Tax Calculation, Liability, and Financial Reporting Assignment

This document presents a comprehensive solution to a tax calculation assignment, addressing various aspects of taxation including income tax, corporation tax, capital gains tax, and VAT. The solution begins with a detailed analysis of trading profits, adjusting for overcharged expenses and capital allowances, and calculating Garry’s income tax liability, including salary, interest, and dividend income, alongside capital gains and losses from share transactions and property disposal. The assignment then delves into corporation tax for Snowdrop Ltd, covering tax liabilities, rollover relief, and taxable profits calculations. Further, it explores VAT registration for Cassie, determining her liability based on taxable supplies. The document also differentiates between tax domicile and residence, using Carlos as a case study. Finally, it calculates the inheritance tax liability for Helen’s estate, considering the net value of the estate and applying the relevant tax rates and nil-rate band. The assignment incorporates relevant tax tables and allowances, providing a practical guide to tax calculations.

Tax Calculation

TABLE OF CONTENTS
Question 1..................................................................................................................................3
Question 2..................................................................................................................................4
Question 3..................................................................................................................................6
Question 4..................................................................................................................................6
Question 5..................................................................................................................................7
REFERENCES...........................................................................................................................8

Question 1
Trading profit
Net profit 22800
Other electrical work income 150
Overcharged motor expenses 800
Over charged other expenses 300
Telephone expenses not being charged (7639)
Capital allowance not included 2100
Trading profit 18511
2017 to 2018 Trading profit: 8700
2018 to 2019 Trading profit: 16800
2019 to 2020 Trading profit: 18511
Treatment for double charged income
In case of any income get double charged than such income would be found liable
for the income tax purpose. In the next year income tax return this over charged could be
challenged by providing reasonable evidences.
Garry’s adjusted total profit:
18511
Garry income tax liability:
Salary 18000
Interest income 1100
Dividend 3200
Private pension scheme expenses (4000)
Net income 18300
Tax @ 20% 3660
Garry’s capital gain/ loss of shares
Sales 22000 (20000 + 2000)
Less:
Purchase cost
(18000 / 1500 * 100) * 301 / 220 16418

(500 * 1 4 * 301 / 220) 9577
Capital loss (3995)
Chargeable gain on disposal of home
Sales 225000
Less: cost of purchase
(12000 * 301 / 167) 216288
Capital gain 8712
Relief is delivered to the home counting from the 31 March, 1982, from March 1982
to March 1986 consisting of 156 months and also the final 18 months of ownership that
construct the total time of 174 months (Blundell and et.al., 2018). Period of ownership should
be the criteria of claiming the private residence relief.
Total capital gain of Garry”s
8712 – 3995
= 4717
Tax liability:
4717 * 18%
= 850
Question 2
The Snowdrop Ltd is a small company as for becoming a large company, eth corporation is
required to pay corporation tax liability for the year in advance in 4 quarterly instalments
once its profitable profits for the current period are more than £10 million which is reduced if
the company is having more than one group.
Snowdrop Ltd's corporation tax liability for the year ended 31 December 2020 is £740,000
*19% = £140,600. It should be paid within 9 months and 1 day after the end of the
accounting period.
The gain on sell of freehold property is £213,000 and purchased the new freehold office
building as against the replacement of the old which was purchased for £204,000. Since the
property is purchased less than the amount gained. So, the company is entitled to partial

rollover relief. So, the cost of new freehold property is reduced by £48000 (£213000 -
£165000) to £156000 and may have to pay tax on the remaining gain of £165000 reduced by
eth indexation allowance of £22500 which is amounted to £142500.
The amount of corporation tax attributable to capital gain = £27075 (£142500*19%).
In order to qualify for the business asset rollover relief, the company is required to buy the
new assets within the 3 years of time of selling or disposing the old one or up to 1 year
before. Also, eth business must be trading when the asset is sold to the business. claim relief
on assets including: land and buildings, fixed plant or machinery, for example a printing
press. The amount that is rolled over is £48000.
Snowdrop Ltd.’s taxable total profits for the three-month period ended 31 March 2021
Particulars Amount
Profit before taxation 423000
Less: capital allowance 31800
Less: directors’ benefits 10150
Total profits 401350
Less: Loss from subsidiary 60000
Total taxable profits 341350
Sales 800000
Less: purchase cost
(330000 * 301 / 184) 539837
Property extension cost
(150000 * 301 / 254)
177756
Capital gain 82407
Capital allowance =
Opening balance of assets = 50000*18% = 9000
Motor car 1 = 75000*6% = 4500
Motor car 2 = 35000*6% = 2100
Machinery = 90000*18% = 16200
Total = 31800

