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There are two sections - A and B Section A: total 3 questions totaling 22 marks Question no.1: You are about to complete 6 months trainee work with a famous Tax adviser in UK. The tax adviser is keen to accept you for the permanent job in his office, but he wants a detailed report from you on the following area: a) The meaning of Taxation and the purposes of taxation b) Procedure to claim Saving Nil Rate and Dividend Nil Rate c) Types and classification of taxation. He also wants you to evaluate the incidence of individual in case of Capital Gains tax. While writing a report, you must critically evaluate each of the above with suitable examples (4 + 2+ 6 = 12 marks) Question no.2: Jury, a UK resident, owns 2 properties, both are furnished accommodation, she has occupied one house and the other one is rented. During the year she spent on repairs for the building she had rented. She replaced the entire kitchen units with similar standard and bathroom with high standard. Also, she purchased new washing machine for the tenant and replaced the existing sofa set with high quality sofa set. She paid interest on loan borrowed for the construction of the rented building. As per the agreement the tenant is required to pay the council tax and water tax. During the tax year 2019/20, She paid insurance from 1/8/2019 to 31/7/2020. On 31 March 2020, the water pipe had been burst in the rented property and she replaced it immediately but the payment for the same has been made on 10 May 2020. When calculating the rental income, she is not sure the basis of assessment, which expenses are deductible and not deductible. You are her tax adviser. She is expecting a detailed report from you substantiating each point (5 marks) Question no.3: Rani, a UK resident, has salary income from a UK Company. She received Salary and bonus during the Tax year 2019/20. She contributed from her salary to Occupation Pension scheme and her employer also paid equal amount. She used her own motor car for the purpose of office work and her employer paid mileage allowance for the same. She spent for travelling from home to office and coming back from office to home and thought of claiming the expense as official. She spent for the office uniform and decided to deduct it as she spent as a condition of the employment Also, she purchased a laptop, fully for the office purposes. Because of COVID, she started working from home. She shifted to a bigger house with additional rent and incurred many expenses such as electricity expenses, groceries, etc and decided to deduct the entire household expenses from salary income. Employer provided various benefits such as use of asset benefit, two mobile phones (for business and personal use), car parking fee reimbursement, etc. As a tax adviser, you are required to advise Rani, the various deductions from salary income and the exempt benefits while calculating the employment income. Your answer should be relating to the given case study (5 marks) Section B: total 2 questions totaling 28 marks Question no.4: Ms.Joana's major component of taxable income are rental income and employment Income for the tax year 2019/20. Also, she received other incomes as shown separately. The details of Property Business income (Rental Income): Ms.Joana is a owner of 2 residential properties, house no.1 is Furnished accommodation and house no. 2 is unfurnished. The details for the tax year 2019/20 are as follows: House no.1: 1 January 2019 she entered into an agreement with a tenant with annual rent of E36,000 payable monthly in arrears. The tenant has vacated the property by the end of November 2019 without paying the rent for the month of November 2019. The tenant has absconded, and Joana was unable to find the whereabouts of the tenant. But she was able to find the new tenant from 1 January 2020 with annual rent of 48,000. Joana incurred the following expenses for House no.1, during the tax year 2019/20 : Water Tax 300 and council tax of 500 paid on 10/4/2019 but these are relating to the tax year 2018/19 (last year). On 5 May 2019, she replaced the main Door of the house. It was previously a simple wooden door, but now replaced with Steel double glazed, with double lock door. When the house was empty in the month of December 2019, she incurred and paid for the expenses relating to the painting of the entire house. In January 2020, she replaced various furniture which includes 5-year-old fridge, washing machine and Air conditioner. New fridge cost her 600 and she sold the old fridge for 40. Washing machine not provided before and now she spent 400 for the new washing machine. She had window Air conditioner (AC) and now she changed to Split A.C. She took the quotation for replacing the similar window AC, which costs 1200 but for the comfortable and safety of the house, she decided to go for Split AC by spending 3000. All old window ACs are sold for 200. At the time of purchase of the house she borrowed 200,000 loan and on 31 March 2020 she paid the Interest on loan 1800. 