Arun started a business as an electrical goods dealer on 1 January 2015.
He prepared his Profit and Loss Account for the year ended 31 March 2021 and its shows a net profit of £180,000.
Notes:
1. The profit of £180,000 is calculated after adding the following other incomes:
a) Rental Income £5,000
b) Interest Income £2,000
c) Profit on sale of his house £4,000 and
d) Dividend income of £6,000
2. The net profit of £180,000 is calculated after

deducting various expenses as shown below:
a) Depreciation of £12,000
b) Salary of £8,000, which includes salary withdrawn by Arun £2,000
c) Interest on loan borrowed for business purposes £3,000 and personal purposes £1,000
d) Donation to National charity £600, Local Charity £50 and political donation £200.
e) Subscription for business association £400 and his club membership fees £550.
f) Expenses relating to Gift and Entertainment:
(i) The gift to staff £100
(ii) Entertainment to staff £200
(iii) Gift of chips packets costing £2 each to 1000 customers
(iv) Gift of juice costing £5 each for 200 staffs
(v) Gift of watch set costing £70 each to 10 customers.
g) Bad debts written off include £500 normal trade debt, £300 customer’s loan, and £400 loan given to the former employee.
h) Repairs and maintenance include the following:
(i) Building redecoration (painting) £750
(ii) Purchase of plant and machinery £1,000
i) Other expenses deducted include payment contrary to public policy (bribe) £200, Staff parking fine of £20, the penalty for irregularity in the payment of tax £500.
j) Arun uses the business car for his personal use. 40% of the car expense of £5,000 is assumed as personal.
k) Arun has taken one car on a rental basis for business use. The annual rent of the car is £3,000. The CO2 emission of the car is 120 g/km.
l) Arun has calculated the capital allowances as £20,000 for the year ended 31 March 2021.
3. The business had a trading loss of 23,000 for the year ended 31 March 2020 and it has not been adjusted against any other income.

Required:
a) Calculate the adjusted trading Profit of Arun for the year ended 31 March 2021 after adjusting the brought forward trading loss. (9 marks)

b) Calculate the Class 2 and 4 NIC for the business of Arun. 

c) Arun has calculated the tax liability for the tax year 2020/21 as £25,000. Assume that for the tax year 2020/21, he filed his return on 31 August 2022.

Explain the penalty procedures for the delay in filing the return and also, calculate the penalty for Arun.

Answer rating: 100% (QA)

Answer a Trading Profit for year ended 31 March 2021 1800005000200040006000 12000800030001000600502... View the full answer