BTC - common errors summarised

becs129

Ok, after reading so many posts from eveyone I would like to clarify the few unusual bits in the exam.

From everything I've read I'm going to summarise what I think we've all more or less agreed should have been done....

Section 1

Expenses:
Harrisons salary - dis-allowable
H's wifes salary - dis-allowable
Son's salary - allowable
Assets taken for own use - £600 added back in.

Capital Allowances:

Main Points -
Separate column for SLA.
Own car restricted to 3000 then apportioned for private use.
FYA on P+M (40 or 50 % can't remember)
Overall allowance 67546 (something like that)

NI:

Class 4-
34840 - 5225 x 1%
(54000ish - 34840) x 8%

Class 2-
£2.20 x 52 weeks


PCTCT:

Adjusted Profits x x x x
less cap. allow ( x x )
add charg. gain x x
PCTCT 54000 ish

Question on duration of keeping records:

6 years


Question on possible taxation of shares sale:

Main points-
* Business asset so allowable for relief
* indexation to adjust for inflation up to April 98
* taper relief resulting in 25% of gain chargeable


Section 2

Shares Disposal


Straight forward, only one indexation needed. Indexed gain was £91. Can't remember my answer for the overall chargeable gain.

IBA:
land cost taken out.
fees regarding land cost left in.
Overall figure x 4% x 10/12


PCTCT

Adj. Profits x x x x x
less Cap. all. ( x x )
less IBA ( x x )
add chrg. gain x x
PCTCT 740,000 ish comes to mind?


Tax calculation

Upper limit 1,500,000 x10/12 = 1,250,000
MR: 1/40 x (1,250,000 - 740000) = 12750 (my answer was more like 16k)

740,000 x 30% = 222,000
less MR (12750)
= x x x x x (my actual answer came to about 190k I think)

Associated company question

Basically ouline that with an associated company the marginal relief bands will be halved. I gave an example that with last years profits they wouldn't have been eligible for marginal relief and would have paid tax at 30%.


>That's all I can remember from section 2!


* * * * any comments please feel free * * * *

umerali2003

i think it was his daughters salary which was allowable

there was no son lolzz if my memory serve me correctly

Kairi

I am sure it is just a typo but aren't the NIC rates the other way round.

pernickety

becs129 wrote: »

Ok, after reading so many posts from eveyone I would like to clarify the few unusual bits in the exam.

From everything I've read I'm going to summarise what I think we've all more or less agreed should have been done....

Section 1

Expenses:
Harrisons salary - dis-allowable
H's wifes salary - dis-allowable
Son's salary - allowable
Assets taken for own use - £600 added back in.

Capital Allowances:

Main Points -
Separate column for SLA.
Own car restricted to 3000 then apportioned for private use.
FYA on P+M (40 or 50 % can't remember)
Overall allowance 67546 (something like that)

NI:

Class 4-
34840 - 5225 x 1%
(54000ish - 34840) x 8%

Class 2-
£2.20 x 52 weeks


PCTCT:

Adjusted Profits x x x x
less cap. allow ( x x )
add charg. gain x x
PCTCT 54000 ish

Question on duration of keeping records:

6 years


Question on possible taxation of shares sale:

Main points-
* Business asset so allowable for relief
* indexation to adjust for inflation up to April 98
* taper relief resulting in 25% of gain chargeable


Section 2

Shares Disposal


Straight forward, only one indexation needed. Indexed gain was £91. Can't remember my answer for the overall chargeable gain.

IBA:
land cost taken out.
fees regarding land cost left in.
Overall figure x 4% x 10/12


PCTCT

Adj. Profits x x x x x
less Cap. all. ( x x )
less IBA ( x x )
add chrg. gain x x
PCTCT 740,000 ish comes to mind?


Tax calculation

Upper limit 1,500,000 x10/12 = 1,250,000
MR: 1/40 x (1,250,000 - 740000) = 12750 (my answer was more like 16k)

740,000 x 30% = 222,000
less MR (12750)
= x x x x x (my actual answer came to about 190k I think)

Associated company question

Basically ouline that with an associated company the marginal relief bands will be halved. I gave an example that with last years profits they wouldn't have been eligible for marginal relief and would have paid tax at 30%.


>That's all I can remember from section 2!


*My comments on above, as far as I can remember:-
Section 1 - FYA =50%
NI - If profit was over £34840 then additional 1% on remainder is right - I cant remember the profit, but know I did not allow for it being over, so know I am wrong on this question as I forgot to. Can't remember the taxable trading profits but agree with the principle. It was not a PCTCT though as self assessment for a small trader.

Section 2: Indexation on the shares in Section 2 was definitely a two digit figure, but cant remember the overall gain after indexation at all.

The IBA for section 2 - Was a Limited Co and was definitely a 10month period, 1st April 07 - 31st January 08 but the industrial unit was not brought in to use till 4 months in to that 10 month period - Year started 1st April, and industrial unit not brought in to use till 1st August - so 6/12 is what I used. I seem to be the only one who did this, so I am starting to think I imagined it! Know I got the question wrong in other parts as I know that I did not allow the land levelling (deducted it when I shouldn't have), but checked several times about the unit not in use till 1st August.

All other bits quoted though I agree with though.

cs_1988

Hi pernickety,

The IBA is like the WDA, as long as you have it at the end of the year you get 4% or 25%.

So it's 4% x 10/12. Your mistake is only a 1 or 2 marker though. Nothing to worry about!

I forgot to that land prep costs are allowable!

garry_coombs

The only things I would change there are:

1. Class 4 NI rates are the wrong way round

2. Records are kept for 5 years for a sloe trader

George Tse

ok his wifes wages is allowable which means u dont add it in the trading profit working. Its only Harrisons salaries thats disallowable !

CathG

Gentle Jesus wrote: »

ok his wifes wages is allowable which means u dont add it in the trading profit working. Its only Harrisons salaries thats disallowable !

are you sure his wife's wages were allowable. I disallowed them as it said she didn't actually work for the business?

George Tse

im not sure but its normaly only the owners wages that are disallowed in a sole trader business

GoldenRetreiver

I thought his wifes would be allowable - it would be up to her to inform HMR&C about her income so it would not affect his business. The only disallowable amount in salaries were his (I think)