P2 Explore and explain the implications of taxation liabilities for unincorporated organisations Task Summary Mr. Frank is a Customer relationship Manager with Apex bank. The employment details of Mr. Frank is given below; a) Basic Salary received from Apex bank is 65,000 per annum. b) Bonus received during the year is 10,000. c) A Commission of 6920 was received by Mr. Frank for meeting customer targets. d) During the year, Mr. Frank contributed 2,100 to Occupation pension scheme and paid a payroll deduction of 320 c) During the tax year 2019/20, Apex Bank provided Mr. Frank with living accommodation, which had Annual value of 8,100. Company purchased this accommodation in 2017 for 110,000 and then spent 10,000 on enhancement of the accommodation. Mr. Frank repaid 600 for the private use of the accommodation. The market value of the accommodation as on date was 130,000. During the year Company purchased a petrol motor car costing 70,000 which had a list price of 65,000. This car was provided to Mr. Frank on 6 April 2019 and company spent all the expenses relating to the motor car including fuel. Mr. Frank paid 350 for the private use of car. The CO2 emission of the car is 150 g/km. ) PAYE for the year amounted to 300. In addition to the above, Mr. Frank continues to contribute both financially as well takes part in business activities and dealings in their family business which is currently run by his brother. When it comes to decision making, it is Mr. Frank who takes the call .He has set long term plans for their business and one of the concerns he has is whether to continue the business as a sole trader or to incorporate the business as a Private Company or Public Limited company. In case, if Mr. Frank incorporates his business as a Limited company, Mr. Frank will take 100% shares in the company and the profits will be taken as dividend by Mr. Frank. The profit and loss account of his business for the year ended 31 March 2020 is as follows: E Gross Profit 450,000 Add: Other Income: Property income 20,000 Profit on disposal 1.500 Dividend Income 2,000 23.500 473,500 Less: Administration Expenses: Donation to Local Charity Internet charges (Note 1) 3,000 4,500 Lift maintenance bill (Note 2) 5,900 Rent and rates (Note 3) 12,800 Depreciation Advertisement (Note 4) 6,000 15,500 Gift and Entertainment (Note 5) 8,900 Motor car expenses (Note 6) Car Lease rent (Note 7) 1,800 8,000 Legal expenses on purchase of building 5.500 71,900 Net Profit 401,600 Following notes are relevant for the calculation of Adjusted Trading profit for Mr. Frank: Note 1: Internet charges includes E1500, relating to internet home connection charges of Frank's residence- personal usage. Note 2: Lift maintenance bill includes cost of cameras and fan fitting inside the lifts 2000, Note 3: Rent and rates consists of: Rent for Mr. Frank's residence 2,800 Rent for business premises 10,000 Note 4: Advertisement is incurred for: Advertisement for purchase of second-hand 10,000 machine for use in his business Advertisement for sale of Mr. Frank's two-year-old 5,500 personal Nikon camera Note 5: Gift and Entertainment expenses break up: Customer Entertainment 1,500 Staff Entertainment E 4000 600 E520 Gift to Customers: . Gift of chocolate box: E12 each for 50 customers Gift of watches: 52 each for 10 customers * Gift to staff Note 6: Motor Car Expenses includes: Over speeding fine of Mr. Frank 100 E2280 Note 7: Car Lease rent is for car with a CO2 emission of 150g/km. Note 8: The capital allowance for the year ended 31 March 2020 is 4,900. Mr. Frank's other personal income for computing taxable income purpose ludes: - Annexure 1: interest on Bank deposit 4,000 Winnings from Lottery 80,000 Dividend received from UK based MLC Co. E 8,900 Interest from Individual Savings Account (ISA) 4,000 Note: the above income mentioned in Annexure 1 are in addition to the income mentioned in the Profit & Loss A/C Assume that Mr. Frank's employment and his business details will continue to remain the same, if