Softapps Ltd is a trading company. The companys summarised statement of profit or loss for the year
Question:
Softapps Ltd is a trading company. The company’s summarised statement of profit or loss for the year ended 31 March 2021 is as follows:
Note £
Operating profit 1. 711,475
Other income
Rental income receivable 2. 30,000
Loan interest receivable 3 8,100
Profit on disposal of shares 4 64,900
Finance costs
Interest payable 5 (67,200)
Profit before taxation 747,275
Notes
1.Operating profit
Depreciation of £10,170 and amortisation of leasehold property of £2,500 have been deducted in arriving at the operating profit of £711, 475.
2. Rental income
Softapps Ltd let out a warehouse surplus to its requirements on 1 October 2020, the monthly rent of £5,000 being payable in advance on the first of each calendar month. The rent due on 1 March 2021 was not received due to the business failure of the tenant. Half of the unpaid rent was received on 10th April 2021 and the rest is irrecoverable.
3. Loan interest receivables
The loan was made for non-trading purposes on 1 July 2020. Loan interest of £5,600 was received on 31 December 2020, and interest of £2,500 was accrued at 31 March 2021.
4. Profit on disposal of shares
The profit on disposal of shares is in respect of the sale of Softapps Ltd.’s entire (2%) shareholding in Networked plc on 28 February 2021 for proceeds of £94,945. The shares were acquired on 15 July 2015 at a cost of £30,000. The indexation factor between July 2015 and December 2019 is 0.114.
5. Interest payable
The interest payable is in respect of the company’s 4% loan stock. The interest of £33,600 was paid on 30 September 2020 and again on 31 March 2021. The loan stock was used to finance the company’s trading activities.
Additional information
Leasehold property
On 1 January 2021, Softapps Ltd acquired a leasehold office building, paying a premium of £100,000 for the grant of a 10-year lease. The office building was used for business purposes by Softapps Ltd throughout the period 1 January to 31 March 2021.
Plant and Machinery
The tax written down value of Softapps Ltd.’s plant and machinery as at 1 April 2020 was nil.
On 1 September 2020, Softapps Ltd purchased computer equipment at a cost of £175,000.
During October 2020 Softapps Ltd had an extension constructed adjacent to its existing freehold office building which is used by the company’s employees as a staff room.
The total cost of £100,000 for the extension is made up as follows:
Integral to building
Building cost of extension 61,000
Heating system 3,600
Ventilation system 4,600
Not integral to building
Furniture and fittings 29,400
Refrigerator and microwave cooker 1,400=100,000
Required:
Calculate Softapps Ltd’s corporation tax liability for the year ended 31 March 2021.
Your computation should commence with the operating profit figure of £711,475.
