TAXATION

Professional Accounting Taxation (MAC-2-BTA and MAC-2-PTA)

Professional Accounting Taxation (MAC-2-BTA and MAC-2-PTA)

Introduction

Companies incorporated in the UK and those that have their control centre and decision are considered residents. They are liable to corporation tax in for overall benefits they get from British and other foreign sources. On-resident companies need to pay taxes as a result of benefits resulting from operations carried out in the UK. The taxable profit is determined conventionally by difference acquired receivables and expenses incurred, exclusively for the purposes of the taxable activity.

In addition to corporate taxes, firms in UK are required to pay certain sum of money in different social funds such as National Insurance Contribution and other State Welfare Funds (Langley, 2008). Employees make a certain sum of contribution in National Insurance Contribution and State Welfare Funds including contribution in provident fund (HMR&C, 2012b). This level of contribution change significantly based on the weekly salary level. Additionally, company is also required to make selective percentage contribution on behalf of employee in addition to the funds contributed by the employees.

This report presents an analysis of taxes and contribution in NIC by the Mr. Jedward and Jumbo Ltd. Two scenarios have been discussed in the report. First scenario presents calculation of income tax payable by Mr. Jedward's and total NICs for both Mr Jedward and Jumbo Ltd for 2011/2012, (based on the assumption that Mr Jedward receives only a salary). Second part presents an assessment of the value of the taxable benefits in kind and also the amount of income tax and NICs payable on funds including benefits.



Capital Gains

Capital gains in principle subject to corporation tax under the conditions of law common. However, gains on disposal of investments held at 26% for year 2011 (HMR&C, 2012a). Gain from disposal of certain assets (land, buildings, facilities and fixed equipment) subject to a reinvestment in the acquisition of similar goods. This results in benefit from tax deferral until the sale of new goods (non-depreciable assets or depreciable property).

Depreciation

All tangible and intangible assets depreciate, except land of commercial buildings and office requisites (except hotels) and commerce funds. Buildings are amortized on a straight line at a predetermined rate of over a defined number of years. Machinery, equipment and facilities are pooled and depreciated using the straight line or declining balance method. The rate of the annual depreciation of furniture and automobile vehicles acquired by Jumbo Ltd. is taken at 20%.

National Insurance Contribution Fund

The British system of social protection covers against the risks (unemployment and family benefits, maternity, sickness, invalidity and survivors, old age, occupational diseases, and work accidents) (Langley, 2008). Some risks are covered under the home and others as an occupation. The coverage of these risks is mainly based on social contributions paid by employees, employers allowing in Social Security contributory benefits, which are generally set according to the earning level of a person. Besides these contributory benefits, there are many non-contributory benefits financed by taxes. They are mainly used to help people in precarious ...