he continues his business either as a sole trader or as a company. For the tax year 2019/20, Investigate taxation liabilities when the business is unincorporated (sole trader) as well as when the business is incorporated (company). (You may use appropriate application models and formulae wherever necessary to interpret and analyse data correctly.) Summary of Tax Data FY-2019 1. Personal Allowance= 12,500 2.Income tax rate: Tax Rate for Tax year 2019/20 (Non-Saving Income. Savings income & Dividend income): (Non-Saving income, Saving income & Dividend income): Non-Savings Savings Dividend income income income 0% 20% El to 5,000 5,001 to 37,500 (basic rate band) 137.501 to 150,000 (higher rate band) above 150.000 (Additional rate) 40% 40% 32.5% 45% 45% 38.1% Or in detail Tax Rate for Tax year 2019/20: Non-Savings income: El to 7,500 (basic rate band) 20% 37.501 to 150,000 (higher rate band) 40% above 150,000 (Additional rate) 45% Savings income: % 0% $1 to 5000 (starting rate band) 20% 5001 to 37500 (basic rate band) 40% 37,501 to 150,000 (higher rate band) above 150,000 (Additional rate) Dividend income: % % 7.5% l fo f37.500 (basic rate band) 37.501 to 150.000 (higher rate band) above 150.000 (Additional rate) 32.5% 28.1% 3. Dividend Allowance = 2000 (first 2,000 is at 0%) 4. Mileage Allowance: for Car Up to 10,000 miles 0.45pence Over 10,000 miles 0.25pence 5. Car benefit percentage: 20% CO2 emission per Km Petrol car % sel Car % 7.5% Not exceeding 50g/km 16% 20% 51 g/km to 75g/km 19% 23% 76g/km to 94g/km 22% 26% 95 g/km 23% 27% Each complete An additional 1% is added to An additional 1% is added to the additional 5 g/km above the 23% up to a maximum % 27% up to a maximum % of 95 g/km of 37%. 37% 6. Car Fuel benefit: The base figure for car fuel benefit is 24,100 7. Capital Gains Tax: Annual exemption amount=12,000 Basic or Standard rate =10% Higher rate = 20% 8. Official Rate of Interest for Accommodation benefit = 2.5 % 9. Corporation Tax: - FY-2019- Main rate is 19% Mr. Frank is a Customer relationship Manager with Apex bank. The employment details of Mr. Frank is given below; a) Basic Salary received from Apex bank is 65,000 per annum. b) Bonus received during the year is 10,000. c) A Commission of 6920 was received by Mr. Frank for meeting customer targets. d) During the year, Mr. Frank contributed 2,100 to Occupation pension scheme and paid a payroll deduction of E320 c) During the tax year 2019/20, Apex Bank provided Mr. Frank with living accommodation, which had Annual value of 8,100. Company purchased this accommodation in 2017 for 110,000 and then spent 10,000 on enhancement of the accommodation. Mr. Frank repaid 600 for the private use of the accommodation. The market value of the accommodation as on date was 130,000. 1) During the year Company purchased a petrol motor car costing E70,000, which had a list price of 65,000. This car was provided to Mr. Frank on 6 April 2019 and company spent all the expenses relating to the motor cart including fuel. Mr. Frank paid 350 for the private use of car. The CO2 emission of the car is 150 g/km. g) PAYE for the year amounted to 300. In addition to the above, Mr. Frank continues to contribute both financially as well takes part in business activities and dealings in their family business which is currently run by his brother. When it comes to decision making, it is Mr. Frank who takes the call .He has set long term plans for their business and one of the concems he has is whether to continue the business as a sole trader or to incorporate the business as a Private Company or Public Limited company. In case, if Mr. Frank incorporates his business as a Limited company, Mr. Frank will take 100% shares in the company and the profits will be taken as dividend by Mr. Frank The profit and loss account of his business for the year ended 31 March 2020 is as follows: E E Gross Profit 450,000 Add: Other Income: Property income 120,000 Profit on disposal 1.500 Dividend Income 2,000 23,500 473,500 Less: Administration