Taxation of Melisk Ltd - Essay Example

Taxation of Melisk Ltd Melissa Kean is the MD of Melisk Ltd a cycling business operating in London, selling new and second hand bicycles and a range of cycling accessories. Customers include commuters, as well as local cycling enthusiasts and children. Melissa lives in a flat above the business premises which she also uses as her office.Melisk Ltd, has prepared the accounts as listed below for the period of account from 1st August 2011 to 31st January 2013The Income Statement showed the business made a net profit before tax of £41,873 after taking into account the following information:Additional income from investments and property which was included in the Income Statement as shown below:Interest received on company savings accountAug 2011£136,300Aug 2012£5,700Rent received £900 per monthDividends received Sep 2011£4,700Feb 2012£4,800Aug 2012£ 120,500Capital Gains & LossesNov 2011 gain on sale of shares£92,370Feb 2012 loss on sale of antique(£4,370)Aug 2012 gain on sale of shares£5,500Wages and salaries was composed ofSalary taken by Melissa Wages of other employees £30,000£35,600Sundry expensesDonation to UK Independent party£850Business rates for shop and workshop£1,200Rent of warehouse space£5,000Council tax £1,400Repairs to warehouse floor£950Repairs to flat above shop£550Customer entertainment£1,700Motor Expenses (includes the cost of running the company car which is also used by Melissa privately for approximately 20% of the time)£1,500Subscription to magazine, ‘Cycling Monthly’£110General Provision for Doubtful debts£250Donation to local school to fund a charity bike ride£45Postage, stationery and telephone expenses£320Accountancy charges£180Sundry other items£501.

Depreciation was calculated on a reducing balance method and amounted to £12,9002. Melissa sold a car and the loss on sale was £895. This was included as an expense in the income statement. You do not need to factor this into Capital Allowance calculations.CAPITAL ALLOWANCES3. The value of written down values for the main pool capital allowances as at 1 August 2011 was£Main pool 35,000DisposalsDateDetailsSale proceeds (£)Sept 2011Ford transit van, cost £11,0007,000Nov 2011Ford Focus car, 130g/km, emissions 25% private use, cost £6,0003,000Aug 2012Photocopier cost £1,5002,000Aug 2012Peugeot car, 180g/km, emissions 25% agreed private use.

Cost £14,00010,000 AdditionsDateDetailsCost (£)Jan 2012Office Equipment80,000Feb 2012Peugeot car, 180g/km, emissions 25% private use14,000June 2012Electric car, 104g/km, emissions 16,000Aug 2012Photocopier8,000Aug 2012Ford transit van9,000Melisk LtdStatement showing the adjusted taxable profit as at 31st January 2013££IncomeInterest received on savings account142,000Rent received16,200Dividends received130,000Capital gain on sale of shares97,870386,070ExpensesCapital loss on sale of shares4,370Business rates for shop and workshop1,200Rent of warehouse space5,000Council tax 1,400Repairs to warehouse floor950Repairs to flat above shop550Customer entertainment1,700Motor Expenses (includes the cost of running the company car which is also used by Melissa privately for approximately 20% of the time)1,200Subscription to magazine, ‘Cycling Monthly’110General Provision for Doubtful debts250Postage, stationery and telephone expenses320Accountancy charges180Sundry other items50Wages to other employees35,600Capital allowances20,317(73,197)Taxable profit312,873Capital allowancesWritten down values for the main pool as at 1st August 2011 35,000AdditionsAdditionsDateDetailsCost (£)AllowanceJan 2012Office Equipment80,000Feb 2012Peugeot car, 180g/km, emissions 25% private use14,000(75%*8%*14,000)= 840June 2012Electric car, 104g/km, emissions 16,000(100%*16,000*14/12)= 18,667Aug 2012Photocopier8,000Aug 2012Ford transit van9,000(18%*9,000*6/12)= 810Total20,317Marginal reliefCorporation tax at main rate £312,873 * 26% = £81,347Marginal relief (£1,500,000 - £312,873) * 3/200 = £17,807Corporation tax due £81,347 - £17,807 = £63,540NAMEID NO:LENGTH OF PERIOD OF ACCOUNT18 monthsNET PROFIT BEFORE TAX£312,873NON TRADING LOAN INCOME (AUG 2011)£136,300DIVIDENDS (AUG 2012)£120,500CAPITAL GAIN£97,870TOTAL DISALLOWED EXPENSES£31,195MAIN POOL VALUE£35,000PURCHASES: OFFICE EQUIPMENT£80,000PURCHASES: VAN£9,000DISPOSAL: PEUGEOT CAR£10,000ReferencesFinney, M. (2004) UK Taxation for Students: A Simplified Approach.

Spiramus Press LtdMelville, A. (2012) Taxation: Finance Act 2002, 18th Edition. PaperbackSaleemi, N.A (2004) Taxation I Simplified