Sam is self-employed running a retail shop. His income statement for the year ended 5 April 2023is as follows:

	£	£
Gross profit Depreciation Motor expenses – note 1 Professional fees – note 2 Other expenses - 3	7,600 8,800 1,860 72,040	140,300 90,300
Net profit		50,000

Notes

1) During the year ended 5 April 2023 Sam drove a total of 25,000 miles, of which 5,000 miles were driven when he visited his suppliers in Europe. The balance of the mileage (i.e. the other 20,000 miles) is split 25% for private journeys and 75% for business journeys in the UK.

2) The figure for professional fees consists of £1,050 for legal fees in connection with an action brought against a supplier for breach of contract and £810 for accountancy. Included in the figure for accountancy is £320 in respect of personal capital gains tax advice for the tax year 2020/21.

3) The figure for other expenses of £72,040 includes £560 for gifts to customers of food hampers costing £35 each and £420 for gifts to customers of pens carrying an advertisement for the clothing shop costing £60 each.

Other information

• Sam uses one of the eight rooms in his private residence as an office when he works at home. The total running costs of the house for the year ended 5 April 2023 were £5,120. This cost is not included in the income statements expense of £90,300.

• Sam uses his private telephone to make business telephone calls. The total cost of the private telephone for the year ended 5 April 2023 was £1,600 and 25% of this related to business calls. The cost of the private telephone is not included in the income statement expenses of £90,300.

• During the year ended 5 April 2022 Sam took goods out of the clothing shop for his personal use without paying for them and no entry has been made in the accounts to record this. The goods cost £820 and had a selling price of £1,480.

• Sam is entitled to claim capital allowances of £6,100

Required:

Compute Sam’s tax adjusted profits for the year ended 5 April 2023.

Answer rating: 100% (QA)

Calculating Sams tax adjusted Profits for the year ending 5th April 2023 Particular... View the full answer