Part B

The audited financial statements for New Life Manufacturing for year$-$end December $31,2022,$

show an accounting profit after tax of $$16,500,000$ after charging the following:

$$ Depreciation $$2,500,000`$

$$ Tax for the year $$500,000$

$$ Property Tax $$1,000,000$

$$ Interest expense $$15,000$

$$ Preference dividends of $$40,000$

$$ Legal fees $$1,110,000$

$$ Insurance of $$750,000$

$$ Bad debts $$40,000$

$$ Foreign Travel $$20,000$

$$ Repairs and Maintenance $$1,500,000$

$$ General expenses $$600,000$

Other Information

$1.$ Property Tax of $$600,000$ was paid for the property on which the company$$s factory is

located; $$300,000$ for the office premises and $$100,000$ for the CEO$$s home.

$2.$ The insurance was paid for the factory and office premises.

$3.$ Loss on disposal of fixed assets $$350,000$

$4.$ Income Tax Refund of $$700,000$ was included as part of the entity$$s income.

$5.$ The bad debt expense includes a general provision of $$10,000$ and a specific provision of

$$30,000.$

$6.$ The company paid final ordinary dividends totaling $$100,000.$

$7.$ Repairs and maintenance include $$500,00$ removing the office ceramic floor titles and

replacing it with wooden flooring.

$8.$ Included in the company$$s total assessable income is exempt income of $$50,000.$

$$16,500$ relates to expenses incurred in earning this exempt income.

$9.$ Legal fees include:

$-$ $$155,000$ in respect of recovery of commercial debts for New Life Manufacturing.

$-$ $$40,000$ in respect of recovery of commercial debts for the head office in Cayman. The

company was reimbursed this amount.

$-$ $$415,000$ in respect of recovery of commercial debts for the subsidiary company in the

United States. The company was not reimbursed this amount.

$-$ $$500,000$ relating to the purchase of new company that will be located in Barbados.

$10.$ General expenses include $$72,000$ for the school fees of the CEO$$s son.

$11.$ The capital allowances have been calculated at $$1,330,500.$ Based on the items included

in the fixed asset schedule.

$12.$ There was an increase in wages of $$2,000,000$ which qualifies for Employment Tax

Credit $($all other conditions to qualify for this credit were met$).$

$13.$ Assume capital allowance rate of $5\%$ p$.$ A for building$/$ leasehold improvements.

$14.$ All amounts are in Barbadian currency.

Required

Calculate the Corporation Tax Payable for New Life using the Barbados Income Tax Act, or any

other relevant document explain the treatment of the items included or omitted from the

income tax computation. Your answer should include the reasons for all adjustments made.

Explain the treatment of tax losses in Barbados.