Advanced Taxation ROI August 2021

Advanced Taxation ROI 2nd Year Examination

August 2021

Exam Paper, Solutions & Examiners Comment

Advanced Taxation ROI August 2021 2nd Year Paper

Page 2 of 26 Advanced Taxation ROI August 2021

NOTES TO USERS ABOUT THESE SOLUTIONS

The solutions in this document are published by Accounting Technicians Ireland. They are intended to

provide guidance to students and their teachers regarding possible answers to questions in our

examinations.

Although they are published by us, we do not necessarily endorse these solutions or agree with the views

expressed by their authors.

There are often many possible approaches to the solution of questions in professional examinations. It

should not be assumed that the approach adopted in these solutions is the ideal or the one preferred by us.

Alternative answers will be marked on their own merits.

This publication is intended to serve as an educational aid. For this reason, the published solutions will

often be significantly longer than would be expected of a candidate in an examination. This will be

particularly the case where discursive answers are involved.

This publication is copyright 2021 and may not be reproduced without permission of Accounting

Technicians Ireland.

© Accounting Technicians Ireland, 2021



Accounting Technicians Ireland

2nd Year Examination: AUGUST 2021

Paper: ADVANCED TAXATION (Republic of Ireland)

Wednesday, 11 August 2021

Exam Duration: 4 Hours

Exam Upload: 30 Minutes

INSTRUCTIONS TO CANDIDATES

PLEASE READ CAREFULLY

For candidates answering in accordance with the law and practice of the Republic of Ireland.

Candidates should answer the paper in accordance with the appropriate provisions up to and including

the Finance Act, 2019. The provisions of the Finance Act 2020 should be ignored.

Allowances and rates of taxation to be used by candidates, are set out in the Tax Reference Material.

Answer ALL THREE QUESTIONS in Section A, and ANY TWO of the FOUR questions in Section B.

If more than TWO questions are answered in Section B, then only the first two questions, in the order

answered, will be corrected.

Candidates should allocate their time carefully.

All workings should be shown.

All figures should be labelled as appropriate e.g. €s, units, etc.Answers should be illustrated with

examples, where appropriate.

UPLOAD INSTRUCTIONS

Each question must begin on a new document, excel or word.

Each question must be uploaded to Moodle individually.

Each file must include the candidate’s Registration Number, Subject Name, Question Number for

example RXXXXXX, ATXR, Question 1.

Candidates must retain their original answers until after the release of exam results in September.

ATI may request to see the original files.

https://www.accountingtechniciansireland.ie/images/uploads/general/Taxation_ROI_2020-21._V3_.pdf



SECTION A

Answer QUESTION 1 and QUESTION 2 and QUESTION 3 (Compulsory) in this Section

Question 1 (Compulsory)

John Cronin (44) is married to Nicola (41). They are both Irish resident and domiciled. John is a self-employed

tax consultant and has operated his own practice for many years. On 31 August 2020, John ceased to trade as a

self-employed tax consultant, as a friend from college offered him a full-time position within his company, Tax

Issues Ltd.

Details of John’s results are as follows:

Tax Adjusted Case II Income Year ended 31 October 2018 €86,000

Year ended 31 October 2019 €78,000

Period ended 31 August 2020 €62,000

John commenced employment with Tax Issues Ltd. on 1 September 2020 and was given a company car on the

same day. John spent four days per week out of the office and was required, for billing purposes, to keep a

detailed log of clients visited and kilometres driven.

Details of John’s annual remuneration package are listed below:

Annual salary paid monthly €108,000 – paid evenly throughout the year

PAYE deducted for 2020 €12,000

Company Car (Current market value) €42,000

Additional information:

- The company car is a Category D car and was originally purchased new by Tax Issues Ltd. in January

2019 at a cost of €58,000. John drove 4,000 business kilometres in 2020.

- On 1 October 2020 Tax Issues Ltd gave a 2% loan of €60,000 to John to enable him to construct a new

sunroom and upgrade the electrical wiring in his home.

Other information

John and Nicola have been married since 2008 and they have two children, Paul (11) and Rosie (7). Nicola stays

at home to look after the children. Nicola’s only sources of income for 2020 were:

Irish dividend (received net) €8,250

Irish bank deposit interest (net amount) €4,020

Net Spanish rental income €11,000

Nicola inherited both the shares and the Spanish holiday home from her father, on his death in 2012.

