1. BARTTZS Limited is a company resident in Trinidad and Tobago. Its primary business is the provision of mediation and alternative dispute resolution services. It was incorporated in Trinidad and Tobago in 2012 and has been in operation since. It is also a subsidiary within the global mediation group Old & Young Limited which is resident in Italy (There is no Double Taxation Treaty in place between Trinidad and Tobago and Italy). For the year ended 31st December 2017 its Statement of Comprehensive Income was as follows: Income: $ $ Dividend Income 200,000 Consultancy Fees 3,500,000 Sales of publications 300,000 Capital Gain 5,000 4,005,000 Expenses: Salaries and Wages 2,000,000 Depreciation 200,000 Publication Costs 100,000 Sponsorships 100,000 Entertainment 150,000 Interest 50,000 Bad Debts 40,000 Utilities 60,000 Advertising 100,000 2,800,000 NET PROFIT 1,205,000 Notes to accounts: a. Dividend Income relates to dividends the company has received from subsidiaries it has in Barbados of $150,000 and the Bahamas of $50,000. b. The carried forward balances of its wear and tear allowances pool as at 1st January 2017 are as follows: page 3 The University of the West Indies Course Code: MGMT 3051 18/..../...../ DO NOT WRITE ON THE BACK OF THIS SHEET: USE ONE SIDE ONLY INSTRUCTIONS: Each page must be signed by the Examiners and where applicable, the University Examiner and/or the External Examiner. Where the examination does not require a University Examiner, the form must be signed by the First and Second Examiners. Completed forms should be handed to the Assistant Registrar (Examinations). The EXTERNAL EXAMINER is requested to sign the question paper and return it with comments, if any, (on a separate sheet), to the Assistant Registrar (Examinations). .. .. First Examiner University Examiner .. .. Second Examiner External Examiner (where applicable) Date: 20// Date: 20// Class A$600,000 Class B$440,000 Class C$90,000 On 1st May 2017 the company purchased computer equipment of $60,000 which it treated as a pool C asset. In addition, on 1st December 2017 the company disposed of a motor vehicle which it had acquired in 2014 at a cost of $250,000 for $40,000. The motor vehicle was a pool B asset. The capital gain of $5,000 was recognized in the statement of comprehensive income under the line item indicating such. c. Sponsorships comprise: o Donation to an employee of $20,000 to assist with medical expenses. o The balance is a sponsorship of a video production which was an entirely local production related to the education of the general public in the use of alternative dispute processes. d. Interest comprises the sum of $10,000 which relates to the interest and penalty paid on the late remittance of PAYE whilst the balance relates to the interest accrued on a related party debt obligation where the loan proceeds were utilized in the financing of the business operations. e. Bad debts expense relates to a general provision based on an estimate of the percentage of its debtors balance it believes are likely to become bad. f. The entertainment expense is all relates to business entertainment. g. The company has made Corporation Tax quarterly installments of $74,000 for each quarter and Green Fund Levy installments of $4,250 for each quarter.

Required: During the 2018 year of income, Old & Young Limited intends to charge the company a management fee based on its allocated share of group costs. The services which give rise to the payment of the management fee were all performed in Italy. Would this expenditure be deductible and are there any limitations as to the amount which would be deductible? You are to discuss briefly with reference to the specific legislative provisions. (7 marks)