AAT online test paper 1 question 1.11 (Personal Tax mock)
BradleyClaridge
Registered Posts: 30
in Personal Tax
Hello
I'm stuck on this question, I have got 3 out of the 4 right but for working out Donna I'm stuck.
I have been reading the text book I have and it says that if the person is a connected person then the sales proceeds are deemed to be at the market value.
Donna is selling her item to her brother.
The proceeds are £19,000, the market value is £22,000 and the cost is £7,500, the other taxable income is £30,000 making her a basic rate tax payer.
The answer they have given is £480.00
Any ideas how they got that figure?
Thank you
Bradley
I'm stuck on this question, I have got 3 out of the 4 right but for working out Donna I'm stuck.
I have been reading the text book I have and it says that if the person is a connected person then the sales proceeds are deemed to be at the market value.
Donna is selling her item to her brother.
The proceeds are £19,000, the market value is £22,000 and the cost is £7,500, the other taxable income is £30,000 making her a basic rate tax payer.
The answer they have given is £480.00
Any ideas how they got that figure?
Thank you
Bradley
I'm currently studying AAT Level 4! as part of my Finance Apprenticeship
0
Comments

Hi Bradley
I am sure you've found out the answer by now but just in case 
Market Value must be used so 
Market Value £22,000, less cost £7,500 = net proceeds £14,500
less annual exempt amount (11,100) that gives you gain of £3400.
Her other taxable income is £30,000 therefore there is £2,000 remaining in the basic rate therefore £2000 will be in basic rate (10%) and the excess £1,400 (£3400£2000) will be in higher rate (20%)
£2,000 x 10% = £200
£1,400 x 20% = £280
£200 + £280 = £4800