Business Taxation Assessment

Business Taxation Assessment

Pearson BTEC Level 5 HNC/D Diploma in

Business Taxation Assessment

Date for Submission: 14th August 2014

The submission portal on learnt will close at 13.59 (BST) on 14th August 2014

Assessor: Mike Hermann

Assignment Brief

As part of the formal assessment for the HNC/D program you are required to submit an assignment for each module. Please refer to your Student Handbook for full details of the program assessment scheme and general information on preparing and submitting assignments.

After completing the module you should be able to:

Understand the duties and responsibilities of the tax practitioner in the UK tax environment
Calculate personal taxation liabilities for individuals and partnerships
Calculate corporation tax liabilities for companies
Calculate the capital gains tax payable for individuals and businesses

The learning outcomes above each have a number of assessment criteria which must be met. These are itemized at the end of the assessment together with the tasks which are used to assess them.

Informal feedback

Business Taxation Assessment In order to assist with your learning and to give you some early, informal feedback, you are encouraged to submit a draft of your answer to Task 1 to your tutor.

This offer is optional for you and whether you do this or not, you must still submit your answer to Task 1 with the other tasks on 14th August when all tasks will be formally assessed.

If you wish, before your final submission, you will be able to amend your response to Task 1 after receiving feedback.

If you do decide to complete a draft of an answer to task 1, then, in order to receive feedback, the document must be emailed to the module tutor by no later than Friday 18th July 2014.

The tutor‟s email address can be found in the extra guidelines on learnt (under assessment criteria for a pass) and you will normally receive feedback within seven days.

Assignment brief

You have been engaged in a professional accounting theory practice as a trainee taxation assistant. During your working day, there will be a number of tasks for you to complete.

Assessment criteria associated with each task are indicated, for example, as 1.1

Task 1

A potential client of your business, Jay Cobb has written asking for some information on the UK taxation assignment and the roles and responsibilities of tax practitioners such as your own firm. He has also asked for an explanation of some technical terms and documents which he does not understand. Jay has also sent some details of personal income and transactions for the most recent financial year.

Required Task 1a)

Produce a response in the form of a set of brief, non-technical notes suitable for inclusion in a letter to the potential client. You do not have to produce the letter. As a minimum your notes must include explanation of:

The purpose of taxation levied in the UK, the legislation, and procedure used to administer taxation in the UK, the main types of financial taxation collected in the UK, distinguishing between direct taxes and indirect taxes and the

main ways in which taxation is assessed and collected in the UK	1.1
 The main roles and responsibilities of the tax practitioner in the UK,	1.2

The implication for the tax payer of non-payment of taxes including

examples of the penalties which may be incurred.	1.3
 The main purpose of forms P60, P45, and P11D	2.3

You may initially find the following web sites helpful:

Task 1b)

You are required, On behalf of Jay Cobb, to fill in the appropriate sections of the „employment‟ section of the UK Income Tax Return for year 6 April 2013 to 5 April 2014.

The information sent by Jay was as follows:

Name: Jay Cobb
UTR: 98789 12652
Abi has one main employment working for the SPO Consultancy Ltd,
Employer‟s PAYE tax reference 321/XYZ/B

Jay is not a partner or Company Director. He is 26 years old and has no other income than that listed below. Jay ‟s latest form P60 includes the following information:

Gross pay for year to 5 April 2014: £32,000

Taxation deducted from gross pay in year to 5 April 2014: £5,000
Jay has paid professional fees and subscriptions of £150 during the year.

The professional fees and subscriptions are an essential requirement of her contract of employment and are allowable expenses for tax purposes.

Jay has a form P11D from his employer for the year to 5th April 2014 in respect of taxable private health insurance benefits, £3,000.

Jay has no income from savings.

You are required to fill in the necessary information on the tax return for year
6 April 2013 to 5 April 2014 for Jay.	.	2.3

[Please use the form which is included on the learn module and then copy and paste the completed form into your submission document].

