Taxation Principles and Concepts (Taxation) By Code+ University Name Taxation Principles and Concepts (Taxation) FIRST REQUIREMENT Dear Tobby, Hello, my friend. It has been a long time since we last met at campus…
A capital allowance refers to the amounts in cash that a business operating in the United Kingdom can deduct from the overall income tax on its profits or the corporate tax. The sources of these sums of money come from certain purchases as well as investments as outlined in the Capital Allowances Act of 2001 (Channer & Rogers 2007, p.xiv). A business or corporate organization can claim capital allowances on the costs of cars, vans and machines purchased for business use, or other assets in the business such as scaffolding, equipment, ladders, furniture, computers, and tools. In addition, a business can also claim capital allowances on the expenditures incurred on plant and machinery, as well as, on facilities and equipment used for research and development, and items that a business operator uses privately before using them commercially. Another capital deduction occurs on the premises used for the company to run its business, such as improving a property, and converting a space above a building for rental purposes. As for your case Tobby, you can claim capital allowances on the following items: computers, car, premises and rent for Tamara. The capital allowance on computers is ? 200, car as ? 2,700, premises at ? 12, 5000 and Tamara’s rent at ? 4,000. As such, the total capital allowance that Tobby can claim from the tax authority is ? 19,400 (Dunn & Rogers 2008, p.664). The taxable profits of Lewis include all the expenses as well as the revenues generated by the company. The taxable profits include a deduction of all the expenses that are incurred in the business. These include the rates at 1,500, telephone charges for business calls only at 1,000, light and heat for the whole property at 3,000, NIC contribution for himself at 1,000, wage expenses for lily at 20,000 and for himself at 25,000. The other expenses also included in the expenditure of the company are car-running costs at 6000, depreciation expense on the cars at 4,000, loan repayment costs at 3,500, interests on loans at 5,000, insurance charges at 1,800, advertisement expenses at 1,500. The other additional expenses recorded in the business include parking fines at 1,000, gift aid donations at 1000, membership at a sports club for 900, and donations for lewisham hospital at 1000. He further needs to add an additional expense of wages, which he pays to Tamara at 20000 for the part time job she performs at his corporation. This totals all the business expense to ? 77,200 (Gabay, et al. 2007, p.180). This total expenditure by the business of ? 77,200 shows that the business in incurring a lot of expenses which in turn reduce its level of profitability. In order to calculate the profitability of the firm, this includes a deduction of the expenses from the revenues or incomes made or generated by the firm. The general income made by the business from its business processes and activities is ? 90,102, and a subtraction of the two provides the business profits at ? 12,102. This is the general profit, which is subjected to taxation as the income made by the business during the fiscal year under operation. As such, the profitability of the company for the year ended 31 July 2013 was ? 12,102. The projected assessable profits for the business in the fiscal year ending 2013/2014 were ? 12,102 plus the deductible allowances for the business (Gupta 2003, p.67). The best way to set an accounting year is to position it in line with the financial year of her majesty’ ...
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