In addition to his employment income, Adam had the following other sources of income in 2019/20 Adam received dividends from a French company of 2,720 after the deduction of 15% withholding tax. Adam and his wife, Charlotte, have a joint building society account. Interest of 4,000 was received on this account in 2019/20. Adam let out a furnished freehold flat throughout 2019/20. Until 31 January 2020 he charged rent of 1,600 per month, payable on 1st day of the month, in advance. On 1 February 2020 he increased the rent to 1,750 per month. The letting agency charges Adam a 8% fee for managing the property and dealing with any tenant's issues on his behalf. The fee is based on gross rents received in the tax year. Adam paid loan interest of 7,660 in respect of a loan that was taken out to purchase the flat in 2015. The insurance for the flat is payable annually in advance and cost 1,120 for the year ended 31 July 2020. He also spent 2,800 repairing the balcony of the flat From your tax files you know that Adam completed his 2018/19 self-assessment tax return online and submitted it to HMRC on time, together with the payment due. On checking his tax return you found a careless error in the calculation of his rental income from his flat which resulted in an underpayment of 2,645 income tax. Required (a) Calculate Adam's income tax liability for 2019/20. (31 marks) (b) Calculate the class 1 and class 1A national insurance contributions payable by LBC Ltd in respect of Adam's employment income for 2019/20. (5 marks) (c) Explain what action you should take in respect of Adam's careless error made on his 2018/19 self-assessment tax return. Evaluate the penalties that would be payable, assuming Adam discloses the error to HMRC and pays the amount due on 30 September 2020. (4 marks) (40 marks) In addition to his employment income, Adam had the following other sources of income in 2019/20 Adam received dividends from a French company of 2,720 after the deduction of 15% withholding tax. Adam and his wife, Charlotte, have a joint building society account. Interest of 4,000 was received on this account in 2019/20. Adam let out a furnished freehold flat throughout 2019/20. Until 31 January 2020 he charged rent of 1,600 per month, payable on 1st day of the month, in advance. On 1 February 2020 he increased the rent to 1,750 per month. The letting agency charges Adam a 8% fee for managing the property and dealing with any tenant's issues on his behalf. The fee is based on gross rents received in the tax year. Adam paid loan interest of 7,660 in respect of a loan that was taken out to purchase the flat in 2015. The insurance for the flat is payable annually in advance and cost 1,120 for the year ended 31 July 2020. He also spent 2,800 repairing the balcony of the flat From your tax files you know that Adam completed his 2018/19 self-assessment tax return online and submitted it to HMRC on time, together with the payment due. On checking his tax return you found a careless error in the calculation of his rental income from his flat which resulted in an underpayment of 2,645 income tax. Required (a) Calculate Adam's income tax liability for 2019/20. (31 marks) (b) Calculate the class 1 and class 1A national insurance contributions payable by LBC Ltd in respect of Adam's employment income for 2019/20. (5 marks) (c) Explain what action you should take in respect of Adam's careless error made on his 2018/19 self-assessment tax return. Evaluate the penalties that would be payable, assuming Adam discloses the error to HMRC and pays the amount due on 30 September 2020. (4 marks) (40 marks) QUESTIONS 1. Adam Jones has asked you to help him calculate his liability to income tax and the national insurance contributions payable in respect of his employment income. Adam was born on 23 January 1958, is UK resident and is married to Charlotte. He is employed by LBC Ltd as a manager. In 2019/20 he received a gross annual salary of 73,020, paid on a monthly basis, from which income tax of 26,535 was deducted under PAYE. Adam also received a bonus each year on the 8th of April following LBC Ltd's accounting year end. Recent bonuses have been as follows: Accounting year end: Paid: 28 February 2019 29,800 8 April 2019 28 February 2020 33,500 8 April 2020 Adam has supplied you with the following information regarding the benefits he received in the tax year 2019/20: Until 5 September 2019 Adam used his own car for business purposes. From 6 April to 5 September 2019, Adam travelled a total of 10,660 miles in his own car, of which 5,980 were private miles. LBC Ltd paid Adam a mileage allowance of 42p for his business mileage only. On 6 September 2019 Adam was provided with a diesel powered company car with a CO2 emission rating of 163 g/km and a list price of 33,430. The car does not meet the Real Driving Emissions Step 2 (RDE2) standard. LBC Ltd's car scheme required Adam to make a capital contribution of 5,430 towards the cost of the car, but the company paid all of Adam's business and private fuel from 6 September 2019. As Adam spends a substantial amount of time working on a computer, LBC Ltd paid for Adam's annual eye test, which cost 25, and for the new glasses he needed which cost 210. Since joining the company on 1 September 2017, LBC Ltd has provided Adam with living accommodation in a luxury flat. The annual value of the property is 13,970. The company purchased the flat in August 2014 for 326,970, and on 1 September 2017 it was valued at 503,000. LBC Ltd provided Adam with private health insurance for himself and his family. None of Adam's family work for the company. The premium for this health cover cost the company 1.230. However, had the company just provided cover for Adam, the cost would have been 850. On 6 November 2019, LBC Ltd provided Adam with the use of a home video system for his own personal use at home. The iPad cost LBC Ltd 900. Adam joined the LBC Ltd occupational pension scheme. LBC Ltd contributed 9% of Adam's gross salary into the scheme but Adam is not required to contribute. Instead, Adam made payments of 12,400 into his own personal pension scheme. In