Expenses: Donation to Local Charity 3,000 Internet charges (Note 1) 4,500 Lift maintenance bill (Note 2) 5.900 Rent and rates (Note 3) 12,800 Depreciation 6,000 Advertisement (Note 4) 15,500 Gift and Entertainment (Note 5) 8,900 Motor car expenses (Note 6) Car Lease rent (Note 7) 1,800 8,000 Legal expenses on purchase of building 5.500 71.900 Net Profit 401,600 Following notes are relevant for the calculation of Adjusted Trading profit for Mr. Frank: Note 1: Internet charges includes 1500, relating to internet home connection charges of Frank's residence- personal usage. Note 2: Lift maintenance bill includes cost of cameras and fan fitting inside the lifts 2000, Note 3Rent and rates consists of: Rent for Mr. Frank's residence 2,800 Rent for business premises 10,000 Note 4: Advertisement is incurred for: Advertisement for purchase of second-hand $10,000 machine for use in his business. |Advertisement for sale of Mr. Frank's two-year-old 5,500 personal Nikon camera Note 5: Gift and Entertainment expenses break up: Customer Entertainment 1,500 Staff Entertainment E 4000 Gift to Customers: . Gift of chocolate box: 12 each for 50 E600 customers Gift of watches: E52 each for 10 E520 customers Gift to staff E2280 Note 6: Motor Car Expenses includes: over speeding fine of Mr. Frank E 100 Note 7: Car Lease rent is for car with a CO2 emission of 150g/km. Note 8: The capital allowance for the year ended 31 March 2020 is 4,900. Mr. Frank's other personal income for computing taxable income purpose includes: Annexure 11 Interest on Bank deposit 4,000 Winnings from Lottery 80,000 Dividend received from UK based MLC Co. E 8,900 Interest from Individual Savings Account (ISA) 4,000 Note: the above income mentioned in Annexure 1 are in addition to the income mentioned in the Profit & Loss A/C Assume that Mr. Frank's employment and his business details will continue to remain the same, if he continues his business either as a sole trader or as a company. For the tax year 2019/20, Investigate taxation liabilities when the business is unincorporated (sole trader) as well as when the business is incorporated (company). (You may use appropriate application models and formulae wherever necessary to interpret and analyse data correctly.) (refer to page 7and page 8 for Tax Summary) 8 Source: Customised by CBFS@PSD@HND based on Pearson BTEC format: Annexure 5A Summary of Tax Data FY-2019 1. Personal Allowance 12,500 2. Income tax rate: Tax Rate for Tax year 2019/20 (Non-Saving income, Savings income & Dividend income): (Non-Saving income, Saving income & Dividend income): Non-Savings Savings Dividend income income income l to 5.000 15,001 to 37,500 (basic rate band) 20% 40% 40% 32.5% $37.501 to $150,000 (higher rate band) above 150,000 (Additional rate) 45% 38.1% Or in detail Tax Rate for Tax year 2019/20: Non-Savings income: I to 37,500 (basic rate band) 20% 37.501 to 150,000 (higher rate band) 40% above 150,000 (Additional rate) Savings income: % 0% I to 5000 (starting rate band) 20% 3001 to 37500 (basic rate band) 37,501 to 150,000 (higher rate band) above 150,000 (Additional rate) 40% 45% Dividend income: CI to 37.500 (basic rate band) 7.5% 137,501 to 150,000 (higher rate band) 32.592 above $150,000 (Additional rate) 38.1% 3. Dividend Allowance = 2000 (first 2,000 is at 0%) 4. Mileage Allowance: for Car Up to 10,000 miles 0.45pence Over 10,000 miles 0.25pence 5. Car benefit percentage: 20% CO2 emission per Km Petrol car% sel Car% 7.5% Not exceeding 50g/km 16% 20% 51 g/km to 75g/km 23% 76g/km to 94g/km 22% 95 g/km 23% 27% Each complete An additional 1% is added to An additional 1% is added to the additional 5 g/km above the 23% up to a maximum % 27% up to a maximum % of 95 g/km of 37%. 137%. 