
(b) Note that in answering this part of the question you are not expected to take account of any of the
information provided in part (a) above.
The following information is available in respect of Brandon Ltd’s value added tax (VAT) for the quarter
ended 31 March 2013:
(1) Invoices were issued for sales of £89,200 to VAT registered customers. Of this figure, £70,400
was in respect of exempt sales and the balance in respect of standard rated sales. The standard
rated sales figure is exclusive of VAT.
(2) In addition to the above, on 15 March 2013 Brandon Ltd issued a VAT invoice for £10,000 plus
VAT of £2,000 to a VAT registered customer. This was in respect of a contract for standard rated
financial services that will be completed on 30 April 2013. The customer paid for the contracted
services in two instalments of £6,000 on 31 March 2013 and 30 April 2013 respectively.
(3) Invoices were issued for sales of £150,000 to non-VAT registered customers. Of this figure,
£120,000 was in respect of exempt sales and the balance in respect of standard rated sales. The
standard rated sales figure is inclusive of VAT.
(4) The managing director of Brandon Ltd is provided with free fuel for private mileage driven in her
company motor car. During the quarter ended 31 March 2013 this fuel cost Brandon Ltd £295.
The relevant quarterly scale charge is £366. Both these figures are inclusive of VAT.
For the quarters ended 31 December 2011 and 30 September 2012 Brandon Ltd was two months late in
submitting its VAT returns and in paying the related VAT liabilities. All of the company’s other VAT returns
have been submitted on time.
Required
(i) Calculate the amount of output VAT payable by Brandon Ltd for the quarter ended 31 March
2013. (4 marks)
(ii) State the circumstances in which Brandon Ltd is and is not required to issue a VAT invoice.
(3 marks)
(iii) Advise Brandon Ltd of the default surcharge implications if it is one month late in submitting its
VAT return for the quarter ended 31 March 2013 and in paying the related VAT liability. (3 marks)
(Total: 30 marks)
3 Pat
Pat had the following events relating to capital gains tax during the tax year 2012/13:
(1) On 10 July 2012 Pat sold five acres of land for £620,000. Pat had held the land as an investment
since he had inherited it upon the death of his mother on 15 December 2000, when the land was
valued at £182,000. Pat’s mother had originally purchased the land for £77,000.
(2) On 1 December 2012 an office building, owned by Pat as an investment, was damaged by a fire.
The cost of the office building on that date was £210,000. Pat received insurance proceeds of
£63,000 on 10 January 2013, and spent a total of £71,000 during March 2013 on restoring the
office building.
Pat made a claim to defer the gain arising from the receipt of the insurance proceeds.
(3) On 19 September 2012 Pat made a gift of 10,000 £1 ordinary shares in Randridge plc to his
daughter. On that date the shares were quoted on the Stock Exchange at £4.60 - £4.80, with
recorded bargains of £4.50, £4.65 and £4.70.
8 ACF6EFM13(D) Questions
This examination has been prepared for the December 2013 sitting
Pat has made the following purchases of shares in Randridge plc:
17 March 2001 6,000 shares for £12,600
9 September 2009 8,000 shares for £16,500
1 October 2012 2,000 shares for £8,500
Pat’s total shareholding was less than 5% of Randridge plc and so gift relief is not available.
(4) On 31 December 2012 Pat sold a house for £360,000. The house had been purchased on 1
January 1993 for £50,000.
Pat occupied the house as his main residence from the date of purchase until 31 December 1997.
The house was then unoccupied between 1 January 1998 and 31 December 2001 due to Pat
being required by his employer to work elsewhere in the United Kingdom.
From 1 January 2002 until 30 June 2003 Pat again occupied the house as his main residence.
The house was then unoccupied until it was sold on 31 December 2012.
Throughout the period 1 January 1993 to 31 December 2012 Pat did not have any other main
residence.
Pat’s taxable income in 2012/13 was £27,370. Pat has capital losses brought forward from 2011/12 of
£25,000.
Required
Calculate the capital gains tax payable by Pat for 2012/13 and state the date of payment. (15 marks)
ACF6EFM13(D) Questions 9
This examination has been prepared for the December 2013 sitting
(ii) Calculate Millie’s income tax liability for 2013/14 if she does make the personal pension
contribution. (4 marks)
You should assume that the tax rates and allowances for the tax year 2012/13 will continue to apply in
2013/14.
(Total: 15 marks)
5 Joan
Joan died on 31 December 2012. She had made the following gifts during her lifetime:
1 July 2006: she gave £250 to each of her ten grandchildren
5 July 2008: she gifted £487,000 to a trust for the benefit of her family. Joan paid any tax due.
The nil rate band in 2008/09 was £312,000.
14 February 2010: she gave her great-granddaughter a wedding gift of £25,000
At the date of her death, Joan owned the following assets:
Her residence, valued at £750,000
A vintage car valued at £30,000
Shares held in an ISA valued at £105,000
Bank savings account balance £25,000
Joan’s funeral expenses were £6,500.
Under the terms of her will Joan left £75,000 to her husband, £125,000 to the trust and the balance of her
estate to be shared equally between her three children.
Required
(a) State the amount of any exempt transfers in relation to the lifetime gifts. (3 Marks)
(b) Calculate any lifetime tax payable on the gift to the trust, clearly showing the value of the transfer
to be carried forward. (4 Marks)
(c) Calculate the death tax due on the lifetime gifts. (4 Marks)
(d) Calculate the death tax due on the death estate. (4 Marks)
(Total: 15 marks)
10 ACF6EFM13(D) Questions
This examination has been prepared for the December 2013 sitting
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.
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? 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.
Understanding the subject? Y/N Review your notes/text.
Work through easier examples first.
