TXF6 UK
Syllabus B. Income Tax And Nic Liabilities B1. The scope of income tax

B1a. The residence of an individual

Question 32a - Sample

Up to and including the tax year 2014–15, Dill was always resident in the United Kingdom (UK), being in the UK for more than 300 days each tax year. She was also resident in the UK for the tax year 2016–17. However, during the tax year 2015–16, Dill was overseas for 305 days, spending just 60 days in the UK. Dill has a house in the UK and stayed there on the 60 days which she spent in the UK. She also has a house overseas. For the tax year 2015–16, Dill did not have any close family in the UK, did not do any work in the UK and was not treated as working full-time overseas.

On 6 April 2016, Dill returned to the UK and commenced employment with Herb plc as the IT manager. She also set up a small technology business which she ran on a self-employed basis, but this business failed and Dill ceased self-employment on 5 April 2017. The following information is available for the tax year 2016–17:

Employment
(1) During the tax year 2016–17, Dill was paid a gross annual salary of £270,000.
(2) In addition to her salary, Dill has been paid the following bonuses by Herb plc:

Amount Date of payment Date of entitlement In respect of the four-month period ended
£
16,200 31 December 2016 1 November 2016 31 July 2016
29,300 30 April 2017 1 March 2017 30 November 2016

(3) Throughout the tax year 2016–17, Dill had the use of Herb plc’s company gym which is only open to employees of the company. The cost to Herb plc of providing this benefit was £780.

(4) Throughout the tax year 2016–17, Herb plc provided Dill with a home entertainment system for her personal use. The home entertainment system cost Herb plc £5,900 on 6 April 2016.

(5) During the tax year 2016–17, Dill’s three-year-old son was provided with a place at Herb plc’s workplace nursery. The total cost to the company of providing this nursery place was £7,200 (240 days at £30 per day).

(6) On 1 June 2016, Herb plc provided Dill with an interest-free loan of £80,000 which she used to renovate her main residence. No loan repayments were made before 5 April 2017.

(7) On 25 January 2017, Herb plc paid a health club membership fee of £990 for the benefit of Dill.

(8) During the tax year 2016–17, Dill used her private motor car for both private and business journeys. The total mileage driven by Dill throughout the tax year was 16,000 miles, with all of this mileage reimbursed by Herb plc at the rate of 25p per mile. However, only 14,500 miles were in the performance of Dill’s duties for Herb plc.

(9) During the tax year 2016–17, Dill paid an annual professional subscription of £560 which is relevant to her employment with Herb plc. She also paid an annual membership fee of £1,620 to a golf club which she uses to entertain Herb plc’s suppliers. Herb plc did not reimburse Dill for either of these costs.

(10) During the tax year 2016–17, Dill contributed the maximum possible tax relievable amount into Herb plc’s HM Revenue and Customs’ (HMRC) registered money purchase occupational pension scheme. The company did not make any contributions on her behalf. Dill has never previously been a member of a pension scheme.

Self-employment
For the tax year 2016–17, Dill’s self-employed business made a tax adjusted trading loss of £58,000. Dill will claim relief for this loss against her total income for the tax year 2016–17.

Other income
(1) On 1 November 2016, Dill received a premium bond prize of £1,000.
(2) On 28 February 2017, Dill received interest of £1,840 on the maturity of savings certificates from NS&I (National Savings and Investments).

Required:
(a) Explain why Dill was treated as not resident in the United Kingdom for the tax year 2015–16. (3 marks)

515 others have taken this question

MC Question 9 -

In certain circumstances an individual is automatically not resident in the UK.

Which of the following two individuals, if either, is automatically not resident in the UK for the tax year 2015–16?

Eric, who has never previously been resident in the UK. In the tax year 2015–16, he was in the UK for 40 days.

Fran, who was resident in the UK for the two tax years prior to the tax year 2015–16. In the tax year 2015–16, she was in the UK for 18 days.

A Eric only
B Fran only
C Both Eric and Fran
D Neither Eric nor Fran

599 others have taken this question

MC Question 11 -

Samuel is planning to leave the UK to live overseas, having always previously been resident in the UK. He will not automatically be treated as either resident in the UK or not resident in the UK. Samuel has several ties with the UK and will need to visit the UK for 60 days each tax year. However, he wants to be not resident after he leaves the UK.

For the first two tax years after leaving the UK, what is the maximum number of ties which Samuel could keep with the UK without being treated as resident in the UK?

A. One
B. Four
C. Two
D. Three

549 others have taken this question

Question 3a -

You should assume that today’s date is 15 December 2013.

Patrick and Emily Grant are a married couple. They have both always been resident in the United Kingdom (UK), being in the UK for more than 300 days each tax year up to and including the tax year 2012–13. However, following Patrick’s retirement, the couple decided to move overseas, purchasing an overseas property on 6 April 2013.

Patrick and Emily still have a house in the UK, and will stay there on the 105 days which they spend in the UK during the tax year 2013–14. Neither Patrick nor Emily works full-time, and neither of them will do any substantive work in the UK during the tax year 2013–14.

For the tax year 2013–14, Patrick will have taxable income of £7,200, and Emily will have taxable income of £46,400. During May 2013, Emily disposed of an investment, and the resultant chargeable gain fully utilised her annual exempt amount for the tax year 2013–14.

Patrick and Emily urgently need to raise £80,000 in order to renovate their overseas property, and have three alternative assets which can be sold. They would like to sell the asset which will provide them with the highest net of tax proceeds. The three alternatives are as follows:

Alternative 1 – Land
Patrick owns eight acres of land, and a neighbouring farmer has offered to buy this land for £92,000. Patrick originally purchased 14 acres of land on 2 May 2001 for £108,600 and he sold six acres of the land on 27 September 2006 for £37,800. The market value of the unsold eight acres of land as at 27 September 2006 was £52,700. The land has never been used for business purposes.

Alternative 2 – Unquoted shares
Emily owns 8,000 £1 ordinary shares in Shore Ltd, an unquoted trading company with a share capital of 100,000 £1 ordinary shares. Shore Ltd’s shares have recently been selling for £13·00 per share, but Emily will have to sell at £11·50 per share given that she needs a quick sale. The sale will be to an unconnected person. Emily subscribed for her shares in Shore Ltd at par on 1 June 2005, and she has been a director of the company since that date.

Alternative 3 – Quoted shares
Patrick and Emily jointly own 32,000 £1 ordinary shares in Beach plc, a quoted trading company. The shares are currently quoted on the Stock Exchange at £2·88. Patrick and Emily originally purchased 54,000 shares in Beach plc on 23 May 2003 for £75,600, but they had sold 22,000 shares on 17 November 2011 for £44,440.

The shareholding is less than 1% of Beach plc’s issued share capital, and neither Patrick nor Emily has ever been an employee or a director of the company.

Required:
(a) Explain why Patrick and Emily Grant will both be treated as resident in the United Kingdom for the tax year 2013–14. (3 marks)

533 others have taken this question