19% 26% 6. Car Fuel benefit: The base figure for car fuel benefit is 24,100 7. Capital Gains Tax: Annual exemption amount=12,000 Basic or Standard rate=10% Higher rate = 20% 8. Official Rate of Interest for Accommodation benefit = 2.5% 9. Corporation Tax: - FY-2019- Main rate is 19% P2 Explore and explain the implications of taxation liabilities for unincorporated organisations Task Summary Mr. Frank is a Customer relationship Manager with Apex bank. The employment details of Mr. Frank is given below; a) Basic Salary received from Apex bank is 65,000 per annum. b) Bonus received during the year is 10,000. c) A Commission of 6920 was received by Mr. Frank for meeting customer targets. d) During the year, Mr. Frank contributed 2,100 to Occupation pension scheme and paid a payroll deduction of 320 c) During the tax year 2019/20, Apex Bank provided Mr. Frank with living accommodation, which had Annual value of 8,100. Company purchased this accommodation in 2017 for 110,000 and then spent 10,000 on enhancement of the accommodation. Mr. Frank repaid 600 for the private use of the accommodation. The market value of the accommodation as on date was 130,000. During the year Company purchased a petrol motor car costing 70,000 which had a list price of 65,000. This car was provided to Mr. Frank on 6 April 2019 and company spent all the expenses relating to the motor car including fuel. Mr. Frank paid 350 for the private use of car. The CO2 emission of the car is 150 g/km. ) PAYE for the year amounted to 300. In addition to the above, Mr. Frank continues to contribute both financially as well takes part in business activities and dealings in their family business which is currently run by his brother. When it comes to decision making, it is Mr. Frank who takes the call .He has set long term plans for their business and one of the concerns he has is whether to continue the business as a sole trader or to incorporate the business as a Private Company or Public Limited company. In case, if Mr. Frank incorporates his business as a Limited company, Mr. Frank will take 100% shares in the company and the profits will be taken as dividend by Mr. Frank. The profit and loss account of his business for the year ended 31 March 2020 is as follows: E Gross Profit 450,000 Add: Other Income: Property income 20,000 Profit on disposal 1.500 Dividend Income 2,000 23.500 473,500 Less: Administration Expenses: Donation to Local Charity Internet charges (Note 1) 3,000 4,500 Lift maintenance bill (Note 2) 5,900 Rent and rates (Note 3) 12,800 Depreciation Advertisement (Note 4) 6,000 15,500 Gift and Entertainment (Note 5) 8,900 Motor car expenses (Note 6) Car Lease rent (Note 7) 1,800 8,000 Legal expenses on purchase of building 5.500 71,900 Net Profit 401,600 Following notes are relevant for the calculation of Adjusted Trading profit for Mr. Frank: Note 1: Internet charges includes E1500, relating to internet home connection charges of Frank's residence- personal usage. Note 2: Lift maintenance bill includes cost of cameras and fan fitting inside the lifts 2000, Note 3: Rent and rates consists of: Rent for Mr. Frank's residence 2,800 Rent for business premises 10,000 Note 4: Advertisement is incurred for: Advertisement for purchase of second-hand 10,000 machine for use in his business Advertisement for sale of Mr. Frank's two-year-old 5,500 personal Nikon camera Note 5: Gift and Entertainment expenses break up: Customer Entertainment 1,500 Staff Entertainment E 4000 600 E520 Gift to Customers: . Gift of chocolate box: E12 each for 50 customers Gift of watches: 52 each for 10 customers * Gift to staff Note 6: Motor Car Expenses includes: Over speeding fine of Mr. Frank 100 E2280 Note 7: Car Lease rent is for car with a CO2 emission of 150g/km. Note 8: The capital allowance for the year ended 31 March 2020 is 4,900. Mr. Frank's other personal income for computing taxable income purpose ludes: - Annexure 1: interest on Bank deposit 4,000 Winnings from Lottery 80,000 Dividend received from UK based MLC Co. E 8,900 Interest from Individual Savings Account (ISA) 4,000 Note: the above income mentioned in Annexure 1 are in addition to the income mentioned in the Profit & Loss A/C Assume that Mr. Frank's employment and his business details will continue to remain the same, if