Solutions Manual
Taxation:
Finance Act 2023
Twenty-ninth edition
Alan Melville
,Contents
Preface v
Chapter 2 Introduction to income tax
Solutions 2.5 and 2.6 1
Chapter 3 Personal allowances
Solutions 3.8 and 3.9 2
Chapter 4 Payments and gifts eligible for tax relief
Solutions 4.8 and 4.9 3
Chapter 5 Income from property
Solutions 5.6 and 5.7 5
Chapter 6 Income from savings and investments
Solution 6.6 6
Chapter 7 Income from employment (1)
Solutions 7.5 and 7.6 7
Chapter 8 Income from employment (2)
Solutions 8.4 and 8.5 8
Chapter 9 Income from self-employment: Computation of income
Solutions 9.7 and 9.8 9
Chapter 10 Income from self-employment: Basis of assessment
Solutions 10.8, 10.9, 10.10, 10.11, 10.12 and 10.13 10
Chapter 11 Income from self-employment: Capital allowances
Solutions 11.4 and 11.5 13
Chapter 12 Income from self-employment: Trading losses
Solutions 12.5 and 12.6 15
Chapter 13 Income from self-employment: Partnerships
Solution 13.5 16
Chapter 14 Pension contributions
Solutions 14.6 and 14.7 18
Chapter 15 Payment of income tax, interest and penalties
Solution 15.4 19
Chapter 16 National Insurance contributions
Solutions 16.4 and 16.5 20
Review questions (Set A)
Solutions A6, A7, A8, A9 and A10 21
Chapter 17 Introduction to capital gains tax
Solutions 17.8, 17.9 and 17.10 29
Chapter 18 Computation of gains and losses
Solutions 18.6 and 18.7 30
iii
© 2024 Pearson Education Limited. All Rights Reserved.
,Chapter 19 Chattels and wasting assets
Solutions 19.8, 19.9 and 19.10 31
Chapter 20 Shares and securities
Solutions 20.8, 20.9, 20.10 and 20.11 33
Chapter 21 Principal private residence
Solution 21.5 36
Chapter 22 CGT reliefs
Solutions 22.5, 22.6, 22.7 and 22.8 37
Review questions (Set B)
Solutions B5, B6, B7, B8 and B9 39
Chapter 23 Introduction to corporation tax
Solution 23.6 44
Chapter 24 Corporate chargeable gains
Solution 24.3 45
Chapter 25 Computation and payment of the corporation tax liability
Solutions 25.7, 25.8, 25.9 and 25.10 47
Chapter 26 Corporation tax losses
Solution 26.6 49
Chapter 27 Close companies and investment companies
Solutions 27.4 and 27.5 50
Chapter 28 Groups of companies and reconstructions
Solution 28.6 51
Review questions (Set C)
Solutions C6, C7, C8, C9 and C10 52
Chapter 29 Value added tax (1)
Solutions 29.6, 29.7 and 29.8 56
Chapter 30 Value added tax (2)
Solutions 30.4 and 30.5 58
Chapter 31 Inheritance tax
Solutions 31.6 and 31.7 59
Chapter 32 Overseas aspects of taxation
Solutions 32.7 and 32.8 61
Review questions (Set D)
Solutions D5, D6, D7 and D8 62
iv
© 2024 Pearson Education Limited. All Rights Reserved.
, Chapter 2
Introduction to income tax
2.5
Total Non-savings Savings Dividends
£ £ £ £
Employment income 17,055 17,055
Gilt interest £1,360 ´ 100/80 1,700 1,700
Dividends 14,560 14,560
——— ——— ——— ———
Total income 33,315 17,055 1,700 14,560
Less: Personal allowance 12,570 12,570
——— ——— ——— ———
Taxable income 20,745 4,485 1,700 14,560
——— ——— ——— ———
Income tax due
Non-savings income : Basic rate 4,485 @ 20% 897.00
Savings income : Starting rate 515 @ 0% 0.00
: Nil rate 1,000 @ 0% 0.00
: Basic rate 185 @ 20% 37.00
Dividend income : Nil rate 1,000 @ 0% 0.00
: Ordinary rate 13,560 @ 8.75% 1,186.50
———
20,745
——— ———
Tax liability 2,120.50
Less: Tax deducted at source (£1,700 – £1,360) 340.00
———
Tax payable 1,780.50
———
Note that the premium bond prize is exempt from income tax. For a Scottish taxpayer, the first £2,162 of
non-savings income would be taxed at 19%, reducing the tax liability by £21.62.
2.6
Total Non-savings Dividends
£ £ £
Business profits 26,930 26,930
Income from property 3,750 3,750
Dividends 124,460 124,460
——— ——— ———
Total income 155,140 30,680 124,460
Less: Personal allowance 0 0
——— ——— ———
Taxable income 155,140 30,680 124,460
——— ——— ———
Income tax due
Non-savings income : Basic rate 30,680 @ 20% 6,136.00
Dividend income : Nil rate 1,000 @ 0% 0.00
: Ordinary rate 6,020 @ 8.75% 526.75
: Upper rate 87,440 @ 33.75% 29,511.00
: Additional rate 30,000 @ 39.35% 11,805.00
———
155,140
——— ————
Tax liability 47,978.75
————
1
© 2024 Pearson Education Limited. All Rights Reserved.
