[Stefano]

@Fidget said:
Q1 my IHT liability was £54,800, and overall available funds left for the expansion around £213k.

With the error corrections, the car was only allowed 8% capital allowances due to it’s CO2 emissions, the AIA claimed on the other amount was added back in full. So this gave me a total of £47,202 to be added back with £18880 of that being overlap profits for the first 3 months.

I advised Nate to sell the shares across current year and next year so that each disposal would be fully covered by the A.E.

In Q3, there was a subtle different for Freya making the sale of the painting, and Birta making it. For Freya, it didn’t matter – she got £34k regardless. But… Freya is a connected person to Birta, and as the painting was sold at a loss, this meant that the loss could only be relieved against any future gains from transactions with Freya. Whereas, if she had sold it to the unconnected person herself, that restriction wouldn’t’ve applied.

Can’t remember much else.

you nailed it!

[Stefano]

I found the exam was overall OK. I was disappointed by Q1. There was no much group loss relief. CT computations seemed to easy I doubt I unveiled the tricks. The timing of CT payments seemed the key point and I was not very strong on that I probably failed most of the marks on that part.

There were fairly many marks available for VAT. I could not ascertain if the VAT charged on legal advice oversea was to consider as a service to an individual or to a VAT registered business.

VAT group: only 2 companies in the group. Disadvantages: – dual liability for errors towards HMRC. – more admin to collate the info in one single return – no refund of input VAT if one company makes 0% rated supplies

NAte’s business: additional taxable profits due to errors
add back 15% of the lease of the car was: not allowable because the car CO2 emission exceeded 130g/km
– the capital allowance claimed on not qualifying assets added back in full

opening years rules to allocate the additional profits to the first two tax years and resulting 3 month overlap profits.

Application of tax band rates for IT and NIC class 4 computations

Ethical question pretty easy: I just omitted to talk about risks to principles of ethical code and safeguards and option to refuse to act as tax adviser but mentioned ID and proof of address – ATL – attitude towards disclosure of profits especially to HMRC – ethical principle of professional competence and technical competence and Integrity

IHT on sale of 13,000 shares had no AE allowance as both previously used
but there was diminishing value relief available as shares value on death was inferior to share price at the time of the price. The rest was straightforward computation of both NRB and residential NRB

Q4. part a. no difference on CGT implication on two disposal proposed from none of the parties.

I hardly remember the remaining questions. Finger crossed!

[Stefano]

Thanks again!

[Stefano]

Thank you very much for this clarification!!
In exam I will only deduct interest relating to the period capitalisation has started.

Thanks again

[Stefano]

That was great thanks! ?

[Stefano]

Popping in because I’m interested in the answer
Thanks

[Stefano]

Thank you!!

[Stefano]

ehm I thought we would only expense the statement of profit and loss with interests on the loan. The loan itself it is a capital payment and would be recorded as a liability. As we make a repayment we would debit the loan account and credit cash. However, what I seem to understand now is that when we expense the profit and loss statement with the transaction costs we credit the loan account and that would result in an increase of the carrying amount of the loan.
I would appreciate your opinion on the above.
Thank you very much,
Stefano

[Stefano]

Yes, that was helpful
Thank you

[Stefano]

Hi

The example I am looking at says that the useful life of the asset is 4 years and the profit generated by using the asset are 30k each year for the four years calculated as follow
50k profit before depreciation
(25) depreciation
5k. Grant
30k profit
On the financial statement this is accounted as deferred income in the following way
15k on the first year, 10k on the second year and 5k on the third year with 0 on the last year.
And the full price of asset is depreciated in 4 years. The company received 20% grant towards the cost of new machinery (100k) that is 20k.
I don’t understand the rule for deferred income if any…hope I explained myself better this time
Thank you

Stefano

[Stefano]

I have got 11500 vat payable
I did not account for input vat for private use of car and other benefits … As I think they are to be added as cost… I am so confused..

[Stefano]

Yes this is much clearer
Thank you again!

