Tax and Capital Gains Analysis: Imogen's Financial Situation (2016/17)

This assignment requires the calculation of Imogen's tax liabilities and capital gains for the tax year 2016/17. The first question involves calculating Imogen's tax-adjusted trading profit for her Indian restaurant, income tax payable, and national insurance contributions as both an employed and self-employed person. It also requires advising Imogen on the consequences of late tax payments. The second question focuses on calculating chargeable gains or losses for Pulika from the sale of various assets, including an antique clock, a warehouse, and shares in a listed company. It also involves calculating the capital gains tax payable, maximizing available reliefs, and considering the implications of rollover relief and main residence relief. The assignment covers a range of tax concepts, including employment income, self-employment, capital gains, and relevant tax reliefs, providing a detailed financial analysis of the scenarios presented.

Question 1
On 31 December 2016, Imogen resigned as an employee of Dhissom plc. The
company had employed her as pastry chef since 2001. On 1st January 2017, Imogen was now
self-employed and started running her own Indian restaurant, preparing accounts to 30th
September. She is now self-employed as from 01 January 2017. The following information is
available for the tax year 2016/17.
Employment
1. During the period 6th April 2016 to 31st December 2016 Imogen’s total gross salary from
her employment with Dhissom plc was £57,000. Income tax of £9,505 was deducted from
this figure under PAYE.
2. Imogen used her personal motor car for both business and private purposes during the
period from 6th April 2016 to 31st December 2016 as an employee of Dhissom plc . She
received no reimbursement from Dhissom plc for any of the expenditure incurred.
Imogen’s total mileage during the period was 15,000 miles, shown as below:
No. of miles
Normal daily travel from home and workplace 4,650
Voluntary travel from home and workplace to turn off the fire alarm 120
Travel from workplace and suppliers 750
Travel from home to a seconded temporary workplace for two
months
3,800
Private travel 5,680
Total miles 15,000
3. On 1st October 2016, Dhissom plc paid £13,000 towards Imogen’s removal expenses
when she permanently relocates to Taunton, to work in a restaurant owned by Dhissom
plc.
4. Imogen contributed 6% of her gross salary of £57,000 into Dhissom plc’s HMRC
approved occupational pension scheme.

Self-Employment
1. Imogen’s income statement for her Indian restaurant for the 9 month period ended 30th
September 2017 is as follows:
£ £
Gross Profit 192,300
Depreciation 5,250
Motor expenses note 2 4,200
Property expenses note 3 19,200
Allowable expenses 76,050 (104,700)
Net profit 87,600
2. Imogen purchased her Indian restaurant on 1st January 2017.
3. She lives in an apartment that is situated above the restaurant and 25% of the total
property expenses of £19,200 relate to this apartment.
4. On 1st January 2017, Imogen purchased a motor car with CO2 emissions of 125 g/km for
£16,667 and cooking equipment for £5,400.
5. During the period 1st January to 30th September 2017, Imogen drove a total of 6,000
miles, of which 1,500 miles were for visiting her mother who lived in Exeter. You can
assume that HMRC have agreed to a further 500 miles for private journey.
Other income
1. During the tax year 2016/17, Imogen received bank deposit interest of £3,000 and
dividends of £10,500.
Additional Information
1. Imogen contributed £1,600 into a personal pension scheme during the period 1st January
2017 to 5th April 2017.
2. She did not make any payments on account of income tax in respect of the tax year 2016-
17.

Required
(a) Calculate Imogen’s tax adjusted trading profit for the nine month period ended 30th
September 2017.
(b) Calculate the income tax payable by Imogen for the tax year 2016-17.
(c) Calculate Imogen’s national insurance contributions as an employed person for Dhissom
plc and a self-employed person for the tax year 2017/18.
(d) Advise Imogen of the consequences of not making the balancing payment for the tax year
2016/17 on the due date. Assume that the HMRC interest rate on late paid income tax is
3%.
(Total 50 marks)

Question 2
1. Pulika sold an antique clock for which she received £17,940 after the auctioneer’s
commission of 8%. Pulika had purchased the clock for £1,500 on 1 January 2007.
2. on 30 April 2016, Pulika sold a warehouse for £600,000. The warehouse had been
purchased in September 2008 for £377,800. In March 2017, Pulika purchased another
warehouse for £470,000 and claimed roll over relief in relation to the gain arising on the
warehouse sold in April 2016.
3. Pulika decided to retire to Vietnam, and will have to dispose of her main residence in
London. Pulika acquired her house in London on 1 June 1997 and lived there until 31
March 1998 when she left the UK and went to Vietnam. On 1st November 1998, she took
a job with a hospital in Vietnam, where she stayed until 31 December 1999 when she
returned to the UK and returned to her house. She stayed in this house until 30 June 2013,
when she left it permanently to live in a rented flat in Brighton. The London house was
sold on 31 May 2016. The house was bought for £55,000 and an extension was completed
in December 2000 at a cost of £22,000. The agreed sales proceeds were £330,000 and she
incurred allowable expenses of £5,720 for the sale of the house. Throughout the period of
Pulika’s absence, the house is not occupied.
4. Pulika sold all the shares in FirstOne plc, a listed company on the FTSE350. She had
acquired them as follows:
Date No. of shares Cost, £
1January 2007 1,000 4,200
19 June 2008 700 2,950
31 December 2014 1,200 5,620
11 August 2016 400 2,100
Pulika took up a 1 for 4 rights issue at £3.50 per share on 31 May 2015. The shares
were all sold for £38,000 on 31 January 2017.
Required:

(a) For each of the above disposals (1 to 4) calculate the chargeable gains or losses
for the tax year 2016-17.
(b) State the amount of chargeable gains tax payable by Pulika for the tax year 2016-
17. You should maximise all the reliefs available.
Note: You can assume that Pulika has no other income in that year.
(Total 50 marks)