Other outgoings and savings for John and Nicola

VHI (private medical insurance) €3,257

Medical expenses (60% of which have been reimbursed by VHI) €1,200 (figure before reimbursement

from VHI)

Private savings fund for the children’s college fees €2,800

Orthodontic treatment for Rosie (non-routine) €1,400



Requirement:

a) Compute the total Case II income which will be assessed for John’s last two years of trading, giving a brief

explanation for any revisions that you make or do not make.

(5 marks)

b) Compute the income tax payable/refundable by John and Nicola for the tax year 2020, on the basis that they

have elected to be jointly assessed. (Ignore PRSI and USC)

(15 marks)

Total: (20 Marks)



Question 2 Compulsory (Answer Part A & B)

Part A

a) Explain the provisions of Capital Gains Withholding Tax.

(1 mark)

b) What is the value of the sales proceeds above which assets are subject to Capital Gains Withholding Tax?

(2 marks)

c) List FIVE assets that are subject to Capital Gains Withholding Tax.

(5 marks)

d) State the filing date for capital gains returns for 2020.

(1 mark)

e) State the payment dates for capital gains tax.

(2 marks)

Part B

Orla Kelly, is Irish resident and domiciled and in 2020 she disposed of the following assets:

1) On 30 April 2020, Orla sold her house in Rathgar, Dublin, (Ireland) for €950,000. Incidental costs of sale

were €25,000.

Orla had purchased the house from her mother for €80,000 on 1 May 1981. The market value of the house

on 1 May 1981 was €80,000. Orla spent €30,000 renovating the house in May 1984. Orla lived in the

house until 30 April 1985, when she moved to take up a position in Galway, Ireland. She returned to live

in the house on 1 November 1989. She then moved to New York at the request of her employer on 1 May

1990, where she remained until 31 October 1992. She then returned to Ireland and lived in the house until

31 December 1994.

Orla installed a new heating system at a cost of €30,000 on 31 October 1992.

On 1 January 1995 she moved to Donegal to pursue the dream of becoming a writer. During this time Orla

had rented out her house in Rathgar. Orla returned to live in the house on 1 January 1998 until 31 August

2004.

On 1 September 2004, she rented the house on a long-term rental agreement and she moved into her new

home in Clontarf.

2) In August 2020, Orla sold her portfolio of 4,000 shares in IBC Bank plc for €24,000. She had originally

acquired these shares in December 2000 at €1.50 per share.

3) In October 2020, Orla sold Trojan, a thoroughbred racehorse for €120,000. She had purchased Trojan in

2016 for €35,000, however because of his success over the last 18 months he became very valuable to

horse breeders. This was the only horse she has owned and does not intend buying others.

Requirement:

Compute Orla’s capital gains tax, if any, for disposals made in 2020. Give a brief explanation in the case of any

disposal which does not give rise to a capital gain or capital loss.

(9 marks)

Total 20 Marks



Question 3 Compulsory (Answer Part A & Part B)

Part A

Pixie Ltd is an Irish incorporated and resident toy distribution company. It is owned equally by directors, Tom

Watts, and his fiancée Naomi Candle. The authorised share capital is 100,000 €1 ordinary shares. Pixie Ltd.’s

accounting period is the 31 March each year. The company’s results for the year ended 31 March 2020 are as

follows:

Case I – adjusted profit before capital allowances €140,000

Details of the Tax Written Down Value of the assets used by Pixie Ltd, as at 1 April 2019 are as follows:

Delivery Trucks €115,000

Computers & office furniture €24,750

All the delivery trucks were purchased on 11 November 2016 for €230,000. The computers and office furniture

were all purchased on 1 April 2017 for €33,000. On 18 February 2020 Pixie Ltd sold a delivery truck for €38,700

which was originally purchased for €60,000. On the same date Pixie Ltd purchased a new delivery truck for

€42,000. Pixie Ltd wishes to avail of the replacement option for capital allowances.

All assets owned by Pixie Ltd were in use on 31 March 2020.

On 1 September 2019 Pixie Ltd rented out a warehouse that it was no longer using. The new tenants signed a 15-

year-lease.

