For the year ended 31 December 2016 Hutchinsons Pharmacy Ltd had a profit before tax of $5.8M

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Question:

For the year ended 31 December 2016 Hutchinson’s Pharmacy Ltd had a profit before tax of $5.8M after charging / the following items:

Depreciation 507 000

Professional Fees 223 000

Audit Fees 240 000

Interest Income (300 000)

Interest Expenses 680 000

Donation and Subscriptions 156 000

Legal Fees 1 800 000

Bad Debts 170 000

Additional Information

i. Legal fees are as follows:

a. Expenses in respect of the recovery bad debts - $300 000

b. Cost of successfully refuting allegations of breaches of the law- $1.5m

ii. The pharmacy sold two display cases for a profit of $300 000. This profit was included in the company’s revenue.

iii. Bad Debts are as follows: a. $86 000 was owed by a few of the pharmacy’s lager customers. The company made several attempts to collect but was unsuccessful. b. A loan of $50 000 was made to one of the pharmacist who left the company without repaying the loan.

iv. Initial allowances $97 000 and annual allowances$110 000. The sale of the display cases resulted in a balancing charge of $60 000.

v. Included in donation & subscription is an amount for membership fees to a Healthy Lifestyle Gym of $40 000.

vi. Interest receivable (gross) for the year of assessment 2016 is $200 000 and in the year of assessment 2015 was $150 000.

vii. The company paid estimated tax of $200 000 for the year of assessment 2016.

viii. Interest payable as at 32 December 2015 was $350 000 and at the end of 2016 was $230 000.

ix. Hutchinson’s Pharmacy has been trading for many years and have a tax loss of $300 000 from the previous year of assessment.

Required:

Compute the income tax liability for Hutchinson’s Pharmacy Ltd for the year of assessment 2016 with notes, including case laws and the relevant sections of the Income Tax Act of Jamaica, where applicable.