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Answer to Example 3
Note in this example no analysis columns of the income are used as all the income is non-savings
income.
Property Income assessment (W1)
£
Rental income received
10,000
Less:
Maintenance costs
(800)
Property Income
9,200
Income Tax Liability:
Employment Income
60,000
Property Income (W1)
9,200
Total Income
69,200
PA
(12,570)
Taxable Income
56,630
Income Tax calculation:
Non savings
37,700 x 20% =
7,540
18,930 x 40% =
7,572
15,112
Less: Interest Relief
(6,000 x 20%) =
(1,200)
Income Tax Liability
13,912
225
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Answer to Example 4
(a)
Ordinary calculation
(b)
Alternative calculation
As gross rents exceed £7,500 Barbara must elect for the rent a room relief to apply if she wants it.
Barbara should elect for the alternative treatment in 2022/23 by 31 January 2025.
Answer to Example 5
Alternatively the assessable premium may be computed as £60,000 less (2% x (20-1)) = 37,200
Answer to Example 6
Gross rent (12 x 650)
7,800
Less: expenses
(1,200)
Property Income
6,600
Gross rent (12 x 650)
7,800
Less: Rent a Room Relief
(7,500)
Property Income
300
£
Premium
51 – 20
×
60,000
37,200
50
Rent received
5,000
Property Income
42,200
Relief available =
£37,200
=
£1,860
p.a.
20
226
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Chapter 4
Answer to Example 1
Jeremy: Tax adjusted trading profit for the year ended 31 May 2022
£
£
Net profit as per accounts
30,200
Add back: Disallowed expenses
Depreciation
4,760
Light and heat (40%
×
£1,525)
610
Motor expenses (9,000/12,000
×
£4,720)
3,540
Personal tax work
250
Purchase of new shop
1,200
Rent and rates (40%
×
£3,900)
1,560
Decorating private flat
1,050
Gift of food hampers
640
Donation to national charity
100
Excessive remuneration to Jeremy’s wife
(£15,500 – £11,000)
4,500
Own consumption
650
18,860
Adjusted trading profit
49,060
Less: Capital allowances (given)
(13,060)
Tax adjusted trading profit
36,000
227
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Chapter 5
Answer to Example 1
Answer to Example 2
Accounting Year Ended 5 April 2023
AIA
Main Pool
Allowance
s
£
£
£
WDV b/f at 6 April 2022
1,250
Additions Qualifying for AIA
10,000
AIA
(10,000)
–
(10,000)
Disposals
(500)
750
Small pool WDA
(750)
(750)
WDV c/f
0
(10,750)
Accounting Year ended 31 December 2022
70%
70%
AIA
Main
Pool
Business
use car (1)
Business
use car (2)
Allowance
s
£
£
£
£
£
WDV b/f at 1 January 2022
21,200
13,600
Additions Qualifying for AIA:
Plant
6,600
AIA
(6,600)
(6,600)
Other additions:
Motor car (CO
2
40g/km)
10,600
Motor car (CO
2
80g/km)
16,000
Disposal
(9,400)
31,800
4,200
16,000
WDA @ 18%
(5,724)
(5,724)
Balancing allowance
(4,200)
×
70%
(2,940)
WDA @ 6%
(960)
×
70%
(672)
TOTAL ALLOWANCES:
(15,936)
WDV c/f
26,076
–
15,040
228
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Answer to Example 3
Accounting period to 31 March 2023:
Accounting period to 31 March 2024:
Main Pool
Short life
Asset
Allowances
£’000
£
£
£
WDV b/f
16,000
Additions qualifying for AIA
Machinery
1,020
Photocopier
40
1,060
AIA (Maximum)
(1,000)
(1,000,000)
Transfer balance to main pool and SLA
20,000
40,000
36,000
40,000
WDA @ 18%
(6,480)
(6,480)
WDA @ 18%
(7,200)
(7,200)
TOTAL Allowances
(1,013,680)
WDV c/f
29,520
32,800
Main Pool
Short life
Asset
Allowances
£
£
£
WDV b/f
29,520
32,800
Disposal
(15,000)
29,520
17,800
WDA @ 18%
(5,314)
(5,314)
Balancing allowance
(17,800)
(17,800)
TOTAL Allowances
(23,114)
WDV c/f
24,206
0
229
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Answer to Example 4
Year ended 31 December 2022
NIL
Disposal is lower of cost and proceeds.
