Examinations for Academic Year Semester I / Academic Year 2016 Semester II

Transcription

1 Programme BSc (Hons) Banking and International Finance BSc (Hons) Financial Services with Law Cohort BBIF/12B/13B/14A/FT/PT BFSL/13B/FT Examinations for Academic Year Semester I / Academic Year 2016 Semester II MODULE: BUSINESS AND INTERNATIONAL TAXATION MODULE CODE: ACCF3108 DURATION: 2 HOURS 10 MINUTES Instructions to Candidates: 1. This question paper consists of Section A and Section B. 2. Section A is compulsory. 3. Answer any two questions from Section B. 4. Always start a new question on a fresh page. 5. Total Marks: 100. This Question Paper contains 4 questions and 11 pages. This Question Paper is printed on BOTH SIDES. BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 1 of 11

2 SUPPLEMENTARY INSTRUCTIONS 1. You should assume that the tax rates and allowances for the tax year 2015/16 and for the financial year to 31 March 2016 will continue to apply for the foreseeable future unless you are instructed otherwise. 2. Calculations and workings need only be made to the nearest. 3. All apportionments should be made to the nearest month. 4. All workings should be shown. TAX RATES AND ALLOWANCES The following tax rates and allowances are to be used in answering the questions. Income tax Normal rates Dividend rates % % Basic rate 1 31, Higher rate 31,866 to 150, Additional rate 150,001 and over A starting rate of 10% applies to savings income where it falls within the first 2,880 of taxable income. Personal allowances Born on or after 6 April ,000 Born between 6 April 1938 and 5 April ,500 Born before 6 April ,660 Income limit Personal allowance 100,000 Personal allowance (born before 6 April 1948) 27,000 BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 2 of 11

3 Car benefit percentage The base level of CO2 emissions is 95 grams per kilometre. The percentage rates applying to petrol cars with CO2 emissions up to this level are: % 75 grams per kilometer or less 5 76 grams to 94 grams per kilometer grams per kilometer 12 Car fuel benefit The base figure for calculating the car fuel benefit is 21,700. Individual savings accounts (ISAs) The overall investment limit is 15,000. Pension scheme limits Annual allowance ,000 Annual allowance to ,000 The maximum contribution that can qualify for tax relief without any earnings is 3,600 Authorised mileage allowances: cars Up to 10,000 miles Over 10,000 miles 45p 25p Capital allowances: rates of allowance % Plant and machinery Main pool 18 Special rate pool 8 New cars with CO2 emissions up to 95 grams per kilometer 100 CO2 emissions between 96 and 130 grams per kilometre 18 CO2 emissions over 130 grams per kilometre 8 BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 3 of 11

4 Annual investment allowance First 500,000 of expenditure 100 Corporation tax Financial year Small profits rate 20% 20% 20% Main rate 24% 23% 21% Lower limit 1, 300, , ,000 Upper limit 1,500,000 1,500,000 1,500,000 Standard fraction 1/100 3/400 1/400 Marginal Relief Standard fraction x (U A) x N/A Value added tax (VAT) Standard rate 20% Registration limit 81,000 Deregistration limit 79,000 Capital gains tax Rate of tax Lower rate 18% Higher rate 28% Annual exempt amount 11,000 Entrepreneurs relief Lifetime limit 10,000,000 Rate of tax 10% BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 4 of 11

5 SECTION A: COMPULSORY QUESTION 1: (40 MARKS) (a) Anna has employment income of 30,000, received bank interest of 2,400 (net) and dividend of 9,000 (net) for the year 2015/16. Calculate Anna s tax liability and tax payable for year of assessment 2015/16. (5 marks) (b) Justin has received net employment income of 65,000, net of PAYE 25,000, received interest of 3,200 (net) and dividend income of 27,000 (net). He also rented out a fully furnished building from 1 st April 2015 to 31 st March 2016, where the first lessee left the building in October 2015, without paying June rent and it was not recoverable by Justin. Then Justin got a second lessee as from 1 st December The rent was fixed at 2,500 per month. Bale incurred the following expenses for the building. Date Description April 2015 Built additional room costing 5,000 August 2015 Paid for repairs amounting 200 September 2015 Justin entered an agreement with a contractor to provide repairs and maintenance service at an agreed rate of 100 per month as from Sep The contract is renewable yearly and the fee has been fixed for a 12 months period. May 2016 Paid for decoration 600 incurred in March 2016 Calculate the tax payable for Justin s for the year of assessment 2015/16? (25 marks) (c) Albert had a property which he acquired for personal use in November 2010 for 80,000 and incurred legal fees 1,000. He disposed the property in March 2016 for 150,000 and incurred estate agency fees of 2,000. He has taxable income of 25,000. Calculate the Capital Gains Tax and Income tax payable. BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 5 of 11

