Samuel and Amy formed the Sam, Amy & Co partnership on 1 January 2021 as interior...

 

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Samuel and Amy formed the Sam, Amy & Co partnership on 1 January 2021 as interior designers, having both worked for Disegno UK Ltd for a number of years. Samuel invested £100,000 in the partnership and Amy invested £75,000. The first accounts were prepared for the 10 months to 31 October 2021 and will be prepared annually thereafter. The accounting profits of the partnership for the 10 months ended 31 October 2021 are £92,245 after accounting for the following items. £ 4,500 13,500 1,450 1,345 1,690 36,804 3,188 2,400 3,348 400 Depreciation Rent of the whole building Heating and lighting of the whole building Overdraft interest Legal costs. Staff costs Repairs Lease costs for Samuel's car Motor expenses Interest income Notes Notes Employee salary and class 1 NICS Partners' salaries. 1 1 4. Repairs 2 3 1. Office building The partnership rents offices in a 10-year old building owned by Samuel personally. Amy has lived in the flat above the offices since 1 January 2021. The partnership pays Samuel £1,350 per month as rent for the offices and the flat. 4 5 6 & 8 Amy estimates that the flat represents 30% of the office building. 2. Legal costs The legal costs were £300 for advices regarding setting up the partnership. Legal fees for pre- paring supplier contracts and employment contracts were £1,390. 3. Staff costs £ 12,804 24,000 £36,804 Redecorating reception area New armchairs for reception area (purchased September 2021) £ 2,234 954 £3,188 5. Leased car On 1 January 2021 the partnership leased a car for Samuel with a rental for the period of £2,400. The car has a list price of £16,457 and CO₂ emissions of 175 g/km. Samuel uses the car 90% for business purposes. 6. Motor expenses The partnership paid for all motoring expenses. Motoring expenses include costs relating to Samuel's car of £1,160 and relating to Amy's car of £1,688. 7. Paint taken by Samuel In January 2021 Samuel took paint costing £150 to use decorating his own home. The paint had a resale value of £200 and nothing was recorded in the accounts. 8. Fixed assets During December 2020, two computers worth £800 each, and office furniture and equipment worth £2,000, were purchased so that the partnership was ready to commence trading on I January 2021. In May 2021 it purchased a new electric car, with emissions of Og/km, for Amy for £13,000. Amy estimates her private usage of the car at 25%. The partnership then purchased a second-hand car for £4,200 in August 2021 to be used for deliveries only. This car had CO₂ emissions of 52g/km. Further office furniture was purchased in October 2021 for £1,550. Samuel and Amy have agreed to allocate themselves salaries of £14,400 pa each and interest at 5% pa on capital introduced. Any remaining partnership profits are to be split in the ratio 1:2. Samuel and Amy anticipate that their tax adjusted trading profits will be 35% higher for the year ended 31 October 2022 than they were in the period ended 31 October 2021. Requirements: 1. Calculate the partnership tax adjusted trading profits (after capital allowances) for the 10 months ended 31 October 2021. (19 marks) Note: Ignore VAT 2. Calculate the assessable trading profits for both Samuel and Amy for the tax years 2020-21 and 2021-22. State the dates of the basis periods relating to 2020-21 and 2021-22 and the amounts of any resulting overlap profits relating to 2020-21 and 2021-22 (21 marks) Samuel and Amy formed the Sam, Amy & Co partnership on 1 January 2021 as interior designers, having both worked for Disegno UK Ltd for a number of years. Samuel invested £100,000 in the partnership and Amy invested £75,000. The first accounts were prepared for the 10 months to 31 October 2021 and will be prepared annually thereafter. The accounting profits of the partnership for the 10 months ended 31 October 2021 are £92,245 after accounting for the following items. £ 4,500 13,500 1,450 1,345 1,690 36,804 3,188 2,400 3,348 400 Depreciation Rent of the whole building Heating and lighting of the whole building Overdraft interest Legal costs. Staff costs Repairs Lease costs for Samuel's car Motor expenses Interest income Notes Notes Employee salary and class 1 NICS Partners' salaries. 1 1 4. Repairs 2 3 1. Office building The partnership rents offices in a 10-year old building owned by Samuel personally. Amy has lived in the flat above the offices since 1 January 2021. The partnership pays Samuel £1,350 per month as rent for the offices and the flat. 4 5 6 & 8 Amy estimates that the flat represents 30% of the office building. 2. Legal costs The legal costs were £300 for advices regarding setting up the partnership. Legal fees for pre- paring supplier contracts and employment contracts were £1,390. 3. Staff costs £ 12,804 24,000 £36,804 Redecorating reception area New armchairs for reception area (purchased September 2021) £ 2,234 954 £3,188 5. Leased car On 1 January 2021 the partnership leased a car for Samuel with a rental for the period of £2,400. The car has a list price of £16,457 and CO₂ emissions of 175 g/km. Samuel uses the car 90% for business purposes. 6. Motor expenses The partnership paid for all motoring expenses. Motoring expenses include costs relating to Samuel's car of £1,160 and relating to Amy's car of £1,688. 7. Paint taken by Samuel In January 2021 Samuel took paint costing £150 to use decorating his own home. The paint had a resale value of £200 and nothing was recorded in the accounts. 8. Fixed assets During December 2020, two computers worth £800 each, and office furniture and equipment worth £2,000, were purchased so that the partnership was ready to commence trading on I January 2021. In May 2021 it purchased a new electric car, with emissions of Og/km, for Amy for £13,000. Amy estimates her private usage of the car at 25%. The partnership then purchased a second-hand car for £4,200 in August 2021 to be used for deliveries only. This car had CO₂ emissions of 52g/km. Further office furniture was purchased in October 2021 for £1,550. Samuel and Amy have agreed to allocate themselves salaries of £14,400 pa each and interest at 5% pa on capital introduced. Any remaining partnership profits are to be split in the ratio 1:2. Samuel and Amy anticipate that their tax adjusted trading profits will be 35% higher for the year ended 31 October 2022 than they were in the period ended 31 October 2021. Requirements: 1. Calculate the partnership tax adjusted trading profits (after capital allowances) for the 10 months ended 31 October 2021. (19 marks) Note: Ignore VAT 2. Calculate the assessable trading profits for both Samuel and Amy for the tax years 2020-21 and 2021-22. State the dates of the basis periods relating to 2020-21 and 2021-22 and the amounts of any resulting overlap profits relating to 2020-21 and 2021-22 (21 marks)

Answer rating: 100% (QA)

1 Calculate the partnership tax adjusted trading profits after capital allowances for the 10 months ended 31 October 2021 Depreciation 4500 Rent of the whole building 1350 x 10 13500 Heating and light... View the full answer