Question 3
Cassie will become liable to compulsory VAT registration when her taxable supplies during
any 12-month period exceed £85,000 (Almunia and et.al., 2019). A business must be
registered for VAT at any time they expect their taxable supplies for the following 30-day
period to exceed £85,000. In the 9 months period the total taxable supplies is amounted to
£80,400 (£56500 + £12500 + £11400)
It can be seen that the taxable supplies for April 2021 will exceed the limit therefore, she is
liable to register from 1 April being the start of the 30 day period.
Also, Cassie is required to notify the HM Revenue and Customs by 30 April being the 30
days from the date that the expectation arose.
The value-added taxes often described as the regressive tax which is due to the reason that the
consumption and the propensity to consume tends to decline as the income increases. The
poorer households spend a larger proportion of their income on tax. A VAT s therefore
considered as regressive if it is measured in relation to current income and if it is introduced
based upon the other policy adjustments.
Question 4
Difference between tax domicile and residence
Residence is the individual that are originated in the same country. These are the
people that own the citizenship of the country. They do not require holding any visa to stay in
the country legally. These are the individuals earns income in the country (Martinelli, 2017).
Tax domicile on the other hand is the individual or the entity that do not belongs to the
country as a citizen but earn some income in the country and still found liable for the tax
liability. Both the individuals and entity are different from each other and hence pay the tax
liabilities.
Carlos’s tax status
Carlos’s income earned in the United Kingdom would be eligible for the income tax
liability. Dividend income from the Spanish Company would not be found eligible for the tax
liability in United Kingdom (Haig, 2020). The money given by the grand mother could earn
the interest income. This would be found eligible for the tax liability.
Discloser of the bank interest

The income received in form of interest is derived in UK and also receive the same
in UK. This income will be eligible for the tax liability and hence the Carlos’s require
disclosing this interest income.
Question 5
Net value of the estate
Helen’s home £495,000
Quoted shares £175,000
ISA investments £95,000
Cash at bank £43,000
Car £6,000
Total value of estate £814000
Less: the funeral cost £5000
Total net estate value £809,000
Calculating the IHT liability
Current nil-rate band (for 2021/2022) is £325,000. (IHT threshold NRB)
Total amount payable/liable under the IHT
£809000 - £325000 = £484000
Potential IHT liability = £484000*40% = £193,600. (IHT tax rate at death (main) is 40%)
The nil rate band for 2020/21 of £325,000 has been fully utilized.
The donee is always responsible for any of the additional IHT that becomes payable due to
the outcome of death of the donor which is due in 6 months after the end of the month in
which the death occurred (Erixson and Escobar, 2018). Therefore, the personal representative
is needed to pay IHT when they deliver their account of the estate assets to HMRC and this
may occur before the due date.

REFERENCES
Books and Journals
Blundell, R. and et.al., 2018. Income inequality and the labour market in Britain and the
US. Journal of Public Economics. 162. pp.48-62.
Martinelli, L., 2017. Assessing the Case for a Universal Basic Income in the UK. IPR Policy
Brief. Institute for Policy Research, University of Bath, Bath. https://www. bath. ac.
uk/publications/assessing-the-case-for-a-universal-basic-income-in-the-uk/
attachments/basic_income_policy_ brief. pdf.
Haig, R. M., 2020. The concept of income—economic and legal aspects. In Forerunners of
Realizable Values Accounting in Financial Reporting (pp. 140-167). Routledge.
Erixson, O. and Escobar, S., 2018. Inheritance tax planning at the end of life (No. 2018: 5).
working paper.
Almunia, M., and et.al., 2019. VAT Notches, Voluntary Registration, and Bunching: Theory
and UK Evidence.