Advanced Taxation Republic of Ireland

Transcription

1 Advanced Taxation Republic of Ireland 2 nd Year Examination August 2015 Solutions

2 NOTES TO USERS ABOUT THESE SOLUTIONS The solutions in this document are published by Accounting Technicians Ireland. They are intended to provide guidance to students and their teachers regarding possible answers to questions in our examinations. Although they are published by us, we do not necessarily endorse these solutions or agree with the views expressed by their authors. There are often many possible approaches to the solution of questions in professional examinations. It should not be assumed that the approach adopted in these solutions is the ideal or the one preferred by us. Alternative answers will be marked on their own merits. This publication is intended to serve as an educational aid. For this reason, the published solutions will often be significantly longer than would be expected of a candidate in an examination. This will be particularly the case where discursive answers are involved. This publication is copyright 2014 and may not be reproduced without permission of Accounting Technicians Ireland. Accounting Technicians Ireland,

3 Accounting Technicians Ireland 2 nd Year Examination: Autumn 2015 Paper: ADVANCED TAXATION (Republic of Ireland) Thursday 13 August p.m. to 5.30 p.m. INSTRUCTIONS TO CANDIDATES PLEASE READ CAREFULLY For candidates answering in accordance with the law and practice of the Republic of Ireland. Candidates should answer the paper in accordance with the appropriate provisions up to and including the Finance Act, (No. 2) The provisions of the Finance Act 2014 should be ignored. Allowances and rates of taxation, to be used by candidates, are set out in a separate booklet supplied with the examination paper. Answer ALL THREE QUESTIONS in Section A, and ANY TWO of the FOUR questions in Section B. If more than TWO questions are answered in Section B, then only the first two questions, in the order filed, will be corrected. Candidates should allocate their time carefully. All workings should be shown. All figures should be labelled as appropriate e.g. s, units, etc. Answers should be illustrated with examples, where appropriate. Question 1 begins on Page 2 overleaf. The following insert is included with this paper. Tax Reference Material (ROI) Page 3 of 24

4 SECTION A Answer QUESTION 1 and QUESTION 2 and QUESTION 3 (Compulsory) in this Section QUESTION 1 (Compulsory) Tony and Breda are married and jointly assessed. Breda is an employee of ABC Limited and is paid a salary of 40,000 per annum. In addition to her salary she receives the following benefits from her employer: Use of a company van which had an original market value of 30,000 when purchased new in Breda s annual travel is 14,000km and she maintains a log of her travel. She spends 30% of her time away from the office. A laptop, which cost 2,000 in The laptop is mainly used for work purposes and any personal use is purely incidental. A loan of 10,000 which Breda required to renovate her home. She pays interest at 2% per annum on the loan. In addition to the benefits above, Breda is reimbursed by her employer for the following expenses: Vouched expenses of 1,500 in relation to attending trade fairs and training courses. A round sum allowance of 500 per night when Breda had to travel abroad to attend a trade fair. In addition her employer paid her a flat rate subsistence allowance of per night for the 5 nights she was abroad attending the trade fair. This overnight rate is in line with the approved civil service rates. Tony stays at home to mind the couple s 3 children who are all in primary school. Tony rents out two properties he owns and the following details are relevant for 2014: Property 1 residential property in Dublin Bought on 1 January 2014 Rented from 1 February 2014 to 31 December 2014 Rental income 1,000 per month Interest for the year ended 31 December 2014 on loan taken out to buy the property 3,024 Miscellaneous allowable expenses 1,500 Repairs to the property, carried out in January ,000 Expenses incurred on letting agents in January Property 2 commercial property in Longford Bought in June 2009 Rented from 1 January 2014 to 31 December 2014 Rental income 400 per month Interest on monies borrowed to repair the property in Miscellaneous allowable expenses 750 Page 4 of 24

