Taxation Assignment

Order Instructions/Description

This is a taxation assignment. The assignment has three questions that need to be addressed, showing all the calculations, workings, and with explanation logic of the answer. Please try to include some relevant sources to back up the answers. and please make sure there is low plagiarism.

Assignment to be returned as a word document.
Please note that correct answers will only be accepted for Finance ACT 2015.
Must show all workings.

Question 1
Splash Ltd is a small manufacturing company and has prepared the following income statement for the 12-month period to 30 September 2015:

Splash Ltd, Income Statement for year ended 30 September 2015

£    £
Sales            981,045
Cost of sales    (note i)        (399,655)
581,390
Distribution costs    (note ii)    13,124
Administrative expenses    (note iii)    154,800
(167,924)
Operating profit            413,466
Profit on sale of car park land    (note iv)        45,800
Interest payable on business overdraft            (2,800)
Dividends from unconnected UK companies            18,000
Rent receivable on car park land    (note v)        3,500
Profit before taxation            477,966
Corporation tax            95,593
Profit after tax            382,373

Notes to the income statement:

Cost of sales includes depreciation of £7,800
Distribution costs includes a car leasing payment of £3,467 incurred on a 3 year operating lease, taken out in January 2015, of a car emitting 175g CO2/km
Administration expenses include:
Depreciation of £4,000
A charitable donation of £750 to the UK central office of Oxfam
Legal fees of £800 relates to the sale of land in November 2014

The profit on sale of land recognised in the accounts related to a car park land that the company had originally used for its own business. The company no longer required this car park land so it was let until its sale. The company realised a chargeable gain of £18,600.
USM Ltd has a capital allowances written down value brought forward on 1 October 2014 of:

£
General pool    15,600
Special pool    9,300
Short life asset (note a)    7,800
£
The following assets were purchased during the year:
A car with CO2 emission level of 70g/km    4,700
A car with CO2 emission level of 150g/km    10,100
A lorry     10,500
A machine    2,200

note (a) the short life asset was purchased on 31 December 2007 and is still being used.

Task:
You are required to advise Splash Ltd of the corporation tax liability for the accounting period 30 September 2015. You must show all workings towards this calculation and any others that you think necessary in aiding you in explaining how you got to the final figure.

Question 2
Currently, Bridget works as full time consultant for Bogain Ltd. For the year ended 5 April 2016, she has provided you with the following information:

Her basic salary was £49,000 (PAYE deducted £12,360)
She received a bonus of £3,978 for the year to 5 April 2016
She had the use of a 147g/km diesel-engine company car from 6 May 2015 (date of first registration) to 6 April 2016. The list price of the car was £22,500 but the company negotiated a 15% discount from the dealer. All the business and private fuel was paid for by the company
Bridget had a company mobile phone, which she also used for making private calls. The phone cost the company £360 for the year for rental and charges
Bridget received an interest-free loan of £15,000 from the company on 6 June 2015, which she repaid on 6 December 2015. (Assume that the official rate of interest is 3%)
Bridget paid £200 per month into the company occupational pension scheme by direct deduction from her salary and the company contributed £60 per month.
Bridget had £240 credited to her bank account
Bridget is thinking of leaving the employment in July 2016 and become a self-employed PR consultant. She plans to advertise her services widely, and has already identified potential new clients.
Bridget also hopes to sell some of her self-employed services to Bogain Ltd after she leaves their full-time employment. Her current manager is willing to offer her some short-term tasks on ‘freelance’ basis, working with the existing teams she knows.

Task:
You are required to advise Calculate Bridget’s of the income tax and the National Insurance contribution liability for the tax year 2015/16. She also wants to know the national insurance contribution that Bogain Ltd will have to pay for her to HMRC. (20 marks)

You are required to advise Bridget whether it would be prudent to carry out her self-employed activities, including any services provided for a fee to Bogain Ltd, if she wishes to resist any suggestion from tax authority that she is still an employee of Bogain Ltd. (10 marks)

Explain how it would alter Bridget’s UK tax position if occasional work that she does for BOGAIN Ltd after she leaves the present employment were viewed as a return to employment and not as self-employment. (5marks)

Question 3

Part (A)
Rudolf and Roda are husband and wife. In the tax year2015/16, Roda is a higher rate taxpayer and Rudolf’s taxable income for 2015/16 is £28,785. For the tax year 2015/16, both Roda and Rudolf sold the following assets:

In July 2015, Roda sold her fish and chips building for £260,000. Roda had bought this building in May 2004 for £157,525. In July 2015, Roda bought another building for use in her business, which cost her £240,000. Roda claims roll over relief, for the July 2015 disposal.
Roda sold part of a plot of land in February 2016 for £40,000. The whole piece of land cost £25,000 in November 1997. The value of the land remaining was valued at £30,000 in February 2016.
Roda sold a sculpture for £10,000 in March 2016. The sculpture cost £18,500 in January 1991, with an additional £1,500 of acquisition cost.
Rudolf sold 2,250 quoted ordinary shares of Nino plc for £23,000 in March 2016. Before the sale, he owned 6,750 shares, of which 4,500 shares were purchased in December 1988 for £4,599 and 2,250 were acquired in August 1992 following the company’s rights issue of 1:2 shares at 160p per share.
Rudolf sold 2,550 quoted shares of Lidy plc for £12,375 in June 2015. His previous transactions in Lidy’s shares had been as follows:

no of shares    cost
£
Apr-88    Purchased    1500    3093
Aug-90    Purchased    900    2700
May-92    Bonus issue    1 for 2

Task

Draft brief notes that will form a basis of the letter that you will write to both Roda and Rudolf explaining the final capital gains tax payable by each.
None of the above transactions qualifies for an entrepreneur relief.

Part B
Roda has asked for your advice for her friend Goodly.
Goodly needs to calculate the amount of the property income that must be shown on the self-assessment form for the year 2015/16. For the year 2015/16, she has provided you with the following information:
Goodly lets out a furnished apartment at an annual rent of £3,600 payable monthly in advance, on the first day of the month. During 2015/16, Goodly incurs the following expenditure on the furnished apartment:
May 2015 – Replacement of one broken kitchen unit with a unit of similar standard costing £275.
June 2015, Goodly paid insurance costs for the year from 5 July (previous year £420) is £480
November 2015, Goodly paid for drainage clearance, which cost her £380
March 2016, Goodly had some redecoration work done, for which she paid £750.
The tenant had vacated the property during June 2015, without having paid the rent during June. Goodly was unable to trace the defaulting tenant, but managed to let the property to new tenant from 1 July 2015. She has asked if she should claim any other expenses besides the one above.
On 1 August 2007, Tyrone granted Goodly a lease to a warehouse for a period of 20 years. Goodly paid a premium of £20,000.
On 1 August 2015, Goodly granted a sublease to Sally for a period of 5 years. Sally paid a premium of £24,000.