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QUESTION 2 Kachana Ltd has been in business for many years preparing accounts to 31 December each year. The company has always calculated and paid
QUESTION 2 Kachana Ltd has been in business for many years preparing accounts to 31 December each year. The company has always calculated and paid provisional income tax on the due dates. At the start of the tax year 2020, the company estimated the provisional taxable profits to be K1,200,000. Provisional income tax was calculated correctly and paid on the appropriate due dates. At the end of the tax year 2020, the actual final taxable profit was K1,500,000. The company calculated the balance of income tax for the tax year 2020 and also calculated the provisional taxable profit for the tax year 2021 of K2,100,000 in January 2021. In late January 2021, a fire gutted the company's main warehouse and destroyed property worth millions of Kwacha. Following the disaster, the company experienced a strain on its cash resources and as a result started facing challenges in carrying enough inventories to meet sales demand, leading to a reduction in sales volume. The company therefore revised the provisional taxable business profit for the tax year 2021 from the original estimate of K2,100,000 to 1,600,000 As a result of the poor liquidity position, the company experienced after the fire disaster, the provisional income tax for the quarter ended 31 March 2021, was paid on 9 July 2021 and the return of provisional income for the tax year 2021 was submitted on that date. The provisional income tax for the quarter ended 30 June 2021 was paid on 9 September 2021, whilst the balance of income tax for the tax year 2020 was paid on 20 September 2021 with the self-assessment income tax return for the tax year 2020 also being submitted on 20 September 2021. Cash flow problems were fully resolved after 20 September 2021 and the directors are now confident that all the outstanding taxes thereafter, will be paid promptly on the relevant due dates. You should assume that the income tax rates for the tax year 2021 apply throughout, and that the Bank of Zambia discount rate is 8.5 % per annum. Required: 1) Advise Kachana Ltd of the amounts of penalties and interest charged on overdue taxes on all payments made up to and including 20 September 2021. () Identify the dates when tax returns were submitted late and calculate the amounts of penalties for late submission of those returns. [15 Marks] QUESTION 3 Mulobezi Retailers Ltd employed Lilato Zulu on 1 April 2020 under a three-year non-renewable contract as an Operations Manager. She was dismissed on 31 October 2021 due to professional misconduct. The conditions of service on which Lilato was employed were as follows: K Annual salary 400,200 Housing allowance at 20% of the salary Monthly transport allowance at 10% of salary Education allowance per annum 38,880 Lilato's contract provided for a gratuity of 40% of the cumulative basic pay at the expiry of the contract. As Lilato was dismissed before the expiry of the contract, the company paid her a gratuity of 40% of the cumulative basic pay up to the date of dismissal. On dismissal, Lilato received repatriation pay of K60,000, severance pay of K25,000, and leave pay of K21,410. On 1 May 2021, He received a labour day award consisting of cash K18,000 and a bicycle valued at K7,800. He made the following payments during the charge year 2021: Professional Subscription 2,300 Medical expenses 8,750 Pay As you Earn (PAYE) 137,204 Political donation School fees for Children 12,230 3,600 In the tax year 2021, he contributed 5% of his salary to NAPSA. Required: Calculate the income tax payable by Lilato for the charge year 2021 (Note you should indicate by the use of zero (O) against any income which is not required to be included or expenses which are not deductible in calculating taxable income) [15 Marks] QUESTION 2 Kachana Ltd has been in business for many years preparing accounts to 31 December each year. The company has always calculated and paid provisional income tax on the due dates. At the start of the tax year 2020, the company estimated the provisional taxable profits to be K1,200,000. Provisional income tax was calculated correctly and paid on the appropriate due dates. At the end of the tax year 2020, the actual final taxable profit was K1,500,000. The company calculated the balance of income tax for the tax year 2020 and also calculated the provisional taxable profit for the tax year 2021 of K2,100,000 in January 2021. In late January 2021, a fire gutted the company's main warehouse and destroyed property worth millions of Kwacha. Following the disaster, the company experienced a strain on its cash resources and as a result started facing challenges in carrying enough inventories to meet sales demand, leading to a reduction in sales volume. The company therefore revised the provisional taxable business profit for the tax year 2021 from the original estimate of K2,100,000 to 1,600,000 As a result of the poor liquidity position, the company experienced after the fire disaster, the provisional income tax for the quarter ended 31 March 2021, was paid on 9 July 2021 and the return of provisional income for the tax year 2021 was submitted on that date. The provisional income tax for the quarter ended 30 June 2021 was paid on 9 September 2021, whilst the balance of income tax for the tax year 2020 was paid on 20 September 2021 with the self-assessment income tax return for the tax year 2020 also being submitted on 20 September 2021. Cash flow problems were fully resolved after 20 September 2021 and the directors are now confident that all the outstanding taxes thereafter, will be paid promptly on the relevant due dates. You should assume that the income tax rates for the tax year 2021 apply throughout, and that the Bank of Zambia discount rate is 8.5 % per annum. Required: 1) Advise Kachana Ltd of the amounts of penalties and interest charged on overdue taxes on all payments made up to and including 20 September 2021. () Identify the dates when tax returns were submitted late and calculate the amounts of penalties for late submission of those returns. [15 Marks] QUESTION 3 Mulobezi Retailers Ltd employed Lilato Zulu on 1 April 2020 under a three-year non-renewable contract as an Operations Manager. She was dismissed on 31 October 2021 due to professional misconduct. The conditions of service on which Lilato was employed were as follows: K Annual salary 400,200 Housing allowance at 20% of the salary Monthly transport allowance at 10% of salary Education allowance per annum 38,880 Lilato's contract provided for a gratuity of 40% of the cumulative basic pay at the expiry of the contract. As Lilato was dismissed before the expiry of the contract, the company paid her a gratuity of 40% of the cumulative basic pay up to the date of dismissal. On dismissal, Lilato received repatriation pay of K60,000, severance pay of K25,000, and leave pay of K21,410. On 1 May 2021, He received a labour day award consisting of cash K18,000 and a bicycle valued at K7,800. He made the following payments during the charge year 2021: Professional Subscription 2,300 Medical expenses 8,750 Pay As you Earn (PAYE) 137,204 Political donation School fees for Children 12,230 3,600 In the tax year 2021, he contributed 5% of his salary to NAPSA. Required: Calculate the income tax payable by Lilato for the charge year 2021 (Note you should indicate by the use of zero (O) against any income which is not required to be included or expenses which are not deductible in calculating taxable income) [15 Marks]
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