Fluffy Ltd, an unquoted trading company, changed its accounting date from 31 December to 31 March by preparing accounts for the fifteen months to 31 March 2021. Its net profit for those fifteen months was £700,411 after accounting for the following items:

Note £

Profit on the sale of shares (1) 51,577

Profit on sale of factory (2) 431,500

Bad debt provision (3) 45,000

General expenses (4) 47,000

Depreciation (5) 90,000

Notes:

1. The profit on the sale of shares relates to 20,000 shares in Scarey plc that were sold for £82,000 in February 2021. The shares had been acquired as follows:

10,000 shares were bought for £12,000 in May 1991

Scarey plc made a bonus issue of 1 for 10 in June 1998

10,000 shares were bought for £22,000 in November 1999

2. Fluffy Ltd sold its factory for £612,900 on 1 March 2021. The factory had cost £225,000 when purchased new in October 2005. It had been used exclusively to manufacture Fluffy Ltd's products since its acquisition. Plant and machinery were sold together with the factory. The purchaser paid a further £86,500 (original cost of £172,000) for this plant and machinery. This P&M was included in the WDV b/f in the main pool. Fluffy Ltd leases its other two factories.

3. Bad debts are made up of:

Debts are written off - trade £15,000

Increase in general provisions £30,000

4. General expenses include:

Gifts to customers (100 food hampers) £5,000

Entertaining customers for £2,600

Staff Christmas party (50 people) £2,000

Parking fines paid for employees £700

5. The plant and machinery capital allowance computation for the CAP y/e 31/12/19 provided the following carried forward values:

General/main pool £145,000

Short-life asset pool £10,000

Analysis of the accounts reveals that the following assets were acquired or disposed of during the 15-month period.

May 2020 Acquisition of a delivery van costing £12,000

June 2020 Disposal of the short-life asset for £11,000

Feb 2021 Acquisition of new low emission car £15,000

Mar 2021 Acquisition of a new Audi for £35,000 (emissions 200 g/km)

6. The following indexation factors are available:

May 1991 – November 1999 0.249

November 1999 – December 2017 0.668

October 2005 – December 2017 0.439

Required:

Please note: Marks will be allocated for presentation and layout. Annotate and label all workings

Calculate the Corporation Tax payable for the total period ended 31 March 2021.

CORPORATION TAX

Augmented Profits Corporation Tax rate Corporation Tax rate

Financial Year 2019 Financial Year 2020

(1.4.2019 to 31.3.2020) (1.4.2020 to 31.3.2021)

All Profits Main Rate 19% Main Rate 19%