Advanced Taxation MCT
1- A professional accountant is asked by her father, a partner in the firm employing her,
to overstate the allowable expenses in a client's tax-adjusted accounts. He is offering to
recommend she receive a bonus payment if she does this.
Which two threats to objectivity is the professional accountant faced with in this
situation? correct answers self-interest and familiarity
A professional accountant has been asked to act for a taxpayer who is negotiating a
redundancy settlement with his employer. The employer concerned is a company which
is one of the professional accountant's existing clients. Which of the following
statements is true in this situation? correct answers There is an actual conflict here
between the company and the employee
Which two of the following are not fundamental principles as stated in the ICAEW Code
of Ethics? correct answers Professional intellect and courtesy and consideration
Governments change their tax policy to achieve 'social justice'. Which of the following
has not been an important principle of social justice in modern politics? correct answers
neutrality principle
Which of the following is an allowable expense?
A. Gift of fleece jackets to customers with trade logo costing £55 each
B. Increase in general provision for bad debts
C. Legal expenses on employment contracts;
Gift Aid donation correct answers C - Legal expenses on employment contract
Ivan and Ewan are in partnership. Their accounts include the following expenditure:
Lunch meetings with clients £1,090
Parking fines for Ivan £500
Increase in specific provision for trade bad debt £150
What are the total disallowable expenses?
A. £650
B. £1,240
C. £1,590;
D.£1,740 correct answers C - £1590
Patrick's accounts show £16,550 on repairs and maintenance during the year to 30
September 2022:
Demolishing out-house and building new toilets £5,950
Repainting offices £3,600
Installing new heating system £7,000
How much should be added back to the accounting profit?
, A. £9,550
B. £10,600
C. £12,950;
D. £16,550 correct answers C - £12,950
Case of wine costing £48 to a customer. Each bottle had the name of the garage on the
label.
A. Allowable
B. Disallowable correct answers B. Disallowable
Four bottles of spirits costing £90 to an employee.
C. Allowable;
D. Disallowable correct answers C. Allowable
Cash bonus of £60 to each of his three junior employees.
E. Allowable;
F. Disallowable correct answers E. Allowable
8 Niamh's accounts for the year ended 30 September 2022 showed legal and
professional fees of
£8,000. Which two of the following costs are not allowable in calculating her tax-
adjusted trading profit?
A. Fees incurred in the recovery of a trade bad debt
B. Legal fees for a successful appeal against a tax assessment;
C. Renewal of a ten-year lease on business premises
D. Fees for preparation of the annual accounts
E. Cost of taking out a new five-year lease on business premises; correct answers B
and E
Expenditure shown in the profit and loss account is not always allowable for tax
purposes. Disallowable expenditure must be added back when computing the taxable
trading profits.
A Correct
B Incorrect correct answers A Correct
The building that you are acquiring is dilapidated and requires repair work. You are not
able to use the building until this work has been completed. The additional expenditure
incurred on this repair work is allowable when computing taxable trading profits.
A Correct
B Incorrect correct answers B Incorrect
Noah is a wine merchant with a year ended 31 March 2020.
Which two of the following are allowable expenses in calculating Noah's taxable trading
profits?
A A gift of a £10 bottle of wine to each of 200 potential new customers as a marketing
method to entice them to buy more wine in the future;
1- A professional accountant is asked by her father, a partner in the firm employing her,
to overstate the allowable expenses in a client's tax-adjusted accounts. He is offering to
recommend she receive a bonus payment if she does this.
Which two threats to objectivity is the professional accountant faced with in this
situation? correct answers self-interest and familiarity
A professional accountant has been asked to act for a taxpayer who is negotiating a
redundancy settlement with his employer. The employer concerned is a company which
is one of the professional accountant's existing clients. Which of the following
statements is true in this situation? correct answers There is an actual conflict here
between the company and the employee
Which two of the following are not fundamental principles as stated in the ICAEW Code
of Ethics? correct answers Professional intellect and courtesy and consideration
Governments change their tax policy to achieve 'social justice'. Which of the following
has not been an important principle of social justice in modern politics? correct answers
neutrality principle
Which of the following is an allowable expense?
A. Gift of fleece jackets to customers with trade logo costing £55 each
B. Increase in general provision for bad debts
C. Legal expenses on employment contracts;
Gift Aid donation correct answers C - Legal expenses on employment contract
Ivan and Ewan are in partnership. Their accounts include the following expenditure:
Lunch meetings with clients £1,090
Parking fines for Ivan £500
Increase in specific provision for trade bad debt £150
What are the total disallowable expenses?
A. £650
B. £1,240
C. £1,590;
D.£1,740 correct answers C - £1590
Patrick's accounts show £16,550 on repairs and maintenance during the year to 30
September 2022:
Demolishing out-house and building new toilets £5,950
Repainting offices £3,600
Installing new heating system £7,000
How much should be added back to the accounting profit?
, A. £9,550
B. £10,600
C. £12,950;
D. £16,550 correct answers C - £12,950
Case of wine costing £48 to a customer. Each bottle had the name of the garage on the
label.
A. Allowable
B. Disallowable correct answers B. Disallowable
Four bottles of spirits costing £90 to an employee.
C. Allowable;
D. Disallowable correct answers C. Allowable
Cash bonus of £60 to each of his three junior employees.
E. Allowable;
F. Disallowable correct answers E. Allowable
8 Niamh's accounts for the year ended 30 September 2022 showed legal and
professional fees of
£8,000. Which two of the following costs are not allowable in calculating her tax-
adjusted trading profit?
A. Fees incurred in the recovery of a trade bad debt
B. Legal fees for a successful appeal against a tax assessment;
C. Renewal of a ten-year lease on business premises
D. Fees for preparation of the annual accounts
E. Cost of taking out a new five-year lease on business premises; correct answers B
and E
Expenditure shown in the profit and loss account is not always allowable for tax
purposes. Disallowable expenditure must be added back when computing the taxable
trading profits.
A Correct
B Incorrect correct answers A Correct
The building that you are acquiring is dilapidated and requires repair work. You are not
able to use the building until this work has been completed. The additional expenditure
incurred on this repair work is allowable when computing taxable trading profits.
A Correct
B Incorrect correct answers B Incorrect
Noah is a wine merchant with a year ended 31 March 2020.
Which two of the following are allowable expenses in calculating Noah's taxable trading
profits?
A A gift of a £10 bottle of wine to each of 200 potential new customers as a marketing
method to entice them to buy more wine in the future;
