- Calculate Henry Wottons income from property letting activity in 2017/18.
(15 marks)
- Critically discuss Henry Wottons plans to convert one of the investment properties into furnished holiday lettings.
Wide Lid is a UK registered company that constructs, maintains and manages commercial property. The company has been trading for many years and prepares financial statements to 31 March. Wide Lid has always been profitable Wide Lds main source of income is from the construction and sale of commercial praperty. Income is alsa generated from the provisian of loan finance to ather companies: this activity is not related to the com pany's main trading activity. Wilde Ltd also generates income from a range of ather sources, including investments in financial praducts and dividend income from investments in other companies. The company is owned by Henry Wotton. Henry is alsa the chief executive of the company. On 1 January 2018, Wilde Ltd purchased a car for use by Henry: the company paid 55,000 to purchase the ear. The car's CO2 emissions were 140g/km. 25% of the total distance traveled by the car during the tax year 2017/18 was due to private use by Henry. Tax written down values on plant and machinery for Wilde Ltd as at 1 April 2017 were as follows: This donation was a general donation in support of a palitical party. The donation did nat result in any trading advantage for Wilde Ltd and did not affect the industry in which the company aperates. The following information is alsa relevant for the tax year 2017/18: (1) During the tax year to 201718, Wilde Ltd received investment income from non-trade loan relationships of 380,000. Wilde Ltd's interest payable as a result of non-trade loan relationships was 10,000. Dividend income from investrments in other companies totalled 310,100. (2) Wilde Ltd made qualifying donations to charity of 200,000 on 30 November 2017 and 150,000 on 1 June 2018. Henry Woton owns a number of investment properties and lets these properties to tenants. Nate that these properties are awned by Henry: they are not part of Wilde Ltd's trading activities and are nat related to Henry's role as owner and chief executive of Wide Ltd. 1,305,100 18,400 Car (CO2 emissions 150g/km) (a) Rental income from the letting of these investment properties during the tax year 2017/18 was 315,000 The following expenses were incurred in relation to the leting of the investment praperties: Details af other expenditure on plant and machinery by Wilde Ltd are as follows: Installation of central heating systems ( Maintenance of gardens Legal fees from raising of capial finance Painting and decorating (maintenance) Schaol fees for Henry's daughter Repairs to raofs fallawing storm damage (g) Architect's fees for an impravement to Henry's 70,000 2,000 500 Cost E 13,600 17,000 1,500 5,000 15 April 2017 Drilling equipment 203,700 30 April 2017 Vans 100,000 31 December 2017 Car (CO2 emissions 100g/km) 10,000 1 March 2018 Car (CO2 emissions 200g/krm) 30,000 (D The properties did not have central heating systems prior to this installation in 2017/18. > (g) These repairs brought the roofs back to a condition that was the same as that which existed before they were damaged by the storm. (a) The car with CO emissions af 150g/km was sold for 15,000 7 February 2018. Ne! profit per the financial statements far the year ended 31 March 2018 was 4,765,210. This figure was stated after the deduction of the follawing iems of expenditure: Henry plans to convert one of the investment properties into furnished holiday lettings. Research indicates tha the location of the property will mean that it is likely to be let to tourists for no more than 90 days per 286,525 Entertaining and gif.s (b) Increase in provisions for bad debts (e) Entertaining suppliers Legal and professional fees (d) Donation to political party (e) 160,300 323,070 88,010 261,000 Required: (a) Calculate Wikde Lid's corparation tax Eability for the period ending 31 March 2018. 99,000 (60 marks) () State the dates by which the corporation tax return must be subnitted and the dates by which any payments of corporation tax must be paid. (10 marks) 75,300 relates to gifts of vintage wine to Wilde Ltd's existing and prospective customers. Each bottle of wine has a unit cost price of 500. 20,000 relates to the cost af umbrellas that were given as gifis to the company's customers. A conspicuous advertisement for Wilde Ltd was included on each of the umbrellas. Each umbrella had a unit cost price of 15. 285,000 relates to the cast af enterlaining employees of Wilde Ltd. (e) Increase in provisions for bad debis Wilde Ltd is in dispute with one of its customers. A specific provision for an irrecoverable debt has been made as a result of this dispute. 270,070 relates to this specific provision53,000 relates to an increase in a general provisian af bad debts. (d) Legal and professional fees 40,000 relates to legal advice in respect of a dispute between Henry Wotton and HMRC. This dispute is a private mater: it does not relate to either Henry's work for Wilde Lid or the company's trading activities. 