Make My Taxation Assignment | University of South Wales
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Your manager has just had a meeting with a wealthy client, Marc James, who has been running his own successful manufacturing sole trader business for many years, making up his accounts to 5 April annually.
Marc has asked for a report giving him advice on the income tax and national insurance consequences of providing motor cars to key staff within the business and also to himself as the proprietor of the business.
The following information was provided by Marc during the meeting and should be used in producing your report:
Marc is aged 48, married, with two teenage children. His wife and children are not involved in running the business in any way;
Marc’s tax adjusted trading profits for the year ended 5 April 2016 were £375,000 before taking account of any of the additional information relating to key staff or cars below. Marc takes drawings of £100,000 from the business each year and has no other sources of taxable income;
Key staff: There are three key staff employed in running Marc’s business and on 6 April 2015 Marc arranged for these staff to have a salary increase and to be provided with motor vehicles. Details of these staff and their remuneration packages are as follows:
Andrea Taylor, is aged 28 and single, she is the administrator for the business and is also the bookkeeper and payroll clerk. She earns a salary of £25,000 p.a. and was provided with a Fiesta Zetec 1.6 on 6 April 2015. The list price of the car was £15,060 and it is petrol-engined with a CO2 emissions rating of 138g/km. Marc leased the car at £225 per month under an operating lease and instead of paying for Andrea’s petrol, he reimbursed her 40p per mile for each of the 2,500 business miles that she travelled during 2015-16;
Bob Smith, is 43 and married with one child. He is the production manager and earns a salary of £40,000 p.a. Marc purchased a Mondeo Titanium 2.0 for Bob’s use on 6 April 2015 for £22,000, after discount given by dealer. Marc also paid for all Bob’s diesel used during 2015-16 totalling £2,500. The Mondeo had a list price of £24,690 and a CO2 emissions rating of 112 g/km. Bob travelled 10,000 miles on business in 2015-16;
Carol Froome, is aged 45 and single, she is the sales manager for the business. She earns a salary of £60,000 and was provided with a BMW 430i Convertible on 6 April 2015. Marc bought the car for £38,995 and pays for all Carol’s petrol, totalling £6,300. During 2015-16 she travelled 24,000 miles on business. The BMW has a list price of £42,995 and a CO2 emissions rating of 154 g/km.
Marc also purchased himself a Jaguar XJ SWB XJR 5.0 V8 on 6 April 2015 for £87,500. The car is petrol-engined with a list price of £90,000 and a CO2 emissions rating of 264 g/km. Marc travelled 30,000 miles in 2015-16 with 5,000 being travelling between home and work, 15,000 on business trips and the rest being purely for private/leisure purposes. Marc has agreed with HMRC that he can claim the authorised mileage allowance for any costs relating to business use of the Jaguar.
You should write a report to Marc, which includes the following with clear explanations of the main points:
The three key employees would like to know their likely income tax and national insurance liabilities for 2015-16 based on the additional information given above. You may assume that they have no other income for 2015-16. (30 marks)
Marc wishes to know what deductions, including any capital allowances and employers’ national insurance contributions, he will obtain from the £375,000 taxable trading profit in respect of the additional information given above. (50 marks)
Marc also wishes to know what his income tax and national insurance liabilities will be for 2015-16. (15 marks)
Marks will also be awarded for the quality of grammar/spelling/referencing and the professionalism and realism of your report. (5 marks)
Total marks 100 marks