2 (a) Wireless Ltd, a United Kingdom resident company, commenced trading on 1 October 2007 as a manufacturer
of computer routers. The company prepared its first accounts for the six-month period ended 31 March 2008.
The following information is available:
Trading profit
The tax adjusted trading profit based on the draft accounts for the six-month period ended 31 March 2008 is
£68,400. This figure is before making any adjustments required for:
(1) Capital allowances.
(2) Director’s remuneration of £23,000 paid to the managing director of Wireless Ltd, together with the related
employer’s Class 1 national insurance contributions. The remuneration is in respect of the period ended
31 March 2008 but was not paid until 5 April 2008. No accrual has been made for this remuneration in
the draft accounts. The managing director received no other remuneration from Wireless Ltd during the tax
year 2007–08.
Plant and machinery
Wireless Ltd purchased the following assets in respect of the six-month period ended 31 March 2008:
£
20 September 2007 Office equipment 3,400
5 October 2007 Machinery 10,200
11 October 2007 Building alterations necessary for the installation of the
machinery 4,700
18 February 2008 Motor car 10,600
The motor car purchased on 18 February 2008 is used by the sales manager, and 15% of the mileage is for
private journeys.
Wireless Ltd is a small company as defined by the Companies Acts.
Construction of factory
Wireless Ltd had a new factory constructed at a cost of £200,000 that the company brought into use on
1 November 2007. The cost was made up as follows:
£
Land 60,000
Site preparation 8,000
Canteen for employees 22,000
General offices 42,000
Factory 68,000
––––––––
200,000
––––––––
The factory is used for industrial purposes.
Loan interest received
Loan interest of £1,110 was received on 31 March 2008. The loan was made for non-trading purposes.
Overseas dividend
On 31 March 2008 Wireless Ltd received a dividend of £6,750 (net) from a 100% owned subsidiary company
that is resident overseas. Withholding tax was withheld from the dividend at the rate of 10%. The rate of
underlying tax on the profits attributable to the dividend was 25%.
Donation
A donation to charity of £1,800 was paid on 20 March 2008. The donation was made under the gift aid scheme.
8J–UKAB
Paper F6UK
Required:
(i) Explain when an accounting period starts for corporation tax purposes; (2 marks)
(ii) Calculate Wireless Ltd’s profits chargeable to corporation tax for the six-month period ended 31 March
2008. (14 marks)
(b) Note that in answering this part of the question you are not expected to take account of any of the information
provided in part (a) above.
Wireless Ltd’s sales since the commencement of trading on 1 October 2007 have been as follows:
£
2007 October 9,700
November 18,200
December 21,100
2008 January 14,800
February 23,300
March 24,600
The above figures are stated exclusive of value added tax (VAT).
The company’s sales are all standard rated and are made to VAT registered businesses.
Wireless Ltd only sells goods and since registering for VAT has been issuing sales invoices to customers that show
(1) the invoice date and the tax point, (2) Wireless Ltd’s name and address, (3) the VAT-exclusive amount for
each supply, (4) the total VAT-exclusive amount and (5) the amount of VAT payable. The company does not offer
any discount for prompt payment.
Required:
(i) Explain from what date Wireless Ltd was required to compulsorily register for VAT and state what action
the company then had to take as regards notifying HM Revenue and Customs (HMRC) of the
registration. (4 marks)
(ii) Explain the circumstances in which Wireless Ltd would have been allowed to recover input VAT incurred
on goods purchased and services incurred prior to the date of VAT registration. (4 marks)
(iii) Explain why it would have been beneficial for Wireless Ltd to have voluntarily registered for VAT from
1 October 2007. (3 marks)
(iv) State the additional information that Wireless Ltd must show on its sales invoices in order for them to
be valid for VAT purposes. (3 marks)
(30 marks) 2 (a) (i) (1) An accounting period will normally start immediately after the end of the preceding accounting period.
(2) An accounting period will also start when a company commences to trade or when its profits otherwise become
liable to corporation tax.