This form is based on (and amended from) the information required by HM Customs and Revenue under the UK taxation system.]

Task 1c)

You are required to show a taxation computation for Jay for the year to 5 April 2014 which indicates why he has underpaid his UK income tax liability by £82 for

that year.

2.1 and 2.2

In order to complete task c) you will need to take account of the following rates and allowances which will apply to Jay:

Personal Tax Allowance 2013/2014, = £9,440
Basic rate of tax, based on taxable income between £0 and £32,010, = 20%
Higher rate of tax, based on taxable income between £32,011 and £150,000, = 40%

Task 1d)

During March 2014 Jay also sold some land which he had purchased some time ago as an investment.

Details of the relevant transactions are as follows:

Jay Cobb	£	£
The investment was purchased for		120,000
Legal fees for the purchase were		1,500
Acquisition costs		121,500

The Investment was sold for		140,000
Estate agency costs of the sale were	2,800
Legal costs of the sale were	2,450	(5,250)
Net Disposal Proceeds		134,750

You are required, in respect of Jay Cobb’s land transactions, to:

	Identify the nature of the above transactions for business taxation purposes and to
	define the term „chargeable‟ disposal‟	4.1
	Calculate the amount of the gain which will be subject to tax	4.2

Calculate the amount of tax that Jay will incur in the tax year 2013 – 2014

assuming all of the Jay‟s gains will be taxed at the lower rate of tax.

4.3

In order to complete task d) you will need to take account of the following rates and allowances which will apply to Jay:

Annual exemption for relevant transactions	£10,900
Taxable gains and income below £32,010,	18%

Task 2

Your practice has received some information from a new client of the firm, a self- employed trader, Ben Jack

The first year of Ben Jack‟s business ran from 1 June 2012 to 31 May 2013 and your practice has produced draft accounts for that period which indicate an adjusted profit for tax purposes of £36,000 and also for the period 1 June 2013 to 31 May 2014 which indicate an adjusted profit for tax purposes of £45,000.

As at 5th April 2014, the business is expected to continue trading for the foreseeable future with the same accounting year end.

Ben Jack wishes to understand how these first two sets of annual accounts will be used to assess income from self-employment form tax year 2012/2013 onwards.

Required:

Task 2a)

You are required to draft some brief notes which would be suitable to include in a letter to Ben Jack which explains the amounts of profit which will form the basis

of the Schedule D tax assessments for tax years 2012/2013, 2013/2014 and,
2014/2015.	2.2

It is not necessary for you to write the letter to Ben.

Task 2b)

While preparing Ben Jack‟s accounts for the year to 31 March 2014, the following information had been used:

Ben Jack
Net Profit for the period	54,600
Private items of expenditure included as business expenses	4,500
Disallowed expenses for tax purposes	3,500
New business car purchased (100% business use)	20,000
The car entitles the trader to an annual writing down allowance of	8%

Produce a tax computation which indicates how the above information was used to produce the adjusted profit for taxation purposes of £45,000. 2.2

Task 3

Your supervisor hands you a file containing details of the trading position for the year ended 31 March 2014 of a local company, Glimmer plc, one of the corporate clients of your practice.

The following information is contained within the files:

Glimmer plc	£

Adjusted profits for Corporation tax before capital allowances	1,193,000
Capital allowances to be claimed	215,000
Losses brought forward from previous years	200,000

Capital Gain – Transactions on sale of asset – see below:

The asset had been acquired for	£600,000
RPI at date of acquisition	156.0
The asset was enhanced at a cost of	£100,000
RPI at date of enhancement	176.0
The asset was sold for	£900,000
Disposal costs were	£43,000
RPI at date of sale was	184.0

Required:

Task 3a)

Produce a computation which indicates how a capital gain of around

£44,762 for Glimmer plc was calculated.

4.3

If a capital loss had been made in the year, how might Glimmer plc gain

tax relief for this?