Contact a tutor for help.
Remembering the notes/text? Y/N Quiz yourself constantly as you study. You need to develop your
memory as well as your understanding of a subject.
ACF6EFM13(D) Questions 11
This examination has been prepared for the December 2013 sitting
BPP House, Aldine Place, London W12 8AA
Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
12
www.bpp.com/learningmedia ACF6EFM13(D) Questions
This examination has been prepared for the December 2013 sitting
ACCA Fundamentals Level
Paper F6 (FA 2012)
Taxation (UK)
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.
1 (a)
Tracey - 2012/13 Income Tax Computation
Non savings Savings Dividend
£ £ £
Employment income (w1) 81,367
Property income (w3) 6,740
Building society interest (BSI) 2,280 × 100/80 2,850
Dividends 1,890 × 100/90 2,100
Premium Bond Prize – Exempt ______ ______ ______
Net income 88,107 2,850 2,100
Less personal allowance (8,105) ______ _____
Taxable income 80,002 2,850 2,100
Tax
At 20% 34,370 6,874
At 40% 45,632 18,253
At 40% 2,850 1,140
At 32.5% 2,100 682
Tax liability 26,949
Tax paid:
Dividends 2,100 × 10% 210
PAYE 9,000
BSI 2,850 × 20% 570
(9,780)
Income tax payable 17,169
Working 1 Employment income
£
Salary (12,000 × 6) 72,000
Contributions to Occupational Pension Scheme
72,000 × 5% ( 3,600)
Bonus (received in year) 5,000
Work place nursery Exempt
Interest free loan (w2) 733
Home entertainment system:
Use of: 6,000 × 20% × 6/12 600
Gift of:
Greater of £ £
Original MV 6,000
Less use benefit ( 600) 5,400 5,400
MV when given 4,500
Gym membership 1,234
Employment income 81,367
2 (a) (i)
Brandon Ltd – Trading profit for the year ended 31 March 2013
£ £
Profit before taxation 550,000
Add
Depreciation 95,000
Amortisation of leasehold property 8,000
Gifts of pens to customers 900
Gifts of hampers to customers 1,050
Donation 0
Legal fees re renewal of lease 0
Legal fees re issue of loan stock 0
Entertaining clients 7,590
Entertaining employees 0 112,540
Less
Bank interest 14,500
Dividends 70,000
Profit on disposal of shares 78,000
Interest payable 0
Deduction for lease premium (w 1) 6,560
Capital allowances (w 2) 42,986 (212,046)
Trading profit 450,494
Working 1 – Deduction for lease premium
The office building has been used for business purposes, and so the proportion of the lease premium
assessed on the landlord can be deducted, spread over the life of the lease.
The amount assessed on the landlord is £65,600 calculated as follows:
£
Premium received 80,000
Less: 80,000 × 2% × (10 – 1) (14,400)
Taxable as property income 65,600
This is deductible over the life of the lease, so the deduction for the year ended 31 March 2013 is £6,560
(65,600/10).
Tutorial notes:
(1) Gifts to customers are only an allowable deduction if they cost less than £50 per recipient per
year, are not of food, drink, tobacco, or vouchers for exchangeable goods, and carry a
conspicuous advertisement for the company making the gift.
(2) The costs of renewing a short-lease (less than 50 years) and of obtaining loan finance are
allowable.
(3) The only exception to the non-deductibility of entertainment expenditure is when it is in respect of
employees.
(4) Interest on a loan used for trading purposes is deductible in calculating the trading profit on an
accruals basis.
(5) The cost of the equipment sold will have originally been added to the main pool, so the disposal
proceeds of £4,200 are deducted from that pool.
(a) (ii)
Brandon Ltd – Corporation tax computation for the year ended 31 March 2013
£
Trading profit (part (a)) 450,494
Bank interest 14,500
Chargeable gain 35,006
Taxable total profits 500,000
Franked investment income (45,000 × 100/90) 50,000
Augmented profits 550,000
Corporation tax
£500,000 at 24% 120,000
Marginal relief 1/100 (750,000 – 550,000) × 500,000/550,000 (1,818)
Payable 1 January 2014 118,182
Notes
Brandon Ltd has one associated company, so the upper limit is reduced to £750,000 (1,500,000/2).
Group dividends are not included as franked investment income.
Suggested solution
Text references. Computing chargeable gains is dealt with in Chapter 13, including compensation.
The principal private residence exemption is covered in Chapter 14. Shares and securities are to be
found in Chapter 16.
Top tips. Make sure you deal with each asset separately and then bring the gains together in a
summary computation before deducting losses brought forward and the annual exempt amount.
Easy marks. There were easy marks available for deducting the annual exempt amount and
computing the capital gains tax payable. Did you remember to state the due date? This was another
easy half mark.
Working 1 - Land
£
Proceeds 620,000
Cost (182,000)
Gain 438,000
Suggested solution
Text references. Partnerships are covered in Chapter 11 and the basis of assessment in Chapter 9.
The effect of making personal pension contributions is covered in Chapters 2 and 5.
Top tips. In part (a)(i), since you are only required to compute Kyle’s share of the adjusted trading
profits, it is not necessary to set out the full partnership computation. In part (b)(ii), it is important that
you set out the computation of adjusted net profits in a separate working and don’t try to incorporate it
in the income tax computation.
Easy marks. In part (a) (i) there were some easy marks for the calculation of taxable trading profit for
2012/13 for Kyle if you remembered that the opening year rules applied. In part (b)(i) the income tax
computation was straightforward.
5 (a)
Gifts to Grandchildren
Small gift exemption £250 for each gift
Gift to Trust
Annual Exemption 2008/09 £3,000
2007/08 b/f £3,000