Lionel Ember has asked you to help him calculate his liability to income tax and the national insurance contributions payable in respect of his employment income Lionel was born on 16 October 1967 He is employed by Russell Ltd as the manager of the sales department and he has supplied you with the following information regarding his tax year 2018 19 In 2018 19 Russell Ltd paid Lionel a gross annual salary of 52,200 Lionel is paid his salary on a monthly basis but also received a bonus payment of 2,640 in respect of the year ended 31 December 2017 on 30 April 2018 Lionel was provided with free meals in the staff canteen The total cost to the company of providing the meals for Lionel was 1,025 in 2018 19 Since joining the company on 1 May 2015, Russell Ltd has provided Lionel with living accommodation in a terraced house The annual value of the property is 11,675 The company purchased the house in September 2014 for 309,950, and on 1 May 2015 it was valued at 328,000 In June 2016, capital improvements were made to the house which cost the company 20,440 and further improvements were made in August 2018 which cost 4,660 Lionel was provided with a company car throughout the whole of 2019 20 Until 6 July 2019 he had the use of a petrol powered car with a CO2 emission rating of 157 g km and a list price of 27,850 On 6 July 2019 he changed the car and had the use of a diesel powered car with a CO2 emission rating of 168 g km and a list price of 32,260 The company car scheme required Lionel to make a capital contribution of 2,260 towards the cost of the car Russell Ltd paid 11,095 running costs of the car during 2018 19 including all of Lionel business and private fuel In addition, Russell Ltd paid 2,560 for Lionel car parking costs near to the company premises Russell Ltd provided Lionel with two mobile telephones on 1 December 2018 One was provided for his private and business calls and the other was provided for Tracey, his wife, who does not work for the company Each phone cost Russell Ltd 530 In addition to his employment income Lionel had the following other sources of income in 2018 19 He let out a furnished freehold flat throughout 2018 19 From 6 April 2018 to 5 September 2018 he charged a monthly rent of 1,675, payable in advance on 6th of each month On 6 September 2018 he increased the rent to 2,025 per month The letting agency charges Lionel a 7 fee for managing the flat and dealing with any tenants issues on his behalf The fee is based on gross rents received in the tax year During October 2018 it was necessary for Lionel to spend 1,475 repairing the roof of the flat He paid loan interest of 8,760 in respect of a loan that was taken out to purchase the flat in 2013 Lionel also replaced the furniture in the lounge in August 2018 at a cost of 3,450 The insurance for the flat is payable annually in advance and cost 998 for the year ended 31 July 2018, and 1,145 for the year ended 31 July 2019 During the tax year 2018 19 Lionel received dividends of 3,140 and interest of 606 from his cash individual savings account (ISA) Lionel and Tracey have a joint building society account which received interest of 4,500 in 2018 19 When Lionel joined the company he decided to opt out of joining the Russell Ltd occupational pension scheme Instead he invested into his own personal pension scheme During 2018 19 Lionel made payments of 10,280 into the scheme For the tax year 2017 18, Lionel remembered to complete his return and submitted the online form to HMRC on time on the night of the due date However, he forgot to make the appropriate payment of 6,800 income tax due at the same time He eventually remembered and paid the outstanding tax liability on 31 July 2019 On checking his 2017 18 self assessment tax return you have found a careless error in the calculation of his property income for that year which results in an underpayment of 2,370 income tax Lionel declared the mistake to HMRC and paid the underpaid tax to HMRC on 31 October 2019 Required (a) Calculate Lionel Embers income tax payable for 2018 19 (b) Calculate the national insurance contributions paid by Lionel Ember in respect of employment income for 2018 19 (5 marks) (c) In respect of the error of 2,370 for 2017 18, explain whether Lionel will be liable to any penalties for the submission of an incorrect return and the late payment of the associated tax due (3 marks) (d) Calculate the amount of interest payable on the late payment of the 6,800 income tax for 2017 18 (2 marks) (40 marks) proforma PROFORMA INCOME TAX COMPUTATION Name of taxpayer Income tax computation 2018 19 Total Savings income Dividend income E E Non savings income E Employment income Trading income Pension income Property income Discretionary trust income famount received 100 55 Interest income Dividend income X Total income Less Reliefs Qualifying loan interest gross amount paid) Gifts of land and buildings or shares to charity (MV) (X) (X) (X) (X) (X) Net income Less Personal allowance X (X) (x) (x) X X) Taxable income XE X Income tax at appropriate rates Add Child benefit charge Annual allowance charge 1 38 881 E X Less Marriage allowance (max E238) DTR (Lower of overseas tax suffered or UK tax) Income tax liability Less Tax deducted at source PAYE Tax suffered on trust income (X) (X) Income tax payable (repayable) X X Include overseas income pross of overseas tax suffered Include NP trust income poss of non savings or savings income famount received x 100 801 dividend income famount received 100 92,5) Subject to a maximum amount higher of 50,000 or 25 of ATIB Consider if PA needs to be reduced f 100,000 Consider reduction of PA (compare ANT to 100 000, so take account of gift aid and PPC) Consider transfer of (1,190 of PA to spouse marriage allowance) if conditions met Identify if a ROFAR taxpayer 100,000 Consider reduction of PA (compare ANT to 100 000, so take account of gift aid and PPC) Consider transfer of (1,190 of PA to spouse marriage allowance) if conditions met Identify if a ROFAR taxpayer

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Lionel Ember has asked you to help him calculate his liability to income tax and the national insurance contributions payable in respect of his employment

Lionel Ember has asked you to help him calculate his liability to income tax and the

national insurance contributions payable in respect of his employment income.