5 Requirement In respect of the 2014 tax year: (a) Calculate Breda s assessable Schedule E income. (b) Calculate Tony s assessable Case V income. (c) Calculate Breda and Tony s income tax, PRSI and USC liability. 7 marks 5 marks 8 marks Total 20 Marks QUESTION 2 (Compulsory) Addition Limited (Addition), an Irish trading company, prepares accounts for a 12 month period to 30 June each year. The nominal value of the issued share capital of Addition is 2 and it is owned equally by two shareholders, Frank and Marie. Marie and her husband Seamus are the directors of the company. Frank is not an employee or a director of the company. The results for the year to 30 June 2014 are summarised as follows: Notes Gross profit 750,000 Other income 1,2 100,000 Less Expenses Depreciation 8,000 Salaries 175,000 Entertainment 3 10,000 Interest 4 2, ,000 Net profit 655,000 Notes 1. The figure for other income is made up as follows: Gain on disposal of fixed assets (see note 2 below) 80,000 Dividend from Subtracts Ltd, an unconnected Irish resident company 15,000 Interest from Irish deposit account (received gross) 2,500 Interest from Italian deposit account (received gross) 2, Disposal of fixed assets During the year Addition disposed of 3 assets as follows: (a) A machine was disposed of for 2,500 in May The machine had cost 10,000 in 2005 and had a tax written down value of Nil on 1 July (b) A small premises was disposed of for 100,000 in January The premises cost 10,000 in (c) A car was scrapped in June The car, with C02 emissions of 156g/km, had cost 30,000 when it was bought new in January Addition Ltd had no other plant and machinery at year end. 3. Entertainment The entertainment figure is made up of: Staff Christmas party 1,000 Page 5 of 24

6 Holiday in France for Marie 5,000 Holiday in Spain for Frank 4, Interest expense The interest expense figure is made up of Interest on bank debt 1,500 Interest paid to Marie 500 The interest paid to Marie is interest paid on a loan of 2,500 which Marie made to the company on 1 July The interest rate on the loan is 20%. 5. Other matters At 30 June 2014 Addition had distributable reserves of 500,000. Addition s corporation tax payable for the accounting period ended 30 th June 2013 was 150,000. Requirement (a) Calculate the Corporation Tax liability of Addition for the accounting period ended 30 June marks (b) Calculate the close company surcharge that applies to Addition for the accounting period ended 30 June marks (c) Calculate the income tax payable (if any) by Frank and Marie as a result of their transactions with Addition. You can assume they both pay income tax at the marginal rate of 41%. 2 marks (d) State the due date for payment of the tax due as calculated at (a) above. You are required to state the actual amount payable on each date. Outline the tax consequences if Addition does not pay the tax due by the due date. 3 marks Total 20 Marks Page 6 of 24

7 QUESTION 3 (Compulsory) (a) Supplier Ltd provides you with the following information in relation to its purchases and sales for January / February 2014: Sales invoiced to Irish customers 55,000 Sales to business customers in the UK 15,000 Sales to customers outside of the EU 5,000 Purchases of inventory for resale from Irish suppliers 24,600 Purchases of inventory for resale from UK suppliers 30,750 Purchases of exempt goods 7,000 Purchases of new machine from outside the EU 36,900 The sales figures are net of VAT. The purchases include VAT at 23%, where applicable. All EU customers have provided their VAT registration numbers to Supplier Ltd. Requirement (a) Calculate the VAT due / refundable for Supplier Limited for January / February You are required to provide a brief explanation of your treatment of the sales to and purchases from outside Ireland. 12 marks (b) What records is a VAT registered person required to keep, and how long are they required to keep those records? 2 marks (c) A VAT registered person has an obligation to issue a valid VAT invoice. List eight specific pieces of information that must be contained on a valid invoice. 4 marks (d) Most businesses file bi-monthly VAT returns. In what circumstances can a business file returns less regularly? 2 marks Total 20 Marks Page 7 of 24

8 QUESTION 4 SECTION B Answer ANY TWO of the FOUR questions in Section B In October 2014 Linda sold 1,000 shares in MYK Ltd for 5 per share and in December 2014 she also sold 500 shares in the same company for 5.50 per share. Details regarding her share history with MYK Ltd is as follows: No. per share January 2004 Bought September 2004 Inherited 1,500 3 (market value) Requirement (a) Calculate Linda s capital gains tax liability on the sale of the shares. State the due date for payment of the tax due. You are required to state the actual amount payable on each date. 7 marks (b) For the purposes of capital gains tax, what is a chattel? Explain the capital gains tax treatment of the disposal of both wasting and non-wasting chattels. 5 marks (c) Patricia bought 20 acres of land in Roscommon in 2004 at a price of 700 per acre. In June 2014 Patricia sold two acres for a total of 1,000. The value of the remaining 18 acres was 11,000. In October 2014 Patricia sold 5 acres for a total of 3,000. The value of the remaining 13 acres was 8,000. Requirement (d) Calculate Patricia s chargeable gain or allowable loss for the 2014 tax year. 8 marks Total 20 Marks QUESTION 5 Eugene and Claire are married and jointly assessed. Eugene is 70 years old while Claire is 63. Claire does not have a medical card. Eugene is the assessable spouse. Eugene and Claire have the following income and deductions for the 2014 tax year: Eugene Claire Schedule E remuneration Nil 40,000 Case II profits 30,000 Nil Pension contributions (500) (600) Case V rents 2,500 2,500 Schedule F dividend (gross amount) The following amounts were correctly deducted from Claire s Schedule E remunerations, through the PAYE system: PRSI 1, USC 2, Income tax 5, Total 9, Page 8 of 24