Details relating to this property for year ended 31 March 2020 were:

Premium: €40,000

Annual interest €10,800 (accrued evenly throughout the year)

Annual rent: €42,000

Pixie Ltd sold one of their other warehouses on 1 February 2020 for €150,000. The disposal costs totalled

€6,000. The company had purchased the warehouse for €160,000 in August 2001. The legal fees on acquisition

were €4,000.

Requirements:

a) Compute the corporation tax payable for the year ended 31st March 2020.

(13 marks)

b) Explain when corporation tax must be paid for a small company and the consequence of not paying their

corporation tax by the relevant date.

(2 marks)

c) State the due date for the payment of Pixie Ltd.’s corporation tax for the yearend 31st March 2020. You

may assume Pixie Ltd. is a small company.

(1 mark)

Part B

Due to the impact of Covid-19 worldwide, Pixie Ltd is predicting that it will have a major trading loss for the year

ending 31 March 2021.

Requirement:

State, on the assumption that there are no changes to the relevant legislation, how any trading/capital losses for

the period can be utilised by Pixie Ltd.

(4 marks)

Total 20 Marks



SECTION B

Answer ANY TWO of the FOUR questions in Section B

Question 4 Answer all 10 questions (2 marks each). There is only ONE correct answer for each question.

1. Katie Byrne is a 46-year-old accountant and in 2020 she had the following income:

Case I €126,000

Case I loss (forward) (€10,000)

Case III – Spanish rental income €7,500

Irish Dividend – gross €6,000

She paid a qualifying deed of covenant of €6,000 in 2020.

Katie has a retirement annuity contribution carried forward from 2019 of €2,000 and she paid a premium

of €28,000 in May 2020.

Calculate Katie’s retirement annuity allowed as a charge in 2020:

a) €21,000

b) €24,750

c) €26,250

d) €28,750

2. Brendan Murphy is 68 years old and single. His only income is Irish rental income of €24,000.

Brendan’s tax liability for 2020 is:

a) €1,255

b) €2,400

c) €2,905

d) €3,150

3. Amy, a sole trader, prepares accounts annually to 31 December. In 2019 she leased a category C car with a

retail value of €20,000. Amy drove a total of 45,000 km’s in 2020, of which 11,250 were personal

kilometres. The lease rental payment for year ending 31 December 2020 was €6,000.

Amy’s addback for her Case I computation for 2020 is:

a) (€1,200)

b) €600

c) €2,100

d) €2,400

4. James and Jennifer O’Brien are married. They have been jointly assessed with James being the assessable

spouse. Having attended a tax seminar in 2019 they decided that Jennifer should now be the assessable

spouse for 2020.

By which date must they elect to change the assessable spouse for 2020?

a) 31 October 2020

b) 31 December 2020

c) 31 March 2020

d) 31 August 2019



5. Which of the following expenses is NOT an allowable deduction when calculating Case V rental income?

a) Management fees

b) Repairs

c) Insurance

d) Local Property Tax (LPT)

6. Which of the following statements is NOT true?

a) An individual that is resident, ordinarily resident, and domiciled is liable to Income Tax in Ireland

on their worldwide income.

b) A balancing allowance is added to adjusted Case I income.

c) A husband and wife cannot be jointly assessed for income tax.

d) There is no capital gains tax liability on the transfer of assets between spouses.

7. In July 2020, Siobhan who is married and jointly assessed sold a plot of land in Co. Wexford (Ireland) to

Michael a local farmer for €325,000, making a gain of €138,900. What is the amount of capital gains from

this transaction?

a) €44,999

b) €45,418

c) €45,837

d) None of the above

8. What is the 12-month turnover threshold over which a person supplying services only is required to

register for VAT?

a) €37,500

b) €39,500

c) €42,000

d) €75,000

9. In March 2020, Carmel disposed of an antique chair for €2,200. Carmel bought the chair for €1,000 in

2014 at an antiques trade show in Donegal.

What is the amount of Carmel’s chargeable gain for 2020?

a) €0

b) €800

c) €1,200

d) €2,200

10. Manuela is Irish resident but Spanish domiciled. In June 2020 she sold an apartment in Marbella (Spain)

for €389,000, on which she made a gain of €120,000. Manuela who is getting married in September 2020

and intends to buy a house in Ireland and so remitted €389,000 to Ireland.

