Questions and Answers of Taxation of Individuals

In 2020-21, a landlord receives a premium of £12,000 when granting a lease to a tenant.Compute the amount of this premium which is chargeable to income tax if the length of the lease is:(a) 60
In 2020-21, Jasper is granted a 10-year lease on a property, paying a premium of £15,000.He uses the property for trading purposes. Compute the tax relief which he will be allowed in respect of the
Georgina owns three holiday flats, all of which she lets furnished with a view to profit.None of the flats is ever let to the same tenant for more than 31 consecutive days. The number of days for
In 2020-21, Peter is granted a 12-year lease on a property, paying a premium of £40,000 to his landlord. He immediately grants a 4-year sub-lease to Paula, receiving a premium from her of £14,000.
Melissa (who is not a Scottish taxpayer) owns a house which she lets to tenants. The house was let throughout 2020-21 and rents received during the year were £7,200. Her deductible expenditure for
In 2020-21, Alfred (not a Scottish taxpayer) had business profits of £16,870 and received net debenture interest of £1,520. He acquired the debentures on 1 July 2020 and accrued interest (gross) on
For each of the following savers, identify the further ISA investments that may be made during tax year 2020-21:(a) Alexander saves £500 in a cash ISA on 26 April 2020.(b) Bianca saves £6,000 in a
An interest in possession trust with one life tenant has the following income in 2020-21:(a) Compute the trustees' income tax liability for 2020-21.(b) How much income does the life tenant receive
Assume that a discretionary trust has the same income and expenses in 2020-21 as the trust described in the above example. Assume also that a payment of £5,500 was made to a beneficiary during the
Edward has the following income in 2020-21:He makes a total of £800 of Gift Aid donations during 2020-21. Compute the amount of income tax payable for the year. Bank interest Loan stock interest
Anne's income for 2020-21 is as follows:Compute her income tax liability for the year. Bank interest: Interest on deposit account Interest credited to cash ISA Dividends received Retirement pension 4
Bernice (who is not a Scottish taxpayer) has the following income in 2020-21:She makes a qualifying EIS investment of £20,000 in August 2020. Compute her income tax liability for 2020-21, assuming
An interest in possession trust with two life tenants has the following income in tax year 2020-21:Property expenses incurred in the year were £2,220 and general administration expenses amounted to
Barry (who is not a director) receives an annual salary of £45,000. His bonus for the year to 31 March 2020 was £7,350, received in May 2020. His bonus for the year to 31 March 2021 is £7,900,
Julie uses her own car when travelling on her employer's business. In 2020-21 she drives 12,000 business miles. Explain the taxation implications if her employer pays her:(a) 47p per mile (b) 37p per
In which of the following cases would the expenses described be deductible from the employee's income for tax purposes?(a) A bank manager voluntarily pays an annual subscription to a London club. He
Henrietta (who is not a Scottish taxpayer) is made redundant in March 2021. She receives statutory redundancy pay of £4,500 and an ex gratia compensation payment from her employer of £40,000, none
Henry is single and claims only the basic personal allowance. He makes a deductible payment of £100 per annum and pays an allowable subscription of £85 per annum. His taxable benefits in kind for
Malcolm's gross annual salary is £57,500. He is also entitled to an annual bonus which is based on his employer's profits for the previous calendar year. His bonus for the year to 31 December 2019
Which of the following forms of income from employment would be exempt from income tax in tax year 2020-21?(a) Free meals in the company canteen.(b) Removal expenses of £4,500.(c) £1,000 given to
On 21 March 2021, Penny is made redundant by her employer. She receives statutory redundancy pay of £4,750 and an ex gratia compensation payment of £32,000 (none of which ranks as a PILON). Her
In tax year 2020-21, an employer provides employees with a party at Christmas and a dinner dance in the summer. Calculate the taxable benefit if the cost to the employer of these two functions (per
As from 1 January 2020, an employee is provided by his employer with the use of a house which has an annual value of £5,300. The following information is relevant:(a) The employer bought the house
