Question

Taxation Assignment:

XXX Ltd is a UK resident trading company. The company's statement of profit or loss for the year ended 31 March 2018 is as follows:                                                                            

   £                         £

Gross profit                                                                              1,200,500
Other income
     Loan stock interest (note 1)                                                   15,750
     Rental income (note 2)                                                          24,000
Expenses
     Salaries                                                        282,000
     Depreciation                                                 70,500
     Loss on sale of non-current asset                   2,500
     Impairment losses (all trade)                         3,800
     Professional fees (note 3)                              14,300
     Repairs and renewals (note 4)                       18,700
     Other expenses (note 5)                                28,500
                                                                                                                  (420,300)
Finance costs                                                                           
     Loan interest (note 6)                                                            (15,300)
Profit before taxation                                                                804,650

Notes:

1 Loan stock interest
The loan stock interest is in respect of loan stock held by XXX Ltd as an investment. The
amount of £15,750 is the amount received and accrued to 31 March 2018.

2 Rental income
The rental income is in respect of a warehouse which is held as an investment and is let out to an
unconnected company. The rental received of £24,000 is also the amount accrued to
31 March 2018.

3 Professional fees

Professional fees are as follows:
                                                                                              £

Accountancy and audit fees                                                       5,600
Debt collection of trade debts                                                    5,100
Legal fees in connection with renewing a 25 year lease               1,300
Legal fees in connection with director's motoring offences           2,300
                                                                                           14,300

4 Repairs and renewals

Repairs and renewals include:
                                                                                               £
Extension to factory                                                                   9,988
Repainting exterior of company's offices                                     4,500

5 Other expenses

Other expenses include:

                                                                                                          £
100 pens with an advertisement for company, given to customers           1,200

Qualifying charitable donation                                                                6,000


6 Loan interest
The loan interest relates to the warehouse let out (see note (2)). The amount shown is the amount
paid and accrued to 31 March 2018.

REQUIRED:    

What are XXX Ltd's trading profits for the year ended 31 March 2018? Start with the profit before taxation figure of £804,650 and list all of the items in the statement of profit or loss indicating by the use of a zero (0) any items that do not require adjustment.     

What are XXX Ltd's taxable total profits for the year ended 31 March 2018?

What are XXX Ltd's net profit after tax for the year ended 31 March 2018?

Answer 1

	Answers to the given Questions
	1)
		Profit Before tax				804650
	LESS:	Other Income
		Loan stock Interest received				15750
		Rental Income				24000
						764900
	ADD:	Expenses
		salaries			282000
		depreciation			70500
		Loss on non current assets			2500
		Impairment Loss (all trade)			3800
		Proffessional fees ( note 1)			14300
		Repairs & Renewals (note 2)			18700
		Other Expenses ( note 3)			28500	420300
		Trading Profit				1185200
	WORKING NOTES TO (1) ANSWER
I)	Accountancy & Audit fees					5600
	Debt collection of trade debts					5100
	Legal fees in connection with renewing a 25 year lease					1300
	Legal fees in connection with directors motoring offences					2300
						14300
II)	Repairs & Renewals - TOTAL				18700
	BREAK UP
	Repairs & Renewals to Factory				9988
	Repainting exterior of companys offices				4500
	Other repairs & renewals b/f				4212
III)	Other Expenses - TOTAL			28500
	BREAK UP
	Advertisement Expenses			1200
	Charitable Donation			6000
	Miscellaneous Expenses			21300
	Answers to the given Questions
	2)
		Profit Before tax				804650
		ADD:
		Loss on non current assets *			2500
		Impairment Loss (all trade)#			3800	6300
		Total Taxable Profits				810950
		notes
	i)	Donation made in the question itself its is qualified, so it is allowed for deduction
	ii)	* means Tax Authorities did not allow loss on non current assests
	iii)	# means Tax Authorities did not allow Impairment Loss
	iv)	Advertisement expenses also allowed under Tax Authorities
	Answers to the given Questions
	3)
		Total Taxable Profits				810950
		Tax @ 30%				243285
		Profit Before tax				804650
		Less: Tax Payable				243285
		Net Profit after tax				561365
	note:
	assumed that tax rate for such xxx ltd company is 30%