TXF6 UK
NOTICE: Register for the September exam until 11th May!!!

All students that had entered for the June 2020 exam will have received a credit on their MyACCA account (unless their employer or learning provider paid ACCA directly).

We recommend you to use this refund to enter for the September 2020 exams, this will secure your entry and location of choice. 

You will also benefit from the cheaper Early Exam Entry fee if you book by 11th May.

Section C: Q32

Specimen exam

Q32 Section C

The following scenario relates to two requirements.

You should assume that today’s date is 1 March 2019.

Sarah is currently self-employed. If she continues to trade on a self-employed basis, her total income tax liability and national insurance contributions (NIC) for the tax year 2019-20 will be £12,631.

However, Sarah is considering incorporating her business on 6 April 2019.

The forecast taxable total profits of the new limited company for the year ended 5 April 2020 will be £50,000 (before taking account of any director’s remuneration).

Sarah will pay herself gross director’s remuneration of £30,000 and dividends of £10,000.

The balance of profits will remain undrawn within the new company.

(b)  Advise Sarah as to why her proposed basis of extracting profits from the new limited company is not optimum for tax purposes, and suggest how the mix of director's remuneration and dividends could therefore be improved.

Note: You are not expected to calculate any revised tax or NIC figures. (2 marks)
(10 marks)