David is concerned that his wife, Ceri, may have been taxed incorrectly in her new job. He says that Ceri’s P60 form for the year to 5th April 2021 shows she paid £4,590 income tax and £2,815 national insurance contributions. David explains that Ceri has chosen to make 5% employee contributions to her pension fund, the school makes a further 3% contribution. Ceri took all the other benefits offered in the school’s letter dated 30 December 2019. David also tells you that Ceri has received £3,250 Building Society interest and a dividend of £450 from Scottish Newcastle plc. During the year David bought some land, built a property ‘Rose House’ on the land and sold it for a profit. David asks your advice on how this profit will be taxed. A4) Required: Use the series of Badges of Trade tests to analyse if David is carrying out a trade for tax purposes.
David is concerned that his wife, Ceri, may have been taxed incorrectly in her new job. He
says that Ceri’s P60 form for the year to 5th April 2021 shows she paid £4,590 income tax
and £2,815 national insurance contributions.
David explains that Ceri has chosen to make 5% employee contributions to her pension
fund, the school makes a further 3% contribution. Ceri took all the other benefits offered in
the school’s letter dated 30 December 2019.
David also tells you that Ceri has received £3,250 Building Society interest and a dividend
of £450 from Scottish Newcastle plc.
During the year David bought some land, built a property ‘Rose House’ on the land and
sold it for a profit. David asks your advice on how this profit will be taxed.
A4) Required: Use the series of Badges of Trade tests to analyse if David is carrying out
a trade for tax purposes.
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