Taxation Accounting

Malaak Al Balushi , ST09285

Q1:
g)
a) house d) Painting e) Shares f) Factory
Warehouse
Sales value 70000 6000 60000 72000 80000
Less: Selling
-1400 -500
Price
Net Proceeds 68600 5500 60000 72000 80000
Less: original
-8000 -8000 -40000 -20000 -40000
cost
incidental
-400
cost
cost of
-1000
improvement

Gain 59200 -2500 20000 52000 40000

Less: Reliefs
(e) Gift relief
-20000
for shares
(f) Gift relief
-41600
for factors
(g) Rollover
-30000
Relief
Capital Gain 59200 -2500 0 10400 10000

b) Sale of coins: sale is more than 6000, cost is less 6000, chattel rule 2
1)-Normal way of gain £
Sale proceeds 7200
Less:purchase price -5000
CapitalGain. 2200
2) Using Marginal Relief -Capital gain

('7200 - '6,000.) X 5/3 2,000

Which ever is less - capital gain 2,000

c) Sale of Car - Rule says that car is exempt asset. No CGT

Computation of total Capital Gain taxable

 Residential building Other gains
a) House-gain 59,200
b) Coin -gain 2,000
c) Car-exempt 0
d) Painting-capital loss. -3,000
e) Shares -gain – gift relief 0
f) Factory-gain- gift relief 10,400
g) Warehouse-gain - ROR 10,000

Total gain 56200 22,400

Less: old loss b/f -27,000
29200
Less: AE(fixed amount) -12,300
Taxable gain- pay tax for this total 16,900 22,400

28% IS THE RATE FOR RESEIDENTIAL BULILDING, THERE IS NO GAP IN THE RATE
BAND BASIC. ANOTHER TAXABLE AT 20%

TAX =
16900*28% + 22400*20% = 9212
LESS: ADVANCES TAX = 8,000
TAX PAYABLE = 1212
THE DUE DATE : 31/1/2022

Q2:

Output VAT:
On standard sale 564,000*1/6. 94,000
Zero rate 0
On Export of goods No VAT

Less: Input VAT:

On Standard purchase 204,000*1/6. 34,000
On Zero Rated 0
On Exempt sales No VAT

On Motor car (partly personal). 0

On motor car (fully business)
8,000
40000*20%
Staff Entertainment 2400*1/6 400
UK Customers entertainment (no
0
deduction).
Overseas Customers 4800*1/6. 800

On Fuel 24000*20%. 4,800

On import – goods 28000*20%. 5,600

On import – services 20000*20%. 4,000 -57,600
TOTAL INPUT VAT:
VAT PAYABLE (output VAT –
36,400
Input VAT)

THE INPUT VAT IS NON-DEDUCTIBLE : CAR1 WAS PARTLY USED BY PERSONAL IN

UK CUSTOMER’S ENTERTAINMENT EXPENSE

a) B) For registering business under VAT, the turnover should be more than 85,000. We have to
take each month cumulative total to find out the 85000 limit. Rani started business, turnover =
20000 per month.

30 April 2021 Sales = 20000 cumulative sales =20000. No registraion

31 May 2021 Sales = 20000 cumulative sales =40000. No Registration
30 June 2021 Sales = 20000 cumulative sales =60000. No Registration
31 July 2021 Sales = 20000 cumulative sales =80000. No Registration
31 August 2021 Sales = 20000 cumulative sales =100000. yes Registration required.
85000 increased in August month. 31/8/2021 + 30 days = 30/9/2021.
Registration is effective from 1/10/2021

Deregistration is another area given in the scenario. Raju stopped his business on 10 th
August 2021. It is his duty to inform to the HMRC Government. He has 30 days time for
that duty. 8th September 2021, is the last day to notify. But on the date of closing business
his registration is ceased and deregistered. He will not have any VAT registration after
10/8/2021.

Q3:
a) Explain the meaning of transfer of value, chargeable property and chargeable person.
Clearly explain the domicile status of the assesses and IHT effect.
Transfer of value indicates that the value of some goods can be transferred from a person to
another. For example, donor to the done. Selling an asset to someone cannot be considered
transfer of value. Where chargeable property refers to it is taxable property under the IHT. Which
 means that all assets are subject to taxation. There are no assets that are exempt from taxation.
Chargeable persons refer to person being subject to taxation under IHT which means individuals
is taxable. In order to apply the taxation, we need to look at the individual’s permanent residence.
For example, if he resides in UK then all assets the individual owns in the world is under IHT.
However, if he does not reside in UK, then only UK assets are subject to taxation.
a) There are two types of gifts-during lifetime is known as lifetime gift. During death (after
death) is known as death estate.
Lifetime gift is not taxable at the time of gift but taxable only if the person died in 7 years
from the date of gift. For example. A gave gift on 10/1/2020. If he die on or before
10/1/2027, then done has to pay tax. if he die after 10/1/2027, no IHT for that gift.
Death tax is calculated based on the market value at the time of death. After some exemption
and RNRB, NRB, balance is taxable at 40%
Life time gift and death estate has many difference. The main one is life time during he was
alive, death estate is after death. Some exmeption is available for life time but such
exemption is not there for death estate. RNRB is only for death estate, not for life time. Taxa
rate is same as 40%.

