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Q1 was really confusing, I left it until last and feel like i rushed through it.
Did you have to calculate his after tax income if he was a sole trader or if he was incorporated and the difference between the two?
That’s what i did but stupidly forgot to include any NIC!!
I thought the rest of the paper wasn’t too bad, really hoping i’ve done enough it’s my last paper and this is the 4th time i’ve done it!!
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I started off with the ethic question as it was a tutor’s tip so knew it would come up. I should get about 5 marks for this as very straight forward. Plus 2 professional for memorandum and a letter. But others, God please help me pass this last one 🙂
@xolile said:
I think the paper was fair but was really time pressured. I could have done with an extra 30 mins. Q1 was easy but far too lengthy. The question did say to ignore the R&D expenditure in part 1a. I used 55000 as the adjusted profit for both the company and sole trader. I then deducted the salary and employers ni (less ni allowance) from the company profit and calculated 20% tax on this, the after tax profit would be dividend distributions to Duncan which i grossed up. Not sure if this is correct, but I had to restrict some of the dividend so that he would remain in the basic rate band. Spent far too much time on this question that I had to rush through the other questions.Did anyone make any adjustments to the building in Q4 under the capital good scheme? Just hoping that I have done enough to scrape a pass.
I did exactly what you did for Q1. It felt to straightforward but it made sense so I did it. Then when it asked about including the effect of R&D in part b) I just deducted 130% from the profit before tax then there were more dividends remaining and therefore a high post tax income when Duncan incorporated.
I just wrote any bs in Q4. I rushed that.
@usamaniaz said:
who understood Q1 part A? like what exactly had to be done there.
that was so vague.You just had to compare post tax income’s of trading as a sole trader or as an incorporated business for the 3 years of the new contract.
55000 was the trading profit for the sole trader and the tax adjusted trading profit for the limited company. That’s all they were saying but they say it in such a deceptive way.
So you base all your workings around that figure basically.
THe sole trader has class 2 and 4 ni to pay on the trading profit plus Income tax.
The incorporated business has income tax to pay on the salary and then you need to find out how much dividends you need to reach the BR threshold which means you have to adjust the £55000 and take account of the salary, the class 1 employer’s NI (including the employer’s allowance) and class 1 employee NI. Find the profit after tax figure then pay out dividends net. Then you left with retained profit which is paid out in the same way which means there is no net tax effect on the dividends remaining which means you add it to the post tax income.
I think this is right.
I think I should get at least 14/17 for that question otherwise it’s rigged
@blue24 said:
Q1 was really confusing, I left it until last and feel like i rushed through it.Did you have to calculate his after tax income if he was a sole trader or if he was incorporated and the difference between the two?
That’s what i did but stupidly forgot to include any NIC!!
I thought the rest of the paper wasn’t too bad, really hoping i’ve done enough it’s my last paper and this is the 4th time i’ve done it!!
Yes. Post tax income for the three years ending 31 March 2020.
Obviously NI should have been included (class 2 and 4 for the sole trader and class 1 employer and employee in the incorporated business)
I’ve worked hard spent more than 700 hours studied P6 in length, gain the knowledge in the majority of syllabus areas practiced questions from revision kit for more than three times but am afraid I won’t pass this last paper, it’s a horrible feeling to write and explain in this forum but still trying to search an answer from within that what I’ve done wrong in preparation?, would I be able to pass this last paper ever? or should I leave the study here as couldn’t work hard more than I did and happy to be called as Part Qualified for the rest of the life.
In the examination hall everything went blur couldn’t understand what questions were asking, panic started and one knows that one is seating there for the sake of passing time.
Congratulations for the students who done well in this exam and wish them good luck for the results.
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How to calculate nic 4 in q4 part a ?
@adil22 said:
How to calculate nic 4 in q4 part a ?Class 4 NIC on cessation will apply to any trading profits which have yet to be assessed for the tax.
So use salary and PSA arrangement to work out trading profits for y/e 30 Apr 16 and 8 month period ending 31 Dec 16 when he is to retire. Then deduct the overlap profits of £25000.