On 6 April 2018, an employer purchases a music system for £800 and immediately lends the system to an employee for his private use. The system remains in the employee's possession until 6 October
In 2020-21, an employer provides living accommodation for an employee. The employer also provides the following services in connection with this accommodation:The employee contributes £100 each
(a) Throughout the whole of tax year 2020-21, Lucy is provided by her employer with a car with a list price of £27,400. The car was first registered in March 2020 and is not dieseldriven.Lucy
Throughout 2020-21, Miranda is provided with a petrol-engined motor car (113g/km) which was first registered in 2019. Her employer pays all running costs. The cost of the petrol used for private
Adam has the following four loans from his employer:(a) A £96,000 loan at interest of 1% p.a. to enable Adam to buy his own home.(b) An interest-free season ticket loan of £10,000.(c) A £15,000
Kim lives in a house provided by her employer. The house cost her employer £246,500 in 2018 and a further £28,500 was spent on improvements in 2019. The house has a gross rateable value of £3,700
Throughout 2020-21, Niall is provided by his employer with a diesel-engined motor car which had a list price when new of £24,200. The car was registered in January 2020 and has an emission rating of
On 1 June 2020, Stephen was provided by his employer with an interest-free loan of £20,000. He repays £5,000 of this loan on 1 January 2021 and repays another £3,000 on 1 March 2021. Compute the
Jim is the managing director of a company and earns a basic salary in 2020-21 of £225,000. He receives benefits from the company during the year as follows:(a) He is provided with the use of a
A sole trader's income statement for the year to 30 June 2020 shows an expense of £923 in relation to bad and doubtful debts. This expense comprises:The staff loan written off was not made for trade
(a) A motor car with a retail price of £21,000 is leased for four years at a cost of £300 per month. The car is used only for trade purposes and has an emission rating of 112g/km. How much of the
Linda's income statement for the year ended 31 March 2021 is as follows:Notes:(a) Linda draws a salary of £200 per week from the business. This is included in thewages and salaries figure.(b)
Imran owns a business which operates from rented premises. He has a 10-year lease on the premises and he paid a premium of £7,000 on 1 January 2020 in order to renew this lease. His income statement
Ewan began trading on 1 April 2020. A brief summary of his income statement for the year to 31 March 2021 (prepared on the accruals basis) is as follows:Notes:1. Trade receivables at 31 March 2021
(a) A trader prepares accounts to 31 December each year. Identify the basis period for tax year 2020-21.(b) A trader prepares accounts to 30 September each year. For which tax year will the
Identify basis periods for the first four tax years in each of the following situations:(a) Vera starts trading on 1 January 2019, preparing accounts annually to 31 December.(b) Wilbur starts trading
Albert begins trading on 1 May 2019 and has adjusted trading profits as followsCompute Albert's trading income for each of the first three tax years and also calculate the amount of any overlap
Carmen starts trading on 1 July 2019 and chooses 30 June as her annual accounting date.Identify the basis periods for her last two tax years if she ceases trading as follows: (a) Date of cessation 31
Damien starts trading on 1 July 2015 and chooses 31 December as his annual accounting date. He ceases trading on 30 September 2020 and has the following results:Compute Damien's trading income for
(a) Gary began trading many years ago, preparing accounts to 30 September each year.He decided to change his accounting date to 30 June and the first accounts made up to the new date were for the
(a) Byron began trading on 1 November 2016, preparing accounts to 31 October each year. He decided to change his accounting date to 31 August and the first accounts made up to the new date were for
The recent adjusted trading profits of a self-employed farmer (who began trading many years ago) are as follows:He has no other income. May an averaging claim be made for these two years and would
A creative artist has been self-employed for many years. Adjusted trading profits/(losses) in recent years are as follows:Calculate the artist's trading income for 2016-17 to 2020-21 inclusive,
A market gardener began trading many years ago and has been making good profits for many years. However, adverse weather conditions in 2020 caused his profits to fall very sharply in that year.
