Taxation Law Assignment: Income, Corporation, and VAT Analysis

This taxation law assignment provides detailed solutions to various tax-related problems. Question 1 focuses on calculating taxable earnings from employment, including salary, bonuses, and various allowances, leading to the determination of income tax and National Insurance liabilities for an employee. Question 2 delves into corporation tax liability, detailing the computation of taxable profits by adjusting the profit and loss statement, considering expenses, and calculating chargeable gains on disposal of assets. Question 4 addresses VAT calculations, specifically determining the VAT payable by Dontez based on sales and purchases, including standard and credit sales. Finally, Question 5 presents a scenario involving various gifts and fund transfers, calculating the tax amount due, including standard rate taxes and exempted amounts, providing a comprehensive understanding of different tax implications.

TAXATION LAW

TABLE OF CONTENTS
Question 1........................................................................................................................................1
Question 2........................................................................................................................................2
Question 4 .......................................................................................................................................4
Question 5 .......................................................................................................................................4

Question 1
a)
Taxable Earning from the employment
Salary 49800
Bonus 31000 80800
Relocation Expenses 28000
Exempt 8000 20000
Car 53360
Mileage allowance
3300*1.25 4125
Exempt 1485 2640
Running and fuel cost
17000*0.25 4250
less paid 750 3500
Pension Scheme
Employer contribution 12000
Exempt 12000 0
Contribution of Kushaff
8% of salary 3984
Exempt 3984 0
Taxable Earning from employment 106940
b)
Taxable Earning from employment 106940
Income tax liability 31664
National Insurance liabilities 5998.8
Total Liability 37662.8
Tax due date 31/01/21
1

c)
The self employed workers are not paid through PAYE and also they do not have
employment rights and the responsibility of the employees. Also someone could be self
employed and employed at same time. There is no difference between the tax rate of both the
employed and self employed candidates. For employed people tax is deducted at source for
income and pension contributions. The self employed people have to file annual self assessment
tax return. They can claim the expenses for offsetting the earnings.
Question 2
Computation of Corporation tax liability
Sales 4750230
Cost of Sales 1207400
Gross Profit 3542830
Other Income
Profit on office building sale 1505000
Non trade loan interest received 98000
Profit on sale of the motor vehicles 27500 1630500
5173330
Less Expenses
Repairs & Renewals 30620
Telephone 3500
Motor Expenses 21444.5
Bad Debts 0
Wages and Salaries 1503000
Legal Fees 25000
Unrelieved expenditure 728000
General Expenses 15000
Depreciation 125000 2451564.5
2721765.5
'
Corporation tax rate @19% 517135
Adjustments to Profit and loss
Repairs & Renewals 30620
23500+7120
Wages and Salaries 1503000
2

132000+821000+550000
Motor Expenses 21444.5
27850*77%
Bad Debts Not allowed
Legal fees
8000+17000 25000
Entertainment charges 6000
4000+2000
Profit on office building sale
Sale proceeds 4600000 4600000
Less Expenses
Selling fees 552000
Legal Fees 28000
Cost of Acquisition 1200000
Major Repairs 442000
Additional Construction 873000
Painting 380000
Total 3095000
Profit 1505000
Sale of Motor vehicle
Sales 157500
Cost 102500
Profit 55000
Unrelieved expenditure 840000
Special rate pool 112000 728000
Note:
Machinery & Equipment are capital purchases and are not included in the income statement
Chargeable Gains on Disposal
Profit on office building sale
Sale proceeds 4600000 4600000
Less Expenses
Selling fees 552000
Legal Fees 28000
Cost of Acquisition 1200000
3

Major Repairs 442000
Additional Construction 873000
Painting 380000
Total 3095000
Gain on disposal 1505000
Sale of Motor vehicle
Sales 157500
Cost 102500
Gain on disposal 55000
Question 4
Particulars Amount £
Total sales Sales 130000
Standard rate sales 85000
Standard rate @20% 17000
Sales after VAT 68000
credit sales 678000
First bad debt 19000
second bad debt 23000
Credit sales after reducing bad debt 636000
Standard rate @20% 127200
Credit Sales after VAT 508800
VAT on purchase
Purchase 298000
- exempted purchase from vat 20000
Standard purchase 278000
Standard rate @20% 55600
Purchase after VAT 222400
The amount payable by Dontez VAT of sales VAT on purchase
144200 222400
-78200
Question 5
Particulars Amount £ Amount £
4

cash with Kiera 850000
Property 2200000
Total 3050000
(debt) 32000
3018000
Gift to friend 125
Business assistance to friend 600
Fund to son in law 110000
git to daughter 19000
Fund to nephew for investing in
debt 300000
labour party 22000
fund to husband 19000
Fund to ex-husband 250000
Exempted amount 720725
Tax amount 129275
Standard rate @ 40% 51710
After tax 77565
5

6