*** ACCA F6 June 2017 Exam was.. Instant Poll and comments ***

1 You should assume that today’s date is 15 December 2016.
Zhi has been self-employed since 2000, preparing accounts to 31 December. On 1 December 2016, Zhi purchased
a new freehold warehouse for £164,000 for use in his business, but this purchase has resulted in Zhi having cash
flow problems. He has various tax payments becoming due over the next two months, and would like to reduce or
postpone these payments as much as possible.
Income tax and national insurance contributions (NICs)
Zhi’s income tax liabilities and class 4 NICs for the tax years 2014–15, 2015–16 and 2016–17 are, or are forecast
to be:
2014–15 2015–16 2016–17
£ £ £
Income tax liability 25,200 27,600 18,000
Class 4 NICs 4,084 4,204 3,724
Zhi has not made any claims to reduce his payments on account.
Capital gains tax (CGT)
Zhi has a CGT liability of £12,980 becoming due for payment on 31 January 2017. This is in respect of a freehold
office building which was sold for £210,000 on 10 December 2015, resulting in a chargeable gain of £76,000. The
office building had always been used for business purposes by Zhi.
Zhi is a higher rate taxpayer. No claim has been made for rollover relief.
Value added tax (VAT)
Zhi has forecast that he will have to pay VAT of £20,200 on 7 February 2017 to HM Revenue and Customs (HMRC)
in respect of the VAT quarter ended 31 December 2016.
On 12 December 2016, Zhi despatched goods relating to an exceptionally large credit sale of standard rated goods
of £45,600 (inclusive of VAT). He has not yet issued a sales invoice for this sale.
Because the customer is unlikely to pay until 28 February 2017, Zhi is considering not issuing a sales invoice until
1 February 2017.
PAYE and NICs
Zhi will have to pay PAYE and NICs of £5,724 electronically on 22 January 2017 to HMRC in respect of his two
employees for the tax month running from 6 December 2016 to 5 January 2017.
This includes amounts for bonuses which Zhi was planning to pay to his two employees on 1 January 2017, but
could delay payment until 10 January 2017. The bonuses are in respect of the year ended 31 December 2016, and
they will be treated as being received on whichever is the date of payment.
The first employee has a gross annual salary of £20,000 and is to be paid a bonus of £1,500. The second employee
has a gross annual salary of £55,000 and is to be paid a bonus of £5,000.
6
Required:
(a) Calculate the amount by which Zhi can claim to reduce his self-assessment income tax and NICs due for
payment on 31 January 2017 without incurring interest or penalties. (2 marks)
(b) Calculate the amount by which Zhi’s CGT liability due for payment on 31 January 2017 will be reduced if
he makes a claim for rollover relief based on the warehouse purchased on 1 December 2016 for £164,000.
(3 marks)
(c) Explain whether Zhi can reduce the amount of VAT payable on 7 February 2017 by not issuing a sales
invoice for the credit sale of £45,600 until 1 February 2017, and, if so, by how much the payment will be
reduced. (2 marks)
(d) Calculate the amount by which Zhi’s PAYE and NICs due on 22 January 2017 will be reduced if he delays
the payment of employee bonuses until 10 January 2017, and state when the postponed amount will be
payable.
Note: Your calculations should be based on annual income tax and NIC thresholds

Can you please show the solving of all these 3 questions?

