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Class test#2 Duration: 1 hr 5 minutes

Taxation (F6)

Date: 30-March-2013 Marks: 37

Following are various income and related information of Mr. Carlos Slim for the tax year 2012/13 (A) He got a freehold house that qualifies as trade under the furnished holiday letting rules. The property was purchased on 6 April 2012. During the tax year 2012-13 the property was let for eighteen weeks at 370 per week. Slim spent 5,700 on furniture and kitchen equipment during April 2012. Due to a serious flood 7,400 spent on repairs during November 2012. The damage was not covered by insurance. The other expenditure on this property for the tax year 2012-13 amounted to 2,710 and this is all allowable. Calculate property income/loss for above property own by Mr. Slim. Also explain the rules to qualify a property as Furnished Holiday Letting. (B) Mr. Slim commence a business on 1 January 2010. He had tax adjusted trading profits of 25,200 for the six-months period ended 30 June 2010, and 21,600 for the tax year ended 30 June 2011.

The following information is available for the tax year 2012/13 Note Income Expenses Depreciation Motor expenses Professional fees Property expenses Purchase Other expenses Impaired debt Gift and donation 95,000

1 2 3 4 5 6 7 8

1,300 2,200 1,650 12,900 4,700 16,550 9,390 3,600 (52,290) 42,710

(1) Slim charge all the running expenses for his motor car to the business. During the year ended 30 June 2012, Slim drove a total of 8,000 miles, of which 7,000 were for private journeys. (2) The figures for professional fees consists of 390 for accountancy and 1,260 for legal fees in connection with the grant of a new five-year lease of parking spaces for customers' motor cars. (3) Slim lives in a flat that is situate above his office and one-third of the total property expenses of 12,900 relate to this flat. (4) During the year ended 30 June 2012 Slim took goods out of his business for his personal use without paying for them, only cost of those goods were booked. The goods cost 250, and had a selling price of 450.

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Class test#2 Duration: 1 hr 5 minutes

Taxation (F6)

Date: 30-March-2013 Marks: 37

(5) The figure for other expenses of 16,550 includes 400 for a fine in respect of health and safety regulation, 80 for a donation to a political party, and 160 for a trade subscription to the profession related to his business.

(6) Slim uses is private telephone to make business telephone calls. The total cost of the private telephone for the year ended 30 June 2012 was 1,200, and 20% of this related to business telephone calls. The cost of the private telephone is not included in the expenses in the statement of profit or loss. (7) There was impaired debts of total 9,390, of which 1,100 was from supplier. (8) Several gifts and donation made during the period: Gift to customer (pens costing 45 each displaying business' name) Gifts to customer (food hamper 30 each) Donation to local charity under gift aid scheme 1,080 720 1,800 3,600

(9) Following information are relevant to calculate capital allowance for Mr. Slims business On 1 July 2011 the tax written down values of the business' plant and machinery were Main pool Short life assets Motor car (1) 3,100 8,000 14,000

The following transactions took place during the year ended 30 June 2012: 8 May 2012 8 May 2012 28 May 2012 1 June 2012 30 June 2012 Sold motor car (1) Purchased motor car (2) Purchased motor car (3) Purchased laptop (SLA) Purchased machine 13,100 11,600 14,200 22000 13200

Motor car (1) was purchased in December 2009 and had a CO2 emission rate of 145 g/KM. It is used by Mr. Slim, and 70% of the mileage is for business journeys. Motor car (2) is a new car purchased with CO2 emission 105 gm/KM. It is used for business purpose. Motor car (3) has a CO2 emission rate of 135 gm/km. Requirements: (a) Calculate capital allowance (b) Calculate tax adjusted trading profit/(loss) (c) Calculate amount of trading profits that will have been assessed on Mr. Slim for the tax years 2009/10, 2010/11 and 2011/12.

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Class test#2 Duration: 1 hr 5 minutes

Taxation (F6)

Date: 30-March-2013 Marks: 37

(C) He is also a part time employee for XYZ Ltd and receive 2,000 per month. During the tax year he worked for only 6 months with the company. Company provided certain benefits to him: 1) A 2500 cc motor car with CO2 emission 185 gm/km, it has list price of 28,000 pound. Slim used that car only for business purpose throughout his employment. 2) XYZ provided Slim with living accommodation since his joining. The company had purchased the property in 2009 for 160,000 and it was valued at 185,000 on 1 July 2010. Improvements costing 13,000 were made to the property during June 2011. The Annual value of the property is 9,450 Calculate employment income of Mr. Slim.

(D) Assume tax adjusted trading profit of Mr. Slim is 17,000 and employment income is 12,500. Interest received from government security and building society are 3,000 and 1,800 respectively. Dividend received 2,700. PAYE deducted by employer 2,000. Calculated income tax liability of Mr. Slim.

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