Question

Question 2        

Ann, Bea and Cal have been in partnership for many years preparing

accounts to 30 September each year. The partnership agreement is that Bea

receives £15,000 per annum salary and the balance of profits is shared

equally between the three partners. During the year ended 30 September

2019 the partnership made trading profits of £180,000.

Ann wants to claim rollover relief in respect of the office that she owns but the

partners trade from.

       

Calculate the trading profits assessable on each partner and state the tax year of assessment in respect of 30 September 2019, explaining how and when the tax is payable.

State the conditions that must apply to allow Ann to make a claim for rollover

relief. (maximum word count 200 words)

Capital Gains Tax

Annual exemption	£12,000
Standard rate of tax (assets other than residential property)	10%
Higher rate of tax (assets other than residential property)	20%
Standard rate of tax on residential property	18%
Higher rate of tax on residential property	28%
Entrepreneurs’ relief: For trading businesses and companies held for at least one year (minimum 5% employee shareholding)
Lifetime limit of gains Rate of tax Lease Premium Formulae Capital proportion is 2% (n-1) P Chattels Formulae Gains restricted to 5/3(gross proceeds - £6,000)	£10,000,000 10%

National Insurance (not contracted-out rates)

Primary		%
Class 1 employees	£0 - £8,632 per year	Nil
	Above £8,632 – £50,000 per year	12.0
	Above £50,000 per year	2.0
Secondary
Class 1 employer	£0 - £8,632 per year	Nil
	Above £8,632 per year	13.8
Class 1A employer	On benefits in kind	13.8
Sole traders
Class 2	Paid weekly If earnings are above the small profits threshold of £6,365 pa	£3pw
Class 4	£0 - £8,632 per year	Nil
	Above £8,632 - £50,000 per year	9.0
	Above £50,000 per year	2.0

Answer 1

Tax on trading Business
Profit		180000
Tax on above @10%		18000
Profit for distribution		162000

Tax on trading Partners
	Ann	Bea	cell
Income from Salary		15000
Trading profit	54000	54000	54000
Total Income	54000	69000	54000
Trading profit exempt	54000	54000	54000
Taxable Income		15000
Tax on above @12%		1800

Conditions to claim rollover relief:

• trading
• carrying on a business of furnished holiday lettings
• occupying commercial woodlands and managing them commercially to make a profit
• carrying on a profession, vocation, office or employment
• providing an asset to your personal company
• disposing of land by a compulsory purchase

If you’re a trader you can claim relief if you use the old and new assets in:

• the same trade
• another trade that you carry on at the same time or shortly after you’ve ceased the first trade

HMRC will accept claims to relief where there is a gap of 3 years or less between one trade ending and another beginning