Advanced Taxation Assignment Solution (AC7232) - 2019/20

This document provides a detailed solution to an advanced taxation assignment, focusing on corporation tax and capital gains tax calculations for the tax year 2019/20. The solution includes calculations of trading adjusted profit, corporation tax, and capital gains tax payable. It also addresses tax reliefs for donations and the treatment of various income sources. The assignment covers topics such as unincorporated trading businesses, shares, and property transactions, providing a comprehensive analysis of tax liabilities. References to relevant books and journals are also included. The solution demonstrates the application of tax rates and allowances to determine tax liabilities, offering a practical guide for understanding advanced taxation concepts.

ADVANCED TAXATION

TABLE OF CONTENTS
Section-A.........................................................................................................................................1
QUESTION- 2.................................................................................................................................1
QUESTION 3...................................................................................................................................2
REFERENCES................................................................................................................................3

Section-A
a) Calculation of trading adjusted profit
Particulars Amount
Gross profit 2225000
Less: operating expenses 615200
Operating profit or trading profit 1609800
Tax rate applicable 45% 724410
Tax adjusted trading profit 885390
B) Calculation of corporation tax
1734500 – 1500000 = 234500*19% = 44555
C)
2. Donations to local and national charities can be availed as a tax relief from the profit of the
business before charging tax (Beenstock, ed., 2018).
5. Initial cost of repair to the building is added to the cost of acquisition of the building and thus
not allowed for as expenses to be deducted from profit (Arnold, Ault and Cooper, eds., 2019).
6. Franked income such as dividend are exempted from tax. It is the income received from
another company in the form of dividend.
QUESTION- 2
Computation of income under inherent tac:-
300,000 Unincorporated trading business in South London
200,000 Shares in Well-done Pharmaceutical plc (Park, 2020)
650,000 House in East London
300,000 Cottage
45,000 Motor van
25,000 Bank accounts
-1500 Credit card
-4000 Income tax arrears (Inheritance Tax, 2021)
Total =1514500
Tax liability= 1514500-325000= 1189500
1189500*40%= 475800
upto 325000 is exempt
Gifts shall not be taxable
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QUESTION 3
(a)
Computation of Mubarak’s capital gains tax payable for 2019-20
Profits from capital gains = £670000 – £200200 = £469800
Annual income = 150000 (as per the higher tax payers slab rate)
Taxation year 2019/20
Profits from selling property = £469,800
Capital Gains Tax (CGT) = £128,184 (WN 1)
WN 1:
First £12,000 are tax-free.
So, for remaining £457,800 taxed at 28%: £128,184.
In this case where capital gains from property were £469,800 and your total annual earnings
were £619,800:
Capital gains tax (CGT) breakdown
Mubarak pay no CGT on the first £12,000 that Mubarak make
Mubarak pay £128,184 at 28% tax rate on the remaining £457,800 of your capital gains.
(b)
The time within which the Mubarak lived with his father has nothing to do with the tax
purpose. As Mubarak inherited the house from his father and will be required to pay
capital gain tax in respect to the share received on the sale of the house (Odling-Smee and
Lawton, 2019). Moreover, if the holding period of the property is more than 36 months
which also involves the period the house was held by the parents, then the gain will be long
term and the tax.
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REFERENCES
Books and Journals
Park, A. M., 2020. Resolving complex tax issues in the United Kingdom. The International
Family Offices Journal. 4(4). pp.9-15.
Odling-Smee, J. and Lawton, D., 2019. Reforming capital income taxation: the UK experience.
In Reforming Capital Income Taxation (pp. 231-257). Routledge.
Beenstock, M. ed., 2018. Work, welfare and taxation: A study of labour supply incentives in the
UK (Vol. 4). Routledge.
Arnold, B. J., Ault, H. J. and Cooper, G. eds., 2019. Comparative income taxation: a structural
analysis. Kluwer Law International BV.
Online
Inheritance Tax. 2021. [Online] Available through: <https://www.gov.uk/inheritance-
tax>
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