ACCA Taxation questions with correct
solutions
Opening year rules (first year) - correct answer ✔✔In the first tax year always tax the profits
earned from commencement to 5 April (actual basis)
Opening year rules (second year) If Accounting Period ends in tax year = yes - correct answer
✔✔If 12 months:
Tax it. If less than 12 months:
Tax the first 12 months of trading. If more than 12 months:Tax 12 months to the accounting
period end.
Opening year rules (second year) If Accounting Period ends in tax year = no - correct answer
✔✔Tax the 12 months of the tax year (actual)
What is the Cap on loss relief for non trading income? (pg 84) - correct answer ✔✔£50k or 25%
of total income
Maximum amount of trading loss that can be offset against chargeable gains is the lower of... -
correct answer ✔✔The remaining loss or chargeable gains in the year after deducting current
year capital losses and b/fwd capital losses.
Annual allowance for pension - correct answer ✔✔The annual allowance of £40,000, this is
reduced by £1 for every £2 by which adjusted income exceeds £240,000, down to a minimum
annual tapered allowance of £4,000.
, Adjusted income for an employee is net income PLUS: - correct answer ✔✔Employee
contributions to an occupational pension scheme and Employer contributions to either an
occupational or a personal pension scheme.
The maximum tax relievable contribution that can be made in the tax year is the higher of: -
correct answer ✔✔Earnings (employment and trading (incl. Furnished Holiday Let)), OR £3,600.
(Property income does not normally count as relevant earnings for pension contribution
purposes as it is treated as 'unearned' income)
Which class of National insurance contributions is an employer responsible for paying in respect
of its employees? - correct answer ✔✔Class 1 secondary NICs are payable by employers in
respect of employees aged 16 or over and Employers suffer Class 1A NIC at 13.8% on benefits,
e.g. company cars.
Employment allowance - correct answer ✔✔The allowance is £4,000 per employer, and is
deducted from the total employer Class 1 NIC payable for the tax year. There is no deduction
from Class 1A or from employee contributions.
The allowance is intended to help employers who support employment rather than one-man
band companies.
When is the employment allowance not available? - correct answer ✔✔For companies where a
director is the sole employee and where employers' contributions are £100,000 or more for the
previous tax year.
Self employed NIC classes and rates - correct answer ✔✔Class 2 NICs are payable, at a flat
weekly rate of £3.05 a week, by any self-employed individual who Is aged over 16 but is not of
state pension age and has tax adjusted profits that exceed the small profits threshold of £6,515.
Class 4 NICs are payable on profits by self-employed individuals and is payable with income tax
on profits at the following rates
£1 - £9,568 per year: Nil
£9,569 - £50,270 per year: 9%
solutions
Opening year rules (first year) - correct answer ✔✔In the first tax year always tax the profits
earned from commencement to 5 April (actual basis)
Opening year rules (second year) If Accounting Period ends in tax year = yes - correct answer
✔✔If 12 months:
Tax it. If less than 12 months:
Tax the first 12 months of trading. If more than 12 months:Tax 12 months to the accounting
period end.
Opening year rules (second year) If Accounting Period ends in tax year = no - correct answer
✔✔Tax the 12 months of the tax year (actual)
What is the Cap on loss relief for non trading income? (pg 84) - correct answer ✔✔£50k or 25%
of total income
Maximum amount of trading loss that can be offset against chargeable gains is the lower of... -
correct answer ✔✔The remaining loss or chargeable gains in the year after deducting current
year capital losses and b/fwd capital losses.
Annual allowance for pension - correct answer ✔✔The annual allowance of £40,000, this is
reduced by £1 for every £2 by which adjusted income exceeds £240,000, down to a minimum
annual tapered allowance of £4,000.
, Adjusted income for an employee is net income PLUS: - correct answer ✔✔Employee
contributions to an occupational pension scheme and Employer contributions to either an
occupational or a personal pension scheme.
The maximum tax relievable contribution that can be made in the tax year is the higher of: -
correct answer ✔✔Earnings (employment and trading (incl. Furnished Holiday Let)), OR £3,600.
(Property income does not normally count as relevant earnings for pension contribution
purposes as it is treated as 'unearned' income)
Which class of National insurance contributions is an employer responsible for paying in respect
of its employees? - correct answer ✔✔Class 1 secondary NICs are payable by employers in
respect of employees aged 16 or over and Employers suffer Class 1A NIC at 13.8% on benefits,
e.g. company cars.
Employment allowance - correct answer ✔✔The allowance is £4,000 per employer, and is
deducted from the total employer Class 1 NIC payable for the tax year. There is no deduction
from Class 1A or from employee contributions.
The allowance is intended to help employers who support employment rather than one-man
band companies.
When is the employment allowance not available? - correct answer ✔✔For companies where a
director is the sole employee and where employers' contributions are £100,000 or more for the
previous tax year.
Self employed NIC classes and rates - correct answer ✔✔Class 2 NICs are payable, at a flat
weekly rate of £3.05 a week, by any self-employed individual who Is aged over 16 but is not of
state pension age and has tax adjusted profits that exceed the small profits threshold of £6,515.
Class 4 NICs are payable on profits by self-employed individuals and is payable with income tax
on profits at the following rates
£1 - £9,568 per year: Nil
£9,569 - £50,270 per year: 9%
