A plan of attack

If this were the real Taxation (TX – UK) exam and you had been told to turn over and begin, what
would be going through your mind?
Perhaps you’re having a panic. You’ve spent most of your study time on income tax and
corporation tax computations (because that’s what your tutor/BPP Course Book told you to do),
plus a selection of other topics, and you’re really not sure that you know enough. So calm down.
Spend the first few moments or so looking at the exam and develop a plan of attack.
Looking through the exam.
Section A contains 15 Objective Test (OT) questions each worth 2 marks. These will cover all
sections of the syllabus. Some you may find easy and some more difficult. For example, Question
13 on keeping records for tax should be easy marks and you just need to pick the right answers
from the table. Don’t spend a lot of time on anything you really don’t know. For multiple choice
questions you are not penalised for wrong answers, so you should answer all of them. If all else
fails – guess!
Section B contains three OT Case scenarios. These each have five questions each worth 2 marks.
Make sure you read the scenario carefully before you start to answer the OTQs.
• Questions 16 to 20 are about chargeable gains for individuals. In Question 19, note that you
are asked for the amount of CGT which could have been saved if Marlon had transferred 50%
ownership of the residential property to Alvita prior to its disposal so you need to think about
how CGT is computed for Alvita bearing in mind that she has no taxable income or other
disposals in the year.
• Questions 21 to 25 concern inheritance tax (IHT). In Question 24, you need to consider how the
seven year accumulation period works.
• Questions 26 to 30 test topics in value added tax (VAT). For Question 26, you need to think
about the tax point for the contract in part (2).
In Section C you have three constructed response (long) questions:
• Question 31 for 10 marks is about the potential tax saving by incorporating a sole trader
business. You need to work out the individual’s income tax, the national insurance
contributions for an employee and corporation tax.
• Question 32 for 15 marks is an income tax computation.
• Question 33 for 15 marks is a corporation tax question and includes capital allowances. Part
(b) is about how a company files its corporation tax return and supporting accounts.
Allocating your time
BPP’s advice is always allocate your time according to the marks for the question in total and for
the parts of the question. But use common sense. If you’re confronted by an OTQ on a topic of
which you know nothing, pick an answer and move on. Use the time to pick up marks elsewhere.
After the exam… Forget about it!
And don’t worry if you found the exam difficult. More than likely other candidates will too. If this
were the real thing you would need to forget the exam the minute you left the exam hall and think
about the next one. Or, if it’s the last one, celebrate!
ANSWERS

Answers 415
 Section A
1 The correct answer is: £4,069

£
£(50,270 – 12,570) = £37,700 × 9% 3,393
£(84,050 – 50,270) = £33,780 × 2% 676
Class 4 NICs 4,069

The answer £4,248 includes Class 2 NIC. The answer £6,433 uses 9% throughout. The answer
£3,393 is just the 9% band liability.

2 The correct answers are:

• Reporting under the money laundering regulations
• Advising the client to make disclosure
Your firm should advise the client to make disclosure. Your firm should make a report under the
money laundering regulations.
You should not inform HMRC of the non-disclosure. Your firm also should not warn the client that it
will be reporting the non-disclosure as this might constitute the criminal offence of ‘tipping-off.’

3 £ 8,270

£
Personal allowance 12,570
Less restriction £(109,400 – 800 – 100,000) = £8,600/2 (4,300)
Restricted personal allowance 8,270

4 The correct answer is: £135,000

£
Lower of:
Taxable total profits of Shallow Ltd for the corresponding
accounting period (1.7.23 – 31.3.24) £224,000 × 9/12 168,000

Losses of Halo Ltd for the corresponding accounting period

£180,000 × 9/12 135,000

5 The correct answer is: Four instalments of £60,625

Profits threshold £1,500,000/2 (one associated company) 750,000

Sizeable Ltd was therefore a large company in both years.

Upper limit = £250,000 / 2 (one associated company) = £125,000

Sizeable Ltd will therefore be charged corporation tax at the main rate.

