Question

1. Andrew Cousins is 63 years old and is employed as a personal tax planning advisor by PWMG LLP. Andrew is married to Ying Yue Cousins; Ying Yue is a pensions analyst at Falcons plc, a large investment bank.

   Andrew owns an investment portfolio of tangible and intangible assets; he is also a keen collector of antique paintings and sculptures. Andrew intends to retire in the near future; he plans to acquire a retirement home in Nice, France. To finance this acquisition, he made a number of disposals from his investment portfolio during the tax year 2019/20.

   Which of the following disposals would be exempt or wholly relieved from capital gains tax in 2019/20?

   1. Sale of corporate bonds issued by Ravens plc, an engineering company that operates in the UK oil and gas sector

   2. Sale of an oil painting to Ying Yue Cousins. The oil painting had a market value on disposal of £18,000, but Andrew sold it to Ying Yue for a total consideration of £10,000. The painting cost £3,000 when acquired on 6 December 1999

   3. Sale of Andrew’s principal private residence (i.e. his main residence), a house in London, UK. Andrew acquired the house in 1996

   4. Part disposal of 400 shares in Trubisky Inc., a company that is resident in Delaware, USA; the shares were acquired in two acquisitions of £23,000 for 259 shares on 7 October 1994 and £35,000 for 303 shares on 11 July 2001, respectively. Net disposal consideration on the part disposal were £516,000

3. Ahmed Benghazi owns and manages a bakery. Ahmed’s business, Benghazi Mediterranean Khabbaz, produces luxury bread, cakes and pastries for restaurants and delicatessens in Newcastle upon Tyne, UK.

   During the tax year 2019/20, Benghazi Mediterranean Khabbaz’s taxable turnover (excluding capital items) was £222,070. The business’s VAT administration and payments of VAT liabilities are up-to-date. Ahmed Benghazi has never been convicted of a VAT offence or assessed to a penalty for VAT evasion involving dishonest conduct. Since the business started trading in 2012/13, Benghazi Mediterranean Khabbaz has participated in the flat-rate scheme for small businesses.

   Which, if any, of the special schemes for VAT administration are available for Benghazi Mediterranean Khabbaz in 2019/20?

   1. Cash accounting and annual accounting schemes only

   2. Flat rate scheme for small businesses only

   3. Cash accounting scheme, annual accounting scheme and flat-rate scheme for

      small businesses

   4. Annual accounting scheme and flat rate scheme for small businesses

5. Laura
Investment Services Ltd. Jackson Investment Services is a limited company, incorporated under the UK Companies Act 2006. Laura receives dividends from Jackson Investment Services Ltd.

Jackson Investment Services Ltd employs two investment analysts and an administrative assistant. Laura sub-contracts some of Jackson Investment Services Ltd’s work to Josh Dalton, a sole trader and self-employed tax specialist.

Jackson is an asset management advisor; she owns and manages Jackson

Which of the following are chargeable to Jackson Investment Services Ltd for the year ended 31 March 2020?

1. Corporation tax, Class 4 National Insurance contributions and income tax

2. Income tax and corporation tax

3. Corporation tax and Class 1 secondary National Insurance contributions

4. 4. Corporation tax, Class 1 primary National Insurance contributions and income tax

5. The badges of trade are the key factors in deciding whether an activity constitutes a trade.Josh Prescott is employed as an indirect taxation specialist by Falcons LLP, a large investment bank. Josh is also a talented mathematician and computer programmer: he provides risk analysis consultancy services to professional sports clubs in North America.

6. During the tax year 2019/20, Josh engaged in a number of transactions. Which of the following transactions would be used to determine if Josh’s risk analysis and consultancy services are a trading activity? A. Sale of risk analysis and management software to the Portland Panthers American Football Club. The software was originally designed for use in rugby; Josh adapted and improved the software for use in American football. B.Throughout the tax year 2019/20, Josh was supplied with a car by Falcons LLP. Josh used the car for both work and private use. Josh agreed to reimburse Falcons LLP for the full cost of any fuel used for private journeys: this amounted to £3,720, which Josh paid in a single instalment on 3 April 2019. C.Josh sold a licence for a risk analysis model for use in baseball to the Toronto Angels Baseball Club. Josh sold the licence for £70,000 on 1 July 2019.   D. Previously, he had sold licences to use the risk analysis model to four other baseball clubs.

Josh acquired debt finance to fund the acquisition of digital recording technology. The technology was used to collect data that Josh then used as part of his risk analysis consultancy activities.

Answer 1

1. The following disposal would be exempt or wholly relieved from capital gains tax in 2019/20 -

Sale of Andrews principal private residence, a house in London, UK as there is no requirements of payment of capital gain tax in UK on the sale of your main home if you lived in that house , you have not rented it, you have not used for business purpose, the size of property is less than 1 acre and not buy it for purpose of selling to gain .

2. The special schemes of vat administration are available for Benghazi Mediterranean khabbaz in 2019/20 -

Cash accounting and annual accounting system as Benghazi Mediterranean khabbaz is no longer smaller businesses , it's turnover exceeds £150000. Flat rate scheme is applicable to smaller business.

3. Corporation tax is Chargeable to Jackson investment service Ltd for the year ended 31 march 2020

4. The following transaction would be used to determine if Josh risk analysis and consultancy service are a trading activity -

• Sale of risk analysis and management software to the Portland Panthers American Football club. The software was originally designed for use in rugby Josh adapted and improved the software for use in American Football
• Previously he had sold license to use the risk analysis model to four other baseball club.