@huzaifa11 said:
Operating profit
Online Ltd’s operating profit for the year ended 31 March 2017 is £896,700. Depreciation of £21,660 and
amortisation of leasehold property of £9,000 (see the leasehold property note below) have been deducted in arriving
at this figure.
Leasehold property
On 1 April 2016, Online Ltd acquired a leasehold office building, paying a premium of £90,000 for the grant of a
ten-year lease. The office building was used for business purposes by Online Ltd throughout the year ended 31 March
2017.
Plant and machinery
On 1 April 2016, the tax written down values of plant and machinery were as follows:
£
Main pool 56,700
Special rate pool 12,400
The following transactions took place during the year ended 31 March 2017:
Costs/(proceeds)
£
14 May 2016 Sold a motor car (18,100)
18 July 2016 Sold all items included in the special rate pool (9,300)
27 January 2017 Purchased a motor car 13,700
The motor car sold on 14 May 2016 for £18,100 was originally purchased during the year ended 31 March 2016
for £17,200. This expenditure was added to the main pool.
The motor car purchased on 27 January 2017 for £13,700 has a CO2 emission rate of 90 grams per kilometre. The
motor car is used as a pool car by the company’s employees.
Qualifying charitable donations
During the year ended 31 March 2017, Online Ltd made qualifying charitable donations of £6,800. These were not
included in arriving at the operating profit above.
Disposal of shareholding in Network plc
On 20 March 2017, Online Ltd sold its entire shareholding of £1 ordinary shares in Network plc for £90,600. Online
Ltd had originally purchased 40,000 shares (less than a 1% shareholding) in Network plc on 24 June 2010 for
£49,300. On 7 October 2013, Online Ltd sold 22,000 of the shares for £62,200.
Indexation factors are as follows:
June 2010 to October 2013 0·124
June 2010 to March 2017 0·170
October 2013 to March 2017 0·040
Brought forward losses
As at 1 April 2016, Online Ltd had the following brought forward amounts of unused losses:
£
Capital loss 4,700
Property business loss 12,500
Planned acquisition
Online Ltd currently does not have any 51% group companies. However, Online Ltd is planning to acquire a 60%
shareholding in Offline Ltd in the near future. Offline Ltd is profitable and will pay regular dividends to Online Ltd.
10
Required:
(a) Calculate Online Ltd’s taxable total profits for the year ended 31 March 2017. (13 marks)
(b) Briefly explain how the acquisition of Offline Ltd will affect the calculation and payment of Online Ltd’s
corporation tax liability in future years.

HEY, DO you have the answers too?

For question 31 regarding Petula Employment income :

1) Salary 230’000

2) Bonus (18600 + 22400) 41000

3) Car Millage (3000+5350) 8350

4) professional subscription (630)
Golf 0

5) personal loan (140)

6) Pension Contribution Exempt Benefit 0

7) Property (12000-420-1640) 9940

8) Room (8900-7500) 1400

9) Gilt interest 3000
——————————————————————————

Total £292’920

b) Pension allowance is like the PA it is capped between income of £150k to £210k)
any income between that amount gets /2 and taken of the annual amount. income
above £210k then is capped to £10k.

Please can you compare your answers to the above and comment. Thanks

I disagree with your capital allowances calculation. My understanding is that the special rate pool continues to be written down at 8% even though everything in it has been disposed. You only get a balancing allowance (£3100 in your calculation) if the company/individual is ceasing to trade. The WDA on the special rate pool is 8% x 3100 = £248. Total capital allowances = 9576 + 248 = £9824.

It’s so tempting coming on here to compare answers but I think now I’m just going to wait for the results as coming on here only serves to undermine each other’s confidence!

@dicky123 said:
I disagree with your capital allowances calculation. My understanding is that the special rate pool continues to be written down at 8% even though everything in it has been disposed. You only get a balancing allowance (£3100 in your calculation) if the company/individual is ceasing to trade. The WDA on the special rate pool is 8% x 3100 = £248. Total capital allowances = 9576 + 248 = £9824.

It’s so tempting coming on here to compare answers but I think now I’m just going to wait for the results as coming on here only serves to undermine each other’s confidence!

If you have balancing allowance it means that no WDA can be used in the final year, thus only 3100 can be written off as Capital Allowance for the year.

@dicky123 said:
I agree with you on that but at no point does it mention that this company is in its final year of trading therefore no balancing allowance is permitted in the first place only a writing down allowance.

“Sale of plant and machinery
When plant and machinery is sold in the accounting period the sale proceeds, up to a maximum of the original cost of the asset, is
deducted from the balance of the unrelieved expenditure of the relevant pool.”

