Question no.3:

Arun started a business as an electrical goods dealer on 1 January 2015. He prepared his Profit and Loss Account for the year ended 31 March 2021 and its shows a net profit of 180,000. Notes: 1. The profit of 180,000 is calculated after adding the following other incomes: a) Rental Income 5,000 b) Interest Income 2,000 c) Profit on sale of his house 4,000 and d) Dividend income of 6,000 2. The net profit of 180,000 is calculated after

deducting various expenses as shown below: a) Depreciation of 12,000 b) Salary of 8,000, which includes salary withdrawn by Arun 2,000 c) Interest on loan borrowed for business purposes 3,000 and personal purposes 1,000 d) Donation to National charity 600, Local Charity 50 and political donation 200. e) Subscription for business association 400 and his club membership fees 550. f) Expenses relating to Gift and Entertainment: (i) The gift to staff 100 (ii) Entertainment to staff 200 (iii) Gift of chips packets costing 2 each to 1000 customers (iv) Gift of juice costing 5 each for 200 staffs (v) Gift of watch set costing 70 each to 10 customers. g) Bad debts written off include 500 normal trade debt, 300 customers loan, and 400 loan given to the former employee. h) Repairs and maintenance include the following: (i) Building redecoration (painting) 750 (ii) Purchase of plant and machinery 1,000 i) Other expenses deducted include payment contrary to public policy (bribe) 200, Staff parking fine of 20, the penalty for irregularity in the payment of tax 500. j) Arun uses the business car for his personal use. 40% of the car expense of 5,000 is assumed as personal. k) Arun has taken one car on a rental basis for business use. The annual rent of the car is 3,000. The CO2 emission of the car is 120 g/km. l) Arun has calculated the capital allowances as 20,000 for the year ended 31 March 2021. 3. The business had a trading loss of 23,000 for the year ended 31 March 2020 and it has not been adjusted against any other income.

Required: a) Calculate the adjusted trading Profit of Arun for the year ended 31 March 2021 after adjusting the brought forward trading loss. (9 marks) b) Calculate the Class 2 and 4 NIC for the business of Arun. (1 mark)

c) Arun has calculated the tax liability for the tax year 2020/21 as 25,000. Assume that for the tax year 2020/21, he filed his return on 31 August 2022.

Explain the penalty procedures for the delay in filing the return and also, calculate the penalty for Arun.