Taxation Principles Coursework

Taxation Principles Coursework

2016

 

Taxation Principles Coursework 2016

Group coursework which includes a presentation.

 

Drake and Elizabeth

 

This assignment has three requirements:-

 

1. A group report to Drake
2. A group report to Elizabeth

 

The date of submission for requirements one and two is:-

                                           

                                            30nd April 2016

Your group work should be submitted electronically via TURNITIN.

 

You will be notified of the date of your presentations by your lecturer.

__________________________________________________________________________

 

 

READ THE DETAILS CAREFULLY

 

Imagine it is the spring of 2016

 

Drake and Elizabeth are friends and both have attended London South Bank University.

 

DRAKE

 

Drake has graduated from University and has now decided to set up his own business. He has decided to set up business in the boat designing industry in Millbank. His business is called “Golden Hind”. You became friends with Drake at University. He knows you are studying taxation and would like you to give him some tax advice. His circumstances are as follows:-

 

1. He is 25 and has just set up a business in Millbank. He lives in a rented property in Millbank near the river in a flat above his shop.
2. Drake has prepared his own accounts for his first year of business because he says he can’t afford an accountant. He set up full time on 6th April 2015 and his first accounts are to 5^th April 2016. He would like to know whether they would be acceptable to Her Majesty’s Revenue and Customs and whether you would make any changes for him.
3. He works from his workshop below the flat which is really just a garage but has a river view. He has not yet advised Her Majesty’s Revenue and Customs that he has started in business. He has not yet got round to it.
4. Elizabeth pays Drake £4,000 a year to rent one room from him in the flat. Drake has heard this may not be taxable but is not sure. He would like you to advise him.
5. Drake has bought a car for £25,000 on 6^th April 2015. It has CO 2 emissions of 150g/km. He says he needs to visit some customers etc. He also uses the car to get away at the weekend and drive to Plymouth to see his parents and old school friends. He thinks he drives about 500 miles every weekend and about 100 miles on business each week.

Drake would like you to tell him what his taxable profits will be for the tax year 2015/2016. Also he would like to know what income tax and National Insurance Contributions (NICs) he will have to pay for 2015/2016 from all sources of his taxable income.

 

 

 

 

DRAKE’S TRADING AND PROFIT AND LOSS ACCOUNT “Golden Hind” for year ended 5^th April 2016

 

Turnover (see Note One)                                   £

 

Expenses

Purchase of computer equipment                  3,000

Rates                                                               1,500

Telephone (business calls only)                            800

Light and Heat (whole property)                       1,000

NIC (self)                                                         900

Wages (self)                                                 23,000

Purchase of car                                              25,000

Car running costs                                             5,000

Depreciation of car                                          3,000

Interest on loan to buy car                                2,000

Repayment of loan to purchase car                3,500

Property and flood insurance                         1,800

Advertising- local paper                                   1,500

Parking fines- Drake                                      1,000

Gift Aid donation (gross)                              1,000

Boat club membership                                     900

Donations to Local hospital                          1,000

 

 

Drake wants to claim Capital Allowances on the car and the computer.

 

Drake has no other income except as detailed above.

 

FIRST REQUIREMENT for 35 marks

 

Write a letter to Drake explaining to him the information he wishes to know. In particular the letter should contain following information:

 

1. An explanation as to Drake of his capital allowances position and how much capital allowances he may claim for the period of his accounts.

(10 MARKS)

2. What are Drake’s taxable profits for the year ended 5^th April 2016 and what will be his assessable profits for 2015/2016.

(10 MARKS)

3. How much income tax and NICs will he pay for 2015/2016 and how will the liabilities be paid and by what payment dates.

(10 MARKS)

The remaining 5 marks are for the quality of the letter. The quality will be assessed as follows:

Letter format                                  1

Sentence structure                          1

Use of paragraphs                          1

Spelling and grammar                      1

Computer use                                1

 

All your calculations should be produced using a computer package. To summarise, you should submit your letter with a hard copy of your spreadsheet attached.

 

Maximum word length, not including the spreadsheet, should be 750 words.

 

ELIZABETH

Elizabeth is 23 and she works for financial house in the west end of London. She receives an annual salary (See Note Two) and has worked for the company since 1st June 2013. In addition to the salary she receives several benefits in kind from her employer.

Since Elizabeth rents a room from Drake in south east London and she has to deal with high level financial customers from overseas sometimes in the evenings, the company has provided Elizabeth with a flat in west London near to the office. The flat cost the employer £350,000 and has an annual value of £20,000. Elizabeth has free use of the flat whenever she wishes.

In addition to the flat, the employer has provided furniture at a cost of £15,000 and will pay all the ancillary costs of the flat which are £5000 per year. Elizabeth is also provided with a company car so that she can collect clients from the airport and drive them to various destinations whilst they are in London. The rest of the time she can use the car privately. The car has a list price of £18,000 and CO2 emissions of 125 g/km. The employer will pay £3,000 running costs which includes 25% of the fuel costs.

Elizabeth is also provided with a mobile phone costing £1,000 for which the employer pays all the costs.  The employer has also lent Elizabeth expensive computer equipment costing £3,000. Finally she has a loan from her employer of £4,000 at no interest. The loan is for clothing and other personal items. It is not repayable until 2018 or when she leaves the company.

Elizabeth is worried that the salary and benefits will result in her paying a lot of tax and NIC but she does not know how much.

