Question No 5: (10 Marks) Income tax is the single largest source of Government revenue in the United Kingdom. It is a tax levied directly on personal income. HM Revenue and Customs (HMRC) is responsible for administering and collecting taxes in UK. There are many sources of personal income on which income tax is levied. These include: labour income (the wages and salaries of employees and earnings of the self-employed), income from investments (including interest on savings and the rental income from buy-to-let properties). Income tax is collected in a variety of different ways: for the majority of employees, it is paid via the Pay-As-You-Earn (PAYE) system. The amount of tax to be paid is calculated by the employer and transferred directly to the tax authorities (HMRC). This is also known as being deducted at source. It means the individual does not need to deal directly with HMRC and that the tax is paid promptly or the some tax payers it is paid via the self-assessment (SA) system. The amount of tax to be paid is calculated by the individual and declared on a tax return sent to HMRC. Assuming that the following income and expenditure of an individual who lives in UK as follows:

Gross Salary per annum 60,000, Bonus 12,000 per annum, Commission on turnover achieved 2,000 Dividends received from UK companies 42,000, Building society interest 34,000, During the year the individual received interest of 2330 on the maturity of Savings Certificate from NS&I (National Savings and Investments) and Premium bond prizes of 6,500. The individual pays interest of 8,000 p.a. on a loan to invest in a partnership firm. (Qualifying interest). The individual has paid donation of 1200 per annum to Oxfam (Charitable organization) under payroll deduction scheme and he also contributed Donation under Gift aid scheme of 4800 per annum (Gross) Tax deducted by the company under PAYE 6,200.

[Required:]

Assuming that you are a citizen of UK, how would you pay your tax to HMRC in regards to the above income and expenditures and briefly explain the different types of assessable income as per UK Tax law.??

ABC Engineering Company is a Permanent Establishment in Oman. It is one of the largest, multi-disciplined engineering contracting and construction company in the Sultanate of Oman. Established in the year 1972. Its Engineering & Contracting SAOG, has today grown into one of the largest construction companies in the Middle Fast with a turnover of over US$1 billion. Their trading results for the year ended 31 December 2018 are as follows: The Net Sales and Net Purchases of the company for the year ended 31 December 2018 were OMR 580,000 and OMR 322,500 respectively. The Opening inventory as on 19 January 2018 is OMR 60.500 and Closing inventory at the end of the year is OMR 45,000. The current year income as follows: The business camed a Gain on Sale of Land and Profit on Sale of Securities Listed in MSM of OMR 2.500 and RO 12.500 respectively. The following expenses were recorded by the Accountant. Donations of OMR 2.000 approved charitable institution, Provisions for Depreciation of OMR 22,000, Purchase of Patient worth RO 20.000. Purchase of heavy equipment RO 70,000, Depreciation on permanent Building is ROS,400 and General expenses were RO 36,000 Assuming that you have recently joined as an Accountant of the company and you were not aware about all the rules of Law of Income tax on Omani Companies. Indeed, you are not sure about the Business transactions that you have recorded in the company account books. On 31st December 2018, the company received an Assessment order from the Income tax office stating that the company should pay tax on or before the due date. Immediately Ms. Faiza Al aamian Intemal Auditor was called by the company to finalize the accounts as per Omani tax Law requirements The intemal auditor analyzed the Profit & Loss Account prepared by the Accountant and discovered many transactions which are not recorded as per the income tax law requirements. Business Income of RO 20,000 earned during the tax year 2018 was completely ignored by the Accountant. At the end of the year 2018, the opening and closing inventory were undervalued by 40%. The company had incurred an amount of RO6,000 on inaugurating their business outlet. This amount was included in General expense. However, the sufficient documentary evidence is available in the company is only for RO 2,000 The Additional information's provided by the company The Life of patent is 10 years. The Net Book value of Permanent Building as on 1 January 2018 are RO 50,000 The General expenses which includes purchase of personal Computers of RO 800 and Income tax penalty of RO 300 Bad debts recovered of OMR 2,500 in the current year 2018 which was not allowed to write off in the concerned previous year 2017 profit. The company purchased an Office furnitures cost RO 20.000 on 1 January 2018. During the year one of the furniture was broken and the company spent for the repair expense of RO 250. This amount was included in General expense. Heavy equipment was purchased on 19 of January 2018 Requirement: .) You have been used by the Company to present a detailed report on Net Profit of the company for the year ended 31 December 2016. As an Accountant, how would you present such a report to the company? (5 Marks) h) The company would like to pay a tas en time. In this regard, the company asked you to d o with the Internal Auditor regarding the Profit & Loss Account which you prepared. As an Accountant of the company, how would you sist with internal auditor to finalize the accounts as per Omani Tax Law requirements