Answered: Calculate the total impact on taxable…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 3DQ

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William is the owner of the “Douglas Pub”. Before the tax meeting taking place on the 27 of February, he emailed his tax advisor adding the accounts for the Pub, a copy of the Building Society statement (documents a) and b) see below) and he presented the following notes: 1. 2. 3. 4. 5. 6. I have drawn £50 cash every week from the business as wages (shown in “wages”), this also includes National Insurance Contributions of £125. I estimate that only 40% of my car use is for business purposes. The costs of running the car are shown as motoring costs. The heat and light also covers the flat above the pub where I live, I estimate the personal percentage of the total “heat & light” is 30%. About half of telephone calls are personal calls. I sold my car in July 2022 for £2,800 as part exchange for a new car (not a very good investment given it cost £10,000 when I bought it in January 2018)! I part-exchanged for a new Ford Focus which cost £18,000 and apparently has CO2 emissions of 91g/km. Occasionally I have a drink with some of my customers and have probably drunk stock which cost £1,000, but I have not shown any adjustment for this in the accounts, although obviously the stock wouldn’t be included in the year end stock count. Additionally, the statement from the ISA account states that £800 of interest was paid in the year to 31 March 2023. I also received £700 a quarter in rent from renting out a couple of lock-up garages. The only other point worth noting is that I am thinking of opening a small restaurant which my wife may run as a separate business from the public house. Although only a rough guide, we estimate that sales could be £40,000 in the first year, increasing to £60,000 a year for the subsequent 3 years. A.1) In his email William explained that elements of the expenses included in the summarised accounts relate to personal use of the assets. Required: Calculate the total impact on taxable profit of his personal use of the car, telephone, heat & light and of taking stock for personal consumption. (8%)

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