Each instalment for the year to 31 March 2024 is £(970,000 @ 25%) = 242,500/4 60,625

The answer nine instalments of £20,500 (£820,000@25% × 10%) and a balancing payment of
£58,000 (£242,500 – 9 × £20,500) is based on the previous accounting period’s profits with each

416 Taxation (TX – UK) FA2023

 of the instalments being 10% of the liability. This is the VAT annual accounting schedule of
payments. The answer instalments of £51,250 (£820,000@25% ÷ 4) and a balancing payment of
£37,500 (£242,500 – 4 × £51,250) is based on the previous year’s profits, similar to self-
assessment for individuals. The answer £242,500 is the full amount of corporation tax which
would be payable if Sizeable Ltd was not a large company.

6 £1,950

Interest runs from due date (1 October 2024) to the date of payment (31 March 2025) which is six
months.

£60,000 × 6.5% × 6/12 £1,950

The answer £4,875 is for a 15-month period from 31 January 2024 to 31 March 2025. The answer
£650 is for a two-month period from 31 January 2025 to 31 March 2025. The answer £975 is for a
three-month period from the filing date of 1 January 2025 to 31 March 2025.

7 The correct answer is: £4,500

£
Proceeds 8,700
Less cost (3,800)
Gain 4,900

The maximum gain is 5/3 × £(8,700 – 6,000) = £4,500.

The chargeable gain is the lower of £4,900 and £4,500, so it is £4,500.
The answer £0 assumes that this is an exempt chattel.

8 £ 118,750

£
Net chargeable transfer 800,000
Less nil rate band (325,000)
475,000
IHT £475,000 × 20/80 (donor paid tax) 118,750

9 The correct answers are:

£400 to Alfred NOT EXEMPT

£140 to Minnie NOT EXEMPT

A further £280 to Minnie NOT EXEMPT

ANSWERS

£175 to Winifred EXEMPT

Outright gifts to individuals totalling £250 or less per donee in any one tax year are exempt under
the small gifts exemption. The £400 gift to Alfred is therefore not exempt under the small gifts
exemption. If gifts total more than £250, the whole amount is chargeable. Therefore, neither of the
gifts to Minnie which total £(140 + 280) = £420 are exempt under the small gifts exemption. The
gift of £175 to Winifred is exempt under the small gifts exemption.

Answers 417
10 The correct answer is: £7,164
£(49,750 × 120/100) = 59,700 × 12% = £7,164
Under the flat rate scheme, a business calculates VAT by applying a fixed percentage to its tax
inclusive turnover. However, the business cannot reclaim any input tax suffered.

11 The correct answers are:

• A car suitable for private use
• A UK government security (gilt)
A wasting chattel is exempt, as is a chattel sold for gross proceeds of £6,000 or less. Other
chattels are chargeable assets. A house may be exempt if private residence relief applies but is
otherwise a chargeable asset.

12 The correct answer is: £12,000

£(20,000 – 8,000) = £12,000
The answer £20,000 is the full ISA allowance. The answer £0 assumes that only one ISA can be
opened in a tax year and so Winston cannot invest into a stocks and shares ISA having invested in
a cash ISA. The answer £10,000 assumes that the ISA limit is divided equally between the two
accounts.

13 The correct answers are:

Business records 31 JANUARY 2030

Non-business records 31 JANUARY 2030

Records must be retained until five years after the 31 January following the tax year where the
taxpayer is in business. This applies to all of the records, not only the business records.

14 The correct answer is: £62,000

£
Loss incurred in y/e 31.12.23 105,000
p/e 31.12.22 (43,000)
62,000
y/e 31.8.22
Lower of £96,000 × 8/12 = £64,000 and unused loss (62,000)
C/f 0

Loss relief by deduction from total profits may be given by deduction from current period profits
and from the previous 12 months. Therefore, relief can be given in the four-month period ended 31
December 2022 and for eight months of the year ended 31 August 2022.
The answer £64,000 is the time apportioned amount of profits. The answer £96,000 assumes that
the earlier accounting period profits can be relieved first.

15 The correct answer is: 90 days

Nigel was not previously resident in the UK. He will be UK resident for 2023/24 with three UK ties if
he spends at least 91 days in the UK during that tax year. Therefore, the maximum number of
days that Nigel could spend in the UK during the tax year 2023/24 without being treated as UK
resident for that year is 90 days.

418 Taxation (TX – UK) FA2023

Section B
Delroy and Marlon

Course Book references

Computing chargeable gains and computation of the CGT liability are covered in Chapter 13,
and private residence relief in Chapter 14. Business reliefs are the subject of Chapter 15.

