Scalit Ltd has been trading for many years providing printing services to advertising and exhibition customers. The company is not part of a group and has no businesses under common control. Accounts have always been prepared to 31 March each year. You are given the following information

1) The accounts to 31 March 2023 show a trading profit of £245,000 after deduction of the following £ Legal costs 17,000 Planning costs 14,000 Depreciation 26,000 Loss on sale of equipment 8,500

2) The legal and planning costs relate to the construction of a new factory which will be completed in September 2023 The land for the development was bought in November 2022 at a cost of £60,000. The expected costs to be incurred in the year to 31 March 2024 are as follows: £ Demolition of existing building 8,000 Construction of new building 160,000

3) The company incurred the following additional capital expenditure during the year to 31 March 2023 Date expenditure incurred Detail £ 1 July 2022 New electric car for director (30% private use) 40,000 1 September 2022 New digital printer 65,000 15 November 2022 Electrical installation for new offices 15,000 1 February 2023 Second hand printing machine 50,000

4) The company disposed of equipment that it had bought new in May 2021 at a cost of £37,000. The equipment was sold for £12,000.

5) The balances at 1 April 2022 on the general and special rate pools were £48,000 and £18,000 respectively. The company always claims maximum capital allowances.

6) The company had no other income, outgoings or gains during the year The managing director, Mary, wants to raise money to finance future expansion of the company. She was approached by Sam who wants to buy shares in the company. Sam will not be involved in the running of the company. He wants to share in the future profits of the company but has asked for some reassurance that he will receive at least a fixed amount of dividend each year.

Requirements:

1) Calculate Scalit Ltd's Corporation Tax liability for the year ended 31 March 2023.

2) Explain the relief available for the costs associated with the construction of the new factory, together with how allowances are treated when the building is sold.

3) Explain the type of shares that the company can offer to Sam, and how these shares fulfill his requirement for a minimum dividend.

Answer rating: 100% (QA)

1 To calculate Scalit Ltds Corporation Tax liability for the year ended 31 March 2023 we need to start with the trading profit and adjust it for allow... View the full answer