he continues his business either as a sole trader or as a company. For the tax year 2019/20, Investigate taxation liabilities when the business is unincorporated (sole trader) as well as when the business is incorporated (company). (You may use appropriate application models and formulae wherever necessary to interpret and analyse data correctly.) Summary of Tax Data FY-2019 1. Personal Allowance= 12,500 2.Income tax rate: Tax Rate for Tax year 2019/20 (Non-Saving Income. Savings income & Dividend income): (Non-Saving income, Saving income & Dividend income): Non-Savings Savings Dividend income income income 0% 20% El to 5,000 5,001 to 37,500 (basic rate band) 137.501 to 150,000 (higher rate band) above 150.000 (Additional rate) 40% 40% 32.5% 45% 45% 38.1% Or in detail Tax Rate for Tax year 2019/20: Non-Savings income: El to 7,500 (basic rate band) 20% 37.501 to 150,000 (higher rate band) 40% above 150,000 (Additional rate) 45% Savings income: % 0% $1 to 5000 (starting rate band) 20% 5001 to 37500 (basic rate band) 40% 37,501 to 150,000 (higher rate band) above 150,000 (Additional rate) Dividend income: % % 7.5% l fo f37.500 (basic rate band) 37.501 to 150.000 (higher rate band) above 150.000 (Additional rate) 32.5% 28.1% 3. Dividend Allowance = 2000 (first 2,000 is at 0%) 4. Mileage Allowance: for Car Up to 10,000 miles 0.45pence Over 10,000 miles 0.25pence 5. Car benefit percentage: 20% CO2 emission per Km Petrol car % sel Car % 7.5% Not exceeding 50g/km 16% 20% 51 g/km to 75g/km 19% 23% 76g/km to 94g/km 22% 26% 95 g/km 23% 27% Each complete An additional 1% is added to An additional 1% is added to the additional 5 g/km above the 23% up to a maximum % 27% up to a maximum % of 95 g/km of 37%. 37% 6. Car Fuel benefit: The base figure for car fuel benefit is 24,100 7. Capital Gains Tax: Annual exemption amount=12,000 Basic or Standard rate =10% Higher rate = 20% 8. Official Rate of Interest for Accommodation benefit = 2.5 % 9. Corporation Tax: - FY-2019- Main rate is 19% Mr. Frank is a Customer relationship Manager with Apex bank. The employment details of Mr. Frank is given below; a) Basic Salary received from Apex bank is 65,000 per annum. b) Bonus received during the year is 10,000. c) A Commission of 6920 was received by Mr. Frank for meeting customer targets. d) During the year, Mr. Frank contributed 2,100 to Occupation pension scheme and paid a payroll deduction of E320 c) During the tax year 2019/20, Apex Bank provided Mr. Frank with living accommodation, which had Annual value of 8,100. Company purchased this accommodation in 2017 for 110,000 and then spent 10,000 on enhancement of the accommodation. Mr. Frank repaid 600 for the private use of the accommodation. The market value of the accommodation as on date was 130,000. 1) During the year Company purchased a petrol motor car costing E70,000, which had a list price of 65,000. This car was provided to Mr. Frank on 6 April 2019 and company spent all the expenses relating to the motor cart including fuel. Mr. Frank paid 350 for the private use of car. The CO2 emission of the car is 150 g/km. g) PAYE for the year amounted to 300. In addition to the above, Mr. Frank continues to contribute both financially as well takes part in business activities and dealings in their family business which is currently run by his brother. When it comes to decision making, it is Mr. Frank who takes the call .He has set long term plans for their business and one of the concems he has is whether to continue the business as a sole trader or to incorporate the business as a Private Company or Public Limited company. In case, if Mr. Frank incorporates his business as a Limited company, Mr. Frank will take 100% shares in the company and the profits will be taken as dividend by Mr. Frank The profit and loss account of his business for the year ended 31 March 2020 is as follows: E E Gross Profit 450,000 Add: Other Income: Property income 120,000 Profit on disposal 1.500 Dividend Income 2,000 23,500 473,500 Less: Administration