[Stefano]

thank you Mike,

yer, I will take this answer and learn it by heart – I am not familiar with none of those terms yet

🙂

Cheers

[Stefano]

Had foreseen a72%. I passed with 71%!
I guess this makes me good at marking lol

1st timer however put a huge among by of time on this paper. Not an easy one.

Thanks to all for your participation to forums and thanks to Mr Moffat for his help

[Stefano]

Thank you Mike

Is BPP reputable?
How long do you think l should be on this exam before sitting the exam?

SP

[Stefano]

Actually those are the only one I haven’t watched

will definitely do so before the exam

thank you

[Stefano]

Thank you! Really helpful 🙂

[Stefano]

Thanks! 🙂

[Stefano]

Thank you very much

[Stefano]

thank you :)))

[Stefano]

Yes,

I really got confused

thank you

[Stefano]

Dividend yield=dividend/share price=4%
Dividend= 4% 3.20=0.128 or 12.8 c
Dividend cover=EPS/dividend per share=3
EPS=3*0.128=0.384
PE=share price/EPS=3.2/0.384=8.33

Is that correct?

[Stefano]

Thank you Mr Moffat,

I haven’t done F6 yet, hence my confusion. I really appreciate the clarification.

Cheers,

[Stefano]

Brilliant,

That means that labour is an expense rather than a variable cost in this specific example?
Very tricky!

Thank you

[Stefano]

For your reference

21 Sniff Limited (12/07, amended) 36 mins
Sniff Limited manufactures and sells its standard perfume by blending a secret formula of aromatic oils with diluted
alcohol. The oils are produced by another company following a lengthy process and are very expensive. The
standard perfume is highly branded and successfully sold at a price of $39·98 per 100 millilitres (ml).
Sniff Limited is considering processing some of the perfume further by adding a hormone to appeal to members of
the opposite sex. The hormone to be added will be different for the male and female perfumes. Adding hormones to
perfumes is not universally accepted as a good idea as some people have health concerns. On the other hand,
market research carried out suggests that a premium could be charged for perfume that can ‘promise’ the attraction
of a suitor. The market research has cost $3,000.

Data has been prepared for the costs and revenues expected for the following month (a test month) assuming that a
part of the company’s output will be further processed by adding the hormones.
The output selected for further processing is 1,000 litres, about a tenth of the company’s normal monthly output. Of
this, 99% is made up of diluted alcohol which costs $20 per litre. The rest is a blend of aromatic oils costing
$18,000 per litre. The labour required to produce 1,000 litres of the basic perfume before any further processing is
2,000 hours at a cost of $15 per hour.
Of the output selected for further processing, 200 litres (20%) will be for male customers and 2 litres of hormone
costing $7,750 per litre will then be added. The remaining 800 litres (80%) will be for female customers and 8 litres
of hormone will be added, costing $12,000 per litre. In both cases the adding of the hormone adds to the overall
volume of the product as there is no resulting processing loss.
Sniff Limited has sufficient existing machinery to carry out the test processing.
The new processes will be supervised by one of the more experienced supervisors currently employed by Sniff
Limited. His current annual salary is $35,000 and it is expected that he will spend 10% of his time working on the
hormone adding process during the test month. This will be split evenly between the male and female versions of
the product.
Extra labour will be required to further process the perfume, with an extra 500 hours for the male version and 700
extra hours for the female version of the hormone-added product. Labour is currently fully employed, making the
standard product. New labour with the required skills will not be available at short notice.
Sniff Limited allocates fixed overhead at the rate of $25 per labour hour to all products for the purposes of reporting
profits.
The sales prices that could be achieved as a one-off monthly promotion are:
???? Male version: $75·00 per 100 ml
???? Female version: $59·50 per 100 ml
Required:
(a) Outline the financial and other factors that Sniff Limited should consider when making a further processing
decision.
Note: no calculations are required. (3 marks)
(b) Evaluate whether Sniff Limited should experiment with the hormone adding process using the data provided.
Provide a separate assessment and conclusion for the male and the female versions of the product.
(14 marks)
(c) Sniff Limited is considering outsourcing the production of the standard perfume. Outline the main factors it
should consider before making such a decision. (3 marks)
(Total = 20 marks)

[Author]

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