Spotless Homes Ltd is a manufacturer of cleaning products. Spotless Homes Ltds summarized statement of profit and
Question:
Spotless Homes Ltd is a manufacturer of cleaning products. Spotless Homes Ltd’s summarized statement of profit and loss for the 16 month period ended 31 October 2019 is as follows:
£ | £ | |
Gross profit | 1,082,020 | |
Operating expenses | ||
Depreciation | 100,820 | |
Repairs and renewals (Note 1) | 22,800 | |
Professional fees (Note 2) | 19,900 | |
Wages and salaries (Note 3) | 256,000 | |
Motor expenses (Note 4) | 76,910 | |
Other expenses (Note 5) | 224,000 | |
(700,430) | ||
Operating profit | 381,590 | |
Income from investments | ||
Bank interest (Note 7) | 64,525 | |
Dividends (Note 8) | 12,500 | |
Net profit from sale of assets (Note 6) | 5,674 | |
Finance costs (Note 9) | (21,643) | |
Profit before taxation | 442,646 |
Notes:
1) Repairs and renewals
Includes £20,800 relating to the construction of an extension to the company’s current main premises.
2) Professional fees
Professional fees are as follows:
£ | |
Accounting and audit fee | 2,400 |
Legal fees in connection with a legal dispute regarding a cleaning product patent owned by Spotless Homes Ltd | 7,800 |
Corporate membership of a cleaning product society | 3,000 |
Legal fees in connection with an appeal against business rates charged in 2018. | 6,700 |
19,900 |
3) Wages and salaries
Includes £100,000 of bonuses.
4) Motor expenses
Includes £19,200 in relation to the running costs of the Finance Director’s car which is used for private journeys 35% of the time.
5) Other expenses
Includes £105,000 to entertain international clients. Also includes £86,915 in relation to general bad debt provisions. The remaining expenses are all fully allowable.
6) Profit on disposal of assets
The net profit on disposal of assets relates to the disposal of Spotless Homes Ltd office building on 26 July 2019 for £850,000 incurring legal fees of £20,726. The company had acquired this newly-constructed office building in October 2013 for £821,600.
7) Bank interest received
Bank interest was received on 31 December 2018. The bank interest accrues evenly though out the year and deposits are held for non-trading purposes.
8) Dividends received
During the year Spotless Homes Ltd received dividends from Hinchliffe Ltd, an unconnected UK company, and the cash amount received is included in the statement of profit or loss.
9) Finance costs
Spotless Homes Ltd issued a loan note on 1 July 2018, and this was used for trading purposes. Interest of £16,243 was paid on 31 June 2019, and £5,400 was accrued as at 31 October 2019.
10) Plant and machinery
On 1 July 2018 the tax written down values were as follows:
£ | |
General pool | 16,700 |
Finance Director’s car (CO2 emissions 164g/km) | 16,400 |
The following transactions took place during the period ended 31 October 2019:
Cost/(Proceeds) | ||
£ | ||
12 July 2018 | Purchased equipment | 61,400 |
8 September 2018 | Sold the Finance Director’s car (Original Cost £26,800) | (16,750) |
8 October 2018 | Purchased motor car (CO2 emissions 162g/km) | 31,600 |
19 January 2018 | Purchased machine | 213,800 |
8 March 2019 | Sold equipment (Original Cost £7,000) | (7,600) |
10 October 2019 | Installed a second-hand elevator system in their head office | 360,000 |
YOU ARE REQUIRED TO:
- Calculate Spotless Homes Ltd’s tax adjusted trading income for the period ended 31 October 2019, before capital allowances.
- Calculate Spotless Homes Ltd’s capital allowances.
- Calculate Spotless Homes Ltd’s corporation tax liability for the year ended 31 October 2019 and state the due date for payment.
Assume the following Retail Price Indices (RPIs):
October 2013 | 251.9 |
December 2017 | 278.1 |