addition to his employment income, Adam had the following other sources of income in 2019/20 Adam received dividends from a French company of 2,720 after the deduction of 15% withholding tax. Adam and his wife, Charlotte, have a joint building society account. Interest of 4,000 was received on this account in 2019/20. Adam let out a furnished freehold flat throughout 2019/20. Until 31 January 2020 he charged rent of 1,600 per month, payable on 1st day of the month, in advance. On 1 February 2020 he increased the rent to 1,750 per month. The letting agency charges Adam a 8% fee for managing the property and dealing with any tenant's issues on his behalf. The fee is based on gross rents received in the tax year. Adam paid loan interest of 7,660 in respect of a loan that was taken out to purchase the flat in 2015. The insurance for the flat is payable annually in advance and cost 1,120 for the year ended 31 July 2020. He also spent 2,800 repairing the balcony of the flat From your tax files you know that Adam completed his 2018/19 self-assessment tax return online and submitted it to HMRC on time, together with the payment due. On checking his tax return you found a careless error in the calculation of his rental income from his flat which resulted in an underpayment of 2,645 income tax. Required (a) Calculate Adam's income tax liability for 2019/20. (31 marks) (b) Calculate the class 1 and class 1A national insurance contributions payable by LBC Ltd in respect of Adam's employment income for 2019/20. (5 marks) (c) Explain what action you should take in respect of Adam's careless error made on his 2018/19 self-assessment tax return. Evaluate the penalties that would be payable, assuming Adam discloses the error to HMRC and pays the amount due on 30 September 2020. (4 marks) (40 marks) In addition to his employment income, Adam had the following other sources of income in 2019/20 Adam received dividends from a French company of 2,720 after the deduction of 15% withholding tax. Adam and his wife, Charlotte, have a joint building society account. Interest of 4,000 was received on this account in 2019/20. Adam let out a furnished freehold flat throughout 2019/20. Until 31 January 2020 he charged rent of 1,600 per month, payable on 1st day of the month, in advance. On 1 February 2020 he increased the rent to 1,750 per month. The letting agency charges Adam a 8% fee for managing the property and dealing with any tenant's issues on his behalf. The fee is based on gross rents received in the tax year. Adam paid loan interest of 7,660 in respect of a loan that was taken out to purchase the flat in 2015. The insurance for the flat is payable annually in advance and cost 1,120 for the year ended 31 July 2020. He also spent 2,800 repairing the balcony of the flat From your tax files you know that Adam completed his 2018/19 self-assessment tax return online and submitted it to HMRC on time, together with the payment due. On checking his tax return you found a careless error in the calculation of his rental income from his flat which resulted in an underpayment of 2,645 income tax. Required (a) Calculate Adam's income tax liability for 2019/20. (31 marks) (b) Calculate the class 1 and class 1A national insurance contributions payable by LBC Ltd in respect of Adam's employment income for 2019/20. (5 marks) (c) Explain what action you should take in respect of Adam's careless error made on his 2018/19 self-assessment tax return. Evaluate the penalties that would be payable, assuming Adam discloses the error to HMRC and pays the amount due on 30 September 2020. (4 marks) (40 marks) QUESTIONS 1. Adam Jones has asked you to help him calculate his liability to income tax and the national insurance contributions payable in respect of his employment income. Adam was born on 23 January 1958, is UK resident and is married to Charlotte. He is employed by LBC Ltd as a manager. In 2019/20 he received a gross annual salary of 73,020, paid on a monthly basis, from which income tax of 26,535 was deducted under PAYE. Adam also received a bonus each year on the 8th of April following LBC Ltd's accounting year end. Recent bonuses have been as follows: Accounting year end: Paid: 28 February 2019 29,800 8 April 2019 28 February 2020 33,500 8 April 2020 Adam has supplied you with the following information regarding the benefits he received in the tax year 2019/20: Until 5 September 2019 Adam used his own car for business purposes. From 6 April to 5 September 2019, Adam travelled a total of 10,660 miles in his own car, of which 5,980 were private miles. LBC Ltd paid Adam a mileage allowance of 42p for his business mileage only. On 6 September 2019 Adam was provided with a diesel powered company car with a CO2 emission rating of 163 g/km and a list price of 33,430. The car does not meet the Real Driving Emissions Step 2 (RDE2) standard. LBC Ltd's car scheme required Adam to make a capital contribution of 5,430 towards the cost of the car, but the company paid all of Adam's business and private fuel from 6 September 2019. As Adam spends a substantial amount of time working on a computer, LBC Ltd paid for Adam's annual eye test, which cost 25, and for the new glasses he needed which cost 210. Since joining the company on 1 September 2017, LBC Ltd has provided Adam with living accommodation in a luxury flat. The annual value of the property is 13,970. The company purchased the flat in August 2014 for 326,970, and on 1 September 2017 it was valued at 503,000. LBC Ltd provided Adam with private health insurance for himself and his family. None of Adam's family work for the company. The premium for this health cover cost the company 1.230. However, had the company just provided cover for Adam, the cost would have been 850. On 6 November 2019, LBC Ltd provided Adam with the use of a home video system for his own personal use at home. The iPad cost LBC Ltd 900. Adam joined the LBC Ltd occupational pension scheme. LBC Ltd contributed 9% of Adam's gross salary into the scheme but Adam is not required to contribute. Instead, Adam made payments of 12,400 into his own personal pension scheme