Lionel was born on 16 October 1967. He is employed by Russell Ltd as the manager of the sales department and he has supplied you with the following information regarding his tax year 2018/19:

In 2018/19 Russell Ltd paid Lionel a gross annual salary of 52,200. Lionel is paid his salary on a monthly basis but also received a bonus payment of 2,640 in respect of the year ended 31 December 2017 on 30 April 2018.
Lionel was provided with free meals in the staff canteen. The total cost to the company of providing the meals for Lionel was 1,025 in 2018/19.
Since joining the company on 1 May 2015, Russell Ltd has provided Lionel with living accommodation in a terraced house. The annual value of the property is 11,675. The company purchased the house in September 2014 for 309,950, and on 1 May 2015 it was valued at 328,000. In June 2016, capital improvements were made to the house which cost the company 20,440 and further improvements were made in August 2018 which cost 4,660.
Lionel was provided with a company car throughout the whole of 2019/20. Until 6 July 2019 he had the use of a petrol powered car with a CO2 emission rating

of 157 g/km and a list price of 27,850.

On 6 July 2019 he changed the car and had the use of a diesel powered car with a CO2 emission rating of 168 g/km and a list price of 32,260. The company car scheme required Lionel to make a capital contribution of 2,260 towards the cost of the car.

Russell Ltd paid 11,095 running costs of the car during 2018/19 including all of Lionel business and private fuel. In addition, Russell Ltd paid 2,560 for Lionel car parking costs near to the company premises.
Russell Ltd provided Lionel with two mobile telephones on 1 December 2018. One was provided for his private and business calls and the other was provided for Tracey, his wife, who does not work for the company. Each phone cost Russell Ltd 530.

In addition to his employment income Lionel had the following other sources of income in 2018/19:

He let out a furnished freehold flat throughout 2018/19. From 6 April 2018 to 5 September 2018 he charged a monthly rent of 1,675, payable in advance on 6th of each month. On 6 September 2018 he increased the rent to 2,025 per month.

The letting agency charges Lionel a 7% fee for managing the flat and dealing with any tenants issues on his behalf. The fee is based on gross rents received in the tax year.

During October 2018 it was necessary for Lionel to spend 1,475 repairing the roof of the flat. He paid loan interest of 8,760 in respect of a loan that was taken out to purchase the flat in 2013. Lionel also replaced the furniture in the lounge in August 2018 at a cost of 3,450. The insurance for the flat is payable annually in advance and cost 998 for the year ended 31 July 2018, and 1,145 for the year ended 31 July 2019.

During the tax year 2018/19 Lionel received dividends of 3,140 and interest of 606 from his cash individual savings account (ISA).
Lionel and Tracey have a joint building society account which received interest of 4,500 in 2018/19.

When Lionel joined the company he decided to opt out of joining the Russell Ltd occupational pension scheme. Instead he invested into his own personal pension scheme. During 2018/19 Lionel made payments of 10,280 into the scheme.

For the tax year 2017/18, Lionel remembered to complete his return and submitted the online form to HMRC on time on the night of the due date. However, he forgot to make the appropriate payment of 6,800 income tax due at the same time. He eventually remembered and paid the outstanding tax liability on 31 July 2019.

On checking his 2017/18 self-assessment tax return you have found a careless error in the calculation of his property income for that year which results in an underpayment of 2,370 income tax. Lionel declared the mistake to HMRC and paid the underpaid tax to HMRC on 31 October 2019.

Required

(a) Calculate Lionel Embers income tax payable for 2018/19.

(b) Calculate the national insurance contributions paid by Lionel Ember in respect of employment income for 2018/19.

(5 marks)
(c) In respect of the error of 2,370 for 2017/18, explain whether Lionel will be liable to any penalties for the submission of an incorrect return and the late payment of the associated tax due.

(3 marks)
(d) Calculate the amount of interest payable on the late payment of the 6,800 income tax for 2017/18.

(2 marks) (40 marks)

proforma

PROFORMA INCOME TAX COMPUTATION Name of taxpayer: Income tax computation - 2018/19 Total Savings income Dividend income E E Non-savings income E Employment income Trading income Pension income Property income Discretionary trust income famount received 100/55 Interest income Dividend income X Total income Less: Reliefs Qualifying loan interest gross amount paid) Gifts of land and buildings or shares to charity (MV) * * * (X) (X) (X) (X) (X)" Net income Less: Personal allowance X (X) (x) (x) X X) Taxable income XE X Income tax at appropriate rates Add: Child benefit charge Annual allowance charge *|* |*|*1-***|*38|* 881 E X Less: Marriage allowance (max E238) DTR (Lower of overseas tax suffered or UK tax) Income tax liability Less: Tax deducted at source PAYE Tax suffered on trust income (X) (X) Income tax payable/ (repayable) X/X Include overseas income pross of overseas tax suffered Include NP trust income poss of non-savings or savings income famount received x 100/801. dividend income famount received 100/92,5) Subject to a maximum amount higher of 50,000 or 25% of ATIB Consider if PA needs to be reduced f>100,000 Consider reduction of PA (compare ANT to 100.000, so take account of gift aid and PPC) Consider transfer of (1,190 of PA to spouse marriage allowance) if conditions met Identify if a ROFAR taxpayer 100,000 Consider reduction of PA (compare ANT to 100.000, so take account of gift aid and PPC) Consider transfer of (1,190 of PA to spouse marriage allowance) if conditions met Identify if a ROFAR taxpayer