What is the amount of the gain that will be subject to Irish capital gains tax?

a) €60,000

b) €120,000

c) €200,000

d) €389,000

Total: (20 marks)



Question 5 (Answer Part A & B)

Part A

Dingle Ltd. distributes handmade soaps and bath products to both the Irish and international markets. The

following transactions occurred during the VAT period March/April 2020.

Invoiced sales to Irish customers €85,000

Invoiced sales to USA customers €125,000

The above amounts are exclusive of VAT at the standard rate of 23%.

Purchase invoices below were also received during the same period and are inclusive of VAT, also at 23%.

Purchases from Irish supplier €135,000

Purchases from Spanish supplier €65,000

Accommodation - Trade shows €12,000

Food Expenses - Trade shows €6,000

Accountant's fees €12,000

Van leasing €16,000

Requirement:

Compute the VAT payable or refundable for the VAT period March/April 2020 by Dingle Ltd.

(8 marks)

Part B

a) List FOUR items of expenditure for which, a VAT registered trader, cannot claim an input credit.

(4 marks)

b) Smiles are Us; a local dental practice is planning to purchase a new x-ray machine from a supplier in

Germany. The machine will cost €95,000. Outline the VAT implications, if any, for Smiles are Us on this

transaction.

(4 marks)

c) Explain ONE advantage to a trader for accounting for VAT on a cash receipts basis rather than invoice

basis.

(1 mark)

d) Explain what is meant by “Multiple Supply” in VAT and give one example

(3 marks)

Total 20 Marks



Question 6 (Answer Part A & Part B)

Part A

Sophia McNamara is Irish resident, ordinarily resident and domiciled. She was employed by a US multi-national

until December 2019, when she was made redundant. Sophia moved to New York on 1 July 2020 having secured

employment. She hopes to remain with the American employer until at least 2024.

On 31 May 2020, Sophia sold an antique chair for €24,500, realising a gain of €13,000. Sophia left the €13,000

“gain” in her bank account in Ireland and used the remaining €11,500 to pay for her flights to New York and

accommodation on arrival into the United States.

Requirement:

a) Explain Sophia’s Irish tax residency position and tax implications for each year (2020 -2024).

(8 marks)

b) Explain to Sophia the meaning of “self-assessment” in the context of Irish tax.

(3 marks)

c) Explain Sophia’s Capital Gains tax position, and any liability that Sophia may have in Ireland.

(3 marks)

Part B

Revenue Online Services (ROS) can facilitate the payment of tax liabilities electronically.

Requirement:

Explain the THREE electronic payment methods that are currently available on ROS.

(6 marks)

Total 20 Marks



Question 7 (Answer ALL parts)

Part A

Natalie, a sole trader has been in business for many years, preparing accounts annually to the 31 October. Recent

results for her business are as follows:

12 months ending 31/10/2018 31/10/2019 31/10/2020

Case I (€18,000) €30,000 €8,400

Capital allowances €10,500 €7,500 €3,600

Additional information for your attention:

1. In the set of accounts ending 31 October 2017 Natalie recorded a trading loss of €7,500 and no capital

allowances. None of the trading losses had been used by 31 October 2018.

2. Her only sources of income in 2018 and 2019 were from her sole trader business.

3. For the tax year 2020 Natalie received net dividends from an Irish resident trading company of €1,500.

Requirement:

Compute Natalie’s taxable income for 2018, 2019 and 2020 on the basis that she wishes to make maximum use

of the loss available as early as possible, explaining each of your calculations and the application to the scenario.

(12 marks)

Part B

Ruth Michaels is a 34-year-old self-employed accountant, who has not previously provided for her retirement.

She has provided you with the following financial information for tax year 2020.

In 2020 Ruth also paid €12,000 (gross) by way of a qualifying deed of covenant to her father, aged 68, who is

permanently incapacitated after a motor-cycle accident in 2016.

Requirement:

Compute the maximum pension contribution for tax purposes that Ruth can make into her pension fund for 2020.