9 Requirement In respect of the 2014 tax year: (a) Calculate the PRSI payable by Eugene and Claire under the self-assessment system after giving credit for the PRSI deducted under Schedule E. 5 marks (b) Calculate the USC payable by Eugene and Claire under the self-assessment system after giving credit for the USC deducted under Schedule E. 4 marks (c) Calculate the income tax payable by Eugene, as assessable spouse, assuming joint assessment applies. 6 marks (d) Calculate the preliminary tax payable by Eugene if his total tax liability for 2013 amounted to 22, marks (e) State the due dates by which Eugene must pay his 2014 tax liability in order to avoid an interest charge? 2 marks Total 20 Marks Page 9 of 24

10 QUESTION 6 The following multiple choice question consists of TEN parts, each of which is followed by FOUR possible answers. There is ONLY ONE right answer in each part. Requirement: Indicate the right answer to each of the following TEN parts. 1. Thomas earned 40,000 Case I income and a salary of 4,000 in the 2014 tax year. Thomas is entitled to an employee tax credit amounting to: (a) 1,650 (b) 1,600 (c) 800 (d) None 2. Percival, aged 40, has assessable Case I income of 50,000 and Case IV deposit income of 3,000 for the 2014 tax year. He made contributions to a Revenue approved pension scheme of 16,000 during the tax year. The maximum amount of relief for pension contributions that Percival can claim in the 2014 tax year amounts to: (a) 6,000 (b) 10,500 (c) 11,250 (d) 12, Which of the following tax credits is a non-refundable tax credit for an individual who is 67 years of age? (a) Personal tax credit (b) Professional Services withholding tax (c) Tax deducted under PAYE system (d) DIRT withheld on deposit income 4. Joe and Linda have two children and are legally separated. Joe has custody of the children. Which of the following statements is not true. (a) If Joe and Linda opt to be jointly assessed, then no adjustment is made to taxable income in respect of maintenance payments. (b) If Joe and Linda are singly assessed, then Linda can claim a tax deduction for all maintenance payments made on foot of a legally enforceable separation agreement. (c) If Joe and Linda are singly assessed, then Linda can claim a tax deduction for maintenance payments made to Joe, excluding any amounts that relate specifically to their children. (d) If Joe and Linda are singly assessed, then Linda cannot claim a tax deduction for any voluntary maintenance payments made to Joe. Page 10 of 24

11 5. Jarleth commenced trading on 1 July 2013 and prepared accounts for the 8 months to 28 February 2014 which showed an assessable profit of 2,000. He prepared accounts for the 11 months to 31 January 2015 showing an assessable profit of 5,000. He wants to know what his assessable profits are for the 2014 year of assessment. (a) 2,000 (b) 5,000 (c) 5,045 (d) 7,000 QUESTION 6 6. Which of the following is not exempt from capital gains tax if the disposal takes place in the 2014 tax year? (a) A gain by a charity (b) A gain from the transfer of Irish land to a civil partner (c) A gain from the sale of Government securities (d) A gain from the sale of property in an EEA State in Larry made a gain on the disposal of an asset on 1 October The due date for the payment of the CGT due is: (a) 31 October 2014 (b) 15 November 2014 (c) 15 December 2014 (d) 31 January Davy s pizzeria is offering special deal to its customers whereby they can pay 12 for a pizza and a beverage. 8 of the selling price is attributable to the pizza while 4 is attributable to the beverage. The amount of VAT chargeable on the sale amounts to: (a) Nil (b) 0.99 (c) 1.41 (d) Sarah had a Case I loss carried forward from the 2013 tax year amounting to 10,000. Her assessable income for 2014 consists of: Case I profits of 5,000, Schedule E income of 3,000 and Case IV deposit interest of 10. The Case I loss carried forward to the 2015 tax year amounts to: (a) 1,990 (b) 4,990 (c) 5,000 (d) 2, Dillon first came to Ireland on 1 January During 2012 he spent 251 days in Ireland. In 2013, Dillon was resident here for the month of June (30 days in total). In 2014, he spent 150 days in Ireland. For the 2014 tax year Dillon is: (a) resident and ordinarily resident (b) resident but not ordinarily resident (c) not resident but ordinarily resident (d) neither resident nor ordinarily resident. Total 20 Marks Page 11 of 24

