PRINCIPLES OF TAXATIONS 100 VERIFIED QUESTIONS AND ANSWERS LATEST 2024

PRINCIPLES OF TAXATIONS 100 VERIFIED QUESTIONS AND ANSWERS LATEST 2024 Checker Ltd submitted its corporation tax return for the year ended 30 September 2020 on 23 May 2021. This was before the due date of 30 September 2021. HMRC may issue a notice to enquire into this return at any time until: 23 May 2022 Since the return was filed on time, a formal enquiry can be opened within 12 months of the actual submission date of 23 May 2021. Note that in the exam you would not be told the due date, you would need to refer to the 'Submission dates for corporation tax returns' information in the tax tables. Identify which, if any, of the following statements is/are true. A taxpayer may appeal against an information notice. A taxpayer may appeal against the imposition of a penalty. True and True A taxpayer may also appeal against: a request to submit supporting documents amendments made to a self assessment as a result of an enquiry HMRC's right to raise a discovery assessment a discovery assessment a VAT assessment The amount of duty paid on a packet of cigarettes is the same for all individuals, regardless of their income; therefore, the duty is a lower proportion of the income of a higher earner than that of lower earner. Which principle of taxation best describes the above? Progressive/regressive principle Which one of these is produced by HMRC? Statutory instruments Finance Act Case law Extra-statutory concessions Extra-statutory concessions The Finance Act is the annual Act which gives Parliament the right to collect taxation. Statutory instruments are the biggest single source of tax law each year. Case law is an important source of tax law which clarifies parliamentary legislation. Mary had the following income during the tax year 2020/21: Employment income £46,000 (from which PAYE of £7,000 deducted) Self-employment income £4,000 Bank Interest £800 Dividend £1,800 Income from ISAs - Interest £400 - Dividend £900 What is Mary's taxable income for the tax year 2020/21? £40,100 46000 + 4000 + 800 + Sienna filed her tax year 2018/19 tax return, showing income tax payable of £7,400, on 25 September 2020. In addition to the initial £100 late filing penalty, what is the maximum further penalty that she can be charged for filing the tax return late? £1,270 Daily penalties - 90 x 10 6 months, less than 12 - 7400 x 5% Max penalty - 1270 During 2020/21 Gordon has taxable income (after deduction of the personal allowance) of £41,400, consisting entirely of dividend income. What is Gordon's total income tax liability for 2020/21? £3,929 2000 x 0% () x 7.5% 3900 x 32.5% Which TWO of the following benefits are exempt from income tax? Company car Workplace car park space Fuel for a company car Travel expenses if car sharing arrangements break down Workplace car park space Travel expenses if car sharing arrangements break down David was provided with a company car on 6 September 2020. The car had a list price of £27,000 and a carbon dioxide emission rate of 126g/km and was registered after 5th April 2020. David made a capital contribution of £3,000 towards the cost of the car, and paid £100 per month as a contribution towards the private use of the car, and £50 per month as a contribution towards the cost of the private petrol provided. What is the total taxable benefit for the provision of the car and private fuel for the tax year 2020/21? £7,222 Relevant percentage = (125 - 75) x 1/5 + 20% - 2% = 28% (£27,000 - £3,000) = £24,000 × 28% × 7/12 Less: Employee contribution (7 × £100) (£24,500 × 28% × 7/12) (No deduction for contribution towards fuel) Maha is provided with a house (not job-related accommodation) by her employer. Her employer purchased the house in April 2011 at a cost of £155,000 and it had a market value of £205,000 when first made available to Maha in April 2016. The property was extended, at a cost to the employer of £80,000, in December 2019. The property has an annual value of £3,600. What is the assessable benefit for Maha in the tax year 2020/21? 7200.00 The original cost of the house is used in the expensive living accommodation charge as the house was acquired less than six years before it was first provided to Maha. The cost of the extension was incurred prior to the start of the tax year 2020/21 and is therefore added to the original cost of the house to calculate this benefit. In a sole trader's business which of the following expense items would be an allowable deduction from trading profits? Drawings paid to the proprietor of the business. The cost of private phone calls made on the business phone line. Market rate salary paid to the proprietor's wife who works as a sales assistant. Interest paid to the proprietor in respect of the capital invested in the business. Market rate salary paid to the proprietor's wife who works as a sales assistant. Katrina incurred the following costs for the year ended 31 March 2021. Match the expenditure to its tax treatment in arriving at Katrina's tax adjusted trading profits before capital allowances. 1. Fees incurred in chasing a trade debt 2. Legal fees incurred in acquiring a 5 year lease over new shop premises 3. Gift aid donation to a national charity 4. Small donation to a local charity in return for an advert for the business 5. Costs of purchasing computer equipment Deductible Not deductible Not deductible Deductible Not deductible Kamala has been trading for many years making up accounts to 5 April. The only asset in the business for capital allowances is a car with emissions of 105 g/km, which Kamala uses 60% for business purposes. Kamala had purchased the car in June 2014. The tax written down value of the car at 6 April 2020 was