Advanced Taxation...following rental income: Irish Irish French Notes Property 1 Property 2 Property € € € Gross rental Income 1 16,700 8,911 9,700 Interest paid 2 7,000 7,810

AdvancedTaxationRepublic of Ireland

Practise Questions and Suggested Solutions

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Table of Contents

Questions Solutions

Page Page

Section A..................................................... 2 51

Section B..................................................... 7 56

Section C..................................................... 14 67

Section D..................................................... 24 81

Section E..................................................... 29 91

Section F..................................................... 43 105

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2135

(a) State the rules for deciding an individual’s residence in Ireland for a tax year.

(b) Outline the taxation implications of the following:(i) Being Irish resident and Irish domiciled;(ii) Being Irish resident and not Irish domiciled;(iii) Being non-resident but ordinarily resident in Ireland.


Section A


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2137 Roy, a US citizen works for a US multinational company. In 2017, Roy was asked to come to Ireland for ashort assignment at the company’s Irish operation.

The project that Roy was assigned subsequently became much larger and the period of the assignment was extended.

Roy has spent the following days in Ireland:

(i) In 2017 a total of 32 days(ii) In 2018, Roy moved to Ireland on 19 July and stayed for the remainder of the year;

(iii) In 2019, Roy lived in Ireland for the year. However, Roy spent 40 days on holidays outside of Ireland.

Prior to coming to Ireland in 2017, Roy had never been to Ireland before.

In 2019, Roy has the following income:

(i) Salary from US multinational - €246,000 paid from the US. Roy remits €76,300 of this.

(ii) UK dividend income - €4,155 lodged into his UK bank account.

(iii) US rental income - €21,100 lodged directly into his US bank account.

Requirements:(a) Explain Roy’s Irish income tax position in each of the three tax years.

(b) Identify the income that will be used to calculate Roy's Irish income tax liability in 2019.



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2138 Explain how the withholding tax system for subcontractors operates. Your answer should refer to thefollowing:

(a) Who the system applies to?

(b) What type of work it applies to?

(c) How it is possible to avoid the withholding tax?



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2139 Mairead, a solicitor, advised you that she has had Professional Services Withholding Tax (PSWT) deductedfrom a payment received by her business.

You are required to explain the PSWT system to Mairead including the circumstances in which there is anobligation to deduct PSWT and the types of services it relates to.

Include examples to illustrate the explanation.



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2141

(a) Explain the rules for calculating preliminary income tax.

(b) Explain the purpose of a Revenue Audit.



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2145 Jeremiah owns two rental properties. He provides you with the following information in relation to these forthe year ended 31 December 2019.

Property 1 Property 2

€ €Income received 18,000 8,845ExpensesMortgage interest paid 11,900 6,320Insurance 1,055 1,790Cleaning 371 1,316Repairs 839 1,934Light and heat 416 1,678Both of these properties are residential lettings. Jeremiah registered Property 1 with the RTB when the leaseon the property commenced last year.

The tenants in Property 2 left at the end of April 2019. They had been paying rent of €1,112 per month butwhen they left the rent for March and April was unpaid.

Jeremiah has not been able to recover this amount.

As the property was vacant, Jeremiah took the opportunity to redecorate the entire property before re-lettingit.

He got new tenants into the property from 1 June 2019 at a rent of €946 per month.

Whereas the tenancy to the end of April 2019 was registered with the Residential Tenancies Board (RTB),Jeremiah forgot to register the new tenancy with the RTB.

On 1 June 2019 Jeremiah purchased a new commercial property. He let the new property from 1 September2019 on a 40 year lease.

He received a rent of €1,200 per month for the letting. He also received a premium when he let the propertyof €41,000.

Jeremiah borrowed to purchase the commercial property and the interest paid from the date he purchasedthe property was €4,290.

He incurred estate agents fees of €850 finding the tenant and legal fees of €990 setting up the lease.

Requirement:Calculate Jeremiah’s assessable Schedule D Case V income for 2019.


Section B


2260 Ennio Hughes, who is single, is the Sales Director for Zippy. Details of his remuneration package for 2019 are as follows:

(i) Salary €49,300 - PAYE deducted €13,880. (ii) Ennio received commission in addition to his salary. He earned commission of €10,410 for

2019, but €1,880 of this was not actually paid to Ennio until February 2020. (iii) Ennio is provided with a company car. The original market value was €34,400. Ennio pays

for the insurance of the car, which was €520 for 2019. Ennio travels 10,600 business kilometres per annum. The nature of Ennio’s job means that he spends 52% of his time working away from the office. Details of Ennio Hughes’s other income and outgoings for 2019 were as follows:

€ Income Irish bank deposit interest (net of DIRT) 690 Dividend received from Irish company (net of DWT) 560 Outgoings Covenant (note ) 8,750 Private health insurance (tax relief given at source) 750 Third level tuition fee for an approved part-time course 3,350 Note Ennio’s sister, Mary Jo, who is 24 years old and single, is permanently incapacitated since birth. Ennio set up a ten year covenant of €8,750 per annum to help Mary Jo with her living expenses. Mary Jo has a part-time job and earned a salary of €7,300 for 2019. Her only outgoings were qualifying medical expenses of €2,040.

Requirements: (a) Calculate Ennio Hughes’s income tax for 2019 (ignore PRSI and USC).

(b) Calculate Mary Jo’s income tax for 2019 (ignore PRSI and USC).

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2146 Marty and Zelda are married and jointly assessed. Marty is employed as a sales and marketing director for acompany.

His salary for 2019 was €134,000 and he paid €57,100 PAYE on this.

In addition, he has the use of a 2016 BMW 320 (cost €32,600, original market value €40,700).

Marty does 7,190 km business travel a year and spends approximately 60% of his time away from the office.

He also receives the following benefits from the company:

(i) A contribution of €12,600 to the approved pension scheme on his behalf;

(ii) Payment of family membership to the local leisure centre of €1,200.

Zelda stays at home full time and looks after their young children.

Marty and Zelda have invested in three residential properties over the years and are in joint receipt of thefollowing rental income:

Irish Irish French

Notes Property 1 Property 2 Property

€ € €Gross rental Income 1 16,700 8,911 9,700Interest paid 2 7,000 7,810 7,580Repairs 3 2,040 2,090 970Cleaning 4 760 680 810Letting fees 5 1,460 1,010Notes

1 Gross rental IncomeThe rent represents the full amount of rent received in 2019. Property 1 has been owned and rented by themfor the past eight years. The house was vacant for the month of October.

Property 2 was purchased during 2019 and was first let on 1 June 2019.

2 Interest paidThe interest paid is for the full year with the exception of Property 2, which was purchased by Marty andZelda on 1 May 2019. The mortgage interest was incurred from that date.

Property 2 should not be considered to be a 'vacant premises' with regard to expenses incurred before thefirst letting by Marty and Zelda on 1 June.

3 RepairsThe repairs are in relation to normal repair items and do not include any capital items. All of the repairs onProperty 2 were carried out before it was first let on 1 June.

4 CleaningThe cleaning costs were incurred as follows:

For Property 1, during the month of October when the house was vacant.

For Property 2, before the house was let on 1 June.

The French Property was let as a holiday home. The cleaning costs were incurred between each letting.

5 Letting feesAll letting fees are paid to an agent, who finds tenants and collects the rent.

The tenancies in the Irish properties were registered with the RTB.

Other incomeIrish deposit interest - joint account - €1,226 net of DIRT.

Other payments



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Medical expenses of €4,090 incurred. Their medical insurance company reimbursed €2,250 of this amount.

Requirement:Prepare Marty and Zelda’s income tax computation for 2019 (including PRSI and USC).



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2148 Julian Smith, a single man, aged 54 years, is employed as production director with a manufacturingcompany, which is based in Dublin.

During 2019, the company opened a second plant in Cork and, in order to induce Julian Smith to move toCork and take over responsibility for the new facility, they agreed to pay him the following:

(i) Julian Smith’s annual salary was increased from €50,600 to €58,927 with effect from 1 April 2019. His totalsalary for 2019 was €56,845 and total PAYE paid of €18,380;

(ii) From 1 April 2019, travel expenses of €470 per month to cover the cost of travelling to and from Dublin;

(iii) An interest-free loan of €135,000 on 1 September 2019, none of which has been repaid. Julian Smith usedthis towards the purchase of a home in Cork.

Julian Smith received a dividend of €700 in March 2019, net of dividend withholding tax, being a finaldividend in respect of the year ended 31 December 2018.

In March 2020, he received a dividend of €600, net of dividend withholding tax, being the final dividend forthe year ended 31 December 2019.

You are also given the following information about Julian Smith:

(i) As well as the loan from the company, Julian Smith borrowed another €159,000 to purchase the house in

Cork. In order to help fund the purchase of the house, Julian Smith rented out one of the rooms andreceived rent of €11,800 in 2019.

(ii) Julian Smith started a part-time degree while living in Cork and, in 2019, he paid €2,300 in fees (college andcourse are approved by Revenue).

Requirement:Prepare Julian Smith’s income tax computation for 2019 (including PRSI and USC).



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2149 Lorraine Parnell is a single parent with one child who is three years old and fully maintained by LorraineParnell.

She is employed as a marketing executive and her salary for 2019 was €49,017 with PAYE deducted of€16,300.

During 2019, Lorraine Parnell had use of a company car which was supplied on 1 January 2019, originalmarket value of which was €39,400.

The company paid all running costs and Lorraine Parnell makes a contribution of €1,050 each year to thecompany towards the running costs of the car.

Lorraine Parnell's annual travel is approximately 49,200 km, of which 10% is personal.

The other benefits provided to Lorraine Parnell were:

(i) The payment of a professional subscription of €1,080. This relates to Lorraine Parnell’s work;

(ii) Provision of a preferential loan - the loan of €57,000 was granted on 1 January 2017 to fund the purchase ofa holiday home.

The agreement was that Lorraine Parnell would pay interest to her employer on the loan of 2.5% per annum.

The capital balance was still outstanding at 31 December 2019.

In addition to her employment income in 2019, Lorraine Parnell received the following income:

(i) Net dividend of €570 paid by AIB Plc;

(ii) Gross credit union dividend €410 from Special Share Account. This was subject to tax at source and the netinterest was credited to Lorraine Parnell's account on 31 January 2019.

Lorraine Parnell also purchased a residential property on 1 April 2019. She borrowed €289,000 to fund thepurchase and paid interest on this loan of €11,560 from 1 April to 31 December 2019.

The property was first let on 1 August 2019 at a rent of €950 per month. The property should not beregarded as a 'vacant property' with regard to expenses incurred prior to the first letting.

The tenancy was not registered with the RTB.

Lorraine Parnell also incurred the following expenses in relation to the property:

(i) Letting fees - €760;

(ii) Insurance costs (from 1 April to 31 December) - €590.

Requirement:Prepare Lorraine Parnell’s income tax computation for 2019 (including USC and PRSI).



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2150 Tony and Leona got married 1 August 2019. Tony is employed as a senior manager with Alta plc.

Tony’s date of birth is 18 November 1974. Leona’s is 13 May 1978.

Tony was provided with the following income and benefits from his employment in 2019:

(i) Salary of €75,700 and commission of €9,200. PAYE of €35,370 was deducted from Tony’s salary in 2019.

Tony received a bonus of €4,500 in April 2019 in respect of 2018 work. Similarly, a bonus of €2,200 inrespect of 2019 work was paid to Tony on 15 February 2020.

(ii) Tony made contributions to a Revenue approved occupational pension scheme of €320 per month. Hisemployer contributed a further €280 per month to the scheme.

(iii) A company car, which cost €30,190 when purchased on 1 September 2019. The original market value of thecar was €35,100. The bank paid for all expenses except for diesel.

Tony travelled 15,333 km in the course of the bank’s business between 1 September 2019 and 31December 2019.

(iv) Accommodation owned by the bank. The house originally cost the bank €84,000 in 2004. The house had amarket value at 31 December 2019 of €210,000.

The market value of rent for this house was €1,500 per month for 2019. All outgoings on the house werevouched and paid for by Tony. Tony had use of the house for the full year.

(v) The company paid for membership to the local golf club as they felt that Tony would be able to further thebank’s business and meet clients at the club. This cost €588.

(vi) A loan of €14,000 on 1 November 2019 to purchase a car for Leona. Tony paid interest at 2.0% per annumon this loan. No capital repayments had been made in 2019.

Tony and Leona had the following other income for 2019:Tony €Net dividends from Irish public companies 319Credit union interest (net of DIRT) 499Bank deposit interest (net of DIRT) 731Rental income from a Dublin property (net of allowable expenses) 3,700LeonaIncome from part-time employment 18,670Net dividends from Irish public companies 4,000Tony and Leona had their first child, Patrick, on 10 December 2019. Leona has decided to stay at home tolook after Patrick.

Requirements:(a) Prepare Tony and Leona’s income tax computation for 2019 (ignore PRSI and USC).

(b) Calculate reliefs that they may be entitled to for 2019 (year of marriage).



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1840 Liam Ridgewell is aged 70, single, no children and has rental income in 2019 of €25,200.What is the amount of Liam Ridgewell’s income tax liability for 2019?


Section C


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2153 Brendan Lee commenced trading on 1 March 2013 and ceased to trade on 31 January 2019. The followingare the profit figures for each year:

€1 March 2013 – 30 September 2013 10,1001 October 2013 – 31 May 2014 16,9001 June 2014 – 31 May 2015 18,7001 June 2015 – 31 May 2016 29,2001 June 2016 - 31 May 2017 32,6001 June 2017 – 31 May 2018 34,9001 June 2018 – 31 January 2019 24,500

Requirement:Calculate the assessable profit for each year of assessment, showing the year of assessment, basis periodand original and revised assessments.



