On 19 April 2021, Simon Purchased a derelict freehold house for 127,000. Legal fees of 1,800 werepaid in respect of the purchase.Simon then renovated the house at a cost of 50,000, with the renovation being completed on 6August 2021. He immediately put the house up for sale, and it sold on 27 August 2021 for 260,000.Legal fees of 2,600 were paid in respect of the sale.Simon financed the transaction with a bank loan of 150,000 that was taken out on 19 April 2021 atan annual interest rate of 6%. The bank loan was repaid on 28 August 2021

Simon had no other income or capital gains for the tax year 2021/22 except as indicated above

Simon has been advised that whether or not he is treated as carrying on a trade will be determinedaccording to the following six badges of trade

1. Subject matter of the transaction

2. Length of ownership

3. Frequency of similar transactions

4. Work done on the property

5. Circumstances responsible for realisation

6. Motive

a. Briefly explain the meaning of each of the six badges of trade listed in the question.(Note you are not expected to quote from any cases)(3 marks)

b. Calculate Simons income tax liability and his Class 2 and Class 4 national insurancecontributions for the tax year 2021/22, if he is treated as carrying on trade in respect of thedisposal of the freehold house(8 marks)c. Calculate Simons capital gains tax liability for the tax year 20921/22 if he is not treated ascarrying on trade in respect of the disposal of the freehold house