(5 marks)

Part C

State THREE factors that would be taken into consideration in deciding if an individual is:

i. Self-employed

ii. An employee

(3 marks)

Total 20 Marks

Case II €105,000

Capital Allowances €4,200

Loss forward (€5,600)

Rental Income €8,800

Irish Dividends (gross amount) €2,200



2nd Year Examination: August 2021

Advanced Taxation ROI

Suggested Solutions

and

Examiner’s Comments

Students please note: These are suggested solutions only; alternative answers may also be deemed to be correct

and will be marked on their own merits.

Statistical Analysis – By Question

Question No. 1 2 3 4 5 6 7

Average Mark 10.59 13.30 6.79 9.58 12.59 9.97 11

Nos. Attempting (%) 97.64 96.85 97.24 57.48 87.80 46.06 5.91

Statistical Analysis - Overall

Pass Rate 68.11

Average Mark 51.63

Range of Marks Nos. of Students

0-49 81

50-64 114

65-79 49

80 and over 10

Total No. Sitting Exam 254

Total Absent 28

Total Approved Absent 4

Total No. Applied for Exam 286

General Comments:

ASrteon

Solutions Note* Please note that the solutions outlined below are indicative. Marks are awarded on the basis

of the range, depth and development and overall quality of answers provided. Alternative answered are marked

on their merit.

In general, this exam was very well answered with candidates showing strong preparation before taking

this exam. Most candidates performed well in the areas of theory and calculation.



Examiner Comments on Question 1

Solution to Question 1

Question 1a)

Final assessment Actual

2020 €62,000 x 8/10 €49,600

2019 Current year €78,000

Revenue option

Original assessment €78,000

Actual 1/1/2019- 31/12/2019

10/12 x €78,000 €65,000

2/10 x €62,000 €12,400 €77,400

Original assessment in higher, therefore no changes necessary

The standard of answering the Income Tax question was quite high, however there were a number of areas worth

noting:

1. Nicola is not entitled to the Earned Income credit or the Home Carer Credit as many candidates seemed

to suggest.

2. The calculations regarding Dividend Withholding Tax and DIRT seemed to elude many candidates –

some of whom gave prior year rates.

3. The “alternative relief” BIK for John was missed by the majority of candidates

4. Again, some candidates seemed to be quite confused by the order of an income tax computation.

5. A very high number of candidates were not able to correctly deal with the maximum 20% band available

to this couple.



b)

Income Tax Computation for John and Nicola 2020

John

Schedule D - Case II €49,600

Schedule E- Salary (€108,000 /12 x 4) €36,000

Schedule E- BIK (W1) €4,640

Schedule E- BIK -Loan €60,000 x 2% x 3/12) €300

€90,540

Nicola

Schedule F €8,250/100 x 75 €11,000

Schedule D- Case III €11,000

Schedule D- Case IV (€4,020 x100/67) €6,000 €28,000

Taxable Income €118,540

Taxed as €66,300 x 20% €13,260

€6,000 x 33% €1,980

€46,140 x 40% €18,456 €33,696

Less Non-refundable tax credits Married €3,300

PAYE - John €1,650

DIRT €6,000 x 33% €1,980

VHI - Tax relief at source €0

Medical (€1,200 x 40% x 20%) €96

Orthodontic (€1,400 x 20%) €280 €7,306

€26,390

Less Refundable tax credits

PAYE paid €12,000

DWT (€11,000x 25%) €2,750

Tax Due /(Refund) €11,640

Workings W1) - BIK Original market value €58,000

KM driven in 2020 (4,000 /4 x 12) = 12,000km 30%

€17,400

Alternative relief (20%) €3,480

Annual BIK €13,920

BIK for 2020 – 4 months €4,640





Question 2

Part A

a) Where these is a disposal of certain assets there is an obligation on the purchaser to deduct withholding

tax of 15% from the proceeds before paying the proceeds to the vendor.