12 QUESTION 7 (a) It can sometimes be difficult to determine whether someone is an employee or self-employed. List 7 factors that would be considered when trying to determine whether or not an employment existed. 7 marks (b) What are the differences, from an income tax and PRSI perspective, of being treated as an employee compared to being treated as self-employed? 5 marks (c) List 4 benefits that an employee can receive from an employer without tax being charged as a benefit in kind. 4 marks (d) Stan is an employee and on the 28 January 2014 he received a bonus in respect of In what tax year is the bonus taxable? You should refer to any Revenue practice if relevant. 4 marks Total 20 Marks Page 12 of 24

13 2 nd Year Examination: August 2015 Advanced Taxation ROI Suggested Solutions and Examiner s Comments Students please note: These are suggested solutions only; alternative answers may also be deemed to be correct and will be marked on their own merits. Statistical Analysis By Question Question No Average Mark (%) Nos. Attempting Statistical Analysis - Overall Pass Rate 43% Average Mark 47% Range of Marks Nos. of Students and over 1 Total No. Sitting Exam 76 Total Absent 25 Total Approved Absent 3 Total No. Applied for Exam 104 General Comments: Overall students tended to perform consistently over the paper, which showed that those who were successful had a good level of knowledge across the syllabus. In general, students scored better in questions where they were able to give practical examples to show they understood the issues. The selfassessment rules (payment dates, amounts etc.) are very important and warrant further study. A worrying number of people applied income tax rules to a company and corporation tax rules to individuals so this distinction is an important study point. Page 13 of 24

14 Examiner s Comments on Question One Most students did well in the tax part of this question with most students addressing the issue of home carers tax credit v s increased tax band. However, there was some confusion as to the correct treatment of vouched expenses, round sum allowances and civil service rates. Many students did the PRSI and USC on a joint assessment basis. SECTION A Answer QUESTION 1 and QUESTION 2 and QUESTION 3 (Compulsory) in this Section QUESTION 1 (Compulsory) (a) Calculate Breda s assessable Schedule E income for the year. Schedule E Salary 40,000 [0.5 mark] Note 1 BIKs: Van 1 1,500 Laptop 2 Nil Preferential loan Vouched expenses 4 Nil Civil service rate subsistence 4 Nil Round sum allowances 5 2,500 BIK [0.5 mark]on a Van is 5% OMV[0.5 mark] 44,200 Note 2 The Laptop is provided for business use and any personal use is merely incidental. [1 mark]therefore, no BIK arises. Note 3 Preferential loan is to renovate her home. Therefore, the benchmark rate is 4%.[0.5 mark] Breda's loan is at 2% so a BIK arises. The BIK is calculated as the benchmark rate less the rate paid times the loan. So (4% - 2%) * 10,000 = 200[1 mark] Note 4 Vouched expenses [1 mark]and subsistence payments [1 mark]that are in line with civil service rates are not taxable. Note 5 Round sum allowances are taxable as salary. 500 * 5 nights = 2,500[1 mark] (b) Calculate Tony s assessable Case V income for the year. Property 1 Rent (1-Feb-14 to 31-Dec-14) 11,000 [0.5 mark] Interest (limited to 75%) -2,079 Page 14 of 24

15 Allowable expenses -1,500 [0.5 mark] Letting agent - pre-letting -400 [0.5 mark] 7,021 The repairs were carried out before the property was let, and therefore are not an allowable deduction against rental income. [1 mark] 1/12 of the interest was paid pre-letting and is therefore not an allowable deduction [0.5 mark]. 3,024 * 11/12 = 2,772 is therefore the interest paid post letting. 75% [0.5 mark] of this is allowable as this is a residential letting, meaning that 2,772 * 75% = 2,079 is the allowable interest deduction. Property 2 Rental income 4,800 [0.5 mark] Interest -600 [0.5 mark] Allowable expenses -750 [0.5 mark] 3,450 Assessable Case V profits 10,471 (c) Calculate Breda and Tony s income tax liability for Schedule E 44,200 [0.5 mark] Case V 10,471 [0.5 mark] Total income 54,671 Taxable income 54,671 8,360 20% Note 1 2, Tax chargeable 11,438 Less non-refundable tax credits Personal tax credit (married) - 3,300 [0.5 mark] Home carer tax credit Note 1 0 Employee tax credit - 1,650-4,950 [0.5 mark] Tax Payable 6,488 [0.5 mark] Note 1 Jointly assessed couples with two incomes must choose between claiming an increased standard rate cut off point and the home carer tax credit. [1 mark] The home carer tax credit is available if the home carer in this instance Tony as he stays at home to mind the couple s 3 children has total income of less than 5,080. Tony s total income is greater than the threshold. [1 mark] Therefore, the couple could claim an increased standard rate cut off point, such that 10,471 would be taxed at 20% instead of at 41%. [1 mark]. Page 15 of 24

