Ebanks, Brown, and Thomas are partners. They carry on a business jointly as EBT surveyors and share

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Question:

Ebanks, Brown, and Thomas are partners. They carry on a business jointly as EBT surveyors and share profits and losses in the ratio 25:45: 30.

The trading account profit as at 31 December 2021 was $6,500,000 after charging a nominal tax of $750,000.

Notes:

1. The partners receive interest on their capital accounts at 9.5 % on the balance of their partner capital at the end of the budget year. The interest on the capital account was not included in the income statement.

2. Include in the income statement is $80,000 salary per month for each partner.

3. The partnership paid motor vehicle expenses for vehicles owned by the partners as follows:

- Ebanks -$ 50,000

- Brown - $80,000

- Thomas - $130,000

The partners did not use the vehicles for the partnership business.

4. Profit on disposal was $180,000.

5. Depreciation on plant and machinery for the year was $900,000.

6. In recognition of the new IFRS 9 standard, a provision for bad debt of $75,000 was made. This represents a % of the business year-end receivable balance.

7. A portion of bad debt written off in 2020 for a debtor who was experiencing cashflow issues was paid. This amount was $270,000. This was not recognized in the 2021 income statement.

8. The business has the policy to write off small equipment valued under $100,000 in the income statement. For the year 2021, the total for small equipment written off in the income statement was $325,000.

9. The income incurred fines of $70,000 for breaching the Surveyor’s Board policies and rules.

10. As at 31, December 2021, the partners’ capital was Ebanks -$5,000,000, Brown $3,000,000 and Thomas $2,000,000.

11. PAYE of $200,000 was deducted from the salaries of each partner.

12. It is estimated that drawings by each partner were $500,000 per annum.

13. The business donated $450,000 to an entity on CTA ‘s approved list and $600,000 to a political party.

14. Brown received gross interest income on a fixed deposit at the bank accounting for $250,000. The tax deducted at the source was $ 6,250.

15. Ebanks receives a Net Rental income of $3,000,000 per annum.

16. Thomas received $7,000,000 for consultation services.

17. Details of Fixed Assets:

Details Motor Vehicles Equipment Office buildings Cost As at 31 Dec 2021 10,00,000 15,000,00 45,000,000 NBV As at 31 Dec 2021

- Included in the cost of a motor vehicle is a lorry purchased on 1 April 2021 for $2,000,000.

18. Included in the income statement interest relating $800,000 relating to a VAT refund in 2020.

19. Each partner paid a quarterly estimated tax of $600,000.

20. The business is within the first 3 years of trade.

21. The partners each contribute to 5% of their taxable income to approved pension funds.

22. All currencies are in TT$.

Required

Compute each person’s income tax payable/ refundable e for the year of assessment 2021 for each partner on the assumption that the business and the tax partners are tax residents in Trinidad and Tobago. (Ignore all other statutory taxes, except National Insurance)

Part B

Apart from pension contribution state two other expenses that an individual may use to reduce his/her tax liability in Trinidad. (Ensure to include the maximum allowed).

Part C

Ebanks received a Notice of Assessment from the Inland Revenue Division in Trinidad and Tobago. Ebanks was assessed for an additional TT$100,565. The explanation provided by IRD is that Ebanks filed to report taxes on salaries paid by EBT Surveyors in his income tax returns.

(a) Write a letter of Objection to the IRD on behalf of Ebanks. (Maximum 150 words for the letter).

(b) Ebanks is of the view that he may submit the above letter to IRD anytime as there is no timeline for submission. Advice Ebanks accordingly including whether there may be an exception.

Part D

Advice, Mr. Ebanks whether EBT surveyors should be registered for VAT and the benefit of being registered if any.