Taxation:
Finance Act 2023
Twenty-ninth edition
Alan Melville
,Contents
Preface v
Chapter 2 Introduction to income tax
Solutions 2.5 and 2.6 1
Chapter 3 Personal allowances
Solutions 3.8 and 3.9 2
Chapter 4 Payments and gifts eligible for tax relief
Solutions 4.8 and 4.9 3
Chapter 5 Income from property
Solutions 5.6 and 5.7 5
Chapter 6 Income from savings and investments
Solution 6.6 6
Chapter 7 Income from employment (1)
Solutions 7.5 and 7.6 7
Chapter 8 Income from employment (2)
Solutions 8.4 and 8.5 8
Chapter 9 Income from self-employment: Computation of income
Solutions 9.7 and 9.8 9
Chapter 10 Income from self-employment: Basis of assessment
Solutions 10.8, 10.9, 10.10, 10.11, 10.12 and 10.13 10
Chapter 11 Income from self-employment: Capital allowances
Solutions 11.4 and 11.5 13
Chapter 12 Income from self-employment: Trading losses
Solutions 12.5 and 12.6 15
Chapter 13 Income from self-employment: Partnerships
Solution 13.5 16
Chapter 14 Pension contributions
Solutions 14.6 and 14.7 18
Chapter 15 Payment of income tax, interest and penalties
Solution 15.4 19
Chapter 16 National Insurance contributions
Solutions 16.4 and 16.5 20
Review questions (Set A)
Solutions A6, A7, A8, A9 and A10 21
Chapter 17 Introduction to capital gains tax
Solutions 17.8, 17.9 and 17.10 29
Chapter 18 Computation of gains and losses
Solutions 18.6 and 18.7 30
iii
© 2024 Pearson Education Limited. All Rights Reserved.
,Chapter 19 Chattels and wasting assets
Solutions 19.8, 19.9 and 19.10 31
Chapter 20 Shares and securities
Solutions 20.8, 20.9, 20.10 and 20.11 33
Chapter 21 Principal private residence
Solution 21.5 36
Chapter 22 CGT reliefs
Solutions 22.5, 22.6, 22.7 and 22.8 37
Review questions (Set B)
Solutions B5, B6, B7, B8 and B9 39
Chapter 23 Introduction to corporation tax
Solution 23.6 44
Chapter 24 Corporate chargeable gains
Solution 24.3 45
Chapter 25 Computation and payment of the corporation tax liability
Solutions 25.7, 25.8, 25.9 and 25.10 47
Chapter 26 Corporation tax losses
Solution 26.6 49
Chapter 27 Close companies and investment companies
Solutions 27.4 and 27.5 50
Chapter 28 Groups of companies and reconstructions
Solution 28.6 51
Review questions (Set C)
Solutions C6, C7, C8, C9 and C10 52
Chapter 29 Value added tax (1)
Solutions 29.6, 29.7 and 29.8 56
Chapter 30 Value added tax (2)
Solutions 30.4 and 30.5 58
Chapter 31 Inheritance tax
Solutions 31.6 and 31.7 59
Chapter 32 Overseas aspects of taxation
Solutions 32.7 and 32.8 61
Review questions (Set D)
Solutions D5, D6, D7 and D8 62
iv
© 2024 Pearson Education Limited. All Rights Reserved.
, Chapter 2
Introduction to income tax
2.5
Total Non-savings Savings Dividends
£ £ £ £
Employment income 17,055 17,055
Gilt interest £1,360 ´ 100/80 1,700 1,700
Dividends 14,560 14,560
——— ——— ——— ———
Total income 33,315 17,055 1,700 14,560
Less: Personal allowance 12,570 12,570
——— ——— ——— ———
Taxable income 20,745 4,485 1,700 14,560
——— ——— ——— ———
Income tax due
Non-savings income : Basic rate 4,485 @ 20% 897.00
Savings income : Starting rate 515 @ 0% 0.00
: Nil rate 1,000 @ 0% 0.00
: Basic rate 185 @ 20% 37.00
Dividend income : Nil rate 1,000 @ 0% 0.00
: Ordinary rate 13,560 @ 8.75% 1,186.50
———
20,745
——— ———
Tax liability 2,120.50
Less: Tax deducted at source (£1,700 – £1,360) 340.00
———
Tax payable 1,780.50
———
Note that the premium bond prize is exempt from income tax. For a Scottish taxpayer, the first £2,162 of
non-savings income would be taxed at 19%, reducing the tax liability by £21.62.
2.6
Total Non-savings Dividends
£ £ £
Business profits 26,930 26,930
Income from property 3,750 3,750
Dividends 124,460 124,460
——— ——— ———
Total income 155,140 30,680 124,460
Less: Personal allowance 0 0
——— ——— ———
Taxable income 155,140 30,680 124,460
——— ——— ———
Income tax due
Non-savings income : Basic rate 30,680 @ 20% 6,136.00
Dividend income : Nil rate 1,000 @ 0% 0.00
: Ordinary rate 6,020 @ 8.75% 526.75
: Upper rate 87,440 @ 33.75% 29,511.00
: Additional rate 30,000 @ 39.35% 11,805.00
———
155,140
——— ————
Tax liability 47,978.75
————
1
© 2024 Pearson Education Limited. All Rights Reserved.