16 PRSI & USC Breda: Breda has an insurable employment. She is an employed contributor and PRSI is chargeable on her reckonable emoluments. In this instance, her reckonable emoluments and her gross income, for USC purposes are the same amount. [0.5 mark] Reckonable emoluments (PRSI) and gross income (USC) [0.5 mark] 44,200 4% 1,768 USC: First 2% = Next 4% = Balance 7% = 1,972.88[0.5 mark] 2,413 Tony: Tony is a self employed contributor for PRSI purposes. His reckonable income is 10,471. His gross income for USC purposes is the same amount. As his gross income is in excess of the threshold of 10,036, he is liable to pay USC. [0.5 mark] 4% 419 Minimum PRSI 500 USC: First 2% = Next 4% = [0.5 mark] 218 Examiner s Comments on Question Two Students generally seemed unsure as to what this question was asking, with many charging the corporate profits to income tax, taxing the other income twice and providing details of the late filing surcharge instead of the close company surcharge. Most students displayed a good knowledge of the treatment of the payments to the participators. QUESTION 2 (Compulsory) (a) Notes Profit before tax 655,000 Addbacks: Depreciation [0.5 marks] 8,000 Interest paid to participator Expenses treated as distributions to participators 2 4,000 12,500 Deduct: Other income: [1 mark] Profit on disposal of fixed assets 80,000 Franked Investment Income [0.5 marks for FII] 15,000 Case III interest income - Italian 2,500 Case III Irish interest income 2,500 Capital allowances 3 3, ,500 Case II profits 564,000 Case III Italian Interest [0.5 marks] 2,500 Case III Irish Interest [0.5 marks] 2,500 Chargeable gain (re-grossed) 4 [1 mark] 237,600 Taxable income 12.5% [564, ,600] [0.5 mark] 25% [2, ,500] [0.5 mark] 1,250 Page 16 of 24

17 Total 101,450 Note 1: As Marie is a director who owns more than 5% of the share capital of the company, the amount of interest that Addition Ltd can get a tax deduction for is limited to the lower of: 13% of the nominal amount of the issued share capital [13% of 2 = 0.26] OR 13% of the loans from the directors [13% of 2,500 = 325] As the company paid her 500 it is limited to 0.26 and therefore the full 500 must be added back. [1 mark] Note 2: Holiday in Spain for Frank 4,000 [0.5 mark] Total 4,000 Marie will be charged a BIK on the holiday in France. Therefore it is not disallowed. [0.5 marks] Note 3: Balancing allowance / charge calculations Machine Proceeds 2,500 TWDV Nil Balancing charge 2,500[0.5 mark] Car Proceeds Nil TWDV(workings) 6,000 Balancing allowance 6,000 Total 3,500 Workings Cost 30,000 Category D&E cars cost deemed to be 50% of the lower of cost and 24,000 [0.5 mark] Deemed cost - 24,000 * 50% = 12,000 [0.5 mark] 4 years W&T allowances claimed 12.5% * 4 yrs] = 6,000 TWDV = 12,000-6,000 = 6,000 [0.5 mark] Note 4: Capital Gains tax computation Chargeable gain on disposal of small premises Proceeds 100,000 Cost 10,000 Chargeable Gain 90,000 [0.5 33% 29,700 Re-gross to 12.5% [0.5 marks] 237,600 (b) Close company surcharge Investment income Less CT on investment income Plus FII Less trading deduction (7.5%) Less distributions made Close company surcharge (20%) 5,000[1 mark] (1,250) [1 mark] 15,000 [1 mark] 18,750 1,406 [1 mark] 4,500 [0.5 mark] 12,844 2,569[0.5 mark] (c) Page 17 of 24