Elizabeth also inherited property from her uncle. She has a property in Peckham. Since she does not need to use it herself, she has rented it out to students. She first started to let out the property in July 2012. It has six bedrooms and she has six students each paying £5,000 a year.  Elizabeth has allowable property expenses of £5,000 a year but she has not paid any tax on this income and believes that no tax should be payable since the tenants are students.

As you are a friend of Drake, Elizabeth would like you to write her a separate report answering some of her tax concerns and particularly the following issues:-

SECOND REQUIREMENT for 35 marks 

Prepare a Report for Elizabeth which should include the following:-

 

1. A computation of the tax and NIC she should pay for 2015/2016 in respect of her employment income, showing any benefit in kind calculations.

(15 MARKS)

 

2. An explanation of whether she is due to pay any tax on her property income and how much this will be for 2015/ 2016. Also how does she notify her Majesty’s Revenue and Customs and pay any tax on this income.

(15 MARKS)

The remaining 5 marks will be for the quality of the letter. This will be assessed as follows:

 

Report format                                     1

Sentence structure                                1

Use of paragraphs                                1

Spelling                                               1

Use of computers                                1

 

Maximum word length, not including computations, should be 750 words.

 

This assignment should be completed in GROUPS and will involve a presentation. Please see your Module leader regarding content of group and time and date of presentations. Also please see your Module leader for guidance on any further instructions regarding this coursework.

 

NOTE ONE

Drake’s turnover is based on your date of ONE member of your group. Reverse the date of birth of one member of your group, for example 5 April 1970, to give a number of 700405. Then divide by ten giving a turnover of £ 70,040

My Date of Birth: 01/01/1993 = 930101

NOTE TWO

Elizabeth’s annual salary is also based on the date of birth of the same member of your group.  Reverse the date of birth of one member of your group as in Note One, divide by ten giving £ 70,040, then divide by two giving £35,020. In other words Elizabeth’s annual salary should be half of Drake’s turnover.

My Date of Birth: 01/01/1993 = 930101

 

 

 

 

 

 

 

 

 

IMPORTANT NOTE APPLYING TO REQUIREMENTS ONE TWO AND THREE

 

Plagiarism is a serious academic offence that could lead to you failing this module. Your work should be your own at all times. Further information about what constitutes plagiarism can be found in your Course Guide and the University Student Handbook. If you have any question about what constitutes plagiarism address those to the Course Director and the module leader BEFORE submitting this assignment.

END OF ASSIGNMENT
Grading criteria for the individual component

80-100	Demonstrates  – complete knowledge and understanding of key aspects of the field of study, together with an appreciation of the limits of existing knowledge,– accurate and inventive deployment of a range of established techniques of analysis appropriate to the discipline, – exemplary knowledge of conceptual understanding, including concepts at the leading edge of research in the discipline, – ability to apply their skills and understanding to a comprehensive range of situations relevant to the discipline, -work presented to an exemplary standard, of a professional quality. Meets all of the learning outcomes of the assessment at a high level.
70-79	Demonstrates  – excellent knowledge and understanding of key aspects of the field of study,– accurate deployment of established techniques of analysis appropriate to the discipline, – excellent knowledge of conceptual understanding, – ability to apply their skills to a wide range of situations, including those involving ambiguities or situations at the limits of the discipline, -work presented to an excellent standard, in a way that conforms with the norms and standards of the discipline. Meets all of the learning outcomes of the assessment, many to a high level.
60-69	Demonstrates  – a systematic understanding of key aspects of the field of study,– accurate deployment of some techniques of analysis appropriate to the discipline, – high level of conceptual understanding appropriate to the level, – ability to apply their skills to a range of situations appropriate to the discipline, -work presented to an appropriately high standard, in a way that conforms with the norms of the discipline. Meets all of the learning outcomes of the assessment, and some to a high level.
50-59	Demonstrates  – appropriate understanding of key aspects of the field of study,– deployment of techniques of analysis appropriate to the discipline with reasonable accuracy – a level of conceptual understanding appropriate to the discipline, – ability to apply their skills to some situations in the discipline, -work presented to a standard approaching that appropriate to the level. Meets the majority of the learning outcomes of the assessment, at least one to a high level.
40-49	Demonstrates  – an understanding of most key aspects of the field study,– use of techniques of analysis appropriate to the discipline, – a level of conceptual understanding adequate to the task, – an ability to apply some skills to some situations in the discipline, -work presented to a standard that is easily comprehensible. Meets some of the learning outcomes of the assessment.
30-39	Demonstrates  – an understanding of a few key aspects of the field of study,– some use of techniques of analysis, – some conceptual understanding, – limited ability to apply some skills to some situations, -work presented at a below acceptable standard. Meets at least one of the learning outcomes of the assessment, or comes close to meeting some of the learning outcomes.
20-29	Demonstrates  – inadequate understanding of any of the key aspects of the field of study,– inadequately deployed analytical abilities, – inadequate conceptual understanding, – inadequate ability to apply skills to situations in the discipline, – presents work that is of an unacceptably low standard. Falls short of meeting the learning outcomes of the assessment.
0-19	Demonstrates  – little or no understanding of the field of study,– little or no understanding of analysis, – little or no conceptual understanding, – does not apply skills to any appropriate situations, -work presented is of a very poor, illegible or incomprehensible quality. Fails to meet any of the learning outcomes of the assessment at an appropriate level.

 

 

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