The purchaser is required to pay the withholding tax to the Revenue

b) Withholding tax only applies where the proceeds exceed €500,000

c) Five assets include:

1. Land (including buildings in the State)

2. Minerals in the State

3. Exploration or exploration rights in a designated area within the limits of the Irish continental

shelf

4. Unquoted shares deriving their value from assets above

5. Unquoted shares received in exchange for unquoted shares above

6. Goodwill of a trade carried on in the State.

d) Filing date for capital gains tax returns is 31st October 2021

e) Payment dates for capital gains tax is:

15th December 2020 for assets sold between 1st January 2020 and 30 November 2020

Before 31st January 2021 for assets sold between 1st and 31st December 2020

Part B

Orla Kelly - Capital gains tax summary

House (W1) €286,712

Shares (W2) €17,136

Horse (Wasting chattel) €0

€303,848

Less annual exemption €1,270

Taxable gains €302,578 Capital gains tax @ 33% €99,851

W1) House Sales proceeds €950,000 Less costs to sell €25,000

€925,000

Less purchase costs

€80,000 x 2.678 €214,240

€30,000 x 1.819 €54,570

€30,000 x 1.356 €40,680 €309,490

Gain €615,510

Possibly the best answered question on the exam paper. A high mark allocation for theory – which the

vast majority of candidates scored well answering. The computations were all pretty well handled,

however the point of note in this question was the horse “Trojan” – a lot of candidates attempted to

calculate the “gain” of the sale of Trojan. This is clearly a wasting chattel/asset and therefore no

calculation needed.



Less PPR Relief €328,798 Taxable gain €286,712

Total Ownership months 468

PPR Relief Occupied/Deemed

Non-

occupied

1/5/1981 -30/04/1985 48

1/5/1985 - 31/10/1989 48 6

1/11/1989 - 30/04/1990 6

1/5/1990 - 31/10/1992 30

1/11/1992 - 31/12/1994 26

1/1/1995 - 31/12/1997 36

1/1/1998 - 31/08/2004 80

1/9/2004 - 30/04/2020 12 176

250 218

PPR Relief €615,510 x 250/468 €328,798

W2) Shares Sales proceeds €24,000

Less cost 4,000 x €1.50 x 1.144 €6,864

€17,136






Question 3 – Part A

a)

Case I €140,000 Case V Rental income - W1 €47,000

€187,000 Less Capital allowances (W2 (€30,475)

€156,525

Taxed as €109,525 x 12.5% €13,691

€47,000 x 25% €11,750

Total corporation tax €25,441

W1) - Case V Rental income Rent €42,000/12 x 7 €24,500

Premium €40,000x (51-15)/50 €28,800

Less interest €10,800 x 6/12 (€6,300)

€47,000

W2) Capital allowances Trucks €21,250 New Truck (see below) €5,100 Computers (€33,000 x 12.5%) €4,125 Total capital allowances €30,475

Trucks Cost €230,000 Disposal (€60,000)

€170,000 W&T @ 12.5% €21,250

Truck disposal Sales proceeds €38,700 Tax written down value €37,500 Balancing charge €1,200

Tax written down value - truck

Historically Corporation Tax questions have been based upon the notion of adjusting accounting

profits to arrive at Tax Adjusted Profits. Many candidates attempted to build a tax adjusted profits

solution from limited information contained in this question.

Not being able to correctly calculate capital allowances under all circumstances is troubling.

This was not a tough question. A lot of candidates just tackled the theory components ignoring the

calculations.



Cost €60,000 Wear and tear 31/03/2017 €7,500 Wear and tear 31/03/2018 €7,500 Wear and tear 31/03/2019 €7,500 Tax written down value at disposal €37,500

31/03/2020 Not in use at the end of the basis period

New Truck Cost €42,000 Less replacement option (€1,200)

€40,800 Wear & Tear 31/03/2020 €5,100

Asset disposal Sales proceeds €150,000 Less costs to sell €6,000 Net proceeds €144,000

Less purchase price €160,000

Costs to purchase €4,000

€164,000

Index 1.087 1.087 €178,268

Indexed loss (€34,268)

Not allowed to make loss greater

Monetary loss -€20,000

b)

Corporation tax for small companies is due on the 23rd day of the 11th month of a standard 12-month accounting

period.

This is to avoid interest charges

c)

Pixie Ltd.’s corporation tax is due for payment by 23rd February 2020

Part B

Trading losses of Pixie Ltd can be used to reduce:

1) Trading income in prior periods

2) Total corporation tax in the current period if any,

3) Prior period total corporation tax

4) Trading income of the same trade in future periods

Capital losses can only be carried forward to reduce future capital gains.