18 Frank: Deemed distributions on holiday of 41% = 1,640 [1 mark] Marie: BIK on holiday in France of 5,000 [0.5 mark] Interest on loan of 500 [0.5 41% = 2,255 (d) Addition s tax payable for the y/e 30 June 2013 is less than the 200,000 threshold which means that it is a small company [1 mark] for the purposes of calculating the preliminary tax due. As a small company, it must have paid either 90% of 101,450 or 100% of 150,000 by 23 rd May 2013 [1 mark], with the balance of tax due when Addition files its tax return on 23 rd March Failure to pay the tax on time results in interest accruing. [1 mark] Examiner s Comments on Question Three Generally a well answered question. Common mistakes included incorrect re-grossing and treating all foreign dealings as both inputs and outputs. When students are asked to list a set number items, it would be a good idea to list more than that number, as some students listed items that were very closely linked and therefore did not warrant additional marks. QUESTION 3 (Compulsory) (a) SECTION A Sales to Irish customers 23%] 12,650 [1.5 mark] The place of supply for sales to UK business customers is the UK - [1 mark] No VAT applies on sales to customers outside of the EU - [1 mark] From UK suppliers [30,750 reverse charge] 7,073[2 mark] Total 19,723 Purchases From Irish suppliers [24,600] From UK suppliers [30,750 reverse charge] Purchases of new machine from outside the EU [36,900] 4,600 [1.5 mark] 7,073 [2 mark] 8,487 [2 mark] Exempt goods [7,000] nil [1 mark] Total 20,160 Balance refundable (437) (b) A VAT registered person is required to keep a full and true record of all transactions which affect or may affect that person s VAT liability or an entitlement to a deduction [1 mark]. Records must be kept for 6 years [1 mark], other than those that relate to property transactions which must be kept for 20 years. (c) Date of issue, full name, address and VAT registration number of person making supply, full name and address of the customer, quantity and nature of the goods being supplied, date of supply, price excluding VAT, VAT rate applicable, amount of VAT payable. [0.5 marks for each of any 8] Page 18 of 24

19 (d) If a VAT liability is less than 3,000 in a 12 month period [0.5 mark], a VAT registered person may file two returns covering 6 months each. [0.5 mark] For liabilities between 3,001 and 14,000, a VAT registered person may file 3 returns each covering four months. [0.5 mark] These reduced filings are only available if agreed with Revenue. [0.5 mark] Total 20 Marks SECTION B Answer ANY TWO of the FOUR questions in Section B Examiner s Comments on Question Four Most students correctly identified FIFO for the shares and correctly identified what tax was payable when. Most students answered part (b) well, with some using examples to show they understood the difference between wasting and non-wasting chattels. In part (c) many students wrote down the formula, but then did not know how to use that formula. QUESTION 4 (a) January September ,500 3 October 2014 disposal Proceeds [1,000 * 5] 5,000 [0.5 mark] Cost 1,000 shares FIFO basis Jan 04 2] 500 [0.5 mark] Sept 04 3] 2,250 2,750 [0.5 mark] Gain 2,250 [0.5 mark] Less annual exemption 1,270 33% 323 [0.5 mark] payable on 15 th December 2014 [0.5 mark] December 2014 disposal Proceeds [500 * 5.5] 2,750 [0.5 mark] Cost 500 shares FIFO basis Sept 04 3] 1,500 [0.5 mark] Gain 1,250 Total gain 3,500 [1 mark] Less annual exemption 1,270 [0.5 mark] 33% 736 Less tax paid in December (323) [0.5 mark] Payable on 31 st January 2015 [0.5 mark] 413 [0.5 mark] (b) A chattel is tangible moveable property. [1 mark] A wasting chattel is one that has a predicted useful life of less than 50 years. [1 mark]these assets are exempt from CGT [0.5 marks], unless they are used for the purposes of a trade. [0.5 mark] Page 19 of 24