Then the usual way: £42385-8060 @ 9% and remainder above the threshold at 2%
I dont think it was that simple q1 part a.
i mean if what your saying is right, than im gone.
i talked about incorp relief dont ask why.
than i done some thing with profits but i used his salary as well plus the personal allowance. but i agree the wording was horrendous.
didnt even included NIC loland somebody just mentioned class 4 nic, yea all u had to look out for was 8 month period and deduction of overlap profit
BOB was leaving on 31st DEC but their year end was 30 April
Just the part A of Q1. so annoyed.
u do all this hard work and the examiner puts a question in a horrible way- Topics: 0
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Yes I agree with you but think £24k was his salary and £30k was to be the profit after the first three years.
exactly. this is where the confusion started for me.
which figure to take?
i took the 55 deducted 24 as his salary and deducted persoanl allwance and gave him enough to cover up his BRB. but i made a mess coz i totally forgot about the NIC.don’t know why i done that.
all in all lets face it, the wording was not nice.
but other aspects of the paper was good for me
Q2 for was like a compensation for Q1 lol
Q4 was rather nice. part a b and c but d i was little confused but that was only 2 marks
q5 part a was straightforward unless there was a trick, calculate the benefit and plus class 1a nic at 13.8%
part b was mainly EMI vs CSOP
part c was calculation which wasnt too badYou need 3 seperate calculations imo
Unincorporated:
Trading profits/ total income 55000
Less PA 10600
Subject to Income Tax 44400
Class 2 NIC 2.80*52
Class 4 NIC on 55000-8060@9% + remainder at 2%
Then post tax income is 55000 – IT – Class 2 NIC – Class 4 NICIncorporated:
First work out gross dividend by reverse engineering IT computation
Desired taxable income = BRB threshold = 31785
Add PA 10600
Less Salary 24000
So gross dividend = 18385Then post tax income = 24000 – IT – Class 1 e’ee NIC + dividend (0% effective rate as BR taxpayer)
Can compare two figures here but important to realise that there is retained profits in the company which can be withdrawn as dividends at effective rate of 0% once his trading profits fall to £30000 after 31 Mar 2020.
Delayed distribution calculation
Company TTP 55000
Less salary 24000
Less E’er NIC on salary ((24000-8112)*13.8% – 2000 allowance)
This leaves an amount assessable for CT
Less CT @20%
Less dividend payed out as calculated above (remembering dividends are payed out of post tax profits)
This leave retained profits which can be paid out at a 0% effective rate after 31 Mar 2020 as a ‘delayed distribution’How does everyone remember the exam? I literally erase it from my brain the minute I leave the exam hall! haha!
Q3 part d(?) I got the group payment arrangements mixed up with installments, I did mention that refunds can be offset against payments saving cash, hopefully got half a mark for that!
I knew nothing about R&D tax relief, I racked my brains but couldn’t think of anything to say! 6 marks gone straight away!
Was Q2 part b(?) about CGT only? As I said it would be better to dispose of the boat now and possibly make use of the losses from the painting, but you would waste the AEA.
@rupaljignesh said:
I’ve worked hard spent more than 700 hours studied P6 in length, gain the knowledge in the majority of syllabus areas practiced questions from revision kit for more than three times but am afraid I won’t pass this last paper, it’s a horrible feeling to write and explain in this forum but still trying to search an answer from within that what I’ve done wrong in preparation?, would I be able to pass this last paper ever? or should I leave the study here as couldn’t work hard more than I did and happy to be called as Part Qualified for the rest of the life.In the examination hall everything went blur couldn’t understand what questions were asking, panic started and one knows that one is seating there for the sake of passing time.
Congratulations for the students who done well in this exam and wish them good luck for the results.
It depends on how well you apply your knowledge to the question.
I would recommend finding as many questions on P6 as possible and keep doing them over and over again.
I don’t know if I passed but I know that what I answered should be 80% right. So if I answered 80% of the paper and got 80% correct, that is 64%.
It’s all about application. You need to think like a tax advisor.
What I do to understand the question is go through the case study and highlight key points and right little notes so I can get a clearer view of how everything links together.
@chris165 said:
You need 3 seperate calculations imoUnincorporated:
Trading profits/ total income 55000
Less PA 10600
Subject to Income Tax 44400
Class 2 NIC 2.80*52
Class 4 NIC on 55000-8060@9% + remainder at 2%
Then post tax income is 55000 – IT – Class 2 NIC – Class 4 NICIncorporated:
First work out gross dividend by reverse engineering IT computation
Desired taxable income = BRB threshold = 31785
Add PA 10600
Less Salary 24000
So gross dividend = 18385Then post tax income = 24000 – IT – Class 1 e’ee NIC + dividend (0% effective rate as BR taxpayer)
Can compare two figures here but important to realise that there is retained profits in the company which can be withdrawn as dividends at effective rate of 0% once his trading profits fall to £30000 after 31 Mar 2020.
Delayed distribution calculation
Company TTP 55000
Less salary 24000
Less E’er NIC on salary ((24000-8112)*13.8% – 2000 allowance)
This leaves an amount assessable for CT
Less CT @20%
Less dividend payed out as calculated above (remembering dividends are payed out of post tax profits)
This leave retained profits which can be paid out at a 0% effective rate after 31 Mar 2020 as a ‘delayed distribution’I did this.
