Harrogate Chocolate Ltd trades in hand made, vegan, sugar free chocolates and hot chocolates. Harrogate Chocolate Ltd is different from the other companies established in the market across the UK. Therefore, they use the finest chocolates that they buy from the parent company BelManches Chocolate Plc. Harrogate Chocolate Ltd commenced trading on the 1 of October 2022 and the company prepared its first accounts for the six-month period ending 31 March 2023.

Paul William is the financial controller, and he prepared the following information:

1 - Trading profit

The tax adjusted trading profit based on the draft accounts for the six-month period ended 31 March 2022 is 368,400. This figure is before making any adjustments required for:

Directors remuneration of 23,000 paid to the managing director of Harrogate Chocolate ltd. The remuneration is in respect of the period ended 31 March 2022 but was not paid until 5 April 2022. No accrual has been made for this remuneration in the draft accounts. The managing director received no other remuneration from Harrogate Chocolate Ltd during the tax year 2021/22.

Capital allowance or Research & Development reliefs. 2 - Dividend Received

On 31 March 2023 Harrogate Chocolate Ltd paid a dividend of 6.750 to its parent company BelManche Chocolate Plc.

3 - Donation

Harrogate Chocolate Ltd made a donation to a qualifying charity of 1,800 on 20 March 2022.

4 - Plant and machinery

Harrogate Chocolate Ltd, purchased the following assets in respect of the six-month period ended 31 March 2022:

20 September 2021

5 October 2021

11 October 2021.

8 November 2021.

18 February 2022

The motor car purchased on 18 February 2022 is used by the sales director who estimates 15% of the mileage is for private journeys.

5 - Research & Development

Harrogate Chocolate Ltd had a new factory constructed at a cost of 166,100 that the company brought into use on 1 October 2021. The cost was made up as follows:

20TH SEP-2021-Used office equipment -3400 5TH OCT- 2021-New machinery.-10,200 11TH OCT- Building alterations necessary for machinery installation-4,700 8TH NOV2021-Computer equipment for use in R & D of new production techniques- 17,800

18TH FEB-Motor Car (CO2 135 g/Km). 10,600

The motor car purchased on 18 February 2022 is used by the sales director who estimates 15% of the mileage is for private journeys.

5 - Research & Development

Harrogate Chocolate Ltd had a new factory constructed at a cost of 166,100 that the company brought into use on 1 October 2021. The cost was made up as follows:

LAND=65,700

SITE PREPARATION-8,000

STRUCTURAL BUILDING COST- -74,900

COLD AND HOT WATER SYSTEM- 5,200

AIR HEAT VENTILATION - SYSTEM- 8,800

ELECTRIC CAR CHARGE POINT -3,500

RESEARCH AND DEVELOPMENT :

In November 2021, the company set up a new department to focus on the development of a new, innovative, production technique. The company wants to improve the taste of sugar free chocolate. It was anticipated that the technique would meet the criteria for Research & Development tax relief, and the company would qualify as a small/medium sized entity.

In addition to the computer equipment purchased, Harrogate Chocolate Ltd also employed two new staff to help with the new process:

Roger was employed from 1 November 2021 on a two-year term fixed exclusive R&D contract with an annual salary of 42,500.

Saara was appointed on 1 December 2021 on a permanent contract but was only anticipated to spend 25% of her time on operational tasks and 75% on R&D. Saaras annual salary is 35,700.

7-GROUP OWNERSHIP STRUCTURE

Harrogate Ltd is 100% owned by the parent company BelManches Chocolate Plc which also holds the following shareholding:

100% NETHER LTD UK. DORMANT

75% SUGGAR LTD UK. TRADING LOSS 50,780 (FOR THE YEAR END 31ST OF MARCH,2023)

80% HOT LTD USA INTERNATIONAL

45%CAKE LTD

60% CHOCVEG LTD ACCUIRED 3RD JANUARY ,2023

Q-1. Using all the relevant information provided above, calculate Harrogate Chocolate Ltd taxable total profit for the six months ended 31 March 2023.

Q-2- Calculate the corporation tax payable by Harrogate Chocolate Ltd assuming the maximum group relief is surrendered from Suggar Ltd to Harrogate Chocolate Ltd.