20 Conversely, a non-wasting chattel has a predicted useful life of more than 50 years. If a non-wasting chattel is disposed of for less than 2,540 then any gain is exempt from CGT. [1 mark] Where the proceeds are slightly higher, marginal relief may apply. [1 mark] (c) June 2014 Proceeds [2 acres] 1,000 [0.5 mark] Cost part disposal Cost of asset * proceeds / (proceeds plus market value of remaining asset) (700 * 20 = 14,000) [1 mark] * 1,000 [1 mark]/ (1, ,000) [1 mark] (1,167) Loss (167) October 2014 Proceeds [5 acres] 3,000 [0.5 mark] Cost part disposal Cost of asset * proceeds / (proceeds plus market value of remaining asset) (14,000 1,167) [1 mark] * 3,000 [1 mark]/ (3, ,000) [1 mark] (3,500 Loss (500) Total loss 667[1 mark] Examiner s Comments on Question Five Again, joint PRSI and USC calculations caused students to lose marks. Nothwithstanding that error, most students did identify that Eugune did not pay any USC at 7% and take account of the PAYE already paid. The preliminary tax aspects of this question were the weakest, with many students mentioning only the preliminary tax or final tax payment date. QUESTION 5 (a) Eugene Claire Total Marks Allocated Schedule E remuneration Nil 40, Case II profits 30,000 Nil 0.5 Case V rents 2,500 2, Schedule F dividend Reckonable income / emoluments 32,800 4% 1,312 1, Less deducted through PAYE -1,600 1 Total PRSI Payable 1, (b) Income liable to USC 32,800 42, First 10, Next 5, Balance 4%: 16, Balance 7%: 26,584 1, Total 1, ,300.8 Page 20 of 24

21 Less deducted through PAYE -2, Total USC Payable 1, Gross Income for USC purposes is the same as reckonable income / emoluments in this instance. (c) Eugene Claire Total Marks Joint Allocated Schedule E remuneration Nil 40, Pension contributions Case II profits 30,000 Nil Pension contributions Case V rents 2,500 2, Schedule F dividend Total income % % % Personal tax credits Age tax credit Employee tax credit PAYE deducted at source -5, DWT deducted Total income tax payable 5,427 (d) Preliminary tax must be 100% of the prior year tax liability (including PRSI and USC) or 90% of the current year liability. Eugene must therefore either pay 100% of 22,000 [1 mark]or 90% of Eugene Claire Total Marks PRSI 1, , USC 1, , Income tax 5,427 1 Total 8,136 90% 7,322 (e) Preliminary tax must be paid by 31 October 2014 [1 mark], and the balance of tax must be paid by 31 October 2015 [1 mark] to avoid interest. Revenue generally grant a ROS extension to mid- Page 21 of 24

22 November. If Eugene files his returns through ROS and pays all tax due through ROS, then the preliminary tax and balance of tax are due on the ROS extension date rather than on 31 October. Examiner s Comments on Question Six Many students provided workings and explanations which are of no benefit in this question. On question 3 marks were awarded for answers of either (a) or (d) as their was an error in the question. QUESTION 6 The following multiple choice question consists of TEN parts, each of which is followed by FOUR 1. Thomas earned 40,000 Case I income and a salary of 4,000 in the 2014 tax year. Thomas is entitled to an employee tax credit amounting to: (a) 1,650 (b) 1,600 (c) 800 [Maximum allowable is 1,650 or the amount of tax due on employment income. Thomas has Sch E income of 4,000. Tax at 20% is 800. The employee tax credit is therefore restricted to this amount.] (d) None 2. Percival, aged 40, has assessable Case I income of 50,000 and Case IV deposit income of 3,000 for the 2014 tax year. He made contributions to a Revenue approved pension scheme of 16,000 during the tax year. The maximum amount of relief for pension contributions that Percival can claim in the 2014 tax year amounts to: (a) 6,000 (b) 10,500 (c) 11,250 (d) 12,500 Net relevant earnings [the Case I amount] 50,000. Only earned income can be taken into account. Max pension 25% 12,500 Actual pension contributions 16,000 Maximum pension contributions 12, Which of the following tax credits is a non-refundable tax credit for an individual who is 40 years of age? (a) Personal tax credit (b) Professional Services withholding tax [this is always refundable] (c) Tax deducted under PAYE system [this is always refundable] (d) DIRT withheld on deposit income [when an individual or their spouse / civil partner is over 65, DIRT is refundable] 4. Joe and Linda are legally separated and Joe has custody of the children. They want to know which of the following is not true. (a) If Joe and Linda opt to be jointly assessed, then no adjustment is made to taxable income in respect of maintenance payments. (b) If Joe and Linda are singly assessed, then Linda can claim a tax deduction for all maintenance payments made on foot of a legally enforceable separation agreement. [Linda can only claim a deduction for maintenance payments made to Joe, and not for the benefit of the children] (c) If Joe and Linda are singly assessed, then Linda can claim a tax deduction for maintenance payments made to Joe, excluding any amounts that relate specifically to their children. (b) If Joe and Linda are singly assessed, then Linda cannot claim a tax deduction for any voluntary maintenance payments made to Joe. 5. Jarleth commenced trading on 1 July He prepared accounts for the 8 months to 28 February 2014 which showed a profit of 2,000. He prepared accounts for the 11 months to 31 January 2015 Page 22 of 24

