On 6 April 2021, Harry Johnson, aged 38, started employment with, Queens words Ltd as a proof-reader. On the 11 January 2022, Harry also entered into a partnership with his friend Debra. Together they set up a local office of proofreading and preparing accounts for 30th April. Partnership a) The partnership tax adjusted trading profit for the four-month period ended 30 April 2022 was 29,600. This figure is before deduction for any capital allowances. b) The only capital items owned by the partnership are: A reception desk and bookshelves units costing 725 in total, purchased on 29 November 2021. A petrol motor car that cost 12,000 on 1 February 2022 (with CO2 emission rate of 105g/km). The car is used by Debra who estimates 20% of his mileage is for private journeys. c) The partners have agreed to pay Debra in lieu of salary and to share any remaining profits 40% to Harry and 60% to Debra. Page 6 of 26 [633] Arden University reserves all rights of copyright and all other intellectual property rights in the learning materials and this publication. No part of any of the learning materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means, including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about the use and distribution of programme materials please see the Arden Student Terms and Conditions. Employment at Queens Words Ltd d) During the tax year 2021/2022 Harry earned a gross annual salary of 31,850 working for Queens Words Ltd Harry paid 6, 110 income tax and 4,197 national insurance contributions Pay as You Earn. e)Throughout the tax year 2021/22 Queens Words Ltd provided Harry with non-job-related living accommodation. The company purchased the property in 2017 for 199,500 and when Harry moved in on the 6 April 2021 it was valued at 256,000. The annual value of the property is 6,100 and the company furnished the property during March 2021 at a cost of 7,600. f) Harry was provided with unrestricted use of a mobile phone. The phone contract cost Queens Words Ltd 38 a month. Property Income g) Harry owns a freehold house which he lets out to tenants furnished. The property was let throughout the tax year at a monthly rent of 725. h) During the tax year Harry paid council tax of 1,320 in respect of the property. Harry also spends 560 on replacing a damaged sofa and 1,250 to install a new dishwasher in a previously empty space in the houses kitchen. Investment Income i) During the tax year Harry received 580 interest on his Building Society savings account and 500 interest on his Individual Savings Account. j) Harry owns shares in a family company and received a dividend of 6,500 on 25 April 2021. Value added tax (VAT) k) The partnership voluntarily registered for VAT on 1 January 2022 and immediately began using the flat rate scheme to calculate the amount of VAT payable. The relevant flat rate scheme percentage for the partnerships trade is 12%. l) The partnership paid 145 VAT on the furniture purchased on 29 November 2021 and 2,400 on the car bought in February 2022 ( see note b above) Page 7 of 26 [633] Arden University reserves all rights of copyright and all other intellectual property rights in the learning materials and this publication. No part of any of the learning materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means, including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about the use and distribution of programme materials please see the Arden Student Terms and Conditions. m) For the quarter ended 31 March 2022 the partnership had standard rate sales of 59,700, with all sales made to the general public. For the same period standard rated expenses amounted to 27,300. (both figures are stated inclusive of VAT) Disposal Information n) On 13 May 2021 Harry sold, for 60,000 all the shares he held in an unlisted trading company (for which he never worked). Harry acquired the shares from his father in May 2018 for 7,500 when the market value was 40,000 at which time both Harry and his father agreed to a gift relief election. Harrys father paid 1,000 for the shares in 1991. o) On 26 November 2021 Harry sold a painting for 18.300 proceeds, before auctioneers commission of 5%. She purchased the painting on 16 May 2013 for 5,200. Section B requirement: B1- Calculate the taxable trading profit (after capital allowances) for the partnership for the four-months period ended 30th April 2022 and the trading profit which Harry will be taxed on in the 2021/22 basis period; (you may use whole months rather than days) (15%) B2-Calculate Harrys income tax payable for the tax year 2021/22 and specify the date by which he must file his on-line SA100 income tax return; (15%) B3-Explain, with supporting calculations, whether or not it was beneficial for the partnership to have used the VAT flat rate schemes for the quarter ended 31 March 2022: (20%) B4- Calculate the capital gains tax Harry will owe on the disposals he has made in the tax year 2021/22 and state the date by which the capital gains tax should be paid to HMRC.

Section C (15%) C1- During the 12 month accounting period ended 31st December a company employed building contractors to carry out the following work: Installation of air conditioning throughout office 24,500 (5%) Reinforcement of flooring to be strong enough to install heavy machines 3,500 (5%) Repairs to entrance doors 1,800 (5%) Required: Explain the tax treatment of each of the above items of expenditure. You do not need to calculate capital allowances but, if relevant, these should be explained together with any other reliefs. (15%)