Question 1

Section C

Dr. Aris Thorne is a medical consultant. During the tax year 2023/24, he has two sources of income:
1. Employment with the NHS.
2. A private self-employed medical practice.

**NHS Employment:**
Aris receives a gross annual salary of £95,000. The NHS provides him with a petrol-powered company car (list price £35,000, CO2 emissions 135g/km). The NHS also pays for all his private fuel. Aris pays a professional subscription to the General Medical Council of £450, which is necessary for his employment.

**Private Practice:**
Aris prepares his accounts to 5 April each year using the cash basis. For 2023/24, his cash receipts from patients were £65,000. He paid the following expenses:
- Medical supplies: £8,000
- Lease of medical equipment: £4,000
- Purchase of a new laptop for the practice: £1,500
- Client entertainment (taking referring doctors to dinner): £800

**Other Information:**
Aris made gross personal pension contributions of £15,000 during the year. He has no other income.

**Required:**
Calculate Dr. Aris Thorne's Income Tax liability for the tax year 2023/24.

*Note: You should show all workings, including the calculation of employment income, trading income, and the application of the personal allowance and tax bands. Assume the car benefit percentage for 135g/km is 32% and the fuel benefit base figure is £27,800.*

Accepted Answer

1. Calculate Employment Income: Salary + Car Benefit (List price x %) + Fuel Benefit (Base figure x %) - Professional Subscriptions. 
2. Calculate Trading Income (Cash Basis): Receipts - Allowable expenses (Supplies, Lease, Laptop). Exclude client entertainment. 
3. Calculate Net Income: Employment Income + Trading Income. 
4. Determine Personal Allowance: Check if Net Income > £100k. If so, taper the PA. 
5. Calculate Taxable Income: Net Income - PA. 
6. Adjust Tax Bands: Extend the basic rate band by the gross pension contribution (£15,000). 
7. Calculate Tax Liability: Apply 20%, 40%, and 45% rates to the respective bands.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to taper the Personal Allowance, failing to deduct the gross pension contribution when calculating Adjusted Net Income, or treating the laptop as a capital allowance rather than an expense under the cash basis.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 4

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