This balancing charge is then added to the tax adjusted trade profits as too many allowances have
been claimed and need to be repaid.
Answer to Example 5
Accounting Period ended 31 March 2023
No WDA in year of cessation
Main
Pool
Allowances
£
£
WDV b/f at 1 January 2022
4,000
Addition – 1 October 2022
2,000
6,000
Less: Disposal 10 April 2022
(8,600)
(2,600)
Balancing charge
2,600
2,600
Main Pool
Allowances
£
£
WDV b/ at 1 January 2023
12,000
Addition – 1 February 2023
4,000
16,000
Less Disposals – 31 March 2023
(5,000)
11,000
Balancing allowance
(11,000)
(11,000)
–
230
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Answer to Example 6
Accounting period to 31 March 2023
AIA/FYA
Main
Pool
80%
Business
use car
Allowances
£
£
£
£
WDV b/f
30,000
14,000
Additions Qualifying for AIA (Special Rate)
Thermal insulation for business building
28,000
AIA - 100%
(28,000)
(28,000)
Additions Qualifying for AIA (Main)
Computer
60,000
Machine
84,000
Plant
60,000
204,000
AIA - 100%
(204,000)
(204,000)
Other additions:
Motor car (40g/km)
11,200
Disposals
(8,000)
41,200
6,000
WDA @ 18%
(7,416))
(7,416)
Balancing allowance
(6,000)
×
80%
(4,800)
Additions Qualifying for FYA:
Motor car ( zero emissions)
17,000
FYA @ 100%
(17,000)
(17,000)
TOTAL Allowances
(261,216)
WDV c/f
33,784
–
231
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Chapter 6
Answer to Example 1
(a)
2022/23
(b)
2021/22
(c)
2022/23
Answer to Example 2 - Year 2: Short set of accounts
Answer to Example 3 - Year 2: Long set of accounts
Year
Basis of assessment - rules
Workings
£
2021/22
Actual (1/01/2022 – 5/04/2022)
3/6
×
30,000
15,000
2022/23
First 12 months (1/01/2022 – 31/12/2022)
1/01/2022 – 30/06/2022
30,000
1/07/2022 – 31/12/2022
6/12
×
70,000
35,000
65,000
2023/24
CYB (year to 30/06/2023)
70,000
2024/25
CYB (year to 30/06/2024)
82,000
Overlap profits:
1/01/2022 – 5/04/2022
15,000
1/07/2022 – 31/12/2022
35,000
50,000
Year
Basis of assessment - rules
£
2021/22
Actual (1/05/2021 – 5/04/2022)
11/18
×
36,000
22,000
2022/23
12 months to 31/10/2022
12/18
×
36,000 24,000
2023/24
CYB (y/e 31/10/2023)
30,000
Overlap profits:
1/11/2021 – 5/04/2022
5/18
×
36,000
10,000
232
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Answer to Example 4 - Year 2: No accounts ending in the year - actual basis
The overlap profit will be deducted in computing the assessment for the final tax year of assessment
when John ceases to trade.
Answer to Example 5
Boris ceased trading on 31 May 2023, thus making the final tax year 2023/24 and making the
penultimate tax year 2022/23 which using CYB assesses the year ended 31 January 2023. The
assessment for the final tax year 2023/24 is then made of the remaining period of profit less the
overlap relief.
2021/22
Actual (1/12/2021 - 5/04/2022)
4/18 x 54,000 12,000
2022/23
Actual (6/04/2022 - 5/04/2023)
12/18 x 54,000 36,000
2023/24
12 months to 31/05/2023 (1/06/2022 - 31/05/2023)
12/18 x 54,000 36,000
2024/25
CYB (y/e 31/05/2024)
48,000
Overlap profit 1/06/2022 - 5/04/2023
10/18 x 54,000 30,000
£
2022/23
CYB (y/e 31/01/2023)
47,000
2023/24
4 months to 31 May 2023 (1/02/2023 – 31/05/2023)
8,000
Less: overlap relief
(6,000)
2,000
233
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