GoCycle Ltd, incorporated in 2010, is a UK-resident company trading in cycling equipment. GoCycle Ltd holds investments in two companies: 100% of the shares in FooTee Ltd which provides personalised football shirts. FooTee Ltd was established by GoCycle Ltd in 2014. 65% of the shares in GoaLee Ltd which manufactures goal posts (shares acquired in September 2017). Trading income GoCycle Ltd's draft accounting profit before tax for the year ended 31 March 2021 is 983,275. The following income and expenses have been taken into account in arriving at this draft accounting profit. i. ii. Depreciation Dividends received Redundancy costs Warehouse lease Repairs to new warehouse Bank interest received on business account Interest payable on loan to purchase GoaLee Ltd shares Legal & professional fees Flood damage Charity donations Note Statutory redundancy payment Career training sessions Ex-gratia payment (equivalent to four times salary) (i) (iv) (vi) Installation of fixed wall partitioning Installation of new security system and burglar alarm Replacement of units in kitchen area + 52,000 9,450 Dividends of 52,000 were received from GoaLee Ltd. An employee was made redundant on 1 January 2021 and received the following: 2,500 1,250 32,750 36,500 153,293 36,500 78,000 22,500 6,500 13,500 14,500 14,000 On 1 April 2020 GoCycle Ltd secured a lease on a new, larger warehouse to accommodate increased stock levels. On this date the company paid an upfront 20,000 lease premium to secure an 8 year lease and agreed to pay annual rent of 58,000 (payable monthly in advance). 13,000 7,200 2,300 22,500 Before moving the stock on 25 April, it was necessary to carry out the following works to the large warehouse: iv. V. vi. viii. During the year the company incurred legal & professional fees in relation to the following: ix. Advice about the large warehouse new lease Negotiation of new supplier contracts Sale of old small warehouse 2,000 (iii) 1,500 10,000 (viii) 13,500 Other information vii. The tax written down values of the capital allowance pools at 1 April 2020 were: 135,200 main pool and 57,400 special rate pool. Following a small flood in December 2020, in February 2021 GoCycle Ltd received 17,500 from its insurance company to cover the following: 6,500 to repair the flood damage to the building 11,000 to replace the stock destroyed. The stock cost 8,000 and had a sales 17,500 value of 11,000. No accounting entry was made for the 17,500 insurance receipt. GoCycle Ltd paid two donations to "Sports relief", a national UK registered charity. The first donation of 8,000 was paid during the financial year, a second donation of 6,000 on 4 April 2021. Both donations were expensed in the financial accounts by including a 6,000 accrual for the second donation which was still unpaid at the year end. In May 2020 GoCycle Ltd sold a van for 6,000 which originally cost 11,000 when bought by the company in April 2018. In July 2020 GoCycle Ltd purchased a new fork- lift truck for 45,000 with an expected useful life of 10 years and CO2 emissions of 145g/km. No other group companies made capital acquisitions during the accounting period. On 27 April 2020 GoCycle Ltd sold the small warehouse to GoaLee Ltd for 350,000. The market value of the warehouse at the time of disposal was 450,000, GoCycle Ltd purchased the property in September 2010 for 425,000. No account has been taken for this disposal in the accounting profit figure of 983,275 for the year and no capital allowances were claimed on any aspect of the property. Since 1 April 2020, FooTee Ltd has been selling t-shirts to GoaLee Ltd for onwards sale to their goal post customers. During the year, FooTee's relevant VAT exclusive sales to GoaLee totalled 25,000, of which 60% were adult t-shirts and 40% were children's t-shirts. SECTION B REQUIREMENT: B1) Calculate GoCycle Ltd's tax-adjusted trading profit, after capital allowances, for the year ended 31 March 2021. You should start with the accounting profit of 983,275 and show your tax decision in relation to all relevant items in the question (including those where no adjustment is required). 21 marks B2) Calculate GoCycle Ltd's capital gain position on the small warehouse disposal (note viii). 6 marks B3) Calculate GoCycle Ltd's corporation tax liability for the year ended 31 March 2021 and explain the date(s) corporation tax would be payable. 6 marks B4) Explain how the employee concerned would be taxed on the 36,500 redundancy they receive in note (ii). 3 marks B5) Calculate the VAT FooTee Ltd should have paid on the t-shirt sales to GoaLee Ltd during the accounting period (ix). Explain the benefit if the two companies form a VAT group registration and identify if they meet the criteria. 4 marks SECTION B: 40 marks