Top Tips
Be careful to read all the information given in the scenario. In this case you were told that
Grant had used his annual exempt amount, but that Alvita had not made any other disposals
of assets during the year and so must still have her annual exempt amount available.

Easy Marks
There were easy marks in Question 16 for a basic gain computation leading to the calculation
of CGT. Question 20 should have been quick and easy marks for identification of the correct
statement.

16 The correct answer is: £43,000

£
Ordinary shares in Dub Ltd
Proceeds 240,000
Less cost (25,000)
Gain 215,000
Less annual exempt amount (already used as stated in question) (0)
Taxable gain 215,000
CGT: £215,000 × 20% 43,000

Tutorial note. The effect of the gift holdover relief election is that Grant effectively took
over Delroy’s original cost of £25,000.
The disposal does not qualify for business asset disposal relief as Grant was neither an
officer nor an employee of Dub Ltd and, in any case, had only owned the shares for just
over two months (the minimum period for the conditions for the relief to be satisfied is two
years).
The answer £21,500 assumes that business asset disposal relief applies to the disposal so
the rate of tax is 10%. The answer £0 assumes this is an exempt disposal. The answer
£41,800 deducts the annual exempt amount – read the question carefully!

17 The correct answers are:

• Business asset disposal relief would have been available.
• The cash gift would not have been a chargeable disposal.
ANSWERS

Delroy’s disposal would have qualified for business asset disposal relief because for at least
two years prior to the disposal:
• Dub Ltd was Delroy’s personal company as he owned at least 5% of the ordinary share
capital.
• Dub Ltd was a trading company.
• Delroy was an officer or employee of Dub Ltd.
There are no capital gains tax implications of a gift of cash.

Answers 419
18 The correct answer is: £114,800

£
Residential property
Proceeds 497,000
Less cost (152,600)
Gain before PRR 344,400
Less PRR (W) (229,600)
Gain after PRR 114,800

Working
One-third of the residential property was always used exclusively for business purposes, so
the private residence relief exemption is restricted to £(344,400 × 2/3) = £229,600.
The answer £229,600 is the PRR. The answer £0 assumes this is an exempt disposal. The
answer £344,400 is the gain before PRR.
19 The correct answer is: £5,450

£
Annual exempt amount £6,000 × 28% 1,680
Basic rate band £37,700 × (28 – 18)% 3,770
Total tax saving 5,450

The 50% ownership of the house would have been transferred from Marlon to Alvita on a no
gain, no loss basis. The effect of this is that 50% of the gain on disposal would accrue to
Marlon and 50% to Alvita.
Transferring 50% ownership of the house to Alvita prior to its disposal would have enabled
her annual exempt amount and basic rate tax band for 2023/24 to be utilised.
The answer £1,680 is just the annual exempt amount saving. The answer £3,770 is just the
basic rate band saving. The answer £12,236 is the annual exempt amount and the basic
rate band, all at 28%.

20 27 May 2024

The CGT on disposal of a residential property is due within 60 days of the disposal.

Opal

Course Book references

Inheritance tax is covered in Chapter 18.

Top tips
Try drawing a timeline and mark on it the date of Opal’s death and the lifetime transfers. Then
mark the date which is seven years before Opal’s death. It will be clear that the lifetime
transfer in 2014 falls more than seven years before Opal’s death and is therefore exempt.

Easy marks
There were some easy marks for working out the IHT on the death estate in Question 23.

21 The correct answer is: £656,000

£374,000 – £160,000 + £442,000 = £656,000

420 Taxation (TX – UK) FA2023

22 The correct answers are:
• Personal loan from a bank of £22,400
• Funeral cost of £5,200
The promise to pay the nephew’s legal fees is not deductible as it is not legally enforceable.
23 The correct answer is: £338,000

£
Chargeable estate 950,000

105,000 (W) × 0% 0
845,000 × 40% 338,000
950,000
IHT on death estate 338,000

Working

£
Nil rate band at death 325,000
Less: PET 14 August 2014 (0)
PET 7 November 2023 (220,000)
Available nil rate band 105,000

The potentially exempt transfer on 14 August 2014 is exempt from inheritance tax as it was
made more than seven years before 20 March 2024.
The answer £250,000 has an unrestricted nil rate band. The answer £378,000 assumes that
the PET in 2014 becomes chargeable on Opal’s death. The answer £335,600 deducts two
annual exemptions from the gift in 2023.

