You received a mail from Mr. Henry a new client regarding his unincorporated business . EXTRACTS OF THE MAIL;

I was employed from 1 May 2014 until I was made redundant on 28 February 2018. My gross annual salary was 80,000. Just over a year later, on 1 June 2019, I began trading as an unincorporated business preparing accounts to 30 April each year. My tax adviser advised me to trade as an unincorporated business because it was expected that I would make a tax adjusted trading loss for my first trading period ending on 30 April 2020. However, due to the speed with which the business has grown, the forecast for this period now shows a budgeted tax adjusted trading profit of 77,550. Transfer of my business to AQN Ltd In the future, I expect sales to be generated mainly from overseas customers, possibly via companies incorporated and trading outside the UK. In view of this, it has become clear to me that I need to be operating the business through a limited company. Accordingly, I intend to incorporate my business by transferring its trade and assets to a new unquoted company, AQN Ltd, in exchange for ordinary shares. I will own the whole of the ordinary share capital of AQN Ltd and, for the time being, I will be its only director and employee. This incorporation will take place on 1 May 2020. I will realise chargeable gains of 45,000 in respect of the goodwill of the business and 30,000 in respect of the Arch building (which I use as my business premises). I understand from our discussions that these gains will not be subject to capital gains tax due to the relief available when a business is transferred to a company in exchange for shares. Other information Since 1 March 2018, I have had no source of income other than my unincorporated business tax year 2020/21, I will not make any disposals for the purposes of capital gains tax other than the sale of my business to AQN Ltd. Advice required 1. I am trying to determine whether or not I should have been advised to begin trading through a limited company from 1 June 2019 rather than as an unincorporated business. I would like to know if I will pay more tax as a result of the advice I was given. I would also like to understand the relevance of the expected trading loss in the first trading period together with any other reasons my existing tax adviser might have had for advising me to begin trading as an unincorporated business rather than through a limited company. 2. Ideally, I would prefer to retain personal ownership of the Arch building when I incorporate my business, rather than transfer it to AQN Ltd. However, this will depend on how it affects my capital gains tax position. 3. Once AQN Ltd has begun trading, I would like to be able to borrow any excess funds in the company for my personal use. I would then repay the loan as and when I can afford to. I appreciate there may be an employment income benefit in respect of this. 4. One of my customers has gone into liquidation, and I do not expect to be able to recover any part of the outstanding debt. Does this mean that the value added tax (VAT) which I have already paid to HM Revenue and Customs (HMRC) in respect of this sale is lost? Am I correct in thinking that, if I had used the cash accounting scheme for VAT, I would not have had this particular problem, and that my cash flow generally would have benefited? THE FALLOWING ARE EXTRACTS YOU MADE (a) Becoming tax advisers to Henrey Explain the information we require, the matters we should consider and the actions we should take before we agree to become Henreys tax advisers. (b) Trading through a limited company rather than as an unincorporated business Total taxes payable The total taxes payable by Henrey for the tax year 2019/20 in respect of his budgeted tax adjusted trading profit will be 20,589. Prepare calculations to determine whether or not a lower amount would have been payable if Henrey had commenced trading through a limited company rather than as an unincorporated business. You should assume: the companys accounting period ends on 31 March 2020; the companys MONTHLY trading profit for this accounting period is 7,050. This figure is before deducting the cost of Henreys monthly salary; the company pays Henrey a gross salary of 1,200 per month and a dividend equal to its post-tax profits. Reasons for advice given by existing tax adviser Explain why the expectation that Henreys business would make a tax adjusted trading loss would have been an important consideration when deciding on whether he should begin trading as an unincorporated business or through a limited company. You should refer to Henreys first two tax years of trading. State any other reasons why Henreys existing tax adviser may have advised him to commence trading as an unincorporated business rather than through a limited company. (c) Other matters Explain the capital gains tax (CGT) implications for Henrey of retaining personal ownership of the Arch building when he incorporates his business. You ARE NOT REQUIRED to consider CGT gift relief. Explain the tax implications for AQN Ltd of Henrey borrowing excess funds from the company and the subsequent repayment of those funds. You ARE NOT REQUIRED to explain any matters relating to employment income benefits in respect of this arrangement. Provide explanations in response to the two questions raised by Henrey in respect of value added tax (VAT). Calculate the Total taxable income of Mr.Henry as per provisions of UK TAX LAWS 2019.