23 showing a profit of 5,000. He wants to know what his assessable profits are for the 2014 year of assessment. (a) 2,000 (b) 5,000 (c) 5,045 [as there is no 12 month accounting period ending in the second year of trading, the profits on which Jarleth is assessable are the actual profits for the year. These are calculated as: 2,000 * 2 months /8 + 5,000 * 10months /11 = 5,045] (d) 7, Which of the following is not exempt from capital gains tax if the disposal takes place in the 2014 tax year?? (a) A gain by a charity (b) A gain from the transfer of Irish land to a civil partner (c) Government securities (d) Property bought in an EEA State in 2010 [the exemption for does not apply for properties acquired in It only applies for properties acquired from December 2011 onwards. 7. Larry made a gain on the disposal of an asset on 1 October When is the CGT on the gain due for payment? (a) 31 October 2014 (b) 15 November 2014 (c) 15 December 2014 [CGT due on disposals made before 30 November in a year is due for payment by 15 December that year.] (d) 31 January Davy s pizzeria is offering special deal to its customers whereby they can pay 12 for a pizza and a beverage. 8 of the selling price is attributable to the pizza while 4 is attributable to the beverage. The amount of VAT chargeable on the sale amounts to: (a) Nil (b) 0.99 (c) 1.41 [The pizza is chargeable to VAT at the rate of 9% while the beverage attracts VAT at 23%.] (d) Sarah had Case I losses forward of 10,000 into During 2014 she had Case I profits of 5,000, Schedule E income of 3,000 and Case IV deposit interest of 10. What Case I loss relief will Sarah carry forward into 2015? (a) 1,990 (b) 4,990 (c) 5,000 [Sarah can only claim relief against the Case I profits in 2014, meaning she can only use 5,000 of her loss in 2014 and must carry 5,000 forward to 2015 for use against the Case I profits in that year.] (d) 2, Dillon first came to Ireland on 1 January During 2012 he spent 251 days in Ireland. In 2013, Dillon spent only the month of June (30 days in total) in Ireland. In 2014, he spent 150 days in Ireland. For 2014, what is Dillon s residence situation? (a) resident and ordinarily resident (b) resident but not ordinarily resident (c) not resident but ordinarily resident (d) neither resident nor ordinarily resident. [Where a person spends 30 days or less in Ireland in a year, then that year is not counted when determining the person s residence. Therefore, Dillon was not resident in Ireland in For 2014 Dillon has only spent 150 days in Ireland which is less than the 183 days required to become resident. Page 23 of 24

24 Examiner s Comments on Question Seven Many students gave very good, practical answers to this question. Some students listed only 7 items one or two of which were wrong, so it is advisable to list extra items in questions like this. QUESTION 7 (a) [1 mark for 7 factors from the following list, or other good factor] 1. Does the individual work under the control of another person? 2. Does the person supply labour only? 3. Does the person not supply materials or equipment? 4. Can the person subcontract the work? 5. Are they paid a fixed hourly / weekly / monthly rate and entitled to holidays? 6. Can they profit from sound management? 7. Are they obliged to work fixed hours? 8. Are they subject to dismissal or redundancy? 9. Are they registered for VAT? 10. Is there a requirement on the person to have insurance, for example, professional indemnity insurance? 11. Is the person taking a financial risk? Could they incur a loss? (b) For employees, tax and social welfare contributions are collected through the PAYE system, [1 mark] whereas self employed individuals must file tax returns and pay preliminary tax. [1 mark] Employer s must operate employer s PRSI for employees. [1 mark] Certain social welfare entitlements are dependent upon the class of PRSI that a person has paid. [1 mark] Employees are entitled to the PAYE tax credit. [1 mark] (c) [1 mark for 4 of the following] 1. The provision of accommodation for an employee required to live on the premises because of the nature of the trade. 2. Expenses incurred on the provision of free or subsidised canteen meals provided to all staff. 3. Expenses incurred in providing monthly or annual bus or train passes. 4. The provision of a bicycle and equipment to an employee to enable them cycle to, or part of the way, to and from work. 5. employer pension contributions 6. Reimbursement of travel and subsistence based on civil service rates (d) Strictly speaking, a Schedule E charge for 2013 [1 mark] applies as the basis of assessment for Schedule E is on the amount of emoluments earned [1 mark]during the tax year. However, Revenue practice is to allow for the bonus to be taxed in the year in which it is received [1 mark]to avoid taxpayers having to file tax returns[1 mark]. Page 24 of 24