24 £88,000

If Opal were to live for another seven years, the potentially exempt transfer on 7 November
2023 would become exempt.
The inheritance tax payable in respect of her estate would therefore decrease by
£(220,000 × 40%) = £88,000.
25 The correct answers are:
• The gifts must be habitual.
• Opal must have enough remaining income to maintain her normal standard of living.

Glacier Ltd
ANSWERS

Course Book references

Value added tax is covered in Chapters 24 and 25.

Top tips
The tax point is frequently examined and is relevant in Question 26. The basic tax point for a
supply of services is the date when they are completed, but if a VAT invoice is issued or
payment received before the basic tax point, then this becomes the actual tax point.

Answers 421
 Easy marks
There were easy marks in Questions 28 and 29 concerning the late payment and late filing
penalties.

26 £3,480

£
Sales
VAT registered customers £(44,600 – 35,200) = £9,400 × 20% 1,880
Additional contract (1 March 2024) 1,600
Output VAT 3,480

The tax point for the contract is when the VAT invoice was issued on 1 March 2024, which is
earlier than both the basic tax point of 15 April and the receipt of cash on 31 March.

27 Glacier Ltd will include output VAT of £ 82 and input VAT of

£ 120 on its VAT return for the quarter ended 31 March 2024 in respect of the managing
director’s company car.

£
Output VAT £490 × 20/120 82
Input VAT £720 × 20/120 120

28 The correct answer is: 2% of the VAT liability and late payment interest
The late payment of VAT will result in a penalty of 2% of the VAT liability for that period
since the liability was paid within 16 and 30 days of the due date, and late payment
interest from the due date until the date that the VAT liability is paid.
29 The correct answers are:
• Once the threshold is reached, four quarterly returns must be submitted on time to reset
penalty points to zero.
• Penalty points expire after two years unless the threshold of four points has been
reached.

30 Glacier Ltd will be required to issue a VAT invoice when a standard rated supply is made

to a VAT registered customer .

422 Taxation (TX – UK) FA2023

 Section C
ALL three questions are compulsory and MUST be attempted.

31 Sarah

Course Book references

Employment income is covered in Chapter 3; the income tax computation in Chapter 2; and
NICs are dealt with in Chapter 12. Corporation tax is covered in Chapter 19.

Top tips
Note 1 outlines the steps that you need to take to complete the question.

Easy marks
There were some easy marks for basic income tax and corporation tax computations.

Marking guide Marks

(a) Income tax liability

Director’s remuneration 0.5
Dividends 0.5
Personal allowance 0.5
Basic rate on earnings 0.5
Nil rate on dividends 0.5
Basic rate on dividends 0.5
National insurance contributions
Class 1 employee 1
Class 1 employer 1
Corporation tax
Trading profit 0.5
Director’s remuneration 0.5
Employer’s Class 1 NIC 0.5
Corporation tax 0.5
Total tax cost if incorporates 0.5
Additional tax 0.5
8
(b) Salary attracting NICs 1
Restrict salary, take more dividends 1
2
Total 10
ANSWERS

(a) Sarah – Income tax liability 2023/24

Non-savings income Dividend income Total income

£ £ £

Director’s remuneration 30,000

Dividends __ 10,000

Answers 423
 Non-savings income Dividend income Total income

£ £ £

Net income 30,000 10,000 40,000

Less personal allowance (12,570) __

Taxable income 17,430 10,000 27,430

Tax

Non-savings income

£17,430 @ 20% 3,486

Dividend income

£1,000 @ 0% 0

£9,000 (10,000 – 1,000) @ 8.75% 788

Income tax liability 4,274

Sarah – National insurance contributions 2023/24

£
Employee Class 1 £(30,000 – 12,570) = 17,430 @ 12% 2,092
Employer Class 1 £(30,000 – 9,100) = 20,900 @ 13.8% 2,884

Corporation tax liability of the new limited company for the year ended 5 April 2024

£
Trading profit 50,000
Less:
Director’s remuneration (30,000)
Employer’s Class 1 NIC (2,884)
Taxable trading profit 17,116
Corporation tax £17,116 @ 19% 3,252

The total tax and NIC cost if Sarah incorporates her business is £12,502 (4,274 + 2,092 +
2,884 + 3,252).
Therefore, if Sarah incorporated her business, there would be additional tax and NIC payable
as there would be an increase of £1,468 (12,502 – 11,034) compared to continuing on a self-
employed basis.