@huzaifa11 said:
1 You should assume that today’s date is 15 December 2016.
Zhi has been self-employed since 2000, preparing accounts to 31 December. On 1 December 2016, Zhi purchased
a new freehold warehouse for £164,000 for use in his business, but this purchase has resulted in Zhi having cash
flow problems. He has various tax payments becoming due over the next two months, and would like to reduce or
postpone these payments as much as possible.
Income tax and national insurance contributions (NICs)
Zhi’s income tax liabilities and class 4 NICs for the tax years 2014–15, 2015–16 and 2016–17 are, or are forecast
to be:
2014–15 2015–16 2016–17
£ £ £
Income tax liability 25,200 27,600 18,000
Class 4 NICs 4,084 4,204 3,724
Zhi has not made any claims to reduce his payments on account.
Capital gains tax (CGT)
Zhi has a CGT liability of £12,980 becoming due for payment on 31 January 2017. This is in respect of a freehold
office building which was sold for £210,000 on 10 December 2015, resulting in a chargeable gain of £76,000. The
office building had always been used for business purposes by Zhi.
Zhi is a higher rate taxpayer. No claim has been made for rollover relief.
Value added tax (VAT)
Zhi has forecast that he will have to pay VAT of £20,200 on 7 February 2017 to HM Revenue and Customs (HMRC)
in respect of the VAT quarter ended 31 December 2016.
On 12 December 2016, Zhi despatched goods relating to an exceptionally large credit sale of standard rated goods
of £45,600 (inclusive of VAT). He has not yet issued a sales invoice for this sale.
Because the customer is unlikely to pay until 28 February 2017, Zhi is considering not issuing a sales invoice until
1 February 2017.
PAYE and NICs
Zhi will have to pay PAYE and NICs of £5,724 electronically on 22 January 2017 to HMRC in respect of his two
employees for the tax month running from 6 December 2016 to 5 January 2017.
This includes amounts for bonuses which Zhi was planning to pay to his two employees on 1 January 2017, but
could delay payment until 10 January 2017. The bonuses are in respect of the year ended 31 December 2016, and
they will be treated as being received on whichever is the date of payment.
The first employee has a gross annual salary of £20,000 and is to be paid a bonus of £1,500. The second employee
has a gross annual salary of £55,000 and is to be paid a bonus of £5,000.
6
Required:
(a) Calculate the amount by which Zhi can claim to reduce his self-assessment income tax and NICs due for
payment on 31 January 2017 without incurring interest or penalties. (2 marks)
(b) Calculate the amount by which Zhi’s CGT liability due for payment on 31 January 2017 will be reduced if
he makes a claim for rollover relief based on the warehouse purchased on 1 December 2016 for £164,000.
(3 marks)
(c) Explain whether Zhi can reduce the amount of VAT payable on 7 February 2017 by not issuing a sales
invoice for the credit sale of £45,600 until 1 February 2017, and, if so, by how much the payment will be
reduced. (2 marks)
(d) Calculate the amount by which Zhi’s PAYE and NICs due on 22 January 2017 will be reduced if he delays
the payment of employee bonuses until 10 January 2017, and state when the postponed amount will be
payable.
Note: Your calculations should be based on annual income tax and NIC thresholds.

HEY< DO U HAV THE ANSWERS?

Hi.
Does anyone remember the answer to qiestion in section B which asked to calculate input VAt recoverable on car purchase and expenses?
What about the expense for the fuel? There was no info provided to calculate the output VAT…

@ratanasoff said:
“On disposal of the asset, a balancing adjustment is computed by deducting sale proceeds from the tax wdv (there is a balancing charge if sale proceeds exceed tax wdv, and a balancing allowance if sale proceeds are less than tax wdv).
Having computed the balancing adjustment, the amount assessed or allowed is then reduced to the business proportion. A balancing allowance is then added in to the capital allowances of the period whereas a balancing charge will reduce the
capital allowances. If a balancing charge exceeds the allowances available then the net balancing charge is added to the adjusted trading profit of the period.”

I am not sure if this solves the question, but I am quite sure I have seen that if there is a sale of the full amount of the asset – the computed balancing allowance/charge is the only WDA computed in Capital Allowances.

If it is not the final year of trade you do get a balancing allowance but only if the asset is de-pooled, ie it is in a single asset pool on its own. This is the only time you can get a balancing allowance/charge if it is not the final year of trade. When it comes to the main pool or the special rate pool, as is the case in the question, you can only ever get a balancing allowance if you are in the final year of trade otherwise the pool just continues until the trade ceases. As the company in the question is in a continuing trade and no mention of it being in it’s final year of trade, there is no balancing allowance available.

I am only a student so am no expert but I am just repeating exactly what is written in the bpp study text for F6 (UK). Anyway this point is probably only worth 0.5 – 1 mark max.

Hey guys can i have your intake on the Employment income (Petula) question and also Zhi Question. Much appreciated 🙂

Only 2 of the 3 bonuses are included in the computation as the first one Petula became entitled to in the 15/16 tax year (01 April 2016). The payment date for this bonus was in the 16/17 tax year but as you take the earlier of these dates, this bonus is excluded, so I agree with huzaifa 11 on this.

Accrued income from the gilts I calculated as 4/12 (3% x £250,000) = £2,500 but it’s anybody’s guess what the correct answer actually is!