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2155 The following are the details relating to Imogen's business assets for the year ended 31 December 2019:

Assets at 1 Jan Acquired Cost (€) TWDV (€)1 Jan 2019

Plant and equipment May 2016 55,000 34,375Motor vehicle Sep 2015 24,000 12,000Trucks Oct 2015 130,200 65,100

Imogen also provides you with the following details:

(i) The motor vehicle (category B) was sold on 12 August for €12,800.

(ii) There were two new cars purchased. The first was category E and cost €26,000 and the second wascategory B and cost €21,000.

(iii) The business also leased a new car during the year ended 31 December 2019. The total lease costs for theyear were €8,300. The cost of the car was €27,000.

(iv) Three trucks were sold during the accounting period for €42,400 (in total). They had originally cost €31,000,€26,200 and €29,600. They were all purchased in October 2015.

The business invested in a new truck costing €40,000 before the end of the year.

(v) The business also invested heavily in a new computer system during the year. The total cost of theequipment was €86,000.

Nine of the computers, costing €3,000 each, were not put into use until April 2020.

Requirement:Calculate the capital allowances for 2019, showing the wear and tear allowances and the closing tax writtendown values.



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2156 Florence Laurelio runs a coffee shop. The following figures are available for the year ended 30 September2019:

€Case I tax adjusted trading loss 4,000Capital allowances 720In addition, the following information is available:

€Florence Laurelio's rental income 3,700Spouse’s salary from employment 61,130PAYE paid on salary 10,410Spouse’s Irish dividends (net) 1,700Florence Laurelio paid pension contributions of €4,660 in 2019.

Florence Laurelio's spouse is not a member of an occupational pension scheme but paid a contribution of€9,700 into a personal pension. Both are 28 years old.

They had allowable medical expenses of €1,300 in 2019.

Florence Laurelio and spouse are jointly assessed.

Requirement:Prepare Florence Laurelio's income tax computation (including PRSI and USC) for 2019.



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2157 John runs a newsagents and the following are his financial statements for the year ended 31 January 2019:

Notes € €Gross profit 105,531Deposit interest received 2,810Dividends received 4,300

112,641ExpensesWages and salaries 1 63,280Depreciation 7,100Legal fees 2 6,050Motor expenses 3 8,680Light, heat and telephone 4 8,380Bank interest 5 4,180Sundry expenses 6 2,390

(100,060)

Profit 12,581Notes

1 Wages and salaries €John’s drawings 15,400Preliminary tax paid for John 2,780Salary paid to John’s wife 16,700Staff salaries 28,400

63,280

2 Legal fees €Legal fees relating to purchase of new shop 2,170Drafting of staff employment contracts 1,170General legal fees – all allowable 2,710

6,050

3 Motor expenses €Cost of running the car 4,200Cost of running the van 3,800Courier delivery costs 680

8,680

The car is used by John. He estimates that the personal usage of the car is 40% of the total usage.

4 Light, heat and telephone €Heating and lighting 5,500Telephone cost 2,880

8,380

The electricity costs include personal electricity bills of €1,000 and €1,300 paid for repairs to the heating inthe shop.

The telephone costs include personal mobile phone bills of €700. John estimates that 10% of his homelandline phone bills relate to the business and they are not included above.

His total home phone bills amount to €720.



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5 Bank interest €Repayments of bank loan 3,700Bank charges on business current account 480

4,180

The repayments on the bank loan relate to the purchase of equipment for the business. The total amountrepaid includes interest of €1,110 and the balance relates to capital repayment.

6 Sundry expenses €Purchase of a new cash register 1,540Cost of cleaner for the shop 850

2,390

John has the following assets for use in the business: Cost (€)

Car (acquired y/e 31 January 2017) 25,000Fixtures and fittings (acquired y/e 31 January 2017) 29,800The car is a category E car.

John disposed of some of the fixtures and fittings during the year for €7,100 and replaced them with newfixtures and fittings costing €10,500.

The disposed of fixtures and fittings originally cost €10,500.

Requirement:Calculate John’s Schedule D Case I tax adjusted profit and capital allowances for 2019.



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2159 Susie (34 and single) runs an accountancy practice and has the following results for the year ended 31March 2019.

Income: Notes € €Fee income 238,440Dividends received from Irish company (net) 3,800

242,240Expenses:Depreciation 10,510Premises costs 1 9,300Advertising 2 1,630Subscriptions and donations 3 4,150Salaries 4 74,460Telephone and postage 5 3,640Travel and entertainment 6 19,720Light and heat 14,690Professional fees 3,180Loss on disposal of non-current asset 1,900Miscellaneous 7 25,200

(168,380)Profit 73,860Notes

1 Premises costs €Repaint premises 3,100New furniture for office 6,200

9,300

2 Advertising €Business listing in telephone directory 740Advertising for new staff 400Sponsor prizes for local competition 490

1,630

Susie agreed to sponsor a local competition and in return for donating prizes her business name wasincluded on all the posters.

3 Subscriptions and donations €Subscription for accountancy body 470Annual accountancy body subscription for staff 2,350Donation to Amnesty International 1,330

4,150

4 Salaries €Staff salaries 38,310Employer's PRSI 3,450Drawings 32,700

74,460

5 Telephone and postage €Landlines for business premises 1,680Mobile phones for staff 890Broadband for business 770



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Susie’s home phone bill 3003,640

20% of the home phone bill relates to business matters.

6 Travel and entertainment €Speeding tickets 330Motor lease expenses 13,200Business kilometre expenses 2,000Entertainment of customers 2,510Toll fees 380Staff Christmas party 1,300

19,720

The motor lease costs relate to a car that Susie leased in August 2017. The cost of the car was €30,000 andthe CO2 emissions were 164g/km.

7 Miscellaneous €Medical insurance for staff 1,460Pension contribution for Susie 21,390Public liability insurance 1,440Other miscellaneous - all allowable 910

25,200

The assets of the business were as follows:

(i) Office furniture - cost €15,420 acquired during year ended 31 March 2015;

(ii) Computers and equipment – acquired in 2014, cost €13,080; acquired in 2016, cost €5,190.

Susie sold some of the computer equipment before the end of the year. The equipment cost €5,190 inJanuary 2016 and she received €2,920 for it.

Susie purchased five new computers in March 2019 for €4,000 but, due to installation delays, they were notin use before May 2019.

Requirements:(a) Calculate Susie’s Schedule D Case II tax adjusted profit and capital allowances for 2019;

(b) Prepare Susie’s income tax computation (including PRSI and USC) for 2019.



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2160 Graham (48) is self-employed as an engineer. His financial statements for the year ended 31 May 2019show that he earned tax adjusted profits of €294,000 before deducting capital allowances of €20,580.

Graham’s wife, Nellie, does not work outside the home. She looks after the couple’s young children fulltime.

Graham made the following payments during 2019:

(i) Pension contributions of €26,450 to an approved retirement annuity contract;

(ii) Qualifying medical expenses of €1,820 for the family. The insurance company reimbursed Graham €1,200for medical expenses;

(iii) Permanent health insurance premium of €2,600;

Graham and Nellie have the following sources of income, all held jointly:

(i) Net deposit interest from an Irish bank deposit account of €240;

(ii) Net rental income of €7,040 from a property in Dublin. This is the amount after all allowable expenses;

(iii) Net rental income of €4,390 from an apartment in Manchester.

Graham also received net Irish dividend income of €260 during 2019.

Graham paid preliminary tax of €104,600 by cheque for the 2019 tax year on 28 October 2019. Graham’stotal tax liability for the 2018 tax year was €112,000.

Requirements:(a) Prepare Graham and Nellie’s income tax computation for 2019 (including PRSI and USC). They are jointly

assessed;

(b) Calculate whether Graham has paid sufficient preliminary tax in respect of 2019 to avoid interest charges.



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2161 Andy and his wife Amanda have been married for a number of years and have three children. During thattime they have been jointly assessed and Andy has been the assessable spouse.

The couple agreed on a formal separation on 1 August 2019.

It was agreed that, from that date, Andy will pay Amanda maintenance of €1,850 per month.

€740 of this amount relates to maintenance for the children with the balance being paid for Amanda’sbenefit. Amanda becomes the primary carer for the children.

They do not make an election for joint assessment after separation.

Andy is self-employed as an accountant. His financial statements for the year ended 30 September 2019show that he earned tax adjusted profits of €101,900 after deducting capital allowances.

Andy made the following payments:

(i) Qualifying medical expenses of €880 for the family. Andy has been reimbursed €350 of these expenses bythe medical expense insurers.

The entire amount of the expenses relate to their youngest child;

(ii) Permanent health insurance premium of €828 per month

Andy has additional income for 2019 as follows:

(i) Irish dividend received on 4 February 2019 of €380 net, which was the final dividend for the year ended 31December 2018;

(ii) An interim dividend for the year ended 31 December 2019 on 4 June 2019 of €280 net.

Andy had acquired a residential property for rental on 1 April 2018 for €417,000. The property was first let on31 May 2018 for a rent of €1,380 per month.

The property was registered with the Residential Tenancies Board.

The lease on the property ran out on 1 May 2019 and, as Andy and Amanda split up soon after, it was neverre-let. Andy moved into the property to live.

Andy paid insurance of €600 for 2019 and spent €3,000 having the property repainted after the tenantsmoved out.

Amanda is employed as a bookkeeper. She earned a salary of €32,900 gross during 2019 and paid PAYE of€3,948.

Requirement:Prepare Andy and Amanda ’s income tax computations for the year ended 31 December 2019 (ignore PRSIand USC).



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2162 Andrew and Lilly are married and have the following transactions during 2019:

(i) Andrew disposed of a property in February 2019. He had purchased the property for €210,600 in lateJanuary 1995.

He incurred legal fees and auctioneer fees of €5,980 when he purchased the property. He sold it for€413,513 and incurred fees of €5,370.

(ii) Lilly disposed of a house that she had purchased in June 1970 for €5,870. She rented the house out for theentire period of ownership. The value of the house at 6 April 1974 was €7,720.

She spent €48,600 on new windows and roof for the property in March 1999. She sold the property on 3September 2019 for €260,339 and paid legal fees of €4,590.

(iii) Lilly sold a diamond necklace that had been a gift from Andrew. Andrew purchased the necklace in February1994 for €2,418.

Andrew gave the necklace to Lilly for their 25th wedding anniversary in March 2005, when it was valued at€4,690.

Lilly sold the necklace for €7,099 in June 2019.

Requirements:(a) Calculate the capital gain tax liability for Andrew and Lilly for 2019.

(b) Advise when the CGT must be paid.


Section D


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2164 Patrick and Paulina are married and have the following transactions during 2019:

(i) Patrick purchased commercial premises as an investment property in February 1992 for €171,000.

During February 2001, he spent €34,200 on the following: general repairs - €7,180 and new roof andwindows - €27,020.

The property was sold on 31 May 2019 for €405,597.

(ii) Paulina sold a number of items in November 2019:

1. She sold three televisions with DVD players for total proceeds of €818;

2. She sold an antique painting for €3,215. The painting originally cost €1,438 on 15 March 1995;

3. She sold her car for €7,270. She purchased the car for €13,980 in May 2016.

(iii) Patrick sold an apartment to his son on 15 August 2019 for €164,100. He purchased the apartment in March1998 as an investment for €143,000.

The market value of the apartment at the date of sale was €252,366.

(iv) On 15 February 2019, Paulina sold an antique diamond ring for €8,325. She bought the ring for €4,730 inJune 1995.

Requirements:(a) Calculate the capital gains tax liability for Patrick and Paulina for 2019.

(b) Advise the relevant payment dates for any tax arising.



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2165 Marcellus and Mandy are married and jointly assessed. They have the following transactions for 2019:

(i) Marcellus inherited a property from his father during 2009. His father bought the property in 1991 for€35,520. The value of the property when Marcellus inherited it was €222,000.

He sold the property in August 2019 for €252,999.

(ii) Mandy purchased shares in January 2000 for €13,670. She sold the shares in August 2019 for €12,178.

(iii) Marcellus sold ten acres of land for €47,000 in July 2019. The ten acres were part of a 30 acre site he hadpurchased in January 1993 for a total price of €55,000.

He incurred legal fees on the purchase of €2,000. The value of the remainder of the land at the date of salewas €158,000.

Requirements:(a) Calculate the capital gains tax liability for Marcellus and Mandy for 2019.

(b) Marcellus has also asked what capital gains tax his father should have paid.

(c) Advise Marcellus in relation to the date(s) that the CGT liability falls due.



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2167 Vance and Susie had the following transactions in 2019:

(i) They sold their house for €866,810 on 1 May 2019. They had purchased the house on 1 March 1992 for€199,000. Over the next few years the following occurred:

1. On 1 May 1996, they moved to Galway as a result of Vance’s work for his employer. They rented out thehouse during this time but returned to live in the house on 1 June 1999;

2. When they returned to live in the house, they spent €190,000 building an extension to the house consisting ofa new kitchen and an additional bedroom during the tax year 99/00;

3. They remained in the house until 1 January 2003 at which time Vance retired and they moved to Spain.However, they missed family so returned to live in Ireland on 31 March 2006;

4. On their return in 2006, they spent €28,600 upgrading the windows in the house and putting in a new heatingsystem;

5. They continued to live in the house until 1 May 2019.

(ii) Before selling the house, Susie sold the following:

1. An antique table for €2,730 in November 2019. She had purchased the table in February 1996 for €1,592;

2. Household items as follows: television and stereo €561, fridge, washing machine and cooker - €464.

After selling their house, they had intended to live in another house that they had owned for a number ofyears. They purchased the house in May 2013 for €208,900.

However, before moving in they decided it was too big for their requirements.

Instead, they agreed to swap the house in October 2019 for their son’s apartment (now that he had childrenhe required more space).

He had lived in the apartment all of the time that he owned it. The value of their son’s apartment was€261,200 at the date of the swap. The house was valued at €360,460.

