Question 19.3: Corporation tax New Sky Ltd's statement of profit or loss for the year ended 31 March 2021 is given below: f 950,000 80,000 24,000 Gross profit Operating expenses: Depreciation Legal and professional fees (Note 1) Lease of motor car (CO2 95 g/km) General & administrative (Note 2) Employee costs (Note 3) Repairs and renewals (Note 4) 4,310 45,500 400,000 42.000 (595,810) 354,190 12,500 2,460 I Operating profit Other income: Income from property (Note 5) Bank interest (Note 6) Loan interest (Note 7) Dividends (Note 8) Finance costs Interest expenses (Note 9) 3,400 4,600 22,960 (17,000) 360.150 Profit before taxation Notes: 1. Legal and professional fees: Fee paid for accounting and audit services Charges paid to debt collectors Legal fees in connection with the fine on company for violating EHS 14,000 7,000 3,000 24,000 2. General & administrative expenses: General and administrative expenses include: Donations to a local charity (received free advertising in charity's magazine) 4,500 Political donations 2,500 Staff party (costing 180 per head) 10,000 Gifts to customers (100 pens cossting 70 each carrying name and logo of New Sky Ltd) 7,000 Other general and administrative (all allowable) 21,500 45.500 3. Employee costs Employee cost are as follows: I E Counselling services provided to employees who were made redundant Pension contributions paid on behalf of employees Employer class 1 national insurance contributions (NICS) Employee bonuses declared but will not be paid during 2021 Other expenditure (all allowable) 8,500 15,000 14,000 12,500 350.000 400.000 4. Repairs and renewals: Cost of constructing a new office for managing director Repainting company premises 28,000 14 000 42.000 5. Income from property Company let out an unfurnished freehold office building during the year that is surplus to requirements. The rent of 18,500 has been received in respect of the year ended 31 March 2021. During the year New Sky Ltd spent 6,000 on maintenance which is an allowable expense. 6. Bank interest The bank interest was received on 31 March 2021. The bank deposits are held for non- trading purposes. 7. Loan interest On 1 July 2020, Company made a loan as investment. Loan interest of E1,600 was received on 31 December 2020, and interest of 1,800 was accrued at 31 March 2021. 8. Dividends Dividends of 4,600 were received from another UK resident company. 9. The interest is payable is in respect of company's loan stock. The loan stock was used to finance the company's trade activities. The interest amount given in the statement of profit and loss has been paid and is the amount relevant to the accounting period ended 31 March 2021. 10. Maximum capital allowances available for the financial year ended 31 March 2021 are 156,300 I Required: a. Assess tax adusted trading profit using the information given in statement of profit or loss and notes for New Sky Ltd for the accounting period ending 31 March 2021. Start with the profit before taxation of 360,150 and list all of the items in the statement of profit and loss and in notes indicating by the use of a zero (0) any items that do not require adjustment. Assume that the company claims maximum available capital allowances. b. Assess taxable total profits for the period ended 31 March 2021. C. Assess New Sky Ltd's corporation tax liability for the period ended 31 March 2021. Question 19.3: Corporation tax New Sky Ltd's statement of profit or loss for the year ended 31 March 2021 is given below: f 950,000 80,000 24,000 Gross profit Operating expenses: Depreciation Legal and professional fees (Note 1) Lease of motor car (CO2 95 g/km) General & administrative (Note 2) Employee costs (Note 3) Repairs and renewals (Note 4) 4,310 45,500 400,000 42.000 (595,810) 354,190 12,500 2,460 I Operating profit Other income: Income from property (Note 5) Bank interest (Note 6) Loan interest (Note 7) Dividends (Note 8) Finance costs Interest expenses (Note 9) 3,400 4,600 22,960 (17,000) 360.150 Profit before taxation Notes: 1. Legal and professional fees: Fee paid for accounting and audit services Charges paid to debt collectors Legal fees in connection with the fine on company for violating EHS 14,000 7,000 3,000 24,000 2. General & administrative expenses: General and administrative expenses include: Donations to a local charity (received free advertising in charity's magazine) 4,500 Political donations 2,500 Staff party (costing 180 per head) 10,000 Gifts to customers (100 pens cossting 70 each carrying name and logo of New Sky Ltd) 7,000 Other general and administrative (all allowable) 21,500 45.500 3. Employee costs Employee cost are as follows: I E Counselling services provided to employees who were made redundant Pension contributions paid on behalf of employees Employer class 1 national insurance contributions (NICS) Employee bonuses declared but will not be paid during 2021 Other expenditure (all allowable) 8,500 15,000 14,000 12,500 350.000 400.000 4. Repairs and renewals: Cost of constructing a new office for managing director Repainting company premises 28,000 14 000 42.000 5. Income from property Company let out an unfurnished freehold office building during the year that is surplus to requirements. The rent of 18,500 has been received in respect of the year ended 31 March 2021. During the year New Sky Ltd spent 6,000 on maintenance which is an allowable expense. 6. Bank interest The bank interest was received on 31 March 2021. The bank deposits are held for non- trading purposes. 7. Loan interest On 1 July 2020, Company made a loan as investment. Loan interest of E1,600 was received on 31 December 2020, and interest of 1,800 was accrued at 31 March 2021. 8. Dividends Dividends of 4,600 were received from another UK resident company. 9. The interest is payable is in respect of company's loan stock. The loan stock was used to finance the company's trade activities. The interest amount given in the statement of profit and loss has been paid and is the amount relevant to the accounting period ended 31 March 2021. 10. Maximum capital allowances available for the financial year ended 31 March 2021 are 156,300 I Required: a. Assess tax adusted trading profit using the information given in statement of profit or loss and notes for New Sky Ltd for the accounting period ending 31 March 2021. Start with the profit before taxation of 360,150 and list all of the items in the statement of profit and loss and in notes indicating by the use of a zero (0) any items that do not require adjustment. Assume that the company claims maximum available capital allowances. b. Assess taxable total profits for the period ended 31 March 2021. C. Assess New Sky Ltd's corporation tax liability for the period ended 31 March 2021