GoMo Ltd is a UK registered company which commenced trading in the UK on 1 March 2020 as a manufacturer of mopeds (small motorbikes). GoMo Ltd prepared its first accounts for the period 1 March 2020 to 31 December 2020. The following information is available: Trading profit The tax adjusted trading profit based on the draft accounts for the ten-month period ended December 2020 is £944,291. This figure is before making any adjustments required for: 1.Capital allowances. 2.Tax adjustments required for research & development which included payroll expenses of £3,256 and capital expenditure as shown in plant and machinery below (the company is considered small for R&D purposes); 3.Advertising expenditure of £10,280 incurred during February 2020, just before the trade commenced. This expenditure has not been deducted in arriving at the tax adjusted trading profit for the period ended 31 December 2020. 4.Non-trade loan relationships. Plant and machinery The financial accounts for the period ended 31 December 2020 show the following tangible fixed asset additions: Cost £ 02 March 2020 Manufacturing machine 62,500 06 October 2020 Equipment for R&D purposes 1,600 08 November 2020 Petrol motor car 13,200 The motor car has emissions of 125g/km and is to be used by the managing director of the company to travel 10,000 business miles and 4,000 miles of private travel. Building GoMo Ltd purchased a factory on 1 March 2020 for £320,000 (including £100,000 for the land) At the time of purchase the company knew it would need to spend an additional £20,400 to repair a hole in the building’s roof to make it usable for manufacturing purposes. These repairs are included as an expense in reaching the adjusted trading profit of £944,291 above. The company also paid for the construction of a new storage building at a cost of £60,000. The building contract was signed on 1 April 2020, with the building brought into use from 1 November 2020. Interest expense During the first trading period GoMo Ltd received two separate loans: £250,000 secured loan to help finance the purchase of the factory building. £22,980 interest was paid during the accounting period to service the loan to 31 December 2020 and is included as an expense in reaching £944,291 tax-adjusted trading profit. £160,000 loan to finance the purchase of shares in‘MoFinLtd’(see note vii below). Tax adjusted trading profit included an expense of £1,600 for interest on this loan, of this £400 related to interest paid and £1,200 to an accrual for interest owed in respect off the accounting period. Dividends On 16 December 2020, GoMo Ltd received a £14,500 dividend from Flat-Out plc, an unconnected United Kingdom company. This is not included in the tax trading profit of £944,291. No dividends were received in the accounting period from MoFin Ltd, a subsidiary company B2) Required: Calculate GoMo Ltd’s corporation tax liability for the period of account ended 31 December 2020
GoMo Ltd is a UK registered company which commenced trading in the UK on 1 March
2020 as a manufacturer of mopeds (small motorbikes). GoMo Ltd prepared its first
accounts for the period 1 March 2020 to 31 December 2020. The following information is
available:
- Trading profit
The tax adjusted trading profit based on the draft accounts for the ten-month period
ended December 2020 is £944,291. This figure is before making any adjustments
required for:
1.Capital allowances.
2.Tax adjustments required for research & development which included payroll
expenses of £3,256 and capital expenditure as shown in plant and machinery
below (the company is considered small for R&D purposes);
3.Advertising expenditure of £10,280 incurred during February 2020, just before
the trade commenced. This expenditure has not been deducted in arriving at the
tax adjusted trading profit for the period ended 31 December 2020.
4.Non-trade loan relationships.
- Plant and machinery
The financial accounts for the period ended 31 December 2020 show the following
tangible fixed asset additions:
Cost £
02 March 2020 Manufacturing machine 62,500
06 October 2020 Equipment for R&D purposes 1,600
08 November 2020 Petrol motor car 13,200
The motor car has emissions of 125g/km and is to be used by the managing director
of the company to travel 10,000 business miles and 4,000 miles of private travel.
- Building
GoMo Ltd purchased a factory on 1 March 2020 for £320,000 (including £100,000 for the
land)
At the time of purchase the company knew it would need to spend an additional £20,400
to repair a hole in the building’s roof to make it usable for manufacturing purposes. These
repairs are included as an expense in reaching the adjusted trading profit of £944,291
above.
The company also paid for the construction of a new storage building at a cost of £60,000.
The building contract was signed on 1 April 2020, with the building brought into use from 1
November 2020.
- Interest expense
During the first trading period GoMo Ltd received two separate loans:
- £250,000 secured loan to help finance the purchase of the factory
building.
- £22,980 interest was paid during the accounting period to service the
loan to 31 December 2020 and is included as an expense in reaching
£944,291 tax-adjusted trading profit.
- £160,000 loan to finance the purchase of shares in‘MoFinLtd’(see note
vii below).
- Tax adjusted trading profit included an expense of £1,600 for interest on
this loan, of this £400 related to interest paid and £1,200 to an accrual
for interest owed in respect off the accounting period.
- Dividends
On 16 December 2020, GoMo Ltd received a £14,500 dividend from Flat-Out plc, an
unconnected United Kingdom company. This is not included in the tax trading profit of
£944,291.
No dividends were received in the accounting period from MoFin Ltd, a subsidiary
company
B2) Required: Calculate GoMo Ltd’s corporation tax liability for the period of account
ended 31 December 2020
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