Requirements:(a) Calculate the capital gains tax liability for Vance and Susie for 2019 giving details of when the payment and

return filing dates for any CGT arising.

(b) Explain what liability their son might have, if any.



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2169 Jeremy and Sorcha have the following transactions during 2019:

(i) They sold a house in Dublin that they had lived in as their principal private residence. They purchased thehouse in April 1965 for €2,600.

The value of the house at 6 April 1974 was €4,000.

They lived in the house from the date that they had purchased it until 30 June 1985. At that date, Ivor wasrequired to move to Sligo with his job so they rented the house out.

They remained in Sligo until 31 March 1990 and returned to live in the house after that date.

Jeremy was required to move to London with his job from 1 August 1998 until 31 August 2001. When theyreturned, they lived in the house until 30 April 2005 when Jeremy retired.

At that date they purchased another house in Sligo and moved there to live. They sold their house in Dublinon 5 March 2019 for €156,600.

(ii) Sorcha sold 5,700 shares in Kenston for €51,300.

She had the following holdings of shares in the company - 3,000 shares purchased on 5 July 1994 for€23,433 and 6,000 shares purchased on 9 March 2000 for €38,427.

She sold the shares in August 2019.

Requirements:(a) Calculate the capital gains tax liability for Jeremy and Sorcha for 2019.

(b) State when they must pay capital gains tax.



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831 Bolton purchased an office building on 1 January 2019. The company let out the building on 1 May 2019 ona 12 year lease.

The annual rent was €37,200 and the company also charged a premium of €120,000.

The only expense was interest on borrowings drawn down to finance the purchase. The interest for the yearended 31 December 2019 amounted to €7,020.

What is the amount of Case V income that should be included in Bolton’s corporation taxcomputation for the year ended 31 December 2019?


Section E


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2170 Weafer manufactures and distributes pet food. The results for the company for the year ended 30 June 2019are as follows:

Notes € €Sales revenue 430,308Cost of sales (193,880)Gross profit 236,428ExpensesWages 116,100Rent and rates paid 24,600Post and stationery 1,370Motor expenses 1 28,180Subscriptions and donations 2 8,840Professional fees 3 9,490Profit on disposal of non-current assets (3,120)Irrecoverable debts 4 5,480Sundry 5 6,410Depreciation 96,400

(293,750)Other income 6 5,300Loss (52,022)

Notes1 Motor expenses €

Expenses for managing director’s car 10,160Staff business kilometre expenses 5,910Running company vans 6,870Parking fines and speeding tickets 5,240

28,180

The managing director has a car that the company leased from 1 October 2017. The original market value ofthe car was €29,000 and CO2 emissions are 140g/km.

Included in the running expenses are lease payments of €6,100.

2 Subscriptions and donations €Chamber of Commerce 1,630Sponsorship of local rugby team 2,450Charitable donation to eligible charity 930Political donation 3,830

8,840

As part of sponsoring the local rugby team, the company advertising banner was displayed at all the localrugby matches.

3 Professional fees €Audit and accountancy Fees 5,720Legal fees for collection of debts 3,200Legal fees in relation to dispute with customer 570

9,490

4 Irrecoverable debts € €Opening specific allowance (6,890)



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Closing specific allowance 7,9301,040

Irrecoverable debts written off 8,250Irrecoverable debts recovered (3,550)Opening general allowance (5,340)Closing general allowance 5,080

(260)5,480

5 Sundry €Interest paid to Revenue for late payment of VAT 3,840Staff Christmas lunch 1,170Client Christmas presents 1,400

6,410

6 Other income €Dividend received from Irish resident company 5,300

The original cost and tax written down value of the assets at 1 July 2018 are as follows:

Purchased (y/e) OriginalVan 30 June 2014 50,800Van 30 June 2016 61,300Fixtures and fittings 30 June 2017 70,400Computer and office equipment 30 June 2017 32,500During the year ended 30 June 2019, the company acquired and disposed of the following assets:

(i) DisposalThe van acquired on 30 June 2014 was disposed of for proceeds of €23,500.

(ii) Acquisitions Cost (€)Van 25,900Computer system 26,400The company invested heavily in a new computer system during the year but, due to some technicaldifficulties, the system was not in operation by the end of the year.

Requirements:(a) Calculate the tax adjusted profits for the company for the year ended 30 June 2019.

(b) Calculate the capital allowances for the year ended 30 June 2019.

(c) Calculate the corporation tax for the year ended 30 June 2019.



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2171 BBB is a company that had the following results for the year ended 30 November 2019:

Notes € €Sales revenue 265,328Cost of sales (141,920)Gross profit 123,408Other income 1 187,380

310,788ExpensesDirectors' remuneration 50,700Wages and salaries 101,400Pension contributions 2 26,020Insurance 44,300Light and heat 29,000Telephone 12,500Motor expenses 3 8,130Professional fees 4 15,650Bank interest and charges 8,300Irrecoverable debts 5 28,600Sundry expenses 6 13,120Depreciation 47,700

(385,420)Loss (74,632)Notes

1 Other income €Rental income 65,700Deposit interest (received without deduction of DIRT) 9,110Gain on disposal of property (note 7) 112,570

187,380

2 Pension contributions €Paid in respect of employees 15,210Paid in respect of directors 7,610Closing accrual 3,200

26,020

3 Motor expensesMotor expenses include parking fees of €550, parking fines of €620, speeding tickets of €620 and car tax of€920 paid for the directors’ cars.

All the other motor expenses relate to the running costs for the company’s fleet of vans and the sales staffcompany cars.

4 Professional fees €Audit and accounting fees 2,730Solicitor's fees relating to the disposal of property (see note 7) 8,990Sundry allowable legal fees 3,930

15,650

5 Irrecoverable debts



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One of the major customers of the company went into liquidation during the year owing the company€21,900. This amount has been provided for in full.

In addition, there was an increase in the general allowance of €6,700.

6 Sundry expenses €Donation to eligible charity 1,250Interest on late payment of PAYE and VAT 2,810Client entertainment 6,390Subscription to political party 1,010Staff Christmas party 1,660

13,120

7 Capital gainBBB owned a property which has been let for a number of years. However, due to an economic downturnduring the current financial year, it was decided to sell the property.

The proceeds for the disposal were €373,176. The property was originally purchased for €200,000 in July1993.

In June 2001, the company incurred costs of €68,000 replacing the roof on the property.

8 Capital allowancesCosts and closing tax written down values respectively at 30 November 2018 were as follows:

€ €Motor vehicles (see additional information) 84,100 31,500Plant and machinery (purchased 2015) 202,800 101,400Company vans (purchased 2017) 55,500 41,625Computer equipment (purchased 2018) 41,600 36,400Additional information in relation to the cars:

Car Date of purchase Cost (€) CO2 emissions (g/km)1 1 January 2018 29,300 1402 1 July 2018 26,800 1703 1 June 2018 28,000 200

Requirements:(a) Calculate the Schedule D Case I income for the year ended 30 November 2019;

(b) Calculate the corporation tax for the year ended 30 November 2019.



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2173 Byway is a small Irish resident company. The statement of profit or loss for the 18 months ended 31December 2019 is set out below:

Notes € €Gross profit 156,177Other incomeDiscount received 4,300Deposit interest (gross - without deduction of DIRT) 1 5,200Profit on sale of land 2 33,700

199,377ExpensesWages 3 46,000Telephone expenses 4 7,200Motor expenses 10,400Leasing expense - car 5 5,800Depreciation 25,330Repairs 6 17,400Irrecoverable debts 7 4,530Legal and professional fees 8 6,840Entertainment 9 5,600Sundry expenses 10 4,800Other allowable expenses 20,920

(154,820)Profit 44,557

Notes1 Deposit interest of €5,200 was earned in the six month period to 31 December 2019.

2 The company sold land on 30 June 2019 for €86,100. Auctioneers fees payable on the sale were €2,510. Ithad bought the land in February 2008 for €52,400.

3 Wages include €9,200 in respect of directors’ salaries.

4 Telephone includes personal telephone bills paid for the managing director of €800.

5 The leased car is used by the managing director. The original cost of the car was €36,000 and it is aCategory C car.

6 Unexpected repair expenditure of €5,750 was incurred on the heating system during the year.

In light of the engineer’s report, which highlighted the poor state of the main pump, the directors felt it wasprudent to make a general provision of €4,880 for future repairs that might arise.

As this amount is not material in the financial statements, the auditors have agreed that it can be included

7 Irrecoverable debts include a new specific allowance of €500 and a decrease in the general allowance of€730.

8 Included in legal fees are the following expenses: €

Solicitor’s fee incurred in drawing up contracts of employment 2,580Solicitor’s fee relating to disposal of land 3,020

9 Entertainment includes €900 client entertaining and €1,800 for the staff Christmas party.

10 Sundry expenses include interest on late payment of VAT of €1,640, clamping fines of €720.

Details of assets are as follows (TWDVs are at 1 July 2018):Asset Date of purchase Cost (€) TWDV (€)



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Plant and machinery Jan 2016 38,900 24,312Motor vehicle (Category D) Jun 2016 24,600 7,500Fixture and fittings Jun 2018 30,500 26,687

Requirements:(a) Prepare the corporation tax computations for the period ended 31 December 2019;

(b) Identify the relevant corporation tax pay and file dates for the company.



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2174 Omega Limited is a company that has the following shareholders:

Number of ordinary shares

Mr Farmer 300Mrs Farmer 370Mr Trader 679Mr Flynn 776Mr Talbot 620Mr Griffins 580Mr Bush 776Mr Farmer junior 220Mr Clinton 892The Farmer family trust 565The remainder of the shares are held by small shareholders with less than 100 shares each. The total sharecapital is 9,700 ordinary shares.

You may assume that all Farmers mentioned are related. None of the individuals listed above are directorsof the company.

Requirement:Explain whether Omega Limited is a close company.



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2176 Fancorio is a close company. During the year, it paid the following expenses on behalf of the followingindividuals:

(i) Medical insurance premiums paid on behalf of Joe Simpson, who is a director of the company and owns 10%of the share capital of the company;

(ii) Holiday expenses paid on behalf of Reuben Romano, who is not a director of the company and owns 8% ofthe share capital;

(iii) Medical expenses on behalf of Marie Flaire, who is not an employee of the company but whose spouse owns5% of the share capital.

Requirements:(a) Explain the corporation tax treatment for each of the payments above.

(b) Explain the income tax implications for the individuals benefiting from the expenses.



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2177 Drumm has received loans from the following shareholders:

Director ShareholdingLoan

advanced (€)Mr Henry 15% 3,100Mr Davidson 10% 5,500Mr O'Donoghue 2% 2,500Mr Sheedy 14% 5,000

The company agreed to pay interest of 9% to each of the directors on the amounts advanced and all of theloans were outstanding for the full year.

The nominal value of the issued share capital of the company is €4,600.

Requirements:(a) Calculate the amount of interest allowable in the corporation tax computation;

(b) Outline how the balance of the interest payment will be treated.

Show a breakdown of the figures for each shareholder.



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2178 Munster is a company that had the following results for the years ended 31 December 2018 and 2019:

2018 2019€ €

Trade 1 19,200 (70,100)Trade 2 17,100 12,100Case V income 9,400 9,400Case III interest income 8,500 7,600

Requirement:Calculate the corporation tax for the years ended 31 December 2018 and 2019 making maximum use of thelosses available.



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2180 Phantom is a company that has the following results for the nine months ended 31 December 2017 and theyears ended 31 December 2018 and 2019:

2017 2018 2019€ € €

Trade 1 48,300 (156,200) 32,000Trade 2 45,500 46,200 38,700Case IV (gross) 2,100 2,200 1,700Case V 6,900 (3,400) 4,800

DIRT was deducted from the deposit interest. For the purpose of this question, assume that a 35% rate ofDIRT applies in all years.

Requirement:Calculate the corporation tax for all accounting periods making maximum use of the losses available.



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2182 Coco is a company that has the following results for the years ended 31 October 2018 and 2019:

2018 2019€ €

Case I 16,960 17,810Case III 1,970 1,740Case V 4,130 2,850Chargeable gain (adjusted) 6,860The company paid non-trade charges of €9,800 during the year ended 31 October 2018 and €4,270 duringthe year ended 31 October 2019.

Requirement:Calculate the corporation tax for both accounting periods.



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2183 Eagle has the following results for the years ended 30 April 2018 and 2019:

2018 2019€ €

Case I 28,700 31,200Case V 16,800 11,200The company paid trade charges of €46,880 in both years.

Requirement:Calculate the corporation tax for both accounting periods.



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2184 Bolton manufacture and supply fitted furniture. Sales for November/December 2019 amounted to €35,021net of VAT, analysed as follows:

€

Net sales of goods at standard rate (23%) 18,265Net sales of services at reduced rate (13.5%) 16,756

35,021

The company also sold a van for €6,048 and a car for €6,700. No input credit was available on purchase ofthe car. An input credit was claimed at time of purchase of the van.

The outgoings for November/December 2019 were: €Purchase of a van 13,700Purchase of a motor car (note 1) 17,100Motor expenses (note 2) 5,560Computer equipment (note 4) 11,170Wages 36,100Telephone 2,670Electricity (note 3) 4,270Other allowable business expenses 4,360

Notes1 The company purchased a new car. The emissions are 155g/km and it is used 80% of the time for business

purposes.

2 Motor expenses include the following: €General repairs 1,900Petrol 1,760Diesel 1,900

5,560

The petrol and diesel expenses include VAT at 23%; the general repairs include VAT at 13.5%.

3 All of the other purchases include VAT at 23% except for the electricity which include VAT at 13.5%.

4 The computer equipment was purchased on 10 November 2019 for use in the business. However, it wasfound to be unsuitable and was sold on 20 December 2019 for €2,594.

Requirement:Calculate the VAT payable by Bolton for November/December 2019.