424 Taxation (TX – UK) FA2023

Using the spreadsheet software in your CBE exam, your answer might look like this:
Spreadsheet

A B C D

1 Sarah – Income tax liability 2023/24

2 Non-savings Dividend income Total income

income

3 £ £ £

4 Director’s 30,000
remuneration

5 Dividends 10,000
1
6 Net income 30,000 10,0002 40,0003

7 Less personal (12,570) (12,570)

allowance

8 Taxable income 17,4304 10,0005 27,4306

1
=SUM(B4:B5)
2
=SUM(C4:C5)
3
=SUM(B6:C6)
4
=SUM(B6:B7)
5
=SUM(C6:C7)
6
=SUM(D6:D7)
Spreadsheet

A B C D

10 Tax

11 Non-savings 3,4861
income
ANSWERS

12 Dividend income

13 Nil rate band 0

14 7882

15 Income tax 4,2743

liability

Answers 425
 1
=B8*20%
2
=(C8-1000)*8.75%
3
=SUM(B11:B14)
Spreadsheet

A B C D

16

17 Sarah – National insurance contributions 2023/24

18 Employee Class 1 2,0921

19 Employee Class 1 2,8842

1
=(30000-12570)*12%
2
=(30000-9100)*13.8%
Spreadsheet

A B C D

20

21 Corporation tax liability of the new ltd company for the year ended 5 April 2024

22 £

23 Trading profit 50,000

24 Less Director’s (30,000)

remuneration

25 Employer’s Class 1 (2,884)1

NIC

26 Taxable trading 17,1162

profit

27 Corporation tax 3,2523

28 12,5024

29 Therefore, if Sarah incorporated her business there would be additional tax and NIC
payable as there would be an increase of £1,468 (12,502 – 11,034) compared to
continuing on a self-employed basis.

1
=-B19
2
=SUM(C23:C25)
3
=C26*19%
4
=B15+B18+B19+C27

426 Taxation (TX – UK) FA2023

 (b) Advising Sarah:

Word Processor

1
2
3

The relatively high tax cost of Sarah incorporating her business arises because of her
salary attracting both employee and employer NICs.
Restricting the salary to around £8,000 and taxing a correspondingly higher amount of
dividends, would significantly reduce her overall tax cost.

32 Simon

Course Book references

Employment income is dealt with in Chapters 3 and 4.
Trading income is covered in Chapter 7 and capital allowances in Chapter 8.
Property income is the subject of Chapter 6.
The computation of taxable income is covered in Chapter 2.

Top tips
You should use the proforma taxable income computation and deal with more complicated
computations in workings linked to the main computation.

Easy marks
There were some easy marks for computing employment benefits in part (a).

Marking guide Marks

(a) Employment income 0.5

Salary 0.5
Living accommodation
Annual value 1
Additional benefit – market value 0.5
Additional benefit – limit 0.5
Additional benefit – benefit 0.5
Furniture 1
Loan benefit 1
Trading income
Accounts profit 0.5
ANSWERS

Capital allowances – addition 0.5

Capital allowances – WDA 1.5
Salary paid to Art 1
Profit share 1

Answers 427
 Marking guide Marks

Property business income

Rent receivable 1
Council tax 0.5
Furniture 1.5
Personal allowance 0.5
13
(b) 12 months of actual filing date 1
Suspicion of undeclared income (or deductions incorrectly claimed) 1
2
Total 15

(a) Simon – Taxable income 2023/24

£
Employment income
Salary 24,010
Living accommodation – annual value 4,600
Living accommodation – additional benefit (W1) 1,530
Living accommodation – furniture £9,400 × 20% 1,880
Loan benefit £84,000 × 2.25% × 4/12 630
32,650
Trading income (W2) 10,960
Property business income (W4) 5,940
Net income 49,550
Less personal allowance (12,570)
Taxable income 36,980

Workings
1 Market value

£
Market value when first provided to Simon 143,000
Less limit (75,000)
68,000
Additional benefit £68,000 × 2.25% 1,530

Tutorial note. Where the property was acquired by the employer more than six years
before first being provided to the employee, the market value when first provided is
used as the cost of providing the living accommodation.

