Reference no: EM133016275

UGB225 Business Taxation - University of Sunderland

Assignment Brief
Please note that this is an individual assignment and the policy of the University on Cheating, Collusion and Plagiarism "applies.

Question 1:

Linda's income statement for the year ended 31 March 2021 is as	follows: £	£
Sales		82,500
Less: Cost of Sales		37,200
Gross Profit		45,300
Add: Rents receivable	1,200
Bank interest receivable	80
Profit on sale of non-current asset	510	1,790
		47,090
Less: Wages and salaries	22,620
Business rates and insurance	1,750
Heating and lighting	2,170
Repairs and renewals	4,280
Telephone	880
Motor Expenses	3,250
Sundry expenses	1,650
Bad and doubtful debts	640
Credit card interest	120
Loss on sale of non-current asset	70
Depreciation	2,500	39,930
Net profit for the year		7,160

Notes:

a) Linda draws a salary of £250 per week from the business. This is included in the wages and salaries figure.

b) Repairs and renewals are as follows:

                                                 £
Decorating of business premises 380
Installation of new improved heating system 3,700 Minor repair 200
                                                                                           4,280

c) It has been agreed with HMRC that one-quarter of telephone costs and one-fifth of motor expenses relate to private use.

d) Sundry expenses include business entertaining of£520.

e) Trade debts written off in the year amounted to £440 and £200 has been set aside as a general allowance (or provision) for bad and doubtful debts.

Required:

Compute Linda's tax adjusted trading profit (before capital allowances) for the year ended 31 March 2021.

Question 2 :
a) How do you distinguish between an individual who is employed and one that is self- employed?
b) Why do people prefer self-employment rather than being employed, resulting in so many IR 35 cases?

Question 3 :

a) Discuss the six badges of trade with examples?
b) Briefly discuss the different VAT schemes available to the VAT registered business?

Question 4 :

On 23 August 2015, Peter made a gift of a house valued at £420,000 to his son, John. This was a wedding gift when John got married. The nil rate band for the tax year 2015/16 is
£325,000.

Peter

Peter died on 20 March 2021 at which time his estate was valued at £880,000. Under the terms of his will, Peter divided his estate equally, before inheritance tax, between his wife and his son, John. Peter had not made any gifts during his lifetime except for the gift of the house to John. Peter did not own a main residence.

John

John sold the house which he received as a wedding gift from Peter, his father, on 5April 2021. The following information relates to the property:
£

Net sale proceeds after costs of disposal
Cost of new boundary wall around the property (there 496,400
was previously no boundary wall) (5,200)
Cost of replacing the property's chimney (2,800)

John has taxable income (after deduction of the personal allowance) of £13,950 in 2020/21. The house was never occupied by John.
Required:
a) Calculate the inheritance tax that will be payable as a result of Peter's death.
b) Calculate John's capital gains tax liability for the tax year2020/21.