Section F


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2185 Indogroup provides you with the following details in relation to November/December 2019:

€Sales invoiced 193,940Cash sales (from sales book) 52,220Lodgements 149,180You are given the following details in relation to the above figures:

(i) The lodgements include the sale of zero-rated goods totalling €18,650. All of the remaining sales are at thestandard rate;

(ii) The lodgements also include a VAT refund from the Revenue Commissioners in respect of an earlier periodfor €13,680;

(iii) There were cash payments of €7,460 made out of cash received before the lodgements were made.

Details from the purchases book for the period show the following:

€Purchases at standard rate 117,200Purchases at reduced rate (13.5%) 31,650Purchases at zero rate 46,880The purchases figures above include the relevant VAT.

You are given the following details in relation to the purchases figures:

(i) The zero-rated purchases include a purchase from a French supplier for €14,400;

(ii) The standard rate purchases include inventory for the business. Inventory, which cost €14,700 (excludingVAT), was donated to a local charity.

Not included above was the sale of a van to a private individual. The proceeds received amounted to€8,900. The company claimed VAT on the van when it was purchased.

Requirement:Assuming that Indogroup accounts for VAT on the cash receipts basis, calculate the VAT due forNovember/December 2019.



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2187 Zoe Smith is in business and the following are the details of transactions for November/December 2019:

€Invoices issued to customers 93,193Cash sales 45,665Zoe Smith lodged a total of €152,030 into the bank account during the two months. This included proceedsfrom the sale of the spouse's car of €13,700 and a loan from the credit union to get some work done on thehouse of €20,200.

There was a further amount transferred directly into the account by customers totalling €19,800. Thisincluded payment from a customer who transferred the amount he owed twice. Zoe Smith agreed to returnthe second payment of €1,780.

Zoe Smith took drawings out of the business of €1,130 per month. This was all taken in cash before thelodgements were made.

The purchases for the period were €133,169, inclusive of standard rate VAT. This included the following:

(i) Total petrol cost was €1,400. 80% of the usage of the car is personal and this represents all of the petrolcosts for the car;

(ii) Diesel costs amounted to €630. This relates to the business van. Zoe Smith uses the van 30% for personalusage.

The purchases, inclusive of VAT at reduced rate (13.5%), were €18,010. This included payment to a painterand plumber for work done on a holiday home amounting to €2,890.

Zoe Smith also obtained some legal advice from a UK solicitor in relation to a dispute that arose with a UKsupplier.

An invoice for €890 was received but there was no VAT component on it. This is included in the standardrate purchases above.

Requirement:Assuming that Zoe Smith accounts for VAT on a cash receipts basis, calculate the VAT liability forNovember/December 2019.



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2188 Marty has approached you to ask your advice in relation to the VAT implications of the business he is settingup. He plans to sell goods through an internet website.

Having done some market research, he feels he will have a good market in both Ireland and the UK. All ofhis customers will be unregistered individuals.

At the moment, Marty lives in London but is contemplating returning to Ireland. He asks you to explain theIrish VAT implications of setting up the business either here or the UK.

Requirements:(a) If Marty is based in Ireland, when does he have to register for VAT in Ireland?

(b) If Marty is based in the UK, when will he have to register for VAT in Ireland?

(c) If Marty is based in Ireland and sells goods into the UK, when will he have to pay UK VAT?



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2190 Kevin has provided the following details for his November/December 2019 VAT figures. He would like youradvice on how to deal with the issues identified below.

Purchases(i) Purchases for resale at standard rate were €137,070 (VAT inclusive). This includes goods to the value of

€4,770 that Kevin took out of the business for personal use;

(ii) Purchases not for resale at standard rate were €33,640 (VAT inclusive);

(iii) Purchases not for resale at reduced rate (13.5%) were €19,730;

(iv) Exempt purchases not for resale were €18,700.

The following issues have been identified in relation to purchases not for resale:

(i) The standard rate purchases not for resale included an invoice that was entered as €6,930 plus VAT insteadof €7,420 plus VAT;

(ii) The cost of petrol and diesel totalling €4,578 is included in the standard rate purchases not for resale figure.The petrol accounts for €1,610 (plus VAT) of this;

(iii) The exempt purchases include goods bought from the EU for €7,300 and there was no VAT charged onthem.

SalesKevin commenced his business on 1 January 2019. He informs you that he has accounted for VAT on hissales on a cash receipts basis.

However, having checked his VAT registration, you notice that he has not applied for this basis. Anadjustment is therefore required to rectify this in the November/December VAT return.

The total trade receivables outstanding at the end of the year are €7,860. The total amount for invoicesissued in November/December is €202,400 including VAT.

Cash received in November/December amounted to €180,704.

All of the sales are at the standard rate.

Requirement:Calculate the VAT liability for November/December 2019 including the adjustment required for theunauthorised use of the cash receipts basis from 1 January 2019.



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2191 You are a Revenue auditor. You have been given the annual VAT return of Boris Smith's company togetherwith the annual financial statements.

Your supervisor is concerned that the returns are not correct and has asked you to prepare an estimatedreturn based on the accounts.

VAT return year ended 31 December 2019 €VAT on sales 256,480VAT on purchases 143,912Net payable 112,568Total goods to other EU countries nilTotal goods from other EU countries 296,528The following are details of Boris Smith's financial statements for the years ended 31 December 2019 andcomparative 2018:

Statement of profit or lossNotes 2019 2018

€ €Sales revenue 1 830,000 741,000Cost of sales 2 (572,700) (511,300)Gross profit 257,300 229,700Other expenses 3 (157,650) (144,580)

99,650 85,120Dividend received 5,900 6,270Profit before tax 105,550 91,390Taxation (9,500) (10,970)Profit after tax 96,050 80,420Dividend expense (7,700) (3,300)Retained profit 88,350 77,120

Statement of financial positionNotes 2019 2018

€ €Noncurrent assets 4 184,100 160,000Current assetsInventories 143,180 122,800Trade receivables 199,200 185,250Bank and cash 34,400 48,400

376,780 356,450Current liabilitiesTrade payables 68,000 60,300Other payables 55,760 107,380

123,760 167,680Net assets 437,120 348,770EquityShare capital 35,700 35,700Retained earnings 401,420 313,070

437,120 348,770Notes

1 The company is authorised to account for VAT on the cash receipts basis.

2 50% of purchases are from EU suppliers. The remainder are supplied by Irish suppliers.

3 Expenses include the following: 2019 2018



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€ €Wages 88,730 84,500Rent 35,300 33,300Light and heat 2,820 2,630Miscellaneous expenses 7,600 7,910Depreciation 23,200 16,240

157,650 144,5804 Tangible noncurrent assets Plant Vehicles

Cost € €At 1 January 2019 197,500 24,300Additions 23,300 24,000At 31 December 2019 220,800 48,300DepreciationAt 1 January 2019 49,400 12,400Expense for the year 11,100 12,100At 31 December 2019 60,500 24,500Carrying amountAt 31 December 2019 160,300 23,800

The vehicles comprise of two cars used by company salesmen. They do not qualify for any VAT input credit.

5 The VAT rate applicable to supplies and acquisitions of goods and services is 23% where appropriate exceptfor (a) light and heat where the 13.5% rate applies, and (b) rent where no VAT applied.

6 It can be assumed that all EU customers and suppliers are VAT-registered.

Requirements:(a) Calculate the VAT liability of Boris Smith for 2019.

(b) Compare your figures with the return made by the company. Outline your conclusions to your superior.



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INNOTE TO USERS ABOUT THE CONTENT OF THIS DOCUMENT

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This document is intended to serve as an educational aid for ATI students. For this reason, the solutionspresented herein may include more detail than might be expected of a candidate in an ATI examination.

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2135 Solution(a) Tax residence

An individual is resident in Ireland for a tax year if he is present in Ireland for

183 days or more in a tax year; or

280 days or more in two consecutive tax years (known as the 280 day rule).

A person is regarded as being present in Ireland if he is present at any time during a day.

In connection with the 280 day rule, a person will not be regarded as resident for a tax year in which he hasspent less than 30 days in total in the State.

(b) Ordinarily resident

A person is ordinarily resident in Ireland for a tax year if he has been resident for all of the three previous taxyears.

A person will cease to be ordinarily resident only after he is non-resident for three consecutive tax years.

Domicile

Domicile is a legal concept and is not defined in tax legislation. A person cannot be without domicile.

A domicile of origin is where the person was born. A child will acquire the domicile of his father, or if thechild’s parents are not married, the child’s domicile will be the same as the mother.

A person may acquire a new domicile of choice. The onus is on the person to prove that he has abandonedhis domicile of origin and a new domicile has been acquired.

The person must show an intention to reside in the new country of domicile indefinitely.

Taxation implications:

(i) Being Irish resident and Irish domiciled

The individual will be taxed on worldwide income.

(ii) Being Irish resident and non Irish domiciled

The individual will be taxed on the remittance basis - all Irish sources of income, foreign income to the extentthat it is remitted/brought into Ireland and employment income earned where the duties of employment arecarried out in Ireland.

(iii) Being non resident but ordinarily resident in Ireland

The individual will be taxed on worldwide income, excluding:

(a) income earned from duties of employment and self-employment carried on outside the State; and

(b) foreign investment income if it is less than €3,810.


Section A


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2137 SolutionIn order to be considered resident in Ireland for income tax purposes, a person must be in Ireland for:

183 days or more in a tax year, or

280 days or more in two consecutive tax years (known as the 280 day rule).

A person is regarded as being present in Ireland if he is present at any time during a day.

In connection with the 280 day rule, a person will not be regarded as resident for a tax year in which he hasspent less than 30 days in total in the State.

(a) The table below sets out the number of days that Roy has spent in Ireland since 2017.

Tax year Dates Days Resident Ordinarilyresident

2017 32 NO NO2018 19 Jul 2018 to 31 Dec 2018 166 NO NO2019 1 Jan 2019 to 31 Dec 2019 325 YES NOAs Roy is a US citizen, it is assumed that he is also domiciled in the US and does not intend to change this.

(b) The income tax implications of Roy’s time in Ireland are as follows:

2017Roy spent 32 days in Ireland in 2017. He was therefore not resident in Ireland in 2017.

He is taxed on Irish source income only, for example, income from an Irish rental property, an Irish bankaccount or a trade/profession/employment that is exercised in Ireland.

2018Roy moved to Ireland on 19 July 2018. He therefore spent 166 days in Ireland in 2018. This is less than 183days in one tax year.

Roy spent 32 days in Ireland in 2017 so therefore spent 198 days in Ireland in 2017 and 2018 combined.

Roy does not meet the 280 day rule. He is therefore not resident in Ireland for 2018.

He is taxed on Irish source income only for 2018.

2019Roy spent 325 days in Ireland in 2019. He is therefore resident in Ireland in 2019.

As he is not ordinary resident or domiciled in Ireland, he is subject to income tax in Ireland on the remittancebasis.

The remittance basis of assessment means that he is subject to income tax on the following:

(i) Irish source income;

(ii) Foreign income remitted into Ireland;

(iii) Employment income earned where the duties of employment are carried out in Ireland.

As the duties of Roy’s employment are being carried out in Ireland, the salary of €246,000 is subject toincome tax in Ireland in 2019.

As he has not remitted the UK dividend income or US rental income to Ireland (they have been lodged to hisUK and US bank accounts respectively), he is not subject to Irish income tax on this income.



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2138 Solution(a) The system applies to subcontractors working in the construction industry, forestry operations and meat

processing industries.

It places an obligation on the ‘principal contractor’ to deduct withholding tax of 0%, 20% or 35% frompayments to subcontractors.

The withholding tax deducted is paid to the Revenue Commissioners by the principal contractor.

The subcontractor is then entitled to offset the withholding tax against tax liabilities owed to the RevenueCommissioners.

(b) Relevant Contracts Tax applies to relevant operations, which includes:

1. Construction, alteration, repairs, extension, demolition or dismantling of buildings or structures;

2. Installation in a building of a system of heating, lighting, air conditioning, sound proofing, ventilation, powersupply, drainage, sanitation, water supply and burglar or fire protection;

3. Development of land;

4. Construction, alteration, repairs, extension or demolition of any works forming part of the land, includingwalls, road works, power lines, telecommunications systems, water mains;

5. External or internal cleaning of a building so far as carried out as part of the construction, alteration, repairs,extension of the building;

6. Forestry operations and meat processing operations.

(c) The principal contractor is required to notify the Revenue Commissioners through ROS when he enters into arelevant contract with a subcontractor (referred to as contract notification).

The principal contractor should establish the identity of the subcontractor engaged on a relevant contract.

The Revenue Commissioners will acknowledge the contract notification and advise the principal contractor ofthe rate of RCT applicable to the subcontractor.

In general, the rate advised will depend on the subcontractor’s tax compliance record. A subcontractor, whohas a good compliance record and qualified for 0% rate prior to the introduction of the online system, willcontinue to receive payments with 0% RCT deducted.



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2139 SolutionProfessional Services Withholding Tax (PSWT) is required to be deducted by accountable persons making apayment to an individual or company for professional services.

Accountable persons are generally public / state bodies, including:

All Government departments;HSE;RTE;ESB;An Bord Bia;Semi state bodies;State sponsored bodies.Professional services include:

Medical, dental, pharmaceutical, optical, veterinary;Architectural, engineering and surveying;Accountancy, auditing, financial services, marketing, advertising and consultancy;Solicitors, barristers;Training services on behalf of SOLAS.Examples:

A solicitor providing legal services to a Government body;Doctors receiving payments from the HSE for providing services to patients under the medical card scheme;

An engineer providing services to the ESB;An advertising company receiving payment for services provided to RTE.Mairead should receive a certificate (Form F45) confirming the gross payment due to her business and the PSWT deducted from the payment (which should be based on the VAT-exclusive amount of the payment.

The gross payment should be included in Mairead’s income tax computation.