428 Taxation (TX – UK) FA2023

2 Simon’s share of the partnership’s trading profit for the year ended 5 April 2024 is
calculated as follows:

£
Trading profit 29,700
Less capital allowances (W3) (300)
29,400
Less salary paid to Art (2,000)
27,400
Profit share £27,400 × 40% 10,960

3 Year to 5 April 2024

Car Allowances
£ £
Addition 8,333
WDA @ 6% (500) × 60% 300
WDA c/f 7,833

Tutorial note. The partnership’s car has CO2 emissions over 50 grams per kilometre and
therefore qualifies for writing down allowances at the rate of 6%.

4 Property business income

£ £
Rent received £660 × 12 7,920
Council tax and water rates 1,320
Replacement furniture relief
Washing machine £(730 – 70) 660
(1,980)
Property business income 5,940

Tutorial note. No relief is given for that part of the cost of the washer-dryer which
represents an improvement over the original washing machine. Relief is therefore
restricted to the cost of a similar washing machine. This figure is then reduced by the
proceeds from the sale of the original washing machine.
ANSWERS

Answers 429
 Using the spreadsheet software in your CBE exam, your answer might look like this:
Spreadsheet

A B C

1 Simon – Taxable income 2023/24 £

2 Employment income

3 Salary 24,010

4 Living accommodation – annual value 4,600

5 – additional benefit 1,5301

6 - furniture 1,8802

7 Loan benefit 6303

8 32,6504

9 Trading income 10,9605

10 Property business 5,9406

income

11 Net income 49,5507

12 Less personal allowance (12,570)

13 Taxable income 36,9808

1
=(143000-75000)*2.25%
2
=9400*20%
3
=84000*2.25%*(4/12)
4
=SUM(C3:C7)
5
=C21
6
=C27
7
=SUM(C8:C10)
8
=SUM(C11:C12)

430 Taxation (TX – UK) FA2023

 Spreadsheet

A B C

14

15 Trading income £

16 Trading profit 29,700

17 Less capital allowances (300)1

18 Less salary paid to Art (2,000)

19 27,4002

20 Profit share 10,9603

1
=25000*6%*(4/12)*60%
2
=SUM(C16:C18)
3
=C19*40%
Spreadsheet

A B C

22

23 Property business £ £
income

24 Rent received 7,9201

25 Council tax and water (1,320)

rates

26 Replacement furniture (660)2 (1,980)3

relief

27 Property business 5,9404

income

1
=660*12
ANSWERS

2
=-(730-70)
3
=SUM(B25:B26)
4
=SUM(C24:C26)

Answers 431
 (b) Two advantages:

Word Processor

1
2
3

If HM Revenue and Customs (HMRC) intend to carry out a compliance check into Simon’s
tax return, it will have to notify him within 12 months of the actual filing date.
Although compliance checks may be carried out on a random basis, they are usually
carried out because of a suspicion that income has been undeclared or because
deductions have been incorrectly claimed.

33 Naive Ltd

Course Book references

The computation of taxable total profits and the computation of the corporation tax liability
are covered in Chapter 19. The adjustment to trading profits is dealt with in Chapter 7 and
capital allowances in Chapter 8.

Top tips
The best approach to this style of question is to start new computations using the information
given in the question, rather than trying to correct the wrong computations.

Easy marks
There were some easy marks for the adjustment to trading profit and computation of
corporation tax in part (a).

Marking guide Marks

(a) Trading profit

Depreciation 0.5
Donations to political parties 0.5
Qualifying charitable donations 0.5
Accountancy 0.5
Legal fees 0.5
Entertaining suppliers 0.5
Entertaining employees 0.5
Gift to customers – pens 0.5
Gift to customers – food hampers 0.5
Capital allowances brought from working 0.5
Capital allowances
WDV brought forward 1
Annual investment allowance 1
Addition – car [1] 0.5
Addition – car [2] 0.5
Disposal 0.5

432 Taxation (TX – UK) FA2023

 Marking guide Marks

WDA @ 18% 0.5

WDA @ 6% 1
Loan interest 1
Qualifying charitable donations 0.5
Corporation tax 0.5
12
(b) HMRC software automatically to produce in iXBRL 1
Other software automatically to produce in iXBRL 1
Tagging services and software used by Naive Ltd to tag 1
3
Total 15

