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Study On Business & Taxation

   

Added on  2020-02-05

13 Pages3354 Words46 Views
Business andtaxation
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TABLE OF CONTENTSIntroduction .....................................................................................................................................3Task A..............................................................................................................................................3Tax implications of the commercial transactions........................................................................3Task B..............................................................................................................................................6Extraction of profits from a company and its implications.........................................................6Tax calculations...........................................................................................................................7Conclusion ....................................................................................................................................10References......................................................................................................................................112
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INDEX OF TABLESTable 1: Computation of NIC for 2014-15......................................................................................8Table 2: Statement showing adjustment profit of Emma's company...............................................9Table 3: Statement showing chargeable profit of Emma's company...............................................9Table 4: Statement showing tax payable Emma's company............................................................9Table 5: Statement showing computation of capital allowance.......................................................9Table 6: Statement showing computation of capital gain tax of Emma........................................10Table 7: Statement showing computation of capital gain by incorporation .................................11Table 8: Statement showing computation of income tax ..............................................................113
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INTRODUCTION Taxation can be defined as act of legal authorities of imposition of tax on commercial andnon-commercial transactions. Individuals and business entities are liable to pay tax charges forthe profit or benefit earned by them through operational activities in timely manner. Tax is leviedin UK on the basis of statutory norms described by HMRC. Taxes is payable in UK at minimumthree different level i.e. central government, local government and devolved national government(Citron, 2010). Present study is focused on description of tax obligation of Emma by consideringoperational activities of her business. For this aspect description of major taxes will be providedsuch as NIC, corporation tax, capital gains tax, VAT and personal tax. In addition to this, variousmethods for the tax planning will be discussed through which reduction can be made in taxobligations. TASK ATax implications of the commercial transactionsIn accordance with the given case situation Emma is planning for the incorporation ofbusiness for the purpose of expansion. For this aspect, she has option to either rent out thebuilding in the Europe or to purchase building by taking loan from the financial institutions. Byconsidering the provisions of corporate tax she is recommended to the rent out the premises inEurope. It is because; he will be able to make deduction of the rent from the chargeable profits ofthe company. However, similar benefit will not be provided in situation where loan is taken. It isbecause; loan is taken prior to the incorporation. In addition to this, loan will make increase inhis financial obligation. Further, implications of the incorporation from the taxation point ofview is enumerated as below:National Insurance contribution (NIC)An individual or business entity is required to pay national insurance contribution insituation where they have age more than equal to 16. Further, if employee is earning above £155a week or in case of self employed their profit must be more than equal to £5,965 in a year. Inaccordance with the UK taxation law, NI is the amount payable by workers and employerstowards the cost of certain state benefits (Henrekson and Sanandaji, 2011). These contributionsare collected by HMRC on the basis of PAYE system along with the income tax or repayment of4
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