You are a seasoned summer intern at Lockhart & Associates Tax practice. You have recently been appointed by the practice as a Junior Tax Associate, following a rigorous recruitment process. The partners are aware that you have not taken any case as the lead person since you arrived at the practice, but they are confident in your ability to pull it off.

Miss Kalinda Sharma is a new client. She is a contractor employed as an investigator for a reputable law firm in the city, Pearson & Agus. The partners at Kalindas law firm have successfully convinced her to work exclusively for the firm, and she has been offered improved terms reflecting her new responsibilities.

Kalinda was impressed by your quiet confidence during the initial meeting with the tax practice and would like you take her on as a client. She is seeking your expertise with managing her tax affairs.

You are required to deal with all four parts.

PART 1

As she takes on her new position as a Lead Investigator from 6 April 2022, Kalinda will be receiving an enhanced salary (see note 1) and employee benefits, mostly paid by her employer (see notes 2-6). She now would like to know the extent of her tax liability in the current tax year.

Kalinda has other income, as detailed below.

4

New benefits package:

a) Car her own choice, up to the value of 30,000 (see note 2).

b) Unlimited fuel for car (due to the nature of her role).

c) Use of a flat (job-related) (see note 3)

d) Personal computer for home and work use (see note 4)

e) Personal loans (note 6)

f) The firm also provides the following ancillary services:

Maintenance and repairs Rubbish collection Water, lighting, heating, and cleaning Loan of furniture at a cost to the employer

1,835 880 2,310 14,500

Kalinda contributes 500 each month towards these services.

Other Income

In the tax year 2022/23, Kalinda also received interest bank savings account, equal to 3% of her gross salary.

Her portfolio of property investments in the same tax year performed well, and she received a dividend income equal to 12% of her gross salary (note 5).

Kalinda is charitable at heart and has made donations (which qualify as gift aid) to her local temple and food bank. The net value of these donations is equal to 3% of her gross salary.

Kalinda is entitled to the basic personal allowance of 12,570 and contributes 8% of her monthly gross salary into Fidelity, her workplace pension.

Note 1

Using your DOB, calculate Kalindas salary to the nearest .

Instructions:

For students born prior to year 2000.

Reverse your DOB and divide by ten to obtain Kalindas annual salary. Worked example: DOB 20 March 1999 (20/03/99) produces a salary of 99,032 (990320/10).

For students born in year 2000 & after

Use the formula: Gross salary = X + (Your Month of Birth x 10,000) + 30,000

5

First, reverse your DOB and divide by ten to obtain the value for X.

Worked example: DOB 20 July 2002 (20/07/02) produces an X of 02,072 (020720/10) Gross salary for 2022-23 would be: 2,072 + (07 x 10,000) + 30,000 = 102,072

Miss Kalindas income tax paid at source (P.A.Y.E.) for tax year 22/23 is 3,340.

Note 2

Choose a new car (whatever make and model of your liking) from car dealerships online for Kalindas new company car. Provide full details of the make, model, list price, type of engine, and CO2 emissions (print off the details of the car selected from the website you used and add it as an appendix to your report).

Note 3.

Kalinda moved into the company flat in the Cinnabar Wharf complex on 11 May 2021. The property, which has an annual value of 10,600, is rented by her employer since April 2014 and the rental cost on the date Kalinda moved in was 2,500 per month. The terms of the rental agreement between the firm and Foxtons, a local real estate company, provide that the rent charge on the flat tracks the UK inflation rate yearly. Inflation rate in 2022 stood at 7.92%. Kalinda pays 18,000 per annum to her employer in relation to this benefit.

Note 4

On 6th June 2021, the company provided Kalinda with a new laptop computer worth 7,500. This laptop remained in her possession for 2 years, after which company policy allowed her to purchase it (wiped of all data) for 1,000. Its market value on the sale date, 6th June 2023, was 2,300.

Note 5

Kalinda receives rental income each tax year from shrewd property investments made before Hackney and Stratford areas re-developments. Note 6 Kalinda has three different loans from her employer:

A 6,500 loan to buy the necessary paintings and other ornaments for her work office.

An interest-free loan of 25,000.

A 136,000 loan at interest of 1.5% to enable her to buy her own home.

The full amount of each loan was outstanding at 6th April 2023 and no repayments were made during 2022-23. The official rate of interest is 3%.

REQUIRED

6

Prepare a detailed calculation of Kalinda Sharmas income tax payable and her national insurance contributions for the tax year 2022/2023 (FA 2022).