Under the current year basis, for which tax years would the following accounting years form the basis period?(a) year to 31 October 2020 (b) year to 31 March 2021(c) year to 30 April 2022 (d) year to
Frank began trading on 1 July 2018. Identify the basis periods for his first four tax years if he:(a) chooses 30 June as his annual accounting date and prepares his first accounts for the year to 30
Greta commences trading on 1 January 2019 and chooses 30 June as her annual accounting date. Her first accounts are made up for the 18 months to 30 June 2020 and show an adjusted trading profit of
Hitesh has been trading for many years, preparing accounts to 31 January each year. His last full year of trading is the year to 31 January 2020. Identify the basis periods for the last three tax
Phillip starts trading on 1 June 2016 and ceases trading on 31 July 2021. He has adjusted trading profits as followsCompute Phillip's trading income for all tax years. 1 June 2016 to 30 September
Ivy begins trading as a farmer on 1 January 2018, making up annual accounts to 31 December. Her adjusted trading profits/(losses) in the opening years are as follows:(a) Compute Ivy's trading income
Ken starts trading on 1 October 2015 and chooses 30 April as his accounting date. He ceases trading on 31 January 2021 and has adjusted trading profits as follows:Compute Ken's trading income for all
Belinda began trading on 1 March 2016 and chose 31 December as her accounting date.Her first accounts were for the period to 31 December 2016. She eventually decided to change her accounting date to
Roger began trading on 1 January 2014, preparing accounts to 30 April each year. His first accounts were for the 16 months to 30 April 2015. In 2017 he decided to change his accounting date to 30
Lee begins trading on 1 January 2020 preparing accounts to 31 December each year. His adjusted trading profit for the year to 31 December 2020 (before capital allowances) is £21,000 and capital
Calculate the hybrid rate of WDA available in the special rate pool for each of the following chargeable periods:(a) the year to 30 November 2019 (b) the sixteen months to 30 April 2020.
Joanne started a business on 1 May 2019, preparing accounts to 31 December each year.Her first accounts were for the period to 31 December 2019. During this period and during the year to 31 December
Samuel prepares accounts to 28/29 February each year. His expenditure on plant and machinery (other than motor cars) in the year to 28 February 2021 is £300,000, of which £225,000 is spent in
(a) Sharon started a business on 1 April 2019. She chose 31 December as her annual accounting date and her first accounts covered the period from 1 April 2019 to 31 December 2019. During this period
Ian owns a large manufacturing business and prepares accounts to 31 March each year.The written down value of his main pool of plant and machinery after deducting capital allowances for the year to
Allan prepares accounts to 5 April each year. His acquisitions and disposals of plant and machinery in the years to 5 April 2020 and 2021 include the following:Private use of both cars is agreed to
Anita starts trading on 1 July 2017, preparing accounts to 30 June. Her only acquisitions and disposals of plant and machinery in the first three years of trading are as follows:Her £200,000 AIA for
Jake has been trading for many years, preparing accounts to 30 September each year. The written down value of his plant and machinery at 30 September 2019 was:Jake bought plant costing £1,150 in
Gurpreet (who prepares accounts to 31 December) pays £3m to acquire a piece of land and then pays a further £5m for the construction of a new purpose-built factory on this land. The construction
Maurice prepares accounts to 5 April each year. The written down value of his main pool at 5 April 2020 was £10,300. There was no special rate pool. His purchases and sales of plant and machinery
Laura started trading on 1 February 2020, preparing accounts to 31 January. Her adjusted trading profit for the year to 31 January 2021 (before deducting capital allowances) was l£259,171. Her
Norma has prepared a set of accounts for the nine-month period to 31 December 2020.The written down value of her plant and machinery at 31 March 2020 was as follows:Plant and machinery transactions
Raymond started trading on 1 October 2019. He chose 31 March as his accounting date and his first accounts were for the period from 1 October 2019 to 31 March 2020. His purchases and sales of plant
Talat owns a large retail business and prepares accounts to 31 December each year. The written down value of his plant and machinery after deducting capital allowances for the year to 31 December
Carla incurred a trading loss of £42,000 in the year to 30 June 2018 and claimed carryforward relief. Her adjusted trading profits for the following three years are as follows:Carla's only other
Colin's adjusted trading profits/(losses) for the years to 31 August 2019 and 2020 are:He is single and has no other income. If the trading loss is carried forward for relief against future trading
Ashok has been trading for many years. He is single and is not a Scottish taxpayer. Recent trading profits/(losses), adjusted for tax purposes, are as follows:Ashok's only other income comprises
Carl begins trading on 1 July 2019 and chooses 30 June as his accounting date. His tax-adjusted trading profits/(losses) for the first two accounting years are as follows:Now that he is
Andrea ceases trading on 31 October 2020. Her adjusted trading profits/(losses) for the closing periods of account are as follows:Overlap profits of £3,200 arose when Andrea commenced trading.