(ii) Wireless Ltd – Profits chargeable to corporation tax for the period ended 31 March 2008
£ £
Trading profit 68,400
Director’s remuneration (23,000 + 2,275) 25,275
Capital allowances – P & M (working 1) 10,475
– IBA (working 2) 1,960
––––––––
(37,710)
––––––––
30,690
Loan interest 1,110
Overseas income 10,000
––––––––
41,800
Gift aid donation (1,800)
––––––––
Profits chargeable to corporation tax 40,000
––––––––
(1) The director’s remuneration can be deducted as it was paid within nine months of the end of the period of account.
(2) The employer’s Class 1 NIC will be £2,275 (23,000 – 5,225 = 17,775 at 12·8%).
(3) Relief for underlying tax is given where the UK holding company owns at least 10% of an overseas company’s
voting power.
(4) The dividend from the overseas subsidiary must therefore be grossed up for both withholding tax and underlying
tax as follows:
£
Net dividend 6,750
Withholding tax (6,750 x 10/90) 750
–––––––
7,500
Underlying tax (7,500 x 25/75) 2,500
–––––––
Overseas income 10,000
–––––––
Working 1 – Plant and machinery
Pool Allowances
£ £ £
Additions 10,600
WDA – 25% x 6/12 (1,325) 1,325
–––––––
9,275
Additions qualifying for FYA
Office equipment 3,400
Machinery 10,200
Alterations 4,700
–––––––
18,300
FYA 50% (9,150) 9,150
–––––––
9,150
–––––––
WDV carried forward 18,425
––––––– –––––––
Total allowances 10,475
–––––––
(1) WDAs are restricted to 6/12 because Wireless Ltd’s accounting period is six months long.
(2) The private use of the motor car is irrelevant, since such usage will be assessed on the employee as a benefit.
(3) The office equipment purchased on 20 September 2007 is pre-trading and is treated as incurred on 1 October
2007.
Working 2 – Industrial buildings allowance
£
Site preparation 8,000
Canteen for employees 22,000
Factory 68,000
–––––––
Eligible expenditure 98,000
––––––– 8J–UKAB
Paper F6UK
(1) The accounting period is six months long, so the WDA is £1,960 (98,000 at 4% = 3,920 x 6/12).
(2) The cost of the land does not qualify.
(3) The general offices do not qualify as they cost more than 25% of the total potentially qualifying cost (200,000 –
60,000 = 140,000 x 25% = £35,000).
Note: in practice some of the site preparation costs may be treated as relating to the general offices and would
therefore not qualify. This approach would be awarded equivalent marks.
(b) (i) (1) Wireless Ltd would have been liable to compulsory VAT registration when its taxable supplies during any 12-month
period exceeded £64,000.
(2) This happened on 28 February 2008 when taxable supplies amounted to £87,100 (9,700 + 18,200 + 21,100
+ 14,800 + 23,300).
(3) Wireless Ltd would have had to notify HMRC by 30 March 2008, being 30 days after the end of the period.
(4) The company will have been registered from 1 April 2008 or from an agreed earlier date.
(ii) Input VAT on goods purchased prior to registration
(1) The goods must have been acquired for business purposes and not be sold or consumed prior to registration.
(2) The goods were acquired in the three years prior to VAT registration.
Input VAT on services supplied prior to registration
(1) The services must have been supplied for business purposes.
(2) The services were supplied in the six months prior to VAT registration.
(iii) (1) Wireless Ltd’s sales are all to VAT registered businesses, so output VAT can be passed on to customers.
(2) The company’s revenue would therefore not have altered if it had registered for VAT on 1 October 2007.
(3) However, registering for VAT on 1 October 2007 would have allowed all input VAT incurred from that date to be
recovered.
(iv) The following information is required:
(1) An identifying number (invoice number).
(2) Wireless Ltd’s VAT registration number.
(3) The name and address of the customer.
(4) The type of supply.
(5) The rate of VAT for each supply.
(6) The quantity and a description of the goods supplied. |
发表于 2008-10-11 14:37
| 
