Analysis of Income Tax Assignment Example | Topics and Well Written Essays - 2000 words

Analysis of Income Tax - Assignment ExampleThere atomic number 18 quite a a few(prenominal) changes that have been made to the original figure provided in the scenario, the reason for the changes made are listed below shade 1 These incomes have previously been included in the plebeian turn a profit, origin wholey these incomes should not have been added to the gross profit as these incomes are not related to doubting Thomass business, and these incomes are related to his toffee-nosed castments. These incomes testament be catered to in the total taxable income section that will shortly follow and the assemble on disposal of the machinery will be discussed in the capital gains section. berth2 Thomas owns the business and thus all the profit he earns from his business is his own, he is not allowed to devote a sum namely as his salary that will qualify as a tax write down. Note 3 Council Tax for Thomass ho intention is not related to his business Note 4 Replacement of house b et door is his private expenditure which cannot be included in his business expenditures. Note 5 It has been provided in the scenario that the car is 40% used for Thomass private use, thus the expense on guard will be deducted by 40%, it has been assumed that the patrol used is on the car that is partially used by Thomas. Note 6 Repairs to the car will also be reduced by 40%, as the car is also used for private purposes. Note 7 Insurance and passageway fund tax will also be reduced respectively according to the private use of the car. Note 8 Subscription to the Liberal-Democrat Party will not qualify as a business expense as it does not relate to the business, it is a private expense. Note 9 Providing donation to sons school is a private expenditure, it cannot be added to the business account. Note 10 The depreciation that has been deducted from the net profit is used by using the accountancy principles however this figure cannot be used for tax purposes. Note 11 Flowers taken hom e by Thomas is regarded as a withdrawal from the business, the cost of the flowers are not allowed to be added to the cost of the flowers sold by Thomas, the cost of the flowers which are calculated to be 325 will be added back to the net profit originally calculated. Note 12 The depreciation is replaced by the revenue enhancement depreciation that is known as capital allowance, this allowance is calculated by using the guidelines that are provided by the governments of different countries, the rule here used is based on United Kingdom guidelines (HMRC). The detailed computing of the capital allowance is shown below Annual Investment Allowance? Machinery Purchased 20,000 Excavating Equipment 21,000 Computer Equipment used for Inventory require 8,000 Total Annual Investment Allowance 49,000 According to the guidelines provided by the United Kingdom HM revenue and Customs, a business can claim Annual Investment Allowance this opportunity has been provided to the businesses to enco urage themto invest in machinery.