6 CPI Year Year (10 marks) SECTION B: ANSWER ANY TWO QUESTIONS QUESTION 2: (30 MARKS) 1. Pogba has both employment and trading business income. His employment income amounted to 50,000 and paid PAYE 10,000 for the tax year 2015/16. He has the following trading profit and loss account for the year ended 31 March 2016: Notes Turnover 700,000 Less (400,000) Gross profit 300,000 Other income 1 50,000 LESS EXPENSES: Depreciation 25,000 Motor vehicle running expenses 2 30,000 Rent and rates, light and heat 3 20,000 Legal and professional fees 4 15,000 Repairs and maintenance 5 12,000 Sundry expenses 6 8,000 Wages and salaries 7 55,000 Bad debts and provision for bad debts 8 15,000 (200,000) NET PROFIT 150,000 BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 6 of 11

7 NOTES 1. Other Income Interest (net) 2,400 Dividend (net) 9,000 Profit on disposal of old non current assets 38,600 TOTAL 50, Motor vehicle running expenses He used the motor car as follows, 70% for business use. 3. Rent and rates, and light and heat He used 75% of the rented building for trading purposes and 25% for personal use. 4. Legal and professional fees Accountancy and tax fees 4,000 Debt collection 4,000 Legal fees in connection with purchase of fixed assets 5,000 Legal fees for personal tax penalty 2,000 15,000 Accountancy and tax fees comprise of 2,000 for personal tax assessment. 5. Repairs and maintenance House renovation 3,000 Extension office premises 7,000 Repairs office 2,000 TOTAL 12,000 BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 7 of 11

8 6. Sundry expenses Sundry expenses included 1,500 for his personal expenses, dinner with family for year end. 7. Wages and salaries He paid 12,000 as salary to his brother-in-law, where for the same work 8,000 is paid to the accounts clerk. 8. Bad debts and provision for bad debts Bad debts 10,000 Provision for bad debts 5,000 TOTAL 15,000 Bad debts comprise of 6,000 for employee s loan written-off and nonrecoverable. The provision for bad debts is specific for trade debtors. 9. Capital allowances The capital allowances amounted to 20,000. (i) Compute Pogba s tax adjusted profit for income tax purposes in respect of the income year 2015/2016. Calculate his tax liability and tax payable by for 2015/2016. Your computation must be supported by your workings. (30 marks) BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 8 of 11

9 QUESTION 3: (30 MARKS) You are provided on the following information from your manager for a VAT return and advice. (a) XYZ Ltd VAT Return 3 months ending 30 September 2016 Three months ending 31 December 2016 Sales revenue Standard rated (excluding VAT) 450, ,000 Sales revenue Exempt 25,000 28,000 Input tax: Attributable to taxable supplies 70,000 55,000 Attributable to exempt supplies 1,200 3,200 Non-attributable 800 2,500 Total 72,000 60,700 Required: Calculate the payments that will be made by XYZ to the Tax Authorities in respect of the three months ending 30 September 2016 and 31 December 2016, based on the above data provided. (18 marks) (b) Your manager has requested you to prepare a brief on VAT registration, VAT deregistration and the impact of VAT non-filing. (12 marks) QUESTION 4: (30 MARKS) (a) Explain the term Badges of Trade? Support your answer with relevant examples. (8 marks) (b) A client want to incorporate a company in UK, he needs an advice in respect of whether the company will pay tax in UK even if he resides in France or it will be better for him to incorporate same in France and operate in UK. Advise the client on his statement. (5 marks) BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 9 of 11

10 (c) You are provided with the income statement of ABC Ltd for the year end 30 June NOTES Gross profit 113,700 Other income - profit on disposal 12,500 Expenses: Depreciation and amortisation 4,200 Rent and rates 1 6,000 Light and heat 2 3,000 Motor vehicle running expenses 3 8,000 Legal and professional fees 4 4,000 Repairs and maintenance 5 1,500 Sundry expenses 6 2,400 Wages and salaries 7 60,700 Bad debts 8 8,000 Provision for bad debts 3,000 Subscriptions and donations 9 6,500 (107,300) Net profit 18,900 BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 10 of 11

11 Notes: 1: Motor vehicle running expenses The director used the company car around 20,000 miles, where 30% was for personal use and the remaining for business use. 2: Legal and professional fees Accountancy and tax fees 1,000 Legal fees in respect of purchase of warehouse 1,000 Debt collection in respect of employee's loan 1,000 Legal fees in respect of tax penalty personal 1,000 4,000 3: Bad Debts Bad debts included 4,000 for a loan given to a staff who left without notice and the loan was not recoverable. 4: Subscriptions and donations The Company paid 2,000 for political donation. 5: Plant and machinery The capital allowances for the year ended 31 March 2016, amounted to 6,500. Required 1. Calculate tax adjusted trading profit for the year ended 31 March 2016? 2. Calculate his tax liability for the year end? (17 Marks) ***END OF QUESTION PAPER*** BUSINESS AND INTERNATIONAL TAXATION- ACCF3108 Page 11 of 11