4.2

Briefly explain how corporation tax is assessed if a company‟s financial year covers two corporation tax financial years and show your calculation, for Glimmer plc, of the amount that will be subject to corporation tax for

corporation tax year 2014;

3.1

Show a calculation which indicates the amount of corporation tax payable by Glimmer plc for the year to 31 March 2014 to be around £184,156 and

indicate when the corporation will be required to pay the corporation tax to

HMRC.

3.2

In order to complete these tasks you will need to take account of the following corporation tax rates and allowances which will apply to Glimmer plc:

Corporation tax full rate 23% (where profits exceed £1,500,000)
Corporation tax rate for taxable profits below £300,000, 20%
Marginal relief fraction 3/400, for where taxable profits exceed £300,000 but are below £1,500,000.

Task 3b)

Glimmer plc paid loan interest of £320,000 to its debenture holders during the year to 31st March 2014. Assuming that the corporation had deducted 20% income tax when it had paid the loan interest (that is, Glimmer plc had paid the debenture holders £256,000), what would Glimmer plc do with to the £64,000 income tax which had been deducted from the gross loan interest payments? 3.3

Student Guidelines

1.You should write this assignment according to the instructions attached to each of the tasks. There are no formal report requirements and your written notes should be structured to answer the questions posed. For computational aspects, you should produce an appropriate solution and, where necessary, show your workings.

2.You should use diagrams and tables of figures where appropriate ensuring that you reference their source.

3.You should include a reference list and a bibliography using the Harvard referencing system. You must ensure that the submitted assignment is all your own work and that all sources used are correctly attributed. Penalties apply to assignments which show evidence of academic unfair practice. (See „Guide to Unfair Practice in Assessment‟ on the module page on ilearn).

4.It is advised that you write the written elements of your assessment within approximately 2,500 – 3,000 words in order for your research and summarizing skills to be developed and for effective privacy management. You are required to ensure that the assignment addresses all of the assessment tasks .There is no penalty for being over the suggested word count, however, in the interests of good academic practice, assignments submitted with excessive word counts (e.g. over 3,000 words) may be returned to students and asked to be reduced before marking.

The word count excludes the title page, reference list, and appendices. Where assessment questions have been reprinted from the assessment brief these will also be excluded from the word count. ALL other printed words ARE included in the word count. Printed words include those contained within charts and tables.

5.Your assignment should be submitted as a single document. For more information please see the “Guide to Submitting an Assignment” document available on the module page on iLearn.

6.You are recommended and encouraged to prepare the numerical analysis using a computer spreadsheet which is embedded into your submission document, but this is not essential.

If you choose to support your computations with a separate spreadsheet file, then this must be emailed to your tutor after you have submitted your main document to Turnitin. You cannot submit a spreadsheet file to Turnitin.

Do not forget to complete the tax return to support task 1b), available on learn and which, when completed, should be copied and pasted into your final assessment submission document.

Recommended Additional Resources

Textbooks

At present, there is no readily available E-book for this course of study.

EBSCO Business Horizon Source Complete – Online ‘library’ resource available via learnt

Websites

http://www.hops-kotch.com/EdexcelTaxation.html
http://www.theguardian.com/news/datablog/2012/mar/21/budget-2012-spending-tax-visualised
http://www.icaew.com/en/members/regulations-standards-and-guidance/tax/professional-conduct-in-relation-to-taxation#ICAEW6
http://www.hmrc.gov.uk/agents/
http://www.hmrc.gov.uk/manuals/salfmanual/salf211.htm

Learning outcomes and assessment criteria

Learning	Assessment criteria for pass
Outcomes

On successful	To achieve a pass you must meet all of the assessment criteria as stated below.
On successful	Failure to cover all of the assessment criteria will result in a referral grade and you
completion of
completion of	be required to re-submit your assignment.
this unit a	be required to re-submit your assignment.
learner will:

LO1	1.1 describe the UK tax environment.			Task 1a)

Explain the	1.2	analyse the role and responsibilities of the tax practitioner.		Task 1a)
duties and
responsibilities	1.3	explain the tax obligations of tax payers or their agents and the		Task 1a)
of the tax		implications of non-compliance
of the tax
practitioner
and the UK tax
environment
LO2	2.1	calculate relevant income, expenses and allowances		Task 1c)
Calculate	2.2	calculate taxable amounts and tax payable for employed and self-
personal tax		employed individuals and payment dates. – Employed
liabilities for		–	Self employed	Task 1c)
individuals and				Tasks 2a) and 2b)
partnerships	2.3 complete relevant documentation and returns			Tasks 1a) and 1b)
LO3	3.1	calculate chargeable profits		Task 3a)
Calculate	3.2	calculate tax liabilities and due payment dates		Task 3a)
corporation tax
liabilities for	3.3	explain how income tax deductions are dealt with		Task 3b)
companies

LO4	4.1	identify chargeable assets		Task 1d)
Calculate the
capital gains	4.2	calculate capital gains and losses
tax payable for		– Individuals		Task 1d)
individuals and		– Companies		Task 3a)
companies
	4.3	Calculate capital gains tax payable
		–	Individuals	Task 1d)
		–	Companies	Task 3a)

Merit descriptors		Indicative characteristics

To achieve a Merit all of the Pass criteria need to be		The learner‟s evidence shows:
met, then the tutor will assess whether you have met
the Merit Criteria. Each of the Merit criteria must have
been met at least once within the assignment.
The following statements are examples of how a
merit may be achieved if you do meet the Merit
Criteria for showing you have reached this level in
other ways then credit will be awarded for this. You
will need to meet M1, M2 and M3 at least once.
M1	 identify and apply strategies to find	 relevant theories and techniques have been applied in terms of
	appropriate solutions		explaining the UK taxation environment, sources of taxable
			income and the role of the tax practitioner
			problems with more than one variable have been explored an
			effective approach to understanding personal and corporate
			taxation
M2	 select/design and apply appropriate	 complex information/data have been synthesized and
	methods/techniques		processed in terms of computing personal and corporate
			taxation information.
M3	 present and communicate appropriate	 structure and approach has been used in terms of
	findings		presenting personal and business tax computation.
		 a range of methods of presentation has been used to present
			financial information
		 information is appropriate for familiar and unfamiliar audiences
			in terms of the UK tax environment and the role of the tax
			practitioner.

Distinction descriptors		Indicative characteristics

To achieve a Distinction you have met all of the Pass		The learner‟s evidence shows:
and the Merit criteria. Each of the Distinction criteria
must be met at least once within the assignment.
The assignment MUST be fully completed
and submitted on time.
The following statements are examples of how a
Distinction may be achieved if you do meet the
Distinction Criteria by showing you have reached this
the level in other ways then credit will be awarded for
this. You will need to meet D1, D2, and D3 at least
once.
D1	 use critical reflection to evaluate own	 synthesis has been used to generate and justify a valid
	work and justify valid conclusions		conclusion to the complexity of the taxation environment in the
			UK
			evaluation of personal, business and corporate taxation
			liabilities have taken place using defined criteria
D2	 take responsibility for managing and	 autonomy/independence has been demonstrated throughout
	organising activities		the complete assessment. The answer will be supplemented
			with resources researched beyond those within the study
			materials
D3	 demonstrate convergent, lateral and	 ideas generated and decisions were taken
	creative thinking	 taxation problems have been solved
		 unfamiliar contexts relating to taxation have been applied

EXTRA Guidelines

‘Extra’ notes relevant to this assessment are available on the learnt resource for this course. The notes are intended to help you produce appropriate responses to the tasks set for this assignment. They are not intended to ‘give you the answers’, but to direct you in the right direction for a successful submission.

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