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Finance and Accounting Problem
Finance & Accounting
Pages 6 (1506 words)
Question 1 Table 1-Taxable Trading Income of Sam Smith for 2011/12 Item Amount in ? Amount in ? Business income (fees) 90000 Expenses motor vehicle capital allowance (50% of 1687.50) 843.75 Computer capital allowance 0 Motor insurance (50% of 800) 400 Repairs and servicing (50% of 650) 325 Road license (50% of 150) 75 Petrol – home to office 400 branch visits (no refunds) 1,200 Repairs and software for the computer 1,500 Hotel bills regarding branch visits (50% of 2400) 1,200 Stationery (50% of 150) 150 Telephone (50% of 360) 360 Trade subscription (50% of 500) 500 Books and reference materials (50% of 3750) 1,875 charity under the Gift Aid sc
Bank interest is deducted at source at the rate of 20%. Therefore, they cannot be included as taxable income. Depreciation reflects how fixed assets of business reduce in value through wear and tear. However, depreciation is just an accounting concept with nothing to do with taxation. Depreciation can be manipulated and taxmen do not recognize it as an allowable tax. Instead, annual capital allowance is computed. Vehicle of businesses have a standard rate of 25% on a reducing balance. In April 2008, Annual Investment Allowance (AIA) of ?50,000 per annum was introduced. This allowed business entities to spend ?50,000 annually and claim the full cost against tax. For Sam’s case, the tax written down value for the car in 2012 is ?6,750. According to the tax law in the UK the capital allowance on the car is the lower of 25% of the written down value of the car or ?3000 each year. ...
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