QUESTION 1 COMPULSORY Part A: Conor Jacobs owns and operates a hardware retail shop as a sole trader. He prepares his accounts annually to 31 August. Conor provides you with his Statement of Profit or Loss for the year ended 31 August 2021 as follows: Gross profit 984,563 Deposit interest received (net of DIRT) 5,632 Irish rental income (note 12) 15,000 Dividend received from Irish company (net) 3,200 1,008,395 Wages and salaries (Note 1) 268,340 Rent and rates 63,000 Marketing expenses (Note 2) 9,150 Motor vehicle expenses (note 3) 20,200 Travel and entertainment (Note 4) 10,960 Light and heat (Note 5) 4,200 Telephone and postage 9,860 Subscriptions and donations (Note 6) 3,970 Bad debts (Note 7) 4,562 Professional fees (Note 8) 11,030 Office stationery 23,000 Interest (Note 9) 4,100 Depreciation 23,500 Miscellaneous (Note 10) 22,180 Loss on disposal of fixed assets (Note 11) 3,000 481,052 Profit for the year 527,343 Note 1: Salary - Conor 96,000 Conor's PRSI 3,840 Salary - Staff 150,000 Staff PRSI 15,000 Staff bonus 2,000 Write off of staff loan 1,500 268,340 Note 2: Marketing expenses 8,400 Advertising for new staff 250 Advertising for tenant for investment property 500 9,150 BUU33720-1 Page 3 of 12 Trinity College Dublin, The University of Dublin 2021 Note 3: Conor leases a motor vehicle, a Category A. The list price of the car is 52,000. Conor uses the car 80% for business purposes. Lease rental payments 7,000 Motor running expenses 13,200 20,200 Note 4: Entertainment of clients 5,200 Gifts to suppliers 600 Staff Christmas party 2,700 Holiday for Conor 1,900 Holiday for staff member 560 10,960 Note 5: The light and heat expense includes 900 for Conor's private residence. The balance relates to the business premises. Note 6: Trade magazines 520 Trip to trade fair in Germany for Conor 1,100 Charitable donations 850 Donation to political party 1,500 3,970 Note 7: Bad debts written off 4,232 Decrease in specific bad debt provision -900 Increase in general bad debt provision 1,230 4,562 Note 8: Legal fees for drafting lease for tenant 1,230 Accountancy fees 4,200 Legal fees in connection with collection of bad debts 5,600 11,030 Note 9: Interest on bank overdraft 1,560 Loan interest on loan to purchase equipment 2,540 4,100 Note 10: Business insurance 2,960 Interest on underpaid taxes 960 Parking fines 610 Painting and decorating 1,450 Permanent health insurance - Conor 600 BUU33720-1 Page 4 of 12 Trinity College Dublin, The University of Dublin 2021 Purchase of computers 1,600 Miscellaneous all allowable 14,000 22,180 Note 11: The allowable cost of assets at 1 January 2021 which qualified for capital allowances was 75,000. The tax written value of these assets was 46,875. In addition to the computers referred to in note 10 Conor purchased the following assets: 16 April 2021 Point of sale equipment 18,000 27 September 2021 Van 26,000 Included in the assets at 1 January 2021 was equipment costing 16,000. The equipment was purchased in year ended 31 August 2019 and was sold on 16 April 2021 for 17,000. Note 12: Additional information All of Conor's income for 2021 has been included in the above accounts. The property has been let from 1 January 2021. Conor paid preliminary tax for 2021 of 150,000. Note 13: Conor is single. Conor has a son Paul who lives with his mother and visits Conor every second weekend. Conor gives 500 per month to Paul's mother for his care. Required: Part A: Calculate Conors Case I tax adjusted profit for the 2021 tax year. (14 marks) Part B: Calculate Conors capital allowances for the 2021 tax year. (5 marks) Part C: Calculate Conors income tax liability for 2021 tax year. You are NOT required to calculate USC or PRSI. (12 marks) Part D: Kimberley was employed as baker in a local hotel. Unfortunately, due to financial difficulties at the hotel Kimberley was made redundant. Kimberley enjoys collecting and wearing vintage clothing. In order to raise some much needed cash to pay her bills she decided to sell items of clothing to a local second hand shop. Kimberley raised 800. Kimberley is delighted with this and is planning on repeating this periodically in the future. Required: Advise if Kimberleys sale of clothing could potentially constitute trading. Give reasons for your answer with reference to the badges of trade. Your answer should include a list of the badges of trade. (10 marks) Part E: Outline each of the FOUR concepts or tests derived from case law which should be applied in determining whether an individual is employed or self-employed. Your answer should refer specifically to an Irish court case.