Question 1 Income Tax and Capital Gains Tax Gary is an electrician. He works as an employee of Electrical Solutions Ltd but in addition to this he started his own business on 1 December 2017. His adjusted trading profits for the six-month period ended 31 May 2018 were 8,700 and they were 16,800 for the year ended 31 May 2019. The following information is available for the tax year 2020/21: Garys statement of profit or loss for the year ended 31 May 2020 is as follows:

Income		41,987
Expenses:
Purchases	5,550
Depreciation	,4625
Motor expenses	2,400
Other expenses	4,672
		(19,097)
Net profit		22,800

During the year, Gary did some electrical work on his own home and took goods out of the business to do this. The goods cost 300 (selling price 450) and this has been included in purchases. Gary has not paid anything into the business for them and no other accounting entries have been made. Gary charges all the running expenses for his motor car to the business. During the year ended 31 May 2020 Gary drove a total of 12,000 miles, of which 8,000 were for business. Other expenses of 4,672 include a 100 parking fine incurred by Gary whilst working at a customers property and a 200 political donation. Gary uses his private telephone to make business calls. The total cost of the private telephone for the year ended 31 May 2020 was 1200 and 40% of this related to business calls. The cost of these calls has not been included in the expenses above of 19,097. Capital allowances for the year ended 31 May 2020 are 2,100. Version 1 Required: a) Calculate the trading profit that will have been assessed on Gary for the tax years 2017/18, 2018/19 and 2019/20 respectively. b) Gary thinks he has been taxed twice on some of his trading profits. Advise him as to why this might be the case and how he would be compensated for this. c) Calculate Garys adjusted trading profit for the year ended 31 May 2020. Further information: During the tax year 2020/21, Gary received a salary of 18,000 from Electrical Solutions Ltd. The company provided him with a mobile phone (cost to the company of 500) and use of a laptop which Gary uses half for private purposes. The laptop cost the company 1,200. Electrical Solutions Ltd also provide free nursery care for Garys two-year-old son, at a cost to the company of 2,000. PAYE for the year was 3,450. During the tax year 2020/21 Gary received building society interest of 1,100 and dividends of 3,200. He paid 4000 into a private pension scheme. Required: d) Calculate Garys income tax liability for the tax year 2020/21.

Further information: Gary bought a house in Norwich on 1 January 2007 for 120,000 and lived there until 30 June 2010. He decided to move in with his girlfriend, but they split up and he returned to his house at the end of December 2012. After living there for 15 months Gary was seconded to work in London and lived there for 5 years returning to his house on 1 April 2019. After living in the house for another 8 months, Gary left to go travelling around the world, and the house was eventually sold for 225,000 on 31 December 2020. Gary sold 1,000 shares in Books plc on 28 February 2021 for 20,000. He bought the shares as follows: Details

Details	Shares
25 May 2013 purchase	1,500	18,000
17 April 2018 purchase	500	9,000
15 March 2021 purchase	200	3,600

Version 1 He also acquired additional shares when Books plc made a 1 for 5 rights issue at 4.50 per share on 2 February 2021. Gary purchased 500 shares in Stationery Ltd at 14 per share on 30 June 2012. They have declined considerably in value since then and on 28 February 2021, Gary sold them all for 4 per share. Gary has unused capital losses brought forward from earlier years of 7,500. Required: e) Calculate any chargeable gains and / or capital losses on the sales of Garys shares, providing full explanations. f) Analyse which periods of ownership qualify for private residence relief (giving reasons why) and calculate Garys chargeable gain on disposal of the house. g) Calculate Garys chargeable gains overall for 2020/21, with explanations on how any losses are utilised, and compute the capital gains tax liability for 2020/21.