Income Tax computation, Rental and Employment and Self-employment Income

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COLLEGE OF BANKING AND FINANCIAL STUDIES
DEPARTMENT OF UNDERGRADUATE PROGRAMME
B.Sc. in Accounting, Auditing and Finance
INDIVIDUAL ASSIGNMENT BRIEF
Weightage: 20%
Student Name & ST Number
Semester 7 SEPT – DEC 2020 (Fall 2020/21)
Assignment Title Income Tax computation, Rental and Employment and Selfemployment Income
Module Taxation Accounting Assessor: CA.Sujatha Bhat
Start Date: 18 October 2020 Internal Verifier Ms.Sujata Suresh
Due Date: Formative: 8/11/2020
Summative 22/11/2020
Required Work, Format and Grading
You must submit the following by the assignment due date:
▪ Completed answers to each task, making sure that you fully address each of the outcome
criteria.
▪ Answer all questions separately.
▪ Assignments without TURNITIN report will not be accepted.
Resources:
You need to demonstrate a confident application of the theories to the assignment task. The theoretical
underpinning of your observations and deliberations should also demonstrate a good understanding of
the subject by the way that your analysis is structured.
You can access the Internet to research about the topic. You should demonstrate good academic
practice by the appropriate use of academic texts and journals that are properly referenced.
Guidelines and further information about assignment:
Assignment must be submitted with the “Turnitin” report. If the report generated indicates a
similarity index percentage of 20% or more, a review of your assignment is necessary to
ensure the same is reduced to less than 20%.
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Student declaration:
I certify that the work contained in this assignment was researched and prepared by
me:
Signature: ___________________________ Date: ___________________
The user ID and Password for submitting the soft copy of the report
through TURNITIN is as follows:
MORNING BATCH: EVENING BATCH
Class ID: 26946720
Enrolment Password: TAX2020
Class ID: 26946752
Enrolment Password: TAX2020
Submission time and date
You should submit the assignment by the time and date mentioned otherwise a ‘NA’ will
be awarded. Fill in the form cover and staple it with your assignment. Make sure that all
the relevant details are complete. Assignments must be submitted by the due date. You
may include diagrams, figures etc without word penalty.
Plagiarism Writing
1. Plagiarism occurs if you use somebody else’s work in an assignment or exam
answer, but fail to state where you got the material from. You need to be also
very careful about the amount of words you are using from somebody else’s
work.
2. It can happen in any type of assessment where you are given the questions or
tasks in advance.
3. If another student uses your work in his/her answer(s), both you and he/she will
be punished when caught.
4. Punishments for committing plagiarism can be very severe.
Details
Plagiarism is a form of cheating in which students use the work of others and present it
as their own. It may include all or any one of the following –
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1. Copy extensively from the work of others (from sources such as books,
magazines, journal, websites etc) and submit the work as your own.
2. Copy another students’ work and submit it for assessment under your own
name.
3. Allow another student to copy your work and then submit it for assessment
under their own name.
What happens if you get caught?
The examining body of CBFS may punish offending students in any manner that they
deem fit. Typical punishments may range from reduction in grades, making students resit modules and even failing students on a module or an entire award. The college
considers this form of cheating as a serious offence. Therefore be forewarned!
Word count: not more than 1000 words
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Task 1:
a) Explain the meaning of taxation and various types of taxes and classification of
taxation. You must consider the UK rule while explaining this question. (2 marks)
b) “Taxation is very much required for the economic development of the country; to
protect the environment and to reduce the gap between rich and poor”
Using above, Illustrate and Critically evaluate the purpose of taxation. (2 marks)
Task 2:
Ms.Sabeena owns 2 furnished houses, both houses are let out for residential purposes.
The details of each residential property for the tax year 2019/20 are as follows:
1st house:
In 2018, She purchased the house by borrowing loan of £100,000, for which she pays
interest at 8% per annum. The amount of loan is still outstanding during the tax year
2019/20. She let out this house for £24,000 per annum as rent, payable monthly in
advance. The tenant was very regular in the payment of rent in the beginning of each
month, but he failed to give rent in the beginning of July 2019. Ms.Sabeena was behind
the tenant following the rent. But by the end of July 2019, the tenant vacated the
property without informing Ms.Sabeena and she tried her best to find out the
whereabouts of the tenant but later understood that the tenant left the country and he
will not come back again. Then she started searching for new tenant and she was able to
find new tenant from 1 October 2019 with Rent of £32,000 per annum payable monthly
in arrears. New tenant has been paying the rent regularly without fail.
During the tax year 2019/20, The details of expenses incurred and paid by Sabeena are
as follows:
20/4/2019, She paid water tax of £500. But the council tax has been paid by the tenant
£400. Also, on the same date, she spent £1000 to repair the property
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1/7/2019, she paid insurance of £1,800 for the property, out of which £450 will be for
tax year 2020/21 (for next year).
1/10/2019, when new tenant occupies the house, she replaced the old sofa set by
paying £2,500. She sold the existing sofa set for £200. On the same date, she purchased
new washing machine for £3,000, which was not in the house before. She also replaced
the old 32” normal TV- with 55” smart TV costing £2000. The market value of similar
type of old TV is £800. Also, she sold the old TV for £50.
2nd House: furnished house:
On 1 May 2019, she purchased an old house (house no.2) for £50,000 and gave the
house for rent from 1 July 2019 for a monthly rent of £800. Before giving for rent she
spent £5000 to replace the front and back door. Before replacing, it had wooden doors
with single key, but she replaced it with strong steel doors with double lock. She
replaced the wash basin in washroom with similar standard by spending £500.
For furnishing the house, she spent £2200 for curtain and carpet and purchased sofa set
costing £1,500. She paid water tax and council tax totaling £600 for the year.
On 20 March 2020, she incurred £1000 to repaint the entire building but she paid for
the same on 1/5/2020.
Other information:
Ms.Sabeena has received £16,000 Interest on Debenture (Loan notes), £5,000 Interest
from Government Bond, £300 from National Savings Certificate and £200,000 from
winnings from Lottery. Sabeena received Dividend of £30,000 from UK Company.
During the tax year Ms.Sabeena has contributed £1,600 to personal pension
contribution and donation £2,000 for charity.
a) You are required to calculate the tax liability and tax payable of Ms.Sabeena
for the Tax year 2019/20 (8 marks)
b) List out and explain the various incomes exempt from tax (2 marks)
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c) Explain with example, the tax implication of Saving Nil Rate band and Dividend
Nil Rate Band. How it affected the tax of Ms.Sabeena? (2 marks)
Task 3:
Amur started his own business in 2015. For the Accounting year ended 31/3/2020, he
prepared Profit and Loss Account for his business. He had other incomes such as rental
income, interest income, dividend income and profit on sale of fixed asset. He included
all these incomes in his Profit and Loss Account. Also, he has deducted various expenses
while calculating Net Profit in the Profit and loss Account. He is not sure how to
calculate the adjusted trading profit for the purposes of taxation.
Question:
As you are dealing taxation issues in his office, prepare a report explaining clearly the
various expenses, which are deductible, and which are not deductible and the
treatment of various other incomes included in the Profit and loss account, while
calculating the adjusted trading profit for tax purposes. (4 marks)
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