Brendan ceases trading on 30 September 2020. His recent trading profits/(losses) are:He has no other income. Overlap profits of £4,700 arose when Brendan began trading and no claims are made to set
Sally (who began trading many years ago and has not ceased trading) incurs an adjusted trading loss of £40,000 in the year to 31 December 2020. She has no capital gains.(a) What is her trading
Jane is self-employed. Her recent adjusted trading profits/(losses) are:Jane has other income of £10,000 per annum. Assuming that the trading loss is carried forward and set against future trading
Marcus begins trading on 1 January 2019 and has the following results:He is single and has no other income.(a) Compute his trading income (before loss relief) for 2018-19 to 2020-21.(b) Identify the
Nathan begins trading on 1 October 2018, making up accounts to 31 December each year.His first two sets of accounts show the following adjusted trading losses:He has had no other income since
Olive ceases trading on 31 May 2020. Her recent adjusted trading profits/(losses) are:Overlap relief of £7,140 is available. Calculate the terminal loss and show how this would be relieved, assuming
Craig began trading on 1 August 2018 and has the following results:Before commencing to trade, Craig had only investment income. He sold all of his investments in May 2019 (realising a large capital
Tom, Dick and Harry begin trading as a partnership on 1 January 2019, sharing profits in the ratio 3:2:1. With effect from 1 January 2020, they agree that Harry should receive a salary of £20,000
(a) Lock, Stock and Barrel are in partnership, making up accounts to 30 June each year.Their profit-sharing agreement specifies that Lock and Barrel should receive annual salaries of £20,000 and
Red and White begin trading as a partnership on 1 October 2017, sharing profits equally.On 1 January 2019, they agree to admit Blue as a partner and to share profits in the ratio 3:2:1. The adjusted
Hook, Line and Sinker begin trading as a partnership on 1 July 2018, sharing profits equally.The chosen accounting date is 30 June and the first accounts are made up for the year to 30 June 2019. In
Game, Set and Match begin trading in partnership on 1 August 2018, preparing accounts to 31 January each year and sharing profits equally. With effect from 1 March 2019, they agree to share profits
Nickleby, Copperfield and Drood have traded as equal partners for many years, making up accounts to 31 December each year. As from 1 April 2020 they agree to share profits in the ratio 1:2:2. The
Pickwick, Snodgrass and Tupman are in partnership, making up accounts to 31 March annually. Each partner receives 6% interest on fixed capital. Pickwick and Tupman are entitled to annual salaries of
Dodson and Fogg began trading in equal partnership on 1 July 2017. On 1 July 2018, they admitted Jackson as a partner and agreed to share profits in the ratio 5:4:1. The adjusted trading profits of
Wardle, Jingle and Trotter began trading on 1 October 2018, preparing accounts to 30 September each year and sharing profits in the ratio 7:2:1. Results for the first two years of trading are as
Cluppins and Raddle form a partnership on 1 November 2016, preparing accounts to 31 May each year. Bardell is admitted as a partner on 1 January 2018. Cluppins leaves the partnership on 28 February
Gordon is self-employed and he is a member of a registered pension scheme. His trading income for tax year 2019-20 is £27,800 but this falls to only £2,500 in 2020-21.(a) How much may Gordon
(a) Wesley has no earned income in 2020-21 but he does have substantial investment income. He belongs to a registered pension scheme which operates relief at source and he makes pension contributions
During the year to 31 May 2020, an employer made contributions of £400,000 into a registered pension scheme. Explain how tax relief will be given on the contributions made during the year to 31 May
Calculate the annual allowance available in 2020-21 (including unused annual allowance brought forward) to an individual with total pension input amounts as follows: 2017-18 £25,000 2018-19 £62,000
Diane (who is not a Scottish taxpayer) is self-employed and a member of three registered pension schemes. Her pension input amounts for 2020-21 are as follows:Diane's "adjusted income" for 2020-21 is
Compute the annual allowance charge payable by the following (non-Scottish) employees for tax year 2020-21, assuming in each case that "adjusted income" for the year does not exceed £240,000 and
Sharon is a member of two registered pension schemes. She receives no benefits from either scheme until 19 March 2014, when she takes a lump sum of £900,000 from one of her schemes. On 5 January

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