I better get 17/17 lol
@nickinackynoo1 said:
How does everyone remember the exam? I literally erase it from my brain the minute I leave the exam hall! haha!Q3 part d(?) I got the group payment arrangements mixed up with installments, I did mention that refunds can be offset against payments saving cash, hopefully got half a mark for that!
I knew nothing about R&D tax relief, I racked my brains but couldn’t think of anything to say! 6 marks gone straight away!
Was Q2 part b(?) about CGT only? As I said it would be better to dispose of the boat now and possibly make use of the losses from the painting, but you would waste the AEA.
I was in ‘unload’ mode when I was answering these questions.
Q3 d) I just went to the general, cash flow benefit, administrative benefits…
R&D is a give away.
Q2 b) omg I forgot this question!!!! How many marks was it? I talked a load of crap. I just said the benefits and drawbacks of doing one thing and doing another.
It’s difficult to tell if I have passed lmao
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I think the exam was not very hard, but not enough time for me.
Q2 the boat was a wasting chattel so no cgt so i said gift it now as the value of it was increasing so for IHT (not that i mentioned that as it was asking for CGT only) purposes it would mean more IHT if left in will. That was my thought process for that.
Also for the first part i talked about the annual exemption of 3k and how its better to gift now as you lock in the value of assets that might increase later and also Fall in value relief is available if on death the value falls of the asset gifted. For Angie i said further information required is: does her husband own any part of the other 30% as if he does this will effect the value of transfer as she will be connected person to her husband so a combined shareholding needs to be calculated, for BPR we needed to know how long she had the shares in the company as you need to hold them for 2 yrs but the question never told you when she bought the shares or when the company was formed.
Q3 a) what was the base cost of the building? I used the new value as at 1st oct (date of transfer to the new company) because the old value would only have been used if the company was still with its old parent. As the company had bought the building of its parent it would have had to pay a degrouping charge as it left within 6 yrs so then you couldn’t possibly use the old base cost as cost? I was very disappointed as i had studied groups at length and was expecting a 35 or 25 mark question rather than this silly little 20 mark question.
For the loss relief i said the loss from the building can be used now against its trading loss but for the pre entry cap loss that has to be offset against its gains on assets sold. was that right?
Q1 part a was a disaster for me. Hopefully i will score method marks for calculating IT and NIC contributions but i won’t be getting any more marks for anything else.
R&D part i thought was quite a lot of marks for what they were asking. I just explained the rules regarding the additional 130% as just because you get the 100% R&D relief to get the additional 130 % additional rules apply, for example on rent you get 100% but you wouldn’t get the additional 130% and same for computer hardware equipment. Also for subcontractor expenses you would get 100% but then only 65% would qualify for the additional 130%. Then i just worked out the 130% on the 12k and 20% and said his post tax income would increase by this amount.
Cap allowance part not a clue, VAT part: has to be transferred as a going concern, the purchaser has to be VAT registered or will become VAT registered and assets transferred have to be used in the same or similar trade that they were being used in before the transfer.
Stupidly i decided to do Q5 and got confused on part a) accommodation allowance even though i had revised it the night before. The bit about Jake not being entitled to it threw me so i missed that part out 🙁 i was kicking myself after the exam as i knew how to work it out.
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Q5 was so simple part a only u need to do is tell the rules of living accommodation when employer gives living accommodation to employee it is taxable benefit for employee and allowable expense for employor. The taxable benefit will be calculated as basis charge which is based on higher of annual cost or rent charged per yr.
If accommodation cost more then 75000 their would be additional charge based on (mv-75000)*3. Question asked to calculate post tax cost of employer so tax will be deducted from given benefits- Topics: 0
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I took profit of 2016/17 which was 132000 applied % of partner which was 40% then based on the ans I calculated nic 4 9% and 2% is it right or wrong ?
Y/E 30 Apr 16
Total profit 132000
Bob Salary 18000
Bobs profit share 40% (132000-18000) = 456008 Months to 31 Dec 16
Total profit = 8/12 * 180000 = 120000
Bob Salary = 8/12 * 18000 = 12000
Bob Profit share = 40% (120000-12000) = 43200Total Bob trading profits = 18000+45600+12000+43200 = 118800
Less overlap relief 25000
Assessable for Class 4 NIC £93800- Topics: 0
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Is this right calculation Chris ?
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@adil22 said:
Is this right calculation Chris ?Yes, you need to apportion the remaining profit after salary deduction for each of the years. Full profit for 16/17 and 8months profit 17/18 and then deduct overlap profits and calculate the NI.
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