Reference no: EM132957276
Question: Albert Smith is a self-employed wholesale clothing distributor who began trading on 1 July 2011. His summarised accounts for the year to 30 June 2019 are shown below (figures in brackets refer to notes).
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£
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£
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Gross profit
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168.000
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Wages and NIC (1)
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55.200
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Rent and rates
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29.100
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Repairs and renewals (2)
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3.490
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Sundry expenses (3)
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1.375
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Albert's own income tax and NIC
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14.940
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Bad debts (4)
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820
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Legal expenses (5)
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1.060
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Depreciation
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850
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Lease rental on Albert's car (6)
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8.400
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Loss on sale of office furniture
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60
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Gift aid donations (not allowable)
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200
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Transport costs
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3.870
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Interest (7)
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1.150
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Running expenses on Albert's car (8)
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2.000
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Lighting and heating
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1.250
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Relocation expenditure (9)
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2.395
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126.160
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Net profit
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41.840
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Notes:
(1) Included in wages are Albert's drawings of £200 per week and his wife's wages of £16,570. His wife works full-time in the business.
(2) The charge for repairs and renewals includes £3.243 for fitting protective covers over the factory windows and doors to prevent burglary.
(3) Sundry expenses comprise:
• Theft of money by employee 65
• Political donation to Green party 100
• Gifts of 100 calendars 500
(4) Bad debts comprise:
• Trade debts written off 570
• Loan to former employee written off 250
820
(5) Legal expenses comprise:
• Defending action re alleged faulty goods 330
• Cost re lease of new larger premises 250
• Defending Albert in connection with speeding offence 187
• Debt collection 293
1.060
(6) Albert's leased car had a retail price of £20.000 and was leased from 1 July 2018 to 30 June 2019. The car has emissions of 119g/km
(7) Interest is as follows:
• Bank overdraft interest (business account) 860
• Interest on overdue tax 130
990
(8) Included in the charge for motor running expenses is £65 for a speeding fine incurred by Albert whilst delivering goods to a customer.
(9) The relocation expenditure was incurred in transferring the business to new and larger premises.
Capital allowances for the year to 30 June 2019 are £5,680. Albert also made contributions of £11,800 to a registered pension scheme during 2019/20.
Required:
(a) Prepare a profit adjustment statement in respect of the year ending 30 June 2019. showing the trading income for 2019/20. Start from the net profit figure of £41,840. Only include figures that need adjusting in your computation.
(b) Calculate the Class 4 NIC's payable by Albert for 2019/20
(c) Calculate Albert's income tax liability for 2019/20
Attachment:- UK taxation.rar