Expenses: Donation to Local Charity 3,000 Internet charges (Note 1) 4,500 Lift maintenance bill (Note 2) 5.900 Rent and rates (Note 3) 12,800 Depreciation 6,000 Advertisement (Note 4) 15,500 Gift and Entertainment (Note 5) 8,900 Motor car expenses (Note 6) Car Lease rent (Note 7) 1,800 8,000 Legal expenses on purchase of building 5.500 71.900 Net Profit 401,600 Following notes are relevant for the calculation of Adjusted Trading profit for Mr. Frank: Note 1: Internet charges includes 1500, relating to internet home connection charges of Frank's residence- personal usage. Note 2: Lift maintenance bill includes cost of cameras and fan fitting inside the lifts 2000, Note 3Rent and rates consists of: Rent for Mr. Frank's residence 2,800 Rent for business premises 10,000 Note 4: Advertisement is incurred for: Advertisement for purchase of second-hand $10,000 machine for use in his business. |Advertisement for sale of Mr. Frank's two-year-old 5,500 personal Nikon camera Note 5: Gift and Entertainment expenses break up: Customer Entertainment 1,500 Staff Entertainment E 4000 Gift to Customers: . Gift of chocolate box: 12 each for 50 E600 customers Gift of watches: E52 each for 10 E520 customers Gift to staff E2280 Note 6: Motor Car Expenses includes: over speeding fine of Mr. Frank E 100 Note 7: Car Lease rent is for car with a CO2 emission of 150g/km. Note 8: The capital allowance for the year ended 31 March 2020 is 4,900. Mr. Frank's other personal income for computing taxable income purpose includes: Annexure 11 Interest on Bank deposit 4,000 Winnings from Lottery 80,000 Dividend received from UK based MLC Co. E 8,900 Interest from Individual Savings Account (ISA) 4,000 Note: the above income mentioned in Annexure 1 are in addition to the income mentioned in the Profit & Loss A/C Assume that Mr. Frank's employment and his business details will continue to remain the same, if he continues his business either as a sole trader or as a company. For the tax year 2019/20, Investigate taxation liabilities when the business is unincorporated (sole trader) as well as when the business is incorporated (company). (You may use appropriate application models and formulae wherever necessary to interpret and analyse data correctly.) (refer to page 7and page 8 for Tax Summary) 8 Source: Customised by CBFS@PSD@HND based on Pearson BTEC format: Annexure 5A Summary of Tax Data FY-2019 1. Personal Allowance 12,500 2. Income tax rate: Tax Rate for Tax year 2019/20 (Non-Saving income, Savings income & Dividend income): (Non-Saving income, Saving income & Dividend income): Non-Savings Savings Dividend income income income l to 5.000 15,001 to 37,500 (basic rate band) 20% 40% 40% 32.5% $37.501 to $150,000 (higher rate band) above 150,000 (Additional rate) 45% 38.1% Or in detail Tax Rate for Tax year 2019/20: Non-Savings income: I to 37,500 (basic rate band) 20% 37.501 to 150,000 (higher rate band) 40% above 150,000 (Additional rate) Savings income: % 0% I to 5000 (starting rate band) 20% 3001 to 37500 (basic rate band) 37,501 to 150,000 (higher rate band) above 150,000 (Additional rate) 40% 45% Dividend income: CI to 37.500 (basic rate band) 7.5% 137,501 to 150,000 (higher rate band) 32.592 above $150,000 (Additional rate) 38.1% 3. Dividend Allowance = 2000 (first 2,000 is at 0%) 4. Mileage Allowance: for Car Up to 10,000 miles 0.45pence Over 10,000 miles 0.25pence 5. Car benefit percentage: 20% CO2 emission per Km Petrol car% sel Car% 7.5% Not exceeding 50g/km 16% 20% 51 g/km to 75g/km 23% 76g/km to 94g/km 22% 95 g/km 23% 27% Each complete An additional 1% is added to An additional 1% is added to the additional 5 g/km above the 23% up to a maximum % 27% up to a maximum % of 95 g/km of 37%. 137%. 19% 26% 6. Car Fuel benefit: The base figure for car fuel benefit is 24,100 7. Capital Gains Tax: Annual exemption amount=12,000 Basic or Standard rate=10% Higher rate = 20% 8. Official Rate of Interest for Accommodation benefit = 2.5% 9. Corporation Tax: - FY-2019- Main rate is 19%
