COMPANY TAXATION

The accounts of Gelatin Limited a private unregulated local entity showed profits before interest and taxes of $300,000,000 for the year ended December 31, 2021 after recording the following below:

Other income	$35,000,000
Legal Fees	$32,000,000
Bad Debts	$30,000,000
Travel	$15,000,000
Donations	$15,000,000
Motor Vehicle expenses	$58,000,000
Advertising expenses	$80,000,000

During the year the entity paid statutory employment taxes of $20,000,000. The entity files its employment taxes on a timely basis. At the start of the year, the company had the following assets at cost:

Building	$400,000,000
Plant and Machinery	$100,000,000
Motor vehicle	$120,000,000

The property, plant and equipment above have the following estimated remaining useful lives at the date of acquisition:

Building	50 years
Plant and Machinery	10 years
Motor vehicle	5 years

Based on the companys policies, all assets are to be depreciated using the straight line method. The firm started operations on January 1, 2019 and all assets were acquired on that date. Depreciation charge for the current period was appropriated recorded by management. Additionally, capital allowances on these assets are included in the note i immediately below.

The following additional data are relevant to the company:

1. The entity has initial, annual and balancing allowances of $14,000,000, $36,000,000 and $5,000,000 respectively.

2. Included in other income is amount of $8,500,000 received as dividends from ATC Limited a local company, tax refund of $10,000,000 and gain on the disposal of motor car. The total gain amounted to $4,000,000. However, for income tax purposes, the sale resulted in a balancing allowance. The allowance is already included in note i above. The remainder in other income is interest received on bank balances stated at its gross amount.

3. Included in legal expenses is an amount of $10,000,000 to plead an income tax case, the company was unsuccessful. An additional $2,000,000 to defend an employee for robbing a bank in the city. The employee has been recently voted employee of the year. An additional $15,000,000 million relates to the purchase of a new machine oversees. The remainder relates to fees paid to lawyers to collect amounts owed from debtors.

4. Bad debt expense of $16,000,000 represents a 10% general provision on the receivable balance. The remainder related to Ervin Johnson who is now deceased. Mr Johnson is one of the companys most profitable customers.

5. Travel includes airline tickets and hotel for the FCs wife, not an employee of the company, this amounted to $7,500,000. Another $2,500,000 was expensed to provide party refreshments for the CEO sons birthday party.

6. Of the total donations, only $10,000,000 is on the approved list

7. The company made lease payments on its finance lease. The total payment for the period is $20,000,000 of which 20% represents interest payments, the remainder is principal.

8. Motor vehicle expense represents the cost of a brand new, heavy duty truck, bought on January 1, 2021 for $50,000,000. Capital allowances on this acquisition were not computed in error.
9. Advertising expenses includes a concrete bill-board costing $10,000,000 constructed on January 1, 2021. No capital allowance was charged on the same. However, it was advised that the billboard will qualify for an annual allowance of 12.5% and initial allowance of 25%. It is assumed that the asset is involved in the primary production of goods and services

10. The company paid preference dividends on its redeemable preference shares. Rate reasonable rate on the preference share is at 10%. The preference share capital at the same date was $300,000,000. While, the ordinary share capital was 200,000,000 @$1.

11. The company made estimated tax payments of $16,000,000 and had tax losses carry forward of $35,000,000.

12. During the year Mark Bent received accommodation from the company given the fact that he owns 50,000,000 ordinary shares. The monthly rental fee for the premises is $1,000,000 and Mark provides no services for the same. The monthly fee is stated at gross.

13. Marks wife an accountant at the company receives an annually salary of $20,000,000. A reasonable market rate for the same capacity at similar company is only $3,000,000 yearly.

14. The company paid ordinary dividends at $0.05 per share outstanding at the balance sheet date. All dividends were paid at the year end. The dividends were included in finance charge.

15. Included in Motor vehicle expense is an amount of $10,000,000 for servicing the CEO personal motor vehicle.

16. Included in miscellaneous expenses is $75,000,000 to extend the administrative building. The building now houses an additional 35 staff and is to increase the remaining useful lives of the entire building. It qualifies as a non-residential building based on the act. TAJ allows 4% on cost of this building annually.

17. The company purchased a car in Miami on January 1, 2021 for US$30,000 when the exchange rate was US$1 to J$100. The transaction was settled on July 31, 2021 when the rate of exchange is US$1 to J$120. The car is deemed a private motor vehicle for tax purposes and it was estimated that its use in the trade amounted to 40% of its mileage.

Required:

1. Calculate and set out the Income Tax payable for the year 2021, with detailed supporting notes, assumptions and explanations. Ignore the restrictions on the ETC cap as it relates to dividends paid. (50%)