Question 4

Q1 – Answer D

Max allowable NRE = €115,000 x 25% = €28,750

Q2 – Answer B

Over 65 = therefore marginal amount over threshold (€24,000-€18,000) x 40% = €2,400

Q3 – Answer B

11,250/45,000 x 100= 25% personal (€6,000 x 25%) = €1,500

Business related (€6,000-€1,500) = €4,500 x (€20,000-€24,000)/€20,000= (€900)

Final addback €600

Q4 – Answer C

Q5 – Answer D

Q6 – Answer C

Q7 – Answer B

€138,900- €1,270 =€137,630 x 33% = €45,418

Q8 – Answer A

Q9 – Answer A

Q10 – Answer B

Most This question was attempted by approximately half of the candidates – some scoring as high as 18/20

and some scoring as low as 2/20.

This question always examines every tax and should only be attempted by well prepared candidates.

Most

Most





Question 5

Part A

Output VAT VAT

Invoiced sales to Irish customers (€85,000 x 23%) €19,550

Invoiced sales to USA customers - Exempt €0


€34,500

Input VAT Purchases from Irish supplier €135,000/123 x 23 €25,244


Accommodation - Trade shows - Not allowed €0

Food Expenses - Trade shows - Not allowed €0

Accountant's fees €2,244

Van leasing €2,992

€45,430

T1- VAT €34,500

T2- VAT €45,430

VAT due/(refund) (€10,930)

Part B

a) Cannot claim input credits for:

Petrol, other than as stock-in-trade.

Entertainment expenses.

Items taken for personal use.

Items moved from vatable activities to exempt supply.

b) Where a business in Ireland is making supplies that are exempt from VAT, it will not be registered for

VAT.

If the exempt business purchases goods from an EU country, it will not have a VAT number to give the

supplier and therefore will be charged VAT by the foreign supplier.

However, if they exempt business purchases goods worth more than €41,000 in a 12-month period, it is

obliged to register for VAT in respect of the EU acquisition. Once registered, the only transaction that

will be recorded on the VAT return is the acquisitions of goods from other EU countries.

The business will be required to self-account for VAT on these goods. Therefore, it will include output

VAT on the net amount of purchases at the appropriate VAT rate. As it is providing exempt supplies it is

still not entitled to claim any input VAT credits, so in this case the business will have to pay the

Revenue Commissioners the VAT arising on the EU acquisitions.

Two advantages for using the cash receipts basis rather than invoice basis include:

1) Better cash flow as VAT is only paid once the trader themselves are paid.

2) Accounting for bad debts is no longer an issue as the trader only pays the VAT liability when the

trader receives payment.

As always, the VAT question is very well answered and this exam sitting is no different. Any area

concern for me is that a high percentage of candidates told me that the VAT on the lease of a van is

not allowed – which is not correct. It is allowed.

Approximately 80% of candidates selected this as one of their optional questions.



c) Multiple Supply

A multiple supply is defined as being two or more supplies made in conjunction with each other to a

customer for a total consideration covering all elements of the supply, but each of the supplies are

physically and economically dissociable from each other. You could use each item without the other. In

this arrangement each of the supplies is made in conjunction with others is treated as an individual

supply and is taxable/exempt in its own right.

An example is a restaurant meal consisting of food together with the soft drink or wine. The customer is

charged a single price for the meal. The food is liable to VAT at a rate of 13.5% whereas the soft drink or

wine is liable at 23%. Under the rules such a meal is taxed as a multiple supply as each part of the meal is

physically and economically dissociable from the other.





Part A

a) Sophia

Tax Year Status Tax Implications

2020

Resident/Split year

Ordinarily Resident

Domiciled

All income from employment and any

non-employment income - unless split

year residency applies

2021

Not Resident

Ordinarily Resident

Domiciled

Income from employment in New York

is not taxable in Ireland

2022

Not Resident

Ordinarily Resident

Domiciled



2023

Not Resident

Ordinarily Resident

Domiciled



2024

Not Resident

Not Ordinarily Resident

Domiciled



b) Self-assessment means that a taxpayer makes direct payments to the Collector General. This will apply

to all income not covered by the PAYE system.

Self-assessment applies to all chargeable persons.

