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SECTION A

1. Renard Limited is a Company resident in Trinidad and Tobago and it is engaged in the business of the
retail of clothing. For the year ended December 31', 2018, the profit and loss account of the Company
was as follows:

PROFIT AND LOSS ACCOUNT

Gross Sales $2,500,000

Cost of Sales ($1,300,000)
Gross Profit $1,200,000
Other Income $400,000
$1,600,000
Expenses:

Salaries and Wages $300,000

Entertainment $50,000

Advertising $50,000

Depreciation $80,000

Legal and Professional Fees $60,000

Interest $75,000

Donations $50,000

Royalty $25,000

Repairs and Maintenance $30,000

Bad Debts $80,000

Conference Fees $100,000

TOTAL EXPENSES $900,000

NET PROFIT $700,000

©The University of the West Indies Course Code: MGMT 3103 171 .1.....I

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INSTRUCTIONS: Each page must be signed by the Examiners and where applicable, the University Examiner and/or the External
Examiner. Where the examination does not require a University Examiner, the form must be signed by the First and Second
Examiners. Completed forms should be handed to the Assistant Registrar (Examinations). The EXTERNAL EXAMINER is requested to
sign the question paper and return it with comments, if any, (on a separate sheet), to the Assistant Registrar (Examinations).
 page 3

NOTES TO THE ACCOUNTS

i. Other Income includes dividend income from a subsidiary resident in Barbados of $250,000 and the
balance an ordinary dividend from a local resident subsidiary.
The balances brought forward as at lst January 2018 on the wear and tear pools are $300,000,
$160,000 and $100,000 for the pools A to C respectively. There were no additions or disposals
during the year of income 2018.
Legal and Professional Fees relate to the legal fees in filing an objection before the Board of Inland
Revenue in a VAT dispute.
iv. Interest includes the sum of $25,000 which was the interest and penalty on a late remittance of a
withholding tax payment. The balance relates to the interest paid on a loan used to purchase goods
for the business.
v. Donations includes the sum of $35,000 which was a donation made under a deed of covenant to a
registered charity in Trinidad and Tobago (the Stamp Duty on the deed of covenant was paid on the
231d December 2018); the balance relates to a donation made to an employee to assist in his mother's
heart surgery.
vi. The royalty relates to a payment made to a company resident in Uruguay; no withholding tax was
deducted and remitted to the Board of Inland Revenue on this amount. The royalty was paid in
relation to the software license used in the computer operating systems of the Company.
vii. Bad debts include the sum of $30,000 which is an increase in the general provision and the sum of
$20,000 which relates to a loan to a former employee; the balance is all specific trading debts.
viii. Conference fees all relate to the cost of attending a conference in Mumbai, India by one of the
directors and his family, who all spent additional time there for purposes of a vacation. The costs
associated directly with the conference amounted to $30,000.
ix. The company has made aggregate payments with respect to Corporation Tax and Green Fund Levy
liability for the 2018 year of income in the amounts of $161,000 and $9,000 respectively.
x. All entertainment expenses are business related.

©The University of the West Indies Course Code: MGMT 3103 17/..../...../

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INSTRUCTIONS: Each page must be signed by the Examiners and where applicable, the University Examiner and/or the
External
Examiner. Where the examination does not require a University Examiner, the form must be signed by the First and Second
Examiners. Completed forms should be handed to the Assistant Registrar (Examinations). The EXTERNAL EXAMINER is requested
to
sign the question paper and return it with comments, if any, (on a separate sheet), to the Assistant Registrar (Examinations).
 page 5