15 May 2020 she paid 250 repair cost, which has been incurred during March 2020. House no.2: This is an unfurnished accommodated, Joana was unable to find the tenant for the house and on 20 June 2019, she put an advertisement in the local newspaper by spending 100 and she was 5 able to rent the house on 1 July 2019 for a monthly rent of 2500. Council tax of the building 450 has been paid by Joana on 1 September 2019 but the water tax of 350 paid by tenant. In December 2019, she paid Interest on loan 1200 for the loan borrowed for the construction of house. Details of Employment Income: Joana is employed by a large UK company on an annual salary of 35,000 for the tax year 2019/20 She also received bonus of 3,000 during the tax year. Her employer deducted 7000 PAYE from the salary. She contributed 3,500 for the employer's Occupation Pension Scheme. Company also contributed 2500 to the same pension scheme on her behalf. Joana gave standing instruction to the company to deduct 10 per month as donation to charity. Also, she paid 150 subscription to the Professional Institution in UK she incurred 200 travelling expenses relating to her employment, she could not reimburse the above expense from her employer. She received the following benefits from the company during the tax year: a) Joana received a diesel car costing 35,000 from her company for her personal use. The list price of the car is 38,000 and the CO2 emission is 173 g/km. Employer spent 4,000 for the accessories for the same car. Jana paid 7000 for the capital cost (purchase price) of the car and 800 for the use of the car. Assume that car did not meet the RDE2 standard. Company spent all expenses relating to the car including the cost of private Diesel. b) Joana received a furnished accommodation from her employer on 1 January 2017, the market value of the accommodation on that date was 110,000 Company purchased accommodation on 30 January 2008 for 70,000 and incurred immediately the major repair of 20,000. Also, company spent 10,000 on 20 May 2017 as cost of improvement and 5,000 for redecoration and repairs of the same house. On 17 October 2019 company spent again 22,000 cost of improvement for the same property. Along with accommodation Company has provided furniture costing 18,000. The Annual Rateable Value of the property was 8,000 and Joana repaid 4,000 to her employer for the use of the house for personal purposes. c) Joana borrowed 2 loans; one loan is of 6000 on 10 April 2019. This loan was outstanding till the end of the tax year. Another is of interest free loan of 60,000 on 6 April 2019 for her personal use. Joana repaid her employer 20,000 on 1 October 2019 and 10,000 on 31 March 2020 (Use Average method) d) Joana has transferred (relocated) from another branch of the same company during the tax year and the relocation expenses incurred and paid by her employer amounted to 9,500 e) During the year Joana spent 10 nights overseas for the purpose of employment. Employer paid 9 per night as Overseas Allowance. ) During the tax year 2019/20 Joana left her Child for 30 weeks in the workplace Nursery maintained by the company where she works. Company spent 3,000 for the child of Joana during the tax year 2019/20 B) Company provided her the use of Van with fuel for personal purposes during the year 2019/20 6 Other information: Joana has received 16,000 Interest on Debenture (Loan notes). 2,000 Interest from Government Bond, 300 from National Savings Certificate and 200,000 from winnings from Lottery. Joana received Dividend of 18,000 from a UK Company During the tax year Ms.Joana has contributed 6,000 to personal pension contribution and donation 2,400 for charity. Required: a) Calculate the total Property Income for the tax year 2019/20. Show the workings and notes clearly. (5 marks) b) Calculate the employment income of Joana for the tax year 2019/20. Show the workings and notes clearly (5 marks) c) Calculate the Taxable income of Joana for the tax year 2019/20. (2 marks) d) Calculate the Tax Liability and Tax Payable of Joana for the tax year 2019/20. Also specify the due date of payment of tax. (3 marks) (Note: presentation and working notes are very important) (Total 15 marks) 7 Question no.5: Rami, aged 62, has his own business of selling Electrical goods in the city of London, he always closes his accounts on 31 March each year. The profit and loss Account for the year end 31 March 2020 is as shown below: 15000 1000 12000 28000 30000 6000 5000 3600 7000 Sales 600,000 Less: Cost of Sales (240,000) Gross Profit 360,000 Add: other Income Interest from Bank Interest from Individual Savings Account Dividend income Less: Expenses: 388,000 Depreciation Wages and Salaries 12000 Interest Expense 10000 Subscription 1200 Donation Bad and doubtful debt 2000 Gift and Entertainment Other Expense Repairs and maintenance Car Expenses 10800 Car Lease Rent -99600 NET PROFIT 288,400 Notes: 6) Rami's Son Sami also works for the business as Account clerk. Rami paid salary 12000 for him. For the similar work other staff receives salary of 8,000 i) Rami constructed his personal house by borrowing a loan from bank. Interest on that loan 7,000 has been included in the interest expense deducted in the profit and loss account. The remaining interest expense showed in Profit and Loss A/c is for the overdraft taken for working capital requirement. (H) From the business, Subscription paid includes both personal and business. 500 for Electrical goods Dealers Association and 600 for the Gym membership fees of Rami, and the balance is for trading purposes. (iv) Donation includes 200 for Local Charity, 4,800 for National Charity, 1,000 is for Political party. 