221,000 relates to fees from property consultants, buiking surveyors and accountants used by Wilde Ltd. (e) Donation to political party (e) Calculate Henry Watton's income from property leting activity in 2017/18. (d) Critically discuss Henry Watton's plans to convert ane af the investment properties intao furnished holiday lettings. (15 marks) Tatal 100 marks) Wide Lid is a UK registered company that constructs, maintains and manages commercial property. The company has been trading for many years and prepares financial statements to 31 March. Wide Lid has always been profitable Wide Lds main source of income is from the construction and sale of commercial praperty. Income is alsa generated from the provisian of loan finance to ather companies: this activity is not related to the com pany's main trading activity. Wilde Ltd also generates income from a range of ather sources, including investments in financial praducts and dividend income from investments in other companies. The company is owned by Henry Wotton. Henry is alsa the chief executive of the company. On 1 January 2018, Wilde Ltd purchased a car for use by Henry: the company paid 55,000 to purchase the ear. The car's CO2 emissions were 140g/km. 25% of the total distance traveled by the car during the tax year 2017/18 was due to private use by Henry. Tax written down values on plant and machinery for Wilde Ltd as at 1 April 2017 were as follows: This donation was a general donation in support of a palitical party. The donation did nat result in any trading advantage for Wilde Ltd and did not affect the industry in which the company aperates. The following information is alsa relevant for the tax year 2017/18: (1) During the tax year to 201718, Wilde Ltd received investment income from non-trade loan relationships of 380,000. Wilde Ltd's interest payable as a result of non-trade loan relationships was 10,000. Dividend income from investrments in other companies totalled 310,100. (2) Wilde Ltd made qualifying donations to charity of 200,000 on 30 November 2017 and 150,000 on 1 June 2018. Henry Woton owns a number of investment properties and lets these properties to tenants. Nate that these properties are awned by Henry: they are not part of Wilde Ltd's trading activities and are nat related to Henry's role as owner and chief executive of Wide Ltd. 1,305,100 18,400 Car (CO2 emissions 150g/km) (a) Rental income from the letting of these investment properties during the tax year 2017/18 was 315,000 The following expenses were incurred in relation to the leting of the investment praperties: Details af other expenditure on plant and machinery by Wilde Ltd are as follows: Installation of central heating systems ( Maintenance of gardens Legal fees from raising of capial finance Painting and decorating (maintenance) Schaol fees for Henry's daughter Repairs to raofs fallawing storm damage (g) Architect's fees for an impravement to Henry's 70,000 2,000 500 Cost E 13,600 17,000 1,500 5,000 15 April 2017 Drilling equipment 203,700 30 April 2017 Vans 100,000 31 December 2017 Car (CO2 emissions 100g/km) 10,000 1 March 2018 Car (CO2 emissions 200g/krm) 30,000 (D The properties did not have central heating systems prior to this installation in 2017/18. > (g) These repairs brought the roofs back to a condition that was the same as that which existed before they were damaged by the storm. (a) The car with CO emissions af 150g/km was sold for 15,000 7 February 2018. Ne! profit per the financial statements far the year ended 31 March 2018 was 4,765,210. This figure was stated after the deduction of the follawing iems of expenditure: Henry plans to convert one of the investment properties into furnished holiday lettings. Research indicates tha the location of the property will mean that it is likely to be let to tourists for no more than 90 days per 286,525 Entertaining and gif.s (b) Increase in provisions for bad debts (e) Entertaining suppliers Legal and professional fees (d) Donation to political party (e) 160,300 323,070 88,010 261,000 Required: (a) Calculate Wikde Lid's corparation tax Eability for the period ending 31 March 2018. 99,000 (60 marks) () State the dates by which the corporation tax return must be subnitted and the dates by which any payments of corporation tax must be paid. (10 marks) 75,300 relates to gifts of vintage wine to Wilde Ltd's existing and prospective customers. Each bottle of wine has a unit cost price of 500. 20,000 relates to the cost af umbrellas that were given as gifis to the company's customers. A conspicuous advertisement for Wilde Ltd was included on each of the umbrellas. Each umbrella had a unit cost price of 15. 285,000 relates to the cast af enterlaining employees of Wilde Ltd. (e) Increase in provisions for bad debis Wilde Ltd is in dispute with one of its customers. A specific provision for an irrecoverable debt has been made as a result of this dispute. 270,070 relates to this specific provision53,000 relates to an increase in a general provisian af bad debts. (d) Legal and professional fees 40,000 relates to legal advice in respect of a dispute between Henry Wotton and HMRC. This dispute is a private mater: it does not relate to either Henry's work for Wilde Lid or the company's trading activities. 221,000 relates to fees from property consultants, buiking surveyors and accountants used by Wilde Ltd. (e) Donation to political party (e) Calculate Henry Watton's income from property leting activity in 2017/18. (d) Critically discuss Henry Watton's plans to convert ane af the investment properties intao furnished holiday lettings. (15 marks) Tatal 100 marks)