SECTION B
3. Daren Bravado is a retired professional
football player and his only income comes from
dividends in
local resident companies in which he has made significant
investments. On lst February 2017 he bought
property from MONTILE Holdings Ltd located in Maracas
for $2,000,000. As he had a good
relationship with the vendor, he was able to attain a significant discount
from the open market value of
the property. His intention at that point, was to hold the land until it could be
developed and to construct
an inn on it. On 1st March 2018 he received an unsolicited offer from Keith Chandler
to purchase the
property for $3,500,000. He sold the property on 1St May 2018 to her at the price she had offered.
There
was absolutely no work done on the property since the initial acquisition on Pt February 2017
as to the
proposed intention to develop the land and construct an inn.
Having realized a significant profit on the disposal of the property, Daren Bravado is concerned as to
whether the profit is taxable and has come to you as a tax consultant for your advice.
Prepare a memorandum to him in which you with reference to case law and established tests
analyze the transaction and determine whether the resultant profit may be taxable. (20 marks)

4. SCENT-SATIONS Limited is a resident company of Trinidad and Tobago and involved primarily in the
business of the retail of perfumes and bath supplies. It is also a VAT registrant. For the 2-month VAT
period ending 31st May 2019 the following activities are relevant to the determination of its VAT
liability for such period.
a. Sales inclusive of VAT for the period amounted to $400,000 and is all standard-rated
b. A business vehicle was sold to the majority shareholder for $20,000. The motor vehicle based on its
age and condition has an open market value of $100,000 exclusive of VAT. The proceeds of this sale
was not included in the sales figures in (a) above.
c. A bad debt of $1,200 was recovered relating to a trading debt which was written off 2 years ago
relating to a standard rated supply.

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INSTRUCTIONS: Each page must be signed by the Examiners and where applicable, the University Examiner and/or the External
Examiner. Where the examination does not require a University Examiner, the form must be signed by the First and Second
Examiners. Completed forms should be handed to the Assistant Registrar (Examinations). The EXTERNAL EXAMINER is requested to
sign the question paper and return it with comments, if any, (on a separate sheet), to the Assistant Registrar (Examinations)
 page 4

REQUIRED:

Calculate the Corporation Tax, Business Levy and Green Fund Levy liabilities for the company
for the 2018 year of income and determine whether it has any balance of taxes payable or
refundable with respect to the particular tax types. (25 marks)

2. Lee Foster is a finance consultant who operates as an independent contractor and has a wide client base.
He is resident in Trinidad and Tobago. He filed his Income Tax Return for the 2012 year of income on
the 30th April 2018, in which he declared his chargeable income based on his income from his trade or
business as a finance consultant of $300,000. In arriving at his chargeable income, he claimed as a
deductible expense an amount of $50,000 being the aggregate cost of designer suits he bought which he
wears when attending meetings with high net worth clients. His Income Tax Return for the 2012 year of
income was subsequently selected for audit examination. The Board of Inland Revenue by Notice of
th
Assessment dated 30th December 2018 which was served on him on the 11 January 2019 disallowed
his claim for the costs of the designer suits and as a result his chargeable profits increased by $50,000
with additional tax thereon of $12,500. The basis of the Board of Inland Revenue for its adjustment was
that the cost of such suits was not wholly and exclusively incurred in the production of income of the
taxpayer as it had a dual purpose.
Assume that the date is 1st February 2019 and Lee Foster has come to you for advice on the
following for which you are to prepare a memorandum of advice relating to the following issues.

a. Comment on the importance of the distinction between the times in which an assessment on
a taxpayer is made from the time in which the notice of assessment is served on a taxpayer.
(3marks)
b. Was the assessment made by the Board of Inland Revenue statute barred, clearly explain
your reasoning. (3 marks)
c. Explain the processes available to a taxpayer to challenge an assessment made upon him by
the Board of Inland Revenue including the recourse to legal proceedings. (9 marks)

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INSTRUCTIONS: Each page must be signed by the Examiners and where applicable, the University Examiner and/or the External
Examiner. Where the examination does not require a University Examiner, the form must be signed by the First and Second
Examiners. Completed forms should be handed to the Assistant Registrar (Examinations). The EXTERNAL EXAMINER is requested to
sign the question paper and return it with comments, if any, (on a separate sheet), to the Assistant Registrar (Examinations).