Mairead is also entitled to include a refundable tax credit for the PSWT deducted from the payment. Maireadwill therefore receive a refundable tax credit for the PSWT in her income tax computation.



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2141 Solution(a) A taxpayer has three options available to calculate the preliminary income tax payment that is required to be

paid for a tax year:

1. 90% of the current year’s final income tax liability;

2. 100% of the preceding year’s final income tax liability;

3. 105% of the pre-preceding year’s income tax liability.

The105% option is only available if the direct debit option is used and it cannot be used if the tax liability forthe pre-preceding year was nil.

(b) The Revenue Audit is used by the Revenue Commissioners to examine and verify the amounts/returns beingsubmitted by taxpayers.

It allows the Revenue Commissioners to carry out a detailed examination of the items included on a taxreturn to ensure that the income and claims for allowances and credits are correct.

The system is required because the self-assessment system is based on the taxpayer’s calculations anddeclarations.



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2145 Solution

Jeremiah €Property 1 (w2) 3,419Property 2 (w2) 20Commercial property (w4) 9,529Assessable Schedule D Case V income 12,968

Workingsw1Mortgage interest - residential property 2In order to claim relief for interest paid on an Irish rental property, each tenancy must be registered with theResidential Tenancies Board (RTB).

As Jeremiah has not registered the new tenancy with the RTB, he can only claim interest relief for interestpaid on the tenants occupying the property from January to April 2019.

€ €€6,320 x 4/12 2,107

w2 Property 1 Property 2

Residential Case V income € €Rental income 18,000 8,845Expenses:Mortgage interest (11,900)Mortgage interest (w1) (2,107)Insurance (1,055) (1,790)Cleaning (371) (1,316)Repairs (839) (1,934)Light and heat (416) (1,678)Profit or loss 3,419 20

w3Commercial property mortgage interest €Mortgage interest paid 4,290Disallowed pre-letting expense (from June to September) (1,839)

2,451w4Commercial Case V income € €Rental income (€1,200 x 4) 4,800Premium (€41,000 x (51 - 40)/50) 9,020

13,820Allowable expenses:Mortgage interest (w3) (2,451)Estate agent fees (850)Legal fees (990)

(4,291)9,529


Section B


2260 Solution (a) Ennio Hughes

Income tax computation for 2019 € €

Schedule D Case IV deposit interest (€690 / 65%) 1,062 Schedule E employment income (w1) 68,150 Schedule F dividend income (€560 / 80%) 700

69,912 Charges: Covenant (8,750)

61,162 Taxation: €35,300 x 20% 7,060 €1,062 x 35% 372 €24,800 x 40% 9,920

17,352 Non-refundable tax credits: Personal tax credit 1,650 PAYE tax credit 1,650 DIRT deducted (€1,062 x 35%) 372 Tuition fees ((€3,350 - €1,500) x 20%) 370

(4,042) 13,310

Tax on covenant (€8,750 x 20%) 1,750

Refundable tax credits: PAYE paid 13,880 Dividend withholding tax (€700 x 20%) 140

(14,020) Tax liability outstanding 1,040

Tutorial notes: The covenant is allowable in full because Mary Jo is a permanently incapacitated adult. Relief for private health insurance is given at source. It is not required to be included in the income tax computation. As Ennio Hughes was not away from his employer’s place of business for at least 70% of the time, he is not entitled to the 20% deduction in the BIK.

Workings w1 Schedule E employment income - Ennio Hughes € Salary 49,300 Commission (€10,410 - €1,880) 8,530 BIK - company car (€34,400 x 30%) 10,320

68,150 Tutorial note:

The €1,880 commission earned in 2019 but paid only in 2020 is included in Ennio's income tax computation for 2020 (receipts basis of assessment).

(b) Mary Jo Income tax computation for 2019

€ € Schedule D Case IV covenant income 8,750 Schedule E employment income 7,300

16,050 Taxation: €16,050 x 20% 3,210

Non-refundable tax credits: Personal tax credit 1,650 PAYE tax credit (€7,300 x 20%) 1,460 Medical expenses (€2,040 x 20%) 408

(3,518) nil

Refundable tax credits: Tax paid on covenant (€8,750 x 20%) (1,750) Tax refund receivable 1,750

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2146 Solution

Marty and ZeldaIncome tax computation for 2019

Marty Zelda Joint€ € €

Schedule D Case IV deposit interest (w1) 943 943 1,886Schedule D Case V rental income (w3) 3,759 3,759 7,518Schedule E salary 134,000 134,000Schedule E benefit in kind (company car) (w4) 12,210 12,210Schedule E benefit in kind (leisure centre) 1,200 1,200

152,112 4,702 156,814Taxation:€44,300 x 20% 8,860

€1,886 x 35% 660€110,628 x 40% 44,251

53,771Non-refundable tax credits:Married persons tax credit 3,300PAYE employee tax credit 1,650Medical expenses (w6) 368DIRT deducted (€1,886 x 35%) 660Home carer tax credit (w5) 1,500

(7,478)46,293

USC:Marty€12,012 x 0.5% 60€7,862 x 2% 157€50,170 x 4.5% 2,258€81,125 x 8% (exclude deposit interest from which DIRT deducted) 6,490

8,965ZeldaIncome is below the €13,000 total income threshold for USC.

PRSI:Marty€152,112 x 4% 6,084ZeldaIncome below the €5,000 minimum income threshold for PRSI.

61,342Refundable tax credits:PAYE paid in 2019 (57,100)Amount payable by Marty and Zelda 4,242

Workings

w1Deposit interest € €Net amount 1,226€1,226 / 65% (gross up) 1,886



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Marty 943Zelda 943

w2Mortgage interest P1 P2 French

€ € €Interest paid 7,000 7,810 7,580Disallow pre-letting mortgage interest (€7,810 x 1/8) (976)

7,000 6,834 7,580

w3Rental income P1 and P2 P1 P2 French

€ € € €Rental income 16,700 8,911 9,700Expenses:Mortgage interest (w2) (7,000) (6,834) (7,580)Repairs (2,040) (970)Cleaning (760) (810)Letting fees (1,460) (1,010)

7,517 6,900 617 (670)Marty 3,759Zelda 3,759

Tutorial notes:Repairs on property 2 are disallowed pre-letting expenses.Cleaning cost for property 2 are disallowed pre-letting expenses.In order for the property 2 pre-letting expenses to be allowable, the property must be vacant for at least 12months prior to the date of the first letting.

The loss arising on the French property is a Case III loss. This loss is only available against Case III incomeand cannot be used against Case V income.

w4Benefit in kind (company car) €Original market value 40,700Business travel (kms) 7,190BIK percentage 30%

12,210Tutorial note:No BIK for company pension contributions.

w5Home carer tax credit or increased standard rate tax band €

(i) Home carer tax credit (maximum) 1,500(ii) Increased standard rate tax band (€3,759 x 20%) (exclude deposit interest) 752

In this case, option (i) is the more valuable option.Tutorial note:They must choose between the home carer tax credit and the increased standard rate tax band. Theycannot choose both.



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w6Medical expenses €Expenses incurred 4,090Reimbursed (2,250)Qualifying for relief 1,840Tax relief at 20% 368



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2148 Solution

Julian SmithIncome tax computation for 2019

€ €Schedule E salary 56,845Round sum expenses (€470 x 9 months) 4,230Benefit in kind (€135,000 x 4% x 4/12) 1,800Schedule F Irish dividend grossed up (€700 / 80%) 875

63,750Taxation:€35,300 x 20% 7,060€28,450 x 40% 11,380

18,440Non-refundable tax credits:Personal tax credit 1,650Employee PAYE tax credit 1,650Tuition fees ((€2,300 - €1,500) x 20%) 160

(3,460)14,980

USC:€12,012 x 0.5% 60€7,862 x 2% 157€43,876 x 4.5% 1,974

2,191PRSI:€63,750 x 4% 2,550

19,721Refundable tax credits:PAYE paid in 2019 18,380Dividend withholding tax (€875 x 20%) 175

(18,555)Amount payable by Julian Smith 1,166

Tutorial notes:Mortgage taken out after 31 December 2012 - no tax relief in relation to mortgage interest.Rental income - tax free under rent a room scheme (up to €14,000).



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2149 Solution

Lorraine ParnellIncome tax computation for 2019

€ €Schedule D Case IV credit union dividend 410Schedule D Case V rental income (w1) 3,662Schedule E salary 49,017Schedule E benefits in kind (w2) 9,948Schedule F Irish dividend grossed up (€570 / 80%) 713

63,750Taxation:€39,300 x 20% 7,860€410 x 35% 144€24,040 x 40% 9,616

17,620Non-refundable tax credits:Personal tax credit 1,650Single person child carer credit 1,650Employee PAYE tax credit 1,650DIRT deducted (€410 x 35%) 144

(5,094)12,526

USC:€12,012 x 0.5% 60€7,862 x 2% 157€43,466 x 4.5% (exclude interest from which DIRT deducted) 1,956

2,173PRSI:€63,750 x 4% 2,550

17,249Refundable tax credits:PAYE paid in 2019 16,300Dividend withholding tax (€713 x 20%) 143

(16,443)Amount payable by Lorraine Parnell 806

Workings

w1Rental income €Gross rent received (€950 x 5 months) 4,750Expenses:Letting fees (760)Insurance (€590 x 5/9) (328)

3,662Tutorial notes:Property not registered with RTB so mortgage interest not allowable.Insurance cost prior to letting is a disallowed pre-letting expense. The property was not vacant for at least 12months prior to the first letting.

w2



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Benefits in kind € €(i) Company car

Original market value 39,400Business travel (49,200 kms x 90%) 44,280BIK percentage 12%

4,728Reimbursed to company (1,050)

3,678(ii) Preferential loan

€57,000 x (13.5% - 2.5%) 6,2709,948

Tutorial note:Professional subscription relates to work => no BIK.



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2150 Solution

Tony and LeonaIncome tax computations for 2019

Tony Leona Joint€ € €

Schedule E salary 75,700 18,670 94,370Schedule E commission 9,200 9,200Schedule E bonus (received in 2019) 4,500 4,500Schedule E benefits in kind (w1) 19,060 19,060Schedule D Case IV income (w2) 1,892 1,892Schedule D Case V income 3,700 3,700Schedule F income (€319 / 80%) 399 399Schedule F income (€4,000 / 80%) 5,000 5,000

114,451 23,670 138,121Pension contributions (€320 x 12) (3,840) (3,840)

110,611 23,670 134,281Taxation:€35,300 x 20% 7,060€23,670 x 20% 4,734€1,892 x 35% 662€73,419 x 40% 29,368

€44,300 x 20% 8,860€23,670 x 20% 4,734€1,892 x 35% 662€64,419 x 40% 25,768

37,090 4,734 40,024Non-refundable tax credits:Personal tax credit (1,650) (1,650) (3,300)PAYE employee tax credit (1,650) (1,650) (3,300)DIRT deducted (w2) (662) (662)

33,128 1,434 32,762Refundable tax credits:PAYE paid in 2019 (35,370) (35,370)Dividend withholding tax (80) (1,000) (1,080)Tax payable 434Tax repayable 2,322 3,688

Year of marriage relief: Tony Leona Total€ € €

Tax liability as single persons 33,128 1,434 34,562Tax liability under joint assessment 32,762Additional liability when assessed as single persons 1,800

Date of marriage is 1 August 2019 => relief for 5 months (€1,800 x 5/12) 750Tony's portion (€750 x €33,128 / €34,562) 719Leona's portion (€750 x €1,434 / €34,562) 31

Tutorial note:



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Tony and Leona are not entitled to claim the home carer tax credit in 2019 because Leona's 2019 incomeexceeds the maximum permitted, for home carer tax credit purposes, of €10,200.

Workings

w1Benefits in kind

(i) Company car € €Original market value 35,100Business travel (September to December) (kms) 15,333Annual equivalent business kms 46,000Annual BIK percentage 12%Annual BIK (€35,100 x 12%) 4,212BIK in respect of September to December (€4,212 x 4/12) 1,404

(ii) AccommodationOpen market value (€) 210,000BIK (€210,000 x 8%) 16,800Market rent (€1,500 x 12) 18,000BIK in respect of accommodation (lower of two calculated figures) 16,800

(iii) Golf club membership 588

(iv) Preferential loanAnnual BIK (€14,000 x (13.5% - 2.0%)) 1,610BIK for period from November to December (€1,610 x 2/12) 268

19,060w2Schedule D Case IV income €Credit union income 499Bank deposit interest 731

1,230DIRT at 35% of the gross 662Gross interest 1,892



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1840 SolutionLiam Ridgewell's income tax computation 2019

€ €

Schedule D Case V income 25,200Taxed at 20% 5,040Single person tax credit (1,650)Age tax credit (245)

3,145Check for marginal relief:(€25,200 - €18,000) x 40% 2,880Income tax liability (lower of the two calculated amounts) 2,880


Section C


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2153 SolutionBrendan Lee

Year of assessment Year Basis of assessment € €2013 1 From 1 March to 31 December 2013

(i) 1 Mar to 30 Sep 2013 10,100(ii) 1 Oct to 31 Dec 2013 (€16,900 x 3/8) 6,338

16,438

2014 2 Twelve months ended 31 May 2014(i) 1 Jun 2013 to 30 Sep 2013 (€10,100 x 4/7) 5,771(ii) 1 Oct 2013 to 31 May 2014 16,900

22,671

2015 3 Twelve months ended 31 May 2015 18,700

Year 2 revision € €Assessed profit 22,671

Actual year from 1 Jan 2014 to 31 Dec 2014:1 Jan to 31 May 2014 (€16,900 x 5/8) 10,5631 Jun to 31 Dec 2014 (€18,700 x 7/12) 10,908

21,471Actual year 2 profit is less than assessed year 2 profit.Profit in year 3 is reduced by the excess. (1,200)

17,500



2018 Penultimate Twelve months ended 31 May 2018 34,900

Penultimate year revisionActual from 1 January 2018 to 31 December 2018:1 Jan to 31 May 2018 (€34,900 x 5/12) 14,5421 Jun to 31 Dec 2018 (€24,500 x 7/8) 21,438

35,980Actual penultimate year profit is greater than original assessment.Adjustment to original assessment 1,080

35,980

2019 Final Actual basis (1 Jan 2019 to 31 Jan 2019)€24,500 x 1/8 3,063



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2155 SolutionImogen

€24,6754,500

1,000

Capital allowances 2019Plant and equipment (w2)Motor vehicles (w3)Balancing allowance - trucks (w4) Balancing charge - motor vehicles (w5) (800)

29,375

Workings

w1Additions to plant and equipment €Computer equipment 86,000Not in use at year end (€3,000 x 9) (27,000)

59,000Truck 40,000

99,000Tutorial note:Computers must be in use in order to claim capital allowances.

w2Capital allowances - plant, equipment and trucks 2016 2015 2019 Total

€ € € €Cost 55,000 130,200Additions (w1) 99,000Disposals - trucks (86,800)

55,000 43,400 99,000

Tax written down value at 1 January 2019 34,375 65,100Additions (w1) 99,000Disposals (43,400)Wear and tear at 12.5% for 2019 (6,875) (5,425) (12,375) (24,675)Tax written down value at 31 December 2019 27,500 16,275 86,625

w3Capital allowances - motor vehicles 2015 2019 2019 Total

€ € € €Qualifying cost (based on emissions) 24,000Additions (qualifying costs) 12,000 24,000Disposals (24,000)

12,000 24,000

Tax written down value at 1 January 2019 12,000Additions (qualifying costs) 12,000 24,000Disposals (12,000)Wear and tear at 12.5% for 2019 (1,500) (3,000) (4,500)Tax written down value at 31 December 2019 10,500 21,000

Tutorial note:No capital allowances available in respect of leased vehicle.