12000 8 There are two sections - A and B Section A: total 3 questions totaling 22 marks Question no.1: You are about to complete 6 months trainee work with a famous Tax adviser in UK. The tax adviser is keen to accept you for the permanent job in his office, but he wants a detailed report from you on the following area: a) The meaning of Taxation and the purposes of taxation b) Procedure to claim Saving Nil Rate and Dividend Nil Rate c) Types and classification of taxation. He also wants you to evaluate the incidence of individual in case of Capital Gains tax. While writing a report, you must critically evaluate each of the above with suitable examples (4 + 2+ 6 = 12 marks) Question no.2: Jury, a UK resident, owns 2 properties, both are furnished accommodation, she has occupied one house and the other one is rented. During the year she spent on repairs for the building she had rented. She replaced the entire kitchen units with similar standard and bathroom with high standard. Also, she purchased new washing machine for the tenant and replaced the existing sofa set with high quality sofa set. She paid interest on loan borrowed for the construction of the rented building. As per the agreement the tenant is required to pay the council tax and water tax. During the tax year 2019/20, She paid insurance from 1/8/2019 to 31/7/2020. On 31 March 2020, the water pipe had been burst in the rented property and she replaced it immediately but the payment for the same has been made on 10 May 2020. When calculating the rental income, she is not sure the basis of assessment, which expenses are deductible and not deductible. You are her tax adviser. She is expecting a detailed report from you substantiating each point (5 marks) Question no.3: Rani, a UK resident, has salary income from a UK Company. She received Salary and bonus during the Tax year 2019/20. She contributed from her salary to Occupation Pension scheme and her employer also paid equal amount. She used her own motor car for the purpose of office work and her employer paid mileage allowance for the same. She spent for travelling from home to office and coming back from office to home and thought of claiming the expense as official. She spent for the office uniform and decided to deduct it as she spent as a condition of the employment Also, she purchased a laptop, fully for the office purposes. Because of COVID, she started working from home. She shifted to a bigger house with additional rent and incurred many expenses such as electricity expenses, groceries, etc and decided to deduct the entire household expenses from salary income. Employer provided various benefits such as use of asset benefit, two mobile phones (for business and personal use), car parking fee reimbursement, etc. As a tax adviser, you are required to advise Rani, the various deductions from salary income and the exempt benefits while calculating the employment income. Your answer should be relating to the given case study (5 marks) Section B: total 2 questions totaling 28 marks Question no.4: Ms.Joana's major component of taxable income are rental income and employment Income for the tax year 2019/20. Also, she received other incomes as shown separately. The details of Property Business income (Rental Income): Ms.Joana is a owner of 2 residential properties, house no.1 is Furnished accommodation and house no. 2 is unfurnished. The details for the tax year 2019/20 are as follows: House no.1: 1 January 2019 she entered into an agreement with a tenant with annual rent of E36,000 payable monthly in arrears. The tenant has vacated the property by the end of November 2019 without paying the rent for the month of November 2019. The tenant has absconded, and Joana was unable to find the whereabouts of the tenant. But she was able to find the new tenant from 1 January 2020 with annual rent of 48,000. Joana incurred the following expenses for House no.1, during the tax year 2019/20 : Water Tax 300 and council tax of 500 paid on 10/4/2019 but these are relating to the tax year 2018/19 (last year). On 5 May 2019, she replaced the main Door of the house. It was previously a simple wooden door, but now replaced with Steel double glazed, with double lock door. When the house was empty in the month of December 2019, she incurred and paid for the expenses relating to the painting of the entire house. In January 2020, she replaced various furniture which includes 5-year-old fridge, washing machine and Air conditioner. New fridge cost her 600 and she sold the old fridge for 40. Washing machine not provided before and now she spent 400 for the new washing machine. She had window Air conditioner (AC) and now she changed to Split A.C. She took the quotation for replacing the similar window AC, which costs 1200 but for the comfortable and safety of the house, she decided to go for Split AC by spending 3000. All old window ACs are sold for 200. At the time of purchase of the house she borrowed 200,000 loan and on 31 March 2020 she paid the Interest on loan 1800. 