(a) Naive Ltd – Corporation tax computation for the year ended 31 March 2024

£
Trading profit (W1) 248,706
Loan interest 32,800
Total profits 281,506
Less qualifying charitable donations (900)
Taxable total profits 280,606
Corporation tax
£280,606 × 25% 70,152

Workings
1 Trading profit for the year ended 31 March 2024

£
Operating profit before interest and taxation 274,530
Add: Depreciation 15,740
Donations to political parties 400
Qualifying charitable donations 900
Accountancy 0
Legal fees 0
Entertaining suppliers 3,600
ANSWERS

Entertaining employees 0
Gifts to customers – pens 0
Gifts to customers – food hampers 1,650
296,820

Answers 433
 £
Less capital allowances (W2) (48,114)
Adjusted trading profit 248,706

AIA Main pool Special rate pool Allowances

£ £ £ £

WDV brought forward 12,400 13,600

AIA additions

Machinery 42,300

AIA (42,300) 42,300

Transfer to pool 0 0

Non-AIA additions

Car [1] 13,800

Car [2] 14,000

Disposal

Special rate pool items __ (9,300)

26,200 18,300

WDA @ 18% (4,716) 4,716

WDA @ 6% (1,098) 1,098

WDV carried forward 21,484 17,202 __

Allowances 48,114

Tutorial note. Car [1] has CO2 emissions between 1 and 50 grams per kilometre and
therefore qualifies for writing down allowances at the rate of 18%. Cars do not qualify for
the AIA.
Car [2] has CO2 emissions over 50 grams per kilometre and therefore qualifies for writing
down allowances at the rate of 6%. The private use of the motor car is irrelevant since such
usage will be assessed on the employee as a benefit.

Using the spreadsheet software in your CBE exam, your answer might look like this:
Spreadsheet

A B C

1 Naïve Ltd – Corporation tax computation for the year ended 31 March 2024

2 £

3 Trading profit 248,7061

4 Loan interest 32,800

434 Taxation (TX – UK) FA2023

 A B C

5 Total profits 281,5062

6 Less qualifying charitable donations (900)

7 Taxable total profits 280,6063

8 Corporation tax 70,1524

1
=C24
2
=SUM(C3:C4)
3
=SUM(C5:C6)
4
=C7*25%
Spreadsheet

A B C

9 Trading profit for the year ended 31 March 2024

10 £

11 Operating profit before interest and tax 274,530

12 Add:

13 Depreciation 15,740

14 Donations to political parties 400

15 Qualifying charitable donations 900

16 Accountancy 0

17 Legal fees 0

18 Entertaining suppliers 3,600

19 Entertaining employees 0

20 Gifts to customers – pens 0

21 Gifts to customers - food hampers 1,650

22 296,8201

23 Less capital allowances (48,114)2

24 Adjusted trading profit 248,7063

ANSWERS

1
=SUM(C11:C21)
2
=E41
3
=SUM(C22:C23)

Answers 435
 Spreadsheet

A B C D E

25 Capital allowances

26 AIA (£) Main pool (£) Special rate Allowances (£)

pool (£)

27 WDV b/f 12,400 13,600

28 AIA additions

29 Machinery 42,3001

30 AIA (42,300) (42,300)2

31 Transfer to 0 0
pool

32 Non-AIA
additions

33 Car (1) 13,800

34 Car (2) 14,000

35 Disposal

36 Special rate (9,300)

pool items

37 26,2003 18,3004

38 WDA@18% (4,716)5 (4,716)6

39 WDA@6% (1,098)7 (1,098)8

40 WDV c/f 21,4849 17,20210

41 Allowances (48,114)11

1
=42300*100%
2
=SUM(B30:D30)
3
=SUM(C27:C36)
4
=SUM(D27:D36)
5
=-C37*18%
6
=C38
7
=-D37*6%
8
=D39
9
=SUM(C37:C39)
10
=SUM(D37:D39)
11
=SUM(E27:E40)

436 Taxation (TX – UK) FA2023

(b) Options available:

Word Processor

1
2
3

If Naive Ltd has straightforward accounts, it could use the software provided by HM
Revenue & Customs. This automatically produces accounts and tax computations in the
iXBRL format.
Alternatively, other software which automatically produces iXBRL accounts and
computations could be used.
A tagging service could be used to apply the appropriate tags to the accounts and tax
computations, or Naive Ltd could use software to tag documents itself.

ANSWERS

Answers 437