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€42,400

w4Balancing allowance - trucks ProceedsTax written down value (w2) 43,400

1,000w5Balancing charge - motor vehicles €Proceeds (€12,800 x €24,000/€24,000) 12,800Tax written down value (w3) 12,000

800



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2156 Solution

Florence LaurelioIncome tax computation for 2019

Florence Spouse Joint€ € €

Schedule D Case V rental income 3,700Schedule E salary 61,130Schedule F dividend income (€1,700/80%) 2,125

3,700 63,255 66,955S381 loss (€4,000 + €720) (3,700) (1,020) (4,720)

62,235 62,235Pension contributions (w1) (9,170) (9,170)

53,065 53,065Taxation:€44,300 x 20% 8,860€8,765 x 40% 3,506

12,366Non-refundable tax credits:Married person tax credit 3,300PAYE employee tax credit 1,650Medical expenses (€1,300 x 20%) 260

(5,210)7,156

USC:Spouse€12,012 x 0.5% 60€7,862 x 2% 157€43,381 x 4.5% 1,952

2,169Florence LaurelioTotal income is below the €13,000 threshold for USC.

PRSI:Spouse (€63,255 x 4%) 2,530Florence Laurelio's income is below the €5,000 threshold for PRSI.

11,855Refundable tax credits:PAYE paid by spouse in 2019 10,410Dividend withholding tax (€2,125 x 20%) 425

(10,835)Tax payable by Florence Laurelio and spouse 1,020

Workingsw1Pension contribution Spouse

€Net relevant earnings 61,130

At age 28, the relevant percentage of net relevant earnings is 15%.Maximum relief that can be claimed in 2019 9,170



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Premiums paid in 2019 9,700

Amount on which tax relief can be claimed in 2019 9,170

Tutorial notes:Florence Laurelio has no taxable income in 2019 so cannot claim any relief for pension contributions in 2019.

There is no increase in the standard rate tax band because Florence Laurelio's income is reduced to nil bylosses.



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2157 Solution

JohnSchedule D Case I tax adjusted profit for 2019

€ €Profit per financial statements 12,581Adjust:Deposit interest received (2,810)Dividends received (4,300)Depreciation 7,100Drawings 15,400Preliminary tax paid 2,780Legal fees relating to purchase of shop 2,170Motor expenses - personal use (€4,200 x 40%) 1,680Electricity - personal 1,000Telephone - personal mobile 700Telephone - home business paid personally (€720 x 10%) (72)Capital repayment of bank loan (€3,700 - €1,110) 2,590Purchase of cash register (capital expenditure) 1,540

27,778Tax adjusted profit 40,359

Capital allowances € €Fixtures and fittings (w1) 3,918Motor vehicles (w1) 1,500Restrict for personal use of car (€1,500 x 40%) (600)

900Fixtures and fittings balancing allowance (w2) 775

5,593

Workingsw1Capital allowances F&F MV F&F Total

2017 2017 2019€ € € €

Original cost 29,800 25,000Qualifying cost (motor vehicle based on emissions) 29,800 12,000Additions (€10,500 + €1,540) 12,040Disposal (10,500)

19,300 12,000 12,040

Tax written down value at 1 January 2019 22,350 9,000 31,350Additions 12,040 12,040Disposal at tax written down value (7,875) (7,875)Wear and tear at 12.5% (2,413) (1,500) (1,505) (5,418)Tax written down value at 31 December 2019 12,062 7,500 10,535 30,097

w2Fixtures and fittings balancing allowance €Proceeds 7,100Tax written down value at disposal (w1) 7,875



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775



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2159 Solution

(a) SusieSchedule D Case II tax adjusted profit for 2019

€ €Profit per financial statements 73,860Adjust:Dividends received from Irish company (net) (3,800)Depreciation 10,510New furniture for office 6,200Donation to Amnesty International 1,330Drawings 32,700Susie’s home phone bill (personal element is €300 x 80%) 240Speeding tickets 330Motor lease expenses (€13,200 x ((€30,000 - €12,000)/€30,000) 7,920Entertainment of customers 2,510Loss on disposal of non-current asset 1,900Pension contribution for Susie 21,390


Tutorial note:Motor lease expense are restricted on the basis of CO2 emissions.

Capital allowances €Furniture and equipment capital allowances (w1) 4,338Furniture and equipment balancing allowance (w2) 324

4,662Workings

w1Capital allowances - furniture and equipment 2014 2015 2016 2019 Total

€ € € € €Cost 13,080 15,420 5,190Additions 6,200Disposals (5,190)

13,080 15,420 6,200

TWDV at 1 January 2019 4,905 7,710 3,244 15,859Additions (new furniture for office) 6,200 6,200Disposal at tax written down value (3,244) (3,244)Wear and tear at 12.5% for 2019 (1,635) (1,928) (775) (4,338)TWDV at 31 December 2019 3,270 5,782 5,425 14,477

w2Balancing allowance €Proceeds 2,920TWDV at disposal (w1) 3,244

324Tutorial note:Computers bought in March 2019 not in use at year end so no capital allowances can be claimed in 2019.



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(b) SusieIncome tax computation for 2019

€ €Tax adjusted profit 155,090Capital allowances (4,662)Schedule F dividend income (€3,800 / 80%) 4,750

155,178Pension contributions (w3) (21,390)

133,788Taxation:€35,300 x 20% 7,060€98,488 x 40% 39,395

46,455Non-refundable tax credits:Single person tax credit 1,650Earned income tax credit 1,350

(3,000)43,455

USC:€12,012 x 0.5% 60€7,862 x 2% 157€50,170 x 4.5% 2,258€29,956 x 8% 2,396€55,178 x 11% 6,070

10,941PRSI:€155,178 x 4% 6,207

60,603Refundable tax credits:Dividend withholding tax (€4,750 x 20%) (950)Tax payable by Susie 59,653

Workings

w3Pension contributions €Net relevant earnings (maximum) 115,000At age 34, the relevant percentage of net relevant earnings is 20%.Maximum relief that can be claimed in 2019 23,000





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2160 Solution

Graham and NellieIncome tax computation for 2019

Graham Nellie Joint€ € €

Tax adjusted profit 294,000Capital allowances (20,580)

273,420Pension contributions (w1) (26,450)Schedule D Case II income 246,970 246,970Schedule D Case III income from foreign rental property 2,195 2,195 4,390Schedule D Case IV deposit interest (€240 / 65%) 185 185 370Schedule D Case V income 3,520 3,520 7,040Schedule F dividend income (gross) (€260 / 80%) 325 325

253,195 5,900 259,095Allowances:Permanent Health Insurance premium (is within permitted limit) (2,600)

256,495Taxation:€44,300 x 20% 8,860

€370 x 35% 130€211,825 x 40% 84,730

93,720Non-refundable tax credits:Married persons' tax credit 3,300Earned income tax credit 1,350DIRT deducted (€370 x 35%) 130Medical expenses (w3) 124Home carer tax credit (w2) 1,500

(6,404)87,316

USC:Graham€12,012 x 0.5% 60€7,862 x 2% 157€50,170 x 4.5% 2,258€29,956 x 8% 2,396€179,460 x 11% 19,741NellieNo USC - income is below minimum total income (€13,000).

24,612PRSI:Graham€279,645 (income before deduction of pension) x 4% 11,186NellieHigher of (i) €5,900 x 4% and (ii) minimum contribution of €500. 500

11,686123,614

Refundable tax credits:



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Dividend withholding tax (€325 x 20%) (65)Tax payable by Graham and Nellie 123,549Preliminary tax paid (104,600)Amount outstanding 18,949

Sufficiency of preliminary tax payment - lower of: € €(i) 100% of 2018 liability 112,000(ii) 90% of 2019 liability (€123,549 x 90%) 111,194

111,194=> preliminary tax payment of €104,600 was insufficient.

Tutorial note:Graham's USC is calculated based on income before deduction of pension and excluding income from whichDIRT deducted.

Workings

w1Pension contributions €Net relevant earnings (maximum) 115,000At age 48, the relevant percentage of net relevant earnings is 25%.Maximum relief that can be claimed in 2019 28,750



w2Home carer tax credit or increased standard rate tax band €

(i) Home carer tax credit (maximum) 1,500(ii) Increased standard rate tax band (€5,715 x 20%) (exclude deposit interest) 1,143

In this case, option (i) is the more valuable option.Tutorial note:They must choose between the home carer tax credit and the increased standard rate tax band. Theycannot choose both.

w3Medical expenses €Expenses incurred 1,820Insurance reimbursement (1,200)Qualifying for tax relief 620Tax relief at 20% 124



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2161 Solution

Andy and AmandaIncome tax computation for 2019

€ €Schedule D Case II income 101,900Schedule D Case V income (w1) 5,320Schedule F dividend income (gross) (w2) 825

108,045Amanda's schedule E salary (€32,900 x 7/12) 19,192

127,237Charges:Maintenance payments (w3) (5,550)Allowances:Permanent health insurance premiums (w4) (9,936)

111,751Taxation:€44,300 x 20% 8,860€19,192 x 20% 3,838€48,259 x 40% 19,304

32,002Non-refundable tax credits:Married personal tax credit 3,300Earned income tax credit (Andy) 1,350PAYE employee tax credit (Amanda) 1,650Medical expenses (w5) 106

(6,406)25,596

Refundable tax credits:PAYE paid by Amanda (€3,948 x 7/12) 2,303Dividend withholding tax (€825 x 20%) 165

(2,468)Tax payable by Andy 23,128

AmandaIncome tax computation for 2019

€ €Schedule D Case IV (maintenance payments) (w3) 5,550Schedule E salary (€32,900 x 5/12) 13,708

19,258Taxation:€19,258 x 20% 3,852

Non-refundable tax credits:Single person tax credit 1,650Single person child carer credit 1,650PAYE employee tax credit 1,650

(4,950)nil

Refundable tax credits:PAYE paid by Amanda (€3,948 x 5/12) (1,645)



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Tax payable by Amanda 1,645

Workings

w1Schedule D Case V income €Rental income (€1,380 x 4) 5,520Expenses:Insurance (€600 x 4/12) (200)

5,320Tutorial note:

The €3,000 cost of having the property repainted is not deductible because (i) Andy occupied the propertyand (ii) the property was not subsequently leased out.

w2Schedule F dividend income €4 February 3804 June 280Net dividend received 660Grossed up (€660/80%) 825

w3Maintenance payments €Payments (€1,850 x 5 months) 9,250Attributable to children (3,700)Attributable to Amanda 5,550

w4Permanent health insurance premiums €Premiums paid (€828 x 12) 9,936€108,045 x 10% (maximum allowable for Andy) 10,805

Allowed in 2019 9,936

Tutorial note:The 10% restriction on PHI is considered on an individual basis, i.e., with reference to each individual party'stotal income.

w5Medical expenses €Expenses incurred 880Reimbursed by insurer (350)Qualifying for tax relief 530Tax relief at 20% 106



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2162 Solution

(a) Andrew and LillyCapital Gains Tax liability Andrew Lilly Total

€ € €Property (w1) 124,640House (w2) 138,730Necklace (w3) 3,881

124,640 142,611Annual exemption (1,270) (1,270)

123,370 141,341CGT at 33% 40,712 46,643 87,355

Workingsw1

Property - Andrew € €Proceeds 413,513Legal fees (5,370)

408,143Cost 210,600Legal fees 5,980

216,580Indexation factor (94/95) 1.309

(283,503)Chargeable gain 124,640

w2

House - Lilly € € €Proceeds 260,339Legal fees (4,590)

255,749Cost 7,720Indexation factor (74/75) 7.528

58,116Enhancement expenditure 48,600Indexation factor (98/99) 1.212

58,903(117,019)

Chargeable gain 138,730

w3

Necklace - Lilly € €Proceeds 7,099Cost 2,418Indexation factor (93/94) 1.331


(b) CGT payment dates for disposals are as follows:

If the disposal is made in the period 1 January to 30 November (the initial period) the tax is due on or before15 December in that tax year.