C)

Market Value(£)
Government Securities-govt
10,000
bond
Motor Car/vehicle 20,000
Jewellery-chattel taxable 40,000
Shares-Quoted company of
300,000
UK
Deposit in National Savings
50,000
Certificate(NSC)
Deposit in Individual
100,000
Savings Account(ISA)
Cash in hand and Bank
5,000
account Balance
House/residence

Less: Repayment Mortgage

400,000
(450-50)
Factory (450 -0)
Less: Endowment
mortgage
Insurance 450,000
180,000

1,555,000

Less: Deductible expenses: 5000

Tax payable to government 4000

Credit card used before
0 -15,000
death
Promise to pay the loan
0
without document
Expense to manage the
6000
property
Funeral expense after death
1,540,000
Less: Exempt Legacies:
Asset given to wife: -300,000
Car + ISA+ insurance =
20+100+180
Gross Value of assets 1,240,000
Less: N.R.B.(maximum) -325,000
Less: R.N.R.B.(maximum) -175,000
740,000

IHT = 40% for 740,000 =296,000 and due date for payment is 28/2/2021

Q4:

Capital Allowance:

Main pool Spl Rate CA

Opening 100,000 50,000
Car Purchase 20,000 25,000
Other Assets 200+50+40 290,000
Less: Sale -10,000 -5,000
400,000 70,000

72,000 -4,200 72,000

4,200

328,000 65,800 76,200

Trading Profit:

Net Profit as per Income statement 1,000,000

Less: Rent-income -12000 .these are not business income.

Interest-income -10,000 Not business income
Dividend-income -15,000 Not business income
Capital gain-income -50,000 Not business income
913,000
Add: expenses not deductible:
Depreciation £40,000 40,000 Capital allocation
Donation to political party £2,000 2,000 politics

Donation to local charity £200 0 local charity

Donation to National charity £8,000 8,000 Ntional charity

Office building repair £2,500 0 Revenue

Cost of Additional room added to the
9000
office building £9,000
Fine and penalty for irregularity in
Capital expenditure
filing Tax return £4,000
Parking fine of the staff during
Fine not deductible
business hours £50
Car lease rent (CO2 emission = 130
4,000
gms/km) £8,000
Staff entertainment £1,500 Staff cost

Customers’ Entertainment £3,000 0

The gift to Staff £200 1,200 High emission car

Gift of calendars to the customer (10
each for 1000 customers) £10,000
Gift of Chocolate packets to
customers (5 each for 500 customers) 0 Staff cost
£2,500
Gift of mobile to customers (70 each
3,000 Customer not ok
for 10 customers) £700

0 Staff cost

0 Less than 50

2,500 Food items

700 More than 50

983,400

Less: Capital Allowance -76,200 deductible

Trading Profit 907200

Capital Gain:
Sale 160,000.00
Less: purchase cost
-75,000.00
in April 2004

Cost of
improvement in Dec -20,000.00
2004

Unindexed Gain
65,000.00
(including inflation)

Less: IA for inflation

For Cost: IA is
available till Dec -29,625.00
2017
0.395 X
75,000

For Improvement:
IA is available till -6,400.00
Dec 2017
0.320 X
20,000

Capital Gain taxable 28,975.00

To find out
the TTP

Trading profit
907,200.00
calculated

Capital Gain (as

28,975.00
calculated above)
Rental income
12000
(P&L)

Interest income (10+

18) one from P&L 28,000.00
and other from note

Rental Income from

australia
50,000.00
35000/70%
form note

Less: Brought
forward Loss
-55,000.00

Less: QCD
(National Charity)-
P&L A/c

-8,000.00
Taxable Total
Profit (TTP)

935,175.00

Calculation of Corporation
Tax:
 Tax for TTP = 935,175 @19% 177,683.00

Less: Double-Taxation- Relief

a) UK tax for rental

income 50000*19%

b) Tax paid in Australia

9,500
50000*30%

Lower in the above is DTR

Corporation-Tax Payable 15,000 -9,500.00

168,183.00

Corporation tax is to be payable in 9 months: 1/1/2022