15 May 2020 she paid 250 repair cost, which has been incurred during March 2020. House no.2: This is an unfurnished accommodated, Joana was unable to find the tenant for the house and on 20 June 2019, she put an advertisement in the local newspaper by spending 100 and she was 5 able to rent the house on 1 July 2019 for a monthly rent of 2500. Council tax of the building 450 has been paid by Joana on 1 September 2019 but the water tax of 350 paid by tenant. In December 2019, she paid Interest on loan 1200 for the loan borrowed for the construction of house. Details of Employment Income: Joana is employed by a large UK company on an annual salary of 35,000 for the tax year 2019/20 She also received bonus of 3,000 during the tax year. Her employer deducted 7000 PAYE from the salary. She contributed 3,500 for the employer's Occupation Pension Scheme. Company also contributed 2500 to the same pension scheme on her behalf. Joana gave standing instruction to the company to deduct 10 per month as donation to charity. Also, she paid 150 subscription to the Professional Institution in UK she incurred 200 travelling expenses relating to her employment, she could not reimburse the above expense from her employer. She received the following benefits from the company during the tax year: a) Joana received a diesel car costing 35,000 from her company for her personal use. The list price of the car is 38,000 and the CO2 emission is 173 g/km. Employer spent 4,000 for the accessories for the same car. Jana paid 7000 for the capital cost (purchase price) of the car and 800 for the use of the car. Assume that car did not meet the RDE2 standard. Company spent all expenses relating to the car including the cost of private Diesel. b) Joana received a furnished accommodation from her employer on 1 January 2017, the market value of the accommodation on that date was 110,000 Company purchased accommodation on 30 January 2008 for 70,000 and incurred immediately the major repair of 20,000. Also, company spent 10,000 on 20 May 2017 as cost of improvement and 5,000 for redecoration and repairs of the same house. On 17 October 2019 company spent again 22,000 cost of improvement for the same property. Along with accommodation Company has provided furniture costing 18,000. The Annual Rateable Value of the property was 8,000 and Joana repaid 4,000 to her employer for the use of the house for personal purposes. c) Joana borrowed 2 loans; one loan is of 6000 on 10 April 2019. This loan was outstanding till the end of the tax year. Another is of interest free loan of 60,000 on 6 April 2019 for her personal use. Joana repaid her employer 20,000 on 1 October 2019 and 10,000 on 31 March 2020 (Use Average method) d) Joana has transferred (relocated) from another branch of the same company during the tax year and the relocation expenses incurred and paid by her employer amounted to 9,500 e) During the year Joana spent 10 nights overseas for the purpose of employment. Employer paid 9 per night as Overseas Allowance. ) During the tax year 2019/20 Joana left her Child for 30 weeks in the workplace Nursery maintained by the company where she works. Company spent 3,000 for the child of Joana during the tax year 2019/20 B) Company provided her the use of Van with fuel for personal purposes during the year 2019/20 6 Other information: Joana has received 16,000 Interest on Debenture (Loan notes). 2,000 Interest from Government Bond, 300 from National Savings Certificate and 200,000 from winnings from Lottery. Joana received Dividend of 18,000 from a UK Company During the tax year Ms.Joana has contributed 6,000 to personal pension contribution and donation 2,400 for charity. Required: a) Calculate the total Property Income for the tax year 2019/20. Show the workings and notes clearly. (5 marks) b) Calculate the employment income of Joana for the tax year 2019/20. Show the workings and notes clearly (5 marks) c) Calculate the Taxable income of Joana for the tax year 2019/20. (2 marks) d) Calculate the Tax Liability and Tax Payable of Joana for the tax year 2019/20. Also specify the due date of payment of tax. (3 marks) (Note: presentation and working notes are very important) (Total 15 marks) 7 Question no.5: Rami, aged 62, has his own business of selling Electrical goods in the city of London, he always closes his accounts on 31 March each year. The profit and loss Account for the year end 31 March 2020 is as shown below: 15000 1000 12000 28000 30000 6000 5000 3600 7000 Sales 600,000 Less: Cost of Sales (240,000) Gross Profit 360,000 Add: other Income Interest from Bank Interest from Individual Savings Account Dividend income Less: Expenses: 388,000 Depreciation Wages and Salaries 12000 Interest Expense 10000 Subscription 1200 Donation Bad and doubtful debt 2000 Gift and Entertainment Other Expense Repairs and maintenance Car Expenses 10800 Car Lease Rent -99600 NET PROFIT 288,400 Notes: 6) Rami's Son Sami also works for the business as Account clerk. Rami paid salary 12000 for him. For the similar work other staff receives salary of 8,000 i) Rami constructed his personal house by borrowing a loan from bank. Interest on that loan 7,000 has been included in the interest expense deducted in the profit and loss account. The remaining interest expense showed in Profit and Loss A/c is for the overdraft taken for working capital requirement. (H) From the business, Subscription paid includes both personal and business. 500 for Electrical goods Dealers Association and 600 for the Gym membership fees of Rami, and the balance is for trading purposes. (iv) Donation includes 200 for Local Charity, 4,800 for National Charity, 1,000 is for Political party. 12000 8