Section D


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If the disposal is made in the period 1 December to 31 December (the later period) the tax is due on orbefore 31 January in the following year.



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2164 Solution

(a) Patrick and PaulinaCapital Gains Tax liability Patrick Paulina Total

€ € €Commercial premises (w1) 134,260

Apartment (w3) 76,190Diamond ring (w4) 2,285


209,180 1,015CGT at 33% 69,029 335Painting (w2) 338

69,029 673 69,702Workings

w1Commercial premises - Patrick € € €Proceeds 405,597Cost 171,000Indexation factor (91/92) 1.406


30,911(271,337)


Tutorial note:General repairs are not deductible for CGT purposes.

w2Painting - Paulina € €Proceeds 3,215Cost 1,438Indexation factor (94/95) 1.309

(1,882)Chargeable gain 1,333Capital gains tax at 33% 440Check for marginal relief:(€3,215 - €2,540)/2 338Claim marginal relief.

Tutorial note:Televisions, DVD players and cars are wasting chattels - exempt from CGT.

w3Apartment - Patrick € €Proceeds (deemed) 252,366Cost 143,000Indexation factor (97/98) 1.232



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w4Diamond ring - Paulina € €Proceeds 8,325Cost 4,730Indexation factor (95/96) 1.277



If the disposal is made in the period 1 January to 30 November (the initial period) the tax is due on or before15 December of that tax year.

If the disposal is made in the period 1 December to 31 December (the later period) the tax is due on orbefore 31 January of the following year.



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2165 Solution

(a) Marcellus and MandyCapital Gains Tax Liability Marcellus Mandy Total

€ € €Property (w1) 30,999Shares (w2) (1,492)Land (w3) 29,278

60,277 (1,492)Transfer loss (1,492) 1,492Net chargeable gain 58,785Annual exemption (1,270)

57,515Capital gains tax at 33% 18,980 18,980

Tutorial notes:The transfer of the loss between the spouses is considered before the annual exemption.The annual exemption is deducted only if there is a net chargeable gain.Deduct the annual exemption of €1,270 (or up to the amount of the net chargeable gain if the net chargeablegain is less than €1,270).

No annual exemption is deducted if a net loss arises. The loss would be carried forward.

Workings

w1Property - Marcellus €Proceeds 252,999Cost (no indexation) (222,000)Chargeable gain 30,999

w2Shares - Mandy € €Proceeds 12,178Cost 13,670Indexation factor (99/00) 1.193

(16,308)Chargeable gain (4,130)ActualProceeds 12,178Cost (13,670)Gain (1,492)

Indexation cannot increase a loss. (1,492)

w3Land - Marcellus € €Proceeds 47,000Cost (€55,000 x (€47,000 / (€47,000 + €158,000))) 12,610Incidental costs (€2,000 x (€47,000 / (€47,000 + €158,000))) 459

13,069Indexation factor (92/93) 1.356

(17,722)



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(b) Michael inherited the property from his father, therefore it passed to Michael on his father’s death. No CGTis payable on the transfer of assets at death.

(c) CGT payment dates for disposals are as follows:





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2167 SolutionVance and Susie

(a) Capital Gains Tax liability Vance Susie Total€ € €

Principal private residence (w1) 19,844 19,844

House swap (w4) 75,780 75,78095,624 95,624

Annual exemption (1,270) (1,270)94,354 94,354

CGT at 33% 31,137 31,137Antique table - Susie (w3) 95

31,137 31,232 62,369

Tutorial note:Household items are wasting chattels and are exempt from CGT.

CGT payment dates for disposals are as follows:



CGT filing date is 31 October 2020

(b) Son’s CGT liabilityHe had lived in the apartment all of the time he owned it, therefore full PPR relief will be available on thedisposal and no capital gains tax liability will arise.

Workings

w1Principal Private Residence € € €Proceeds 866,810Cost 199,000Indexation factor (91/92) 1.406


226,670Enhancement expenditure 28,600No indexation 1

28,600(535,064)

331,746Principal Private Residence Relief (w2) (292,059)Chargeable gain 39,687

w2Principal Private Residence Relief MonthsPeriod of ownership (1 March 1992 to 1 May 2019) 326



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Periods of occupation:1 March 1992 to 1 May 1996 501 May 1996 to 1 June 1999 371 June 1999 to 1 January 2003 4331 March 2006 to 1 May 2019 157

287

Relief (€331,746 x 287/326) 292,059

Tutorial note:The period of absence in Spain does not qualify for principal private residence relief.

w3Antique table € €Proceeds 2,730Cost 1,592Indexation factor (95/96) 1.277

(2,033)Chargeable gain 697Capital gains tax at 33% 230Check for marginal relief:(€2,730 - €2,540) / 2 95Claim marginal relief.

w4House swap € €Proceeds 360,460Cost 208,900No indexation 1




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2169 Solution

(a) Jeremy and Sorcha Jeremy Sorcha Total€ € €

Principal private residence (w1) 19,126 19,126Shares in Kenston - acquired July 1994 (w3)Shares in Kenston - acquired March 2000 (w4) 3,671


17,856 21,527 39,383CGT at 33% 5,892 7,104 12,996




Workingsw1

Principal private residence € €Proceeds 156,600Cost 4,000Indexation (74/75) 7.528

(30,112)126,488

Principal Private Residence Relief (w2) (88,237)Chargeable gain 38,251

w2Principal Private Residence Relief MonthsPeriod of ownership (6 April 1974 to 5 March 2019) 539Periods of occupation:6 April 1974 to 30 June 1985 13530 June 1985 to 31 March 1990 (maximum of 48 months) (note (i)) 4831 March 1990 to 1 August 1998 1001 August 1998 to 31 August 2001 3731 August 2001 to 30 April 2005 4430 April 2005 to 5 March 2019 (only last 12 months) (ii) 12

376

Relief (€126,488 x 376/539) 88,237

Tutorial notes:(i) Absent because of work in Ireland - maximum of 48 months allowed.(ii) Absence not due to work - only last 12 months allowed.

w3Shares in Kenston - acquired July 1994 € €Proceeds (3,000 x €9 per share) 27,000Cost 23,433



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IN

Indexation factor (94/95) 1.309(30,674)(3,674)

ActualProceeds 27,000Cost (23,433)

3,567Indexation cannot turn an actual gain into a loss.No gain/no loss.

w4Shares in Kenston - acquired March 2000 € €Proceeds (2,700 shares x €9 per share) 24,300Cost (€38,427 x 2,700 / 6,000) 17,292Indexation factor (99/00) 1.193




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831 Solution € €

Rental income (eight months) 24,800Premium on short lease 120,000Premium included as rental income:(€120,000 x (51-12)/50) 93,600

118,400Less interest on borrowings (eight months) (4,680)

113,720


Section E


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2170 Solution(a) Weafer

Tax adjusted profits for the year ended 30 June 2019€ €

Loss per accounts (52,022)Adjust:Other income (franked investment income not taxable) (5,300)Depreciation 96,400Profit on disposal of non-current assets (3,120)Parking fines and speeding tickets 5,240Lease charges (€6,100 x ((€29,000 - €24,000) / €29,000)) 1,052Political donation 3,830Decrease in general allowance for irrecoverable debts (260)Interest on late payment of VAT 3,840Client Christmas presents 1,400


(b) Capital allowances for the year ended 30 June 20192014 2016 2017 2019 Total

€ € € € €Cost 50,800 61,300 102,900Wear and tear at 12.5% to 1 July 2018 (31,750) (22,988) (25,725)

19,050 38,312 77,175 134,537Addition 2019 (w2) 21,450 21,450Disposal 2019 (19,050) (19,050)Wear and tear 2019 (7,663) (12,863) (2,681) (23,207)

30,649 64,312 18,769 113,730Workingsw1Balancing charge €Proceeds of disposal 23,500Tax written down value at disposal (19,050)Balancing charge 4,450

w2Cost of addition for capital allowances €Cost 25,900Balancing charge (w1) (replacement option) (4,450)

21,450Tutorial note:New computer system not in use at financial year end => not eligible for capital allowances.

(c) Corporation tax computation for the year ended 30 June 2019€ €

Tax adjusted profit 51,060Capital allowances (23,207)

27,853Corporation tax at 12.5% 3,482



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2171 Solution

(a) BBBSchedule D Case I income for the year ended 30 November 2019

€ €Loss per accounts (74,632)Adjust:Other income (187,380)Depreciation 47,700Pension contributions accrual (only amounts paid allowable) 3,200Motor expenses - parking fines 620Motor expenses - speeding tickets 620Professional fees - disposal of property 8,990Increase in general allowance for irrecoverable debts 6,700Sundry expenses - interest on late payments of PAYE and VAT 2,810Sundry expenses - client entertainment 6,390Sundry expenses - subscription to political party 1,010

(109,340)Tax adjusted loss (183,972)

Tutorial note:Car tax paid for directors' personal cars is a BIK for the director. The expense is deductible for the company.

(b) Corporation tax computation for the year ended 30 November 2019€ Rate €

Schedule D Case III income (deposit interest) 9,110Schedule D Case V income (rental income) 65,700

74,810 25% 18,703Chargeable gain (w1) 63,545 12.50% 7,943

26,646Loss relief (w5) (26,646)Corporation tax Nil

Working

w1Chargeable gain € € €Proceeds 373,176Solicitor costs (8,990)

364,186Cost 200,000Indexation factor (93/94) 1.331

266,200Enhancement expenditure 68,000Indexation factor (2001) 1.087

73,916(340,116)

Capital gain 24,070Chargeable gain (€24,070 / 12.5% x 33%) 63,545

w2



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Capital allowances - motor vehicles Car 1 Car 2 Car 3 Total€ € € €

Qualifying cost (based on emissions) 24,000 12,000Wear and tear at 12.5% to 1 December 2018 (3,000) (1,500)

21,000 10,500 31,500Wear and tear 2019 (3,000) (1,500) (4,500)

18,000 9,000 27,000

Tutorial note:No capital allowances available for car 3 due to level of emissions.

w3Capital allowances - other than motor vehicles 2015 2017 2018 Total

€ € € €Cost 202,800 55,500 41,600Wear and tear at 12.5% to 1 December 2018 (101,400) (13,875) (5,200)

101,400 41,625 36,400 179,425Wear and tear 2019 (25,350) (6,938) (5,200) (37,488)

76,050 34,687 31,200 141,937

w4Capital allowances €Motor vehicles (w2) 4,500Plant and machinery, vans and computer equipment (w3) 37,488

41,988

w5Loss relief € €Tax adjusted losses 183,972Capital allowances (w4) 41,988

225,960Tax on non-trading income 26,646Losses required to offset tax on non-trading income (€26,646 / 12.5%) 213,168Remaining losses available to carry forward 12,792



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2173 Solution

(a) Corporation tax computations 201912 mnths 12 mnths 6 mnths 6 mnths

30 Jun 30 Jun 31 Dec 31 Dec

€ Rate € € Rate €Tax adjusted profit (w1) 28,900 14,450Capital allowances (w4) (10,176) (5,087)Schedule D Case I income 18,724 12.50% 2,341 9,363 12.50% 1,170Schedule D Case III income 25% 5,200 25% 1,300Chargeable gain (w5) 74,369 12.50% 9,296 12.50%Corporation tax 11,637 2,470

Workings

w1Tax adjusted profit € €Profit per accounts 44,557Adjust:Profit on sale of land (33,700)Deposit interest (gross - without deduction of DIRT) (5,200)Depreciation 25,330Leasing charge (€5,800 x ((€36,000 - €24,000) / €36,000)) 1,933General provision for repairs 4,880Decrease in general allowance for irrecoverable debts (730)Legal fees relating to disposal of land 3,020Client entertainment 900Interest on late payment of VAT 1,640Clamping fines 720

(1,207)43,350

Apportionment:12 months ended 30 June 2019 28,9006 months ended 31 December 2019 14,450

43,350

Tutorial note:No adjustment in respect of payment of personal telephone bills - will be a BIK for the managing director.

w2Capital allowances - motor vehicles 2016

€Qualifying cost (based on emissions) 12,000Wear and tear at 12.5% to 1 July 2018 (4,500)

7,500Wear and tear at 12.5% for year ended 30 June 2019 (1,500)

6,000Wear and tear at 12.5% for six months ended 31 December 2019 (750)

5,250

w3



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Capital allowances - fixtures, fittings, plant and machinery 2016 2018 Total€ € €

Cost 38,900 30,500Wear and tear at 12.5% to 1 July 2018 (14,588) (3,813)

24,312 26,687Wear and tear at 12.5% for year ended 30 June 2019 (4,863) (3,813) (8,676)

19,449 22,874Wear and tear at 12.5% for six months ended 31 December 2019 (2,431) (1,906) (4,337)

17,018 20,968

w4Capital allowances 12 mnths 6 mnths

30 Jun 31 Dec€ €

Motor vehicles (w2) 1,500 750Fixtures, fittings, plant and machinery (w3) 8,676 4,337

10,176 5,087

w5Chargeable gain € €Proceeds 86,100Auctioneer fees (2,510)Legal fees (3,020)

80,570Cost (no indexation) (52,400)Capital gain 28,170Chargeable gain (€28,170 x 33% / 12.5%) 74,369

(b) Small Irish resident company(i) For year ended 30 June 2019:

Preliminary corporation tax payment 23 May 2019Pay final corporation tax and file return 23 March 2020

(ii) For period ended 31 December 2019:Preliminary corporation tax payment 23 November 2019Pay final corporation tax and file return 23 September 2020



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IN

2174 SolutionA close company is a company controlled by:

(i) five or fewer participators; or

(ii) any number of participators who are also directors of the company.

Control is deemed to be an interest of over 50%.

A participator is someone who has an interest in the share capital of the company, i.e. the shareholders.

In this question, the shareholders are not directors. Therefore it is necessary to determine if condition (i)above is met.

