Harry runs a convenience store in your local town. He opened the store a few years ago and recently during the pandemic decided to operate on a near 24/7 basis, as well as offering deliveries to vulnerable people. The successful business keeps him so busy that he no longer has time to do his own tax return and has asked for your help in preparing his trading income for tax purposes.

Below is the Statement of Profit or Loss for the year ended 31 December 2019:

Note 1:

Included in salaries and wages is a gross salary of 30,000 for Harry plus 3,000 payment of his personal National Insurance Contributions. There is an amount of 5,000 for his son who does not actually work for the business and 15,250 for his wife who works there part time.

Note 2:

Insurance expenses contain 950 for Harrys family private medical insurance.

Note 3:

Telephone bills relate to both private and business calls. It has been agreed with HMRC that 40% relates to private use.

Note 4:

Motor expenses include 1,290 expenses relating to Harrys car. It has been agreed with HMRC that it is used 80% of the time for business purposes.

Note 5:

Legal and professional expenses include the cost of taking bad debts to court of 350.

Note 6:

Sundry expenses include a donation to the Labour Party of 400 and a speeding fine of 340 that was incurred by Harry whilst he was out making deliveries.

Note 7:

Bad and doubtful debts include an increase in the bad debt general provision of 400, write offs of 862 and a decrease of 200 in specific allowances for bad debts.

Further information

The tax written down value brought forward on 1 January 2019 is:

Main pool: 42,100

Special rate pool: 11,300

The following transactions took place during the accounting period:

1 February 2019 Purchase of a car (used 20% privately by Harry) 41,000

23 April 2019 Purchase of new heating system for the shop 110,000

18 August 2019 Sold a mini van which originally cost 18,000 4,900

Required:

Calculate the trading income (after capital allowances) to be included in Harry's Income Tax Return for 2019/20.

Note: Your computation should start with the net profit of 240,698 and should list all the items referred to in Notes (1) to (7), indicating with a zero (0) any items that do not require adjustment.

321,455 Gross profit for the year Add: Bank interest receivable Profit on sale of laptop 145 69 214 321,669 Less: Salaries and wages (Note 1) Rent, rates and insurance (Note 2) Electricity Telephone (Note 3) Repairs Printing and advertising Motor expenses (Note 4) Legal and professional expenses (Note 5) Sundry expenses (Note 6) Bad and doubtful debts (Note 7) Depreciation 52,000 2,457 5,360 1,200 980 1,700 2,580 2,250 4,160 993 7,291 (80,971) 240,698 Net profit