ACCA ATX ^UK Syllabus A1. Income tax - Personal Service Companies - Past Papers ^{3 / 3}

Your client, Eric's son, Zak requires advice regarding the application of the personal service company (IR35) legislation.

Zak:
– Is the sole shareholder, director and employee of Yoyo Ltd, a company which provides consultancy services.
– In the year ended 31 March 2016, Yoyo Ltd’s gross fee income from relevant engagements performed by Zak will be £110,000.
– In the tax year 2015/16, Zak will draw a salary of £24,000 and dividends of £50,000 from Yoyo Ltd.
– Neither Yoyo Ltd nor Zak has any other source of income.

Required:
(c) Calculate Zak’s taxable income for the tax year 2015/16 if the personal service company (IR35) legislation were to apply to the fee income received by Yoyo Ltd. (5 marks)

(b) Horner:
– Horner owns all of the shares of Otmar Ltd.
– All of the income of Otmar Ltd is subject to the personal service company (IR 35) rules.
– Budgeted figures for Otmar Ltd for the year ending 5 April 2014 are set out below. Where applicable, these amounts are stated exclusive of value added tax (VAT).

Required:
(i) Outline the circumstances in which the personal service company (IR 35) rules apply. (3 marks)

(b) Horner:
– Horner owns all of the shares of Otmar Ltd.
– All of the income of Otmar Ltd is subject to the personal service company (IR 35) rules.
– Budgeted figures for Otmar Ltd for the year ending 5 April 2014 are set out below. Where applicable, these amounts are stated exclusive of value added tax (VAT).

Required:
(ii) Calculate the deemed employment income of Horner for the year ending 5 April 2014. (4 marks)