When calculating the number of shares that an individual owns, it is necessary to take into account theshares owned by the individual and associates of the individual.

Associates include the following:

(i) family members;(ii) any other company controlled by the individual;(iii) shares held by a trust in which the individual has an interest.

Mr Farmer, Mrs Farmer, Mr Farmer Junior and the Farmer family trust are treated as one shareholder for thepurpose of this question:

Shares %Mr Farmer 300Mrs Farmer 370Mr Farmer Junior 220Farmer family trust 565

1,455 15.0%Mr Trader 679 7.0%Mr Flynn 776 8.0%Mr Bush 776 8.0%Mr Clinton 892 9.2%

4,578 47.2%

Omega is not a close company.



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2176 SolutionThe payment of expenses for participators or their associates, who are not directors/employees of thecompany, are treated as distributions.

The company is required to account for dividend withholding tax on the payment and cannot claim adeduction for corporation tax purposes.

(i) Joe Simpson - medical insurance premiumsJoe Simpson is a participator of the close company and owns 10% of the share capital. However, JoeSimpson is also a director of the company, therefore the close company rules do not apply.

The company will be entitled to a deduction of the expense for corporation tax purposes. The premium willbe treated as a benefit-in-kind for Joe Simpson and the company will account for income tax through payroll.

(ii) Reuben Romano - holiday expensesReuben Romano is a participator and owns 8% of the share capital. Reuben Romano is not a director,therefore the close company rules apply.

The company is not entitled to deduct the expense paid for corporation tax purposes. The expense is treatedas a distribution.

The company must pay dividend withholding tax (DWT) on the expense.

Reuben Romano will be subject to income tax on the amount of the expense and will be entitled to a creditfor DWT.

(iii) Marie Flaire - medical expensesMarie Flaire’s spouse is a participator of the company and owns 5% of the share capital. Marie Flaire is anassociate of the company, is not an employee. Close company rules therefore apply.

The expense is treated as a distribution. The company must pay dividend withholding tax (DWT) on theexpense.

Marie Flaire will be subject to income tax on the amount of the expense and will be entitled to a credit forDWT.



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2177 Solution

(a) Maximum interest that is allowed as an expense is lower of: €(i) 13% of nominal value of issued share capital 598(ii) 13% of loans from directors: Loan (€)

Mr Henry 3,100Mr Davidson 5,500Mr Sheedy 5,000

13,600€13,600 x 13% 1,768

Restricted allowable interest is therefore: 598Allowable in respect of Mr O'Donoghue (€2,500 x 9%) 225Interest allowable in the corporation tax computation 823

Tutorial note:Restriction on allowable interest applies to directors owning more than 5% share capital.

As Mr O'Donoghue owns 2%, the restriction does not apply to his loan.

(b) Amount of interest treated as distribution Loan Interest€ €

Mr Henry 3,100 279Allowed as interest - €598 x 3,100 / 13,600 (136)Treated as distribution 143

Mr Davidson 5,500 495Allowed as interest - €598 x 5,500 / 13,600 (242)Treated as distribution 253

Mr Sheedy 5,000 450Allowed as interest - €598 x 5,000 / 13,600 (220)Treated as distribution 230Total distribution 626

The company is required to pay dividend withholding tax on €626.The directors are required to pay income tax on the same amount. They receive credit in respect of thedividend withholding tax paid by the company in their income tax computations.



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2178 Solution

2018 Rate 2018 2019 Rate 2019€ € € €

Trade 1 19,200Trade 2 17,100 12,100Current year loss relief (w1) (12,100)Prior year loss relief (w1) (36,300)

12.50% nil 12.50% nil Case III income 8,500 25% 2,125 7,600 25% 1,900Case V income 9,400 25% 2,350 9,400 25% 2,350

4,475 4,250Current year loss relief (value basis) (€21,700 x 12.5%) (w1) (2,713)Corporation tax 4,475 1,537

Workingw1Utilisation of losses €Trade 1 loss 2019 70,100Current year loss relief against trade 2 (12,100)

58,000Prior year loss relief against trade income (36,300)

21,700Current year loss relief against non-trade income (value basis) (21,700)

nil



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2180 Solution

2017 Rate 2017€ €

Trade 1 48,300Trade 2 45,500

93,8002018 loss relief (w3) (93,800)

Case IV income 2,100 25% 525Case V income 6,9002018 loss relief (w1) (3,400)

3,500 25% 8751,400

2018 loss relief (w3) (€11,200 x 12.5%) (1,400)Corporation tax nilDIRT deducted (€2,100 x 35%) 735Corporation tax receivable 735

2018 Rate 2018€ €

Trade 1Trade 2 46,200

46,2002018 loss relief (w3) (46,200)

Case IV income 2,200 25% 550Case V income 25%

5502018 loss relief (w3) (€4,400 x 12.5%) (550)Corporation tax nilDIRT deducted (€2,200 x 35%) 770Corporation tax receivable 770

2019 Rate 2019€ €

Trade 1 32,0002018 loss relief (w3) (600)

31,400Trade 2 38,700

70,100 12.50% 8,763Case IV income 1,700 25% 425Case V income 4,800 25% 1,200Corporation tax 10,388DIRT deducted (€1,700 X 35%) (595)Corporation tax 9,793

Workingsw1Utilisation of 2018 Case V losses €Case V losses - 2018 3,400



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Prior year loss relief against Case V income (3,400)

w2Non-trade income - 2017 €Case IV income 2,100Case V income 6,900Case V losses (w1) (3,400)

5,600

w3Utilisation of 2018 trading losses €Case I losses - 2018 156,200Current year loss relief against trade 2 (46,200)

110,000Prior year loss relief against trades 1 and 2 (93,800)

16,200Current year loss relief against non-trade income (value basis) (€2,200 x 25%/12.5%) (4,400)

11,800Prior year loss relief against non-trade income (value basis) (€5,600 (w2) x 25%/12.5%) (11,200)

600Losses available for subsequent year relief against income from Trade 1 (600)



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2182 Solution

Coco 2018 Rate 2018 2019 Rate 2019€ € € €

Case III 1,970 1,740Case V 4,130 2,850

6,100 4,590Non-trade charges (6,100) (4,270)

0% 320 25% 80Case I 16,960 17,810Chargeable gain 6,860Excess non-trade charges (3,700)

20,120 12.50% 2,515 17,810 12.50% 2,226Corporation tax 2,515 2,306

Tutorial notes:Non-trade charges can be used to reduce income taxed at higher rate first.

The non-trade charges are therefore offset against Case III and Case V income first.



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2183 Solution

Eagle 2018 Rate 2018 2019 Rate 2019€ € € €

Case I 28,700 31,200Trade charges (28,700) (31,200)

Case V 16,800 25% 4,200 11,200 25% 2,800Excess trade charges (18,180) 12.50% (2,273) (15,680) 12.50% (1,960)Corporation tax 1,927 840

Tutorial notes:Trade charges are used against trading income first.

Any amount unused against trading income can be used on a value basis against the corporation tax thatrelates to non-trading income in the same year.



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2184 Solution

November/December 2019 Rate VAT VATOutput VAT: € € €Sales (VAT exclusive) 18,265 23.0% 4,201Sales (VAT exclusive) 16,756 13.5% 2,262Disposal of van (VAT inclusive) 6,048 23.0% 1,131Disposal of computer equipment (VAT inclusive) 2,594 23.0% 485

8,079Input VAT:Purchase of van (VAT inclusive) 13,700 23.0% 2,562Purchase of car (VAT inclusive) (20% partial input credit) 17,100 23.0% 640Motor expenses - diesel (VAT inclusive) 1,900 23.0% 355Motor expenses - repairs (VAT inclusive) 1,900 13.5% 226Computer equipment (VAT inclusive) 11,170 23.0% 2,089Telephone (VAT inclusive) 2,670 23.0% 499Electricity (VAT inclusive) 4,270 13.5% 508Other expenses (VAT inclusive) 4,360 23.0% 815

(7,694)VAT payable 385

Tutorial notes:Disposal of car - no input credit at time of purchase so no output VAT at time of disposal.Purchase of car - 20% of VAT allowed for vehicle categories A, B or C that are used at least 60% forbusiness.

No input VAT for petrol expenses.Wages - not relevant for VAT purposes.


Section F


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2185 Solution

November/December 2019 VAT VATOutput VAT: € Rate € €Lodgements 149,180Zero-rated sales (18,650)VAT refund (13,680)Cash received not lodged 7,460Cash receipts (VAT inclusive) 124,310 23.0% 23,245Purchases from France 14,400 23.0% 3,312Self-supply (donation) (excluding VAT) 14,700 23.0% 3,381Disposal of van (VAT inclusive) 8,900 23.0% 1,664

31,602Input VAT:Purchases (VAT inclusive) 117,200 23.0% 21,915Purchases (VAT inclusive) 31,650 13.5% 3,765Purchases from France 14,400 23.0% 3,312

(28,992)VAT payable 2,610



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2187 Solution

November/December VAT VATOutput VAT: € Rate € €Lodgements 152,030Proceeds from disposal of car (13,700)Credit Union loan (20,200)Direct lodgements by customers 19,800Refund duplicate payment to customer (1,780)Drawings out of receipts from customers 2,260Cash receipts (VAT inclusive) 138,410 23.0% 25,882UK purchases (VAT exclusive) 890 23.0% 205

26,087Input VAT:Purchases inclusive of standard rate VAT per question 133,169Petrol expenses (no input credit allowed) (1,400)Diesel expenses - reverse personal element (30%) (189)UK purchases (890)Purchases inclusive of standard rate VAT 130,690 23.0% 24,438Purchases at reduced rate per question 18,010Holiday home expenses (2,890)Purchases at reduced rate (VAT inclusive) 15,120 13.5% 1,798UK purchases (VAT exclusive) 890 23.0% 205

(26,441)VAT receivable 354



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2188 SolutionMartyA charge to VAT arises where the following occurs:

A supply of goods or services;

Within the state;

For consideration;

Made by a taxable person.

Persons obliged to register for Irish VAT include:

(i) Persons whose supplies of taxable goods are likely to exceed €75,000 in any 12 month period;

(ii) Persons making mail order/distance sales into the state, the value of which exceeds €35,000 in any 12month period.

Distance sales are goods that are sold to an unregistered (private) customer in Ireland from another EUmember state or sold to private customers in another EU member state from Ireland.

Where distance sales are made to Ireland by a non-established trader who has exceeded the registrationthreshold (€35,000), or who has elected to register for VAT in Ireland, the place of supply for these goods isIreland.

This means that the non-established trader will be required to charge Irish VAT on sales to Irish customers.

Where the non-established trader has not exceeded the registration threshold and has not elected to registerfor Irish VAT, the place of supply will be determined by where the transportation begins (i.e. in the other EUmember state).

Where distance sales are made from Ireland to another EU member state, the place of supply will be wherethe transportation ends if the trader has exceeded the registration threshold in that EU member state or hasopted to register for VAT in that other member state.

Otherwise, the place of supply will be where the transportation begins, i.e. Ireland.

The VAT implications of the various options are therefore;

(i) If based in Ireland, registration in Ireland for VAT is required if turnover from the supply of taxable goods islikely to exceed €75,000 in a twelve month period.

(ii) If based in the UK, registration in Ireland for VAT is required if the value of distance sales to Ireland exceeds€35,000 in a twelve month period.

(iii) If based in Ireland and making distance sales to the UK, registration in the UK for VAT is required if therelevant threshold in the UK, currently GBP£70,000, is exceeded



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2190 SolutionKevin VAT VATNovember/December 2019 € Rate € €Output VAT:Cash receipts (November/December) 180,704Receivables outstanding at end December 7,860November/December sales (VAT inclusive) 188,564 23% 35,260Self-supply (goods for personal use) 4,770 23% 892EU purchases 7,300 23% 1,679

37,831Input VAT:Purchases for resale at standard rate 137,070 23% 25,631Purchases not for resale at standard rate 33,640Reverse incorrect invoice amount (VAT inclusive) (8,524)Include invoice at correct amount (VAT inclusive) 9,127Exclude petrol (VAT inclusive) (1,980)

32,263 23% 6,033Purchases not for resale at reduced rate (VAT inclusive) 19,730 13.50% 2,347EU purchases 7,300 23% 1,679

(35,690)VAT payable 2,141



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2191 Solution(a) Boris Smith VAT VAT

€ Rate € €Output VAT:Opening receivables 185,250Sales revenue (€830,000 x (1 + 23%)) 1,020,900Closing receivables (199,200)Cash receipts (VAT inclusive) 1,006,950 23.0% 188,291EU purchases (VAT exclusive) (w1) 296,540 23.0% 68,204

256,495Input VAT:Purchases from Irish suppliers (VAT exclusive) (w1) 296,540 23.0% 68,204EU purchases (VAT exclusive) (w1) 296,540 23.0% 68,204Light and heat (VAT exclusive) 2,820 13.5% 381Miscellaneous expenses (VAT exclusive) 7,600 23.0% 1,748Plant and equipment additions (VAT exclusive) 23,300 23.0% 5,359

(143,896)VAT payable 112,599

(b) Accounts Audit Difference€ € €

VAT on sales 256,480 256,495 15VAT on purchases 143,912 143,896 16VAT payable 112,597 112,599 2From other EU countries 296,528 296,540

There are differences in the calculation of VAT, however the differences are minor. Therefore, overall thecompany appears to be accounting for VAT correctly.

Working

w1Purchases €Cost of sales 572,700Closing inventories 143,180Opening inventories (122,800)Total purchases (VAT exclusive) 593,080Purchases from Irish suppliers (€593,080 x 50%) 296,540EU purchases (50%) 296,540



Documents

Advanced Taxation...following rental income: Irish Irish French Notes Property 1 Property 2 Property € € € Gross rental Income 1 16,700 8,911 9,700 Interest paid 2 7,000 7,810