A chargeable person is also required to include a self-assessment of their income tax liability with their

income tax return for the year.

Preliminary tax must be paid by the 31st of October each year.

c) As Sophia is resident, ordinarily resident and domiciled in Ireland in 2020 she is liable to tax on all

worldwide income and will also have a liability to Capital Gains tax.

Sophia is deemed to be a chargeable person and therefore has a capital gains tax liability in Ireland in

2020.

Sophia will have to make a payment to the Revenue Commissioners for the capital gains tax on the

antique chair that she disposed of in July 2020. The payment of (€13,000 -€1,270) x 33% = €3,871, is

due to the Revenue Commissioners by 15th December 2020.

This was a well attempted question and the vast majority of candidates that attempted this question scored

well.

Few if any candidates mentioned split year residency for Sophia in the year that she moved to New

York.



Part B

The three payment methods that are available to a taxpayer currently are:

1. ROS Debit instruction (RDI)

The debit instruction method requires that a customer must complete an ROS debit instruction in order to

make payments for any of the taxes available in ROS. The RDI includes details of the ROS customer's bank

account from which the Revenue can collect the appropriate liability at the due date when authorized by the

taxpayer.

2. Laser card/credit card/debit card

When a payment is due and is being paid online, the details of the taxpayer’s bank debit cards are input and

each individual payment is authorized by the customer. Payment is made on the date the transaction is

processed.

3. Online banking

Online banking can be used for paying outstanding income tax liabilities only.





Part A

2018 – Natalie is entitled to use Section 381of TCA 1997 to reduce other income in the year of the loss. This is

made up of €18,000 (loss) plus €10,500 (capital allowances). She has no other income in 2018 and therefore the

full amount of this €28,500 is carried forward to 2019 under Section 382 of TCA 1997 – along with the €7,500

from 2017, giving a total of €36,000.

2018

Case I €0

Capital allowances €10,500

€0

Taxable Income 2018 €0

2019- Natalie must use capital allowances from 2019 first against her trading income from 2019, before using

Section 382 (€36,000) – Balance of loss after using in 2019 is (€36,000 - €22,500) = €13,500

2019

Case I €30,000


€22,500

Section 382 €22,500

Taxable Income 2018 €0

2020- Natalie can only use the balance of €13,500 against trading income. Again, she will have to reduce the

trading income of €8,400 by her capital allowances of €3,600 first, leaving her with a loss balance of €8,700.

2020

Case I €8,400


€4,800

Section 382 €4,800

€0

Schedule F €1,500 /0.75 €2,000

Taxable Income €2,000

Natalie will have unused loss relief of €8,700 to use against future profits of the same trade and in 2020 Natalie

cannot use the loss remaining of €8,700 against her dividend income in 2020. Her final taxable income for 2020

is €2,000 of Irish dividends.

In total only 4% of candidates attempted this question. This question was very well attempted by those

few candidates and they all scored well.

A point to note for future study is the rules for Ruth and the correct method of dealing with the covenant

payment as a deduction against other income (Rental Income and Irish dividends), before calculating

the final Net Relevant Earnings.



Part B

Case II €105,000

Capital Allowances (€4,200)

Loss forward (€5,600)

€95,200

Rental Income €8,800 Irish Dividends (gross amount) €2,200

€11,000 Less Covenant (€12,000) (€1,000)

Net Relevant Earnings €94,200

Max contribution @ 20% €18,840

Part C

The following factors would indicate the existence of an employment contract:

1) An individual works under the control of another who directs how, when and where the work is carried

out.

2) Where they supply labor only.

3) Where they do not supply materials or equipment.

4) Where they cannot subcontract the work.

5) Where they are paid a fixed hourly weekly or monthly rate and are entitled to holidays.

6) Where they do not have an opportunity to profit from sound management although many employees.

will be entitled to be paid a bonus based on performance.

7) Where they are obliged to work set hours.

8) Where they are subject to dismissal and redundancy.

The following factors may indicate that an individual is self-employed:

1) Have they registered for VAT (although registration itself is not proof of self-employment)?

2) Have they a requirement for insurance both professional indemnity and public liability?

3) Are they taking a financial risk and could they incur a loss?

Documents

Advanced Taxation ROI August 2021