ExpertEasy2 marksMultiple Choice
ACCA · Question 22 · Income tax and NIC liabilities
Section B - Case 2 (GreenRoots LLP)
GreenRoots LLP has two partners, Sarah and Tom. For the year ended 31 December 2023, the partnership's tax-adjusted trading profit is £120,000. Sarah receives an annual salary of £20,000. The remaining profits are split equally (50:50).
What is Tom's share of the trading profit for tax purposes?
Section B - Case 2 (GreenRoots LLP)
GreenRoots LLP has two partners, Sarah and Tom. For the year ended 31 December 2023, the partnership's tax-adjusted trading profit is £120,000. Sarah receives an annual salary of £20,000. The remaining profits are split equally (50:50).
What is Tom's share of the trading profit for tax purposes?
Answer options:
A.
£60,000
B.
£50,000
C.
£70,000
D.
£40,000
How to approach this question
Deduct the partner salaries from the total profit first. Then divide the remaining profit according to the profit-sharing ratio.
Full Answer
B.£50,000✓ Correct
Partnership profits are allocated according to the agreement in place during the accounting period. First, allocate salaries: Sarah gets £20,000. The remaining profit is £120,000 - £20,000 = £100,000. This is split equally, so Tom gets £50,000 and Sarah gets £50,000. Tom's total allocation is £50,000. (Sarah's is £70,000).
Common mistakes
Deducting the salary as an expense before calculating tax-adjusted profit, or giving Tom half of the gross £120,000.
Practice the full ACCA TX — Taxation Practice Exam 2
32 questions · hints · full answers · grading
More questions from this exam
Q01Section A
Marcus, a self-employed marine biologist, filed his self-assessment paper tax return f...EasyQ02Section A
AgriCorp Ltd granted a 21-year lease on a piece of agricultural land to a tenant farme...MediumQ03Section A
Quantum Robotics Ltd, a tech startup, provided its marketing director with a new fully...MediumQ04Section A
Elena sold an antique weaving loom (a tangible movable property) for £6,500. She had o...MediumQ05Section A
Which of the following conditions is NOT required for an individual to qualify for Bus...Easy