ONLINE BRAND COMMUNITIES

Online Brand Communities

Online Brand Communities

Case Introduction

Ryszard has a thriving and highly successful architect's practice, which he has owned for many years. His son ludwik qualified as a chartered architect two years ago and is currently employed in his father's business. Ryszard currently pays ludwik a market rate salary of 25 000 pounds and provides him with a car. The car is a diesel engine hatchback with co2 emissions of 120g/km. the list price was 22 000 pounds when it was provided on 10 April 2009;there are no extras and ludwik does not have any contributions towards the car. the business pays for all his private fuel. Ryszard intends to retire in a few years and is starting to put his mind to succession planning for the business. He has agreed with the HMRS that the private use element is 35% if ludwik is admitted as a junior partner he will retain use of the car he currently uses.

Part A:



Answer a. i)

A non-current asset costing $2,000 was came by at the start of year 1. It is being depreciated directly line over four years, producing in yearly depreciation allegations of $500. Thus a total of $2,000 of depreciation is being charged. The capital allowances conceded on this asset are:

$

Year 1 800

Year 2 600

Year 3 360

Year 4 240

Total capital allowances 2,000 Table 1 displays the bearing worth of the asset, the levy groundwork of the asset and thus the provisional distinction at the end of each year. As asserted overhead, deferred levy liabilities originate on taxable provisional dissimilarities, ie those provisional dissimilarities that outcome in levy being payable in the future as the provisional distinction reverses. So, how does the overhead demonstration outcome in levy being payable in the future?

a. ii)

Entities yield earnings levy on their taxable profits. When working out taxable earnings, the levy administration start by taking the earnings before levy (accounting profits) of an entity from their economic declarations and then make diverse adjustments. For demonstration, depreciation is advised a disallowable total cost for taxation reasons but rather than levy respite on capital expenditure is conceded in the pattern of capital allowances. Therefore, taxable earnings are reached at by supplementing back depreciation and deducting capital allowances from the accounting profits. Entities are then ascribed levy at the befitting levy rate on these taxable profits.

In the overhead demonstration, when the capital allowances are larger than the depreciation total cost in years 1 and 2, the entity has obtained levy respite early. This is healthy money flow in that it hold ups (ie defers) the fee of tax. However, the distinction is only a provisional distinction and so the levy will have to be paid in the future. In years 3 and 4, when the capital allowances for the year are less than the depreciation ascribed, the entity is being ascribed added levy and the provisional distinction is reversing. Hence the provisional dissimilarities can be said to be taxable provisional differences.

a. iii)

Notice that general, the built up depreciation and ...