C4) Alfonso runs a sole-trade business with an accounting period ended 31 December.• On 14 January 2020, Alfonso purchased a piece of land.• On 1" April 2020 he signed a contract with a builder to construct a building for usein his business.• On 1" September 2020 the building was brought into use in his trade.Alfonso paid £100,000 for the land and £500,000 for the building construction.Required: Calculate and explain the structures and building allowance relief Alfonsowill be able to claim in the trading accounting periods ended 31 December 2020 and2021. 40%Lower rate (10%+ of estate left to charity)Stamp Duty/Stamp Duty Reserve Tax"36%36%0.0.5%0.5%• An 8% surcharge applies in respect of residential properties and carried interest** Duty payable on share purchase over £1,000 only and rounded up to nearest £5Capital allowances2020/212019/20Plant and machinery: Main rate18%18%Special rate6%6%Annual investment allowanceEnhanced capital allowancesStructures and Buildings Allowance* applies to investments made 1.1.19 to 31.12.20 then rate of £200,000 will apply£1,000,000* £1,000,0000%100%3%2%Corporation tax, allowances and reliefs2020/212019/20Corporation Tax rateR&D tax credits SME scheme19%19%230%230%R&D SME repayable creditR&D Expenditure creditPatent box14.5%14.5%13%12%10%10%Film, High end TV and videogame tax reliefDiverted Profits Tax25%25%25%25%Digital Service TaxBank SurchargeBank levy: 1.1.20 31.12.20 - equity and LT liabs 0.07%2%8%8%0.075%0.15%ST liabs0.14%

Allowances - It refers to the money payable to employees by the employer for meeting specific…

C4) Alfonso runs a sole-trade business with an accounting period ended 31 December. • On 1" January 2020, Alfonso purchased a piece of land. • On 1" April 2020 he signed a contract with a builder to construct a building for use in his business. • On 1" September 2020 the building was brought into use in his trade. Alfonso paid £100,000 for the land and £500,000 for the building construction. Required: Calculate and explain the structures and building allowance relief Alfonso will be able to dlaim in the trading accounting periods ended 31 December 2020 and 2021.

C4) Alfonso runs a sole-trade business with an accounting period ended 31 December. • On 1" January 2020, Alfonso purchased a piece of land. • On 1" April 2020 he signed a contract with a builder to construct a building for use in his business. • On 1" September 2020 the building was brought into use in his trade. Alfonso paid £100,000 for the land and £500,000 for the building construction. Required: Calculate and explain the structures and building allowance relief Alfonso will be able to dlaim in the trading accounting periods ended 31 December 2020 and 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

C4) Alfonso runs a sole-trade business with an accounting period ended 31 December.
• On 14 January 2020, Alfonso purchased a piece of land.
• On 1" April 2020 he signed a contract with a builder to construct a building for use
in his business.
• On 1" September 2020 the building was brought into use in his trade.
Alfonso paid £100,000 for the land and £500,000 for the building construction.
Required: Calculate and explain the structures and building allowance relief Alfonso
will be able to claim in the trading accounting periods ended 31 December 2020 and
2021.

40%
Lower rate (10%+ of estate left to charity)
Stamp Duty/Stamp Duty Reserve Tax"
36%
36%
0.
0.5%
0.5%
• An 8% surcharge applies in respect of residential properties and carried interest
** Duty payable on share purchase over £1,000 only and rounded up to nearest £5
Capital allowances
2020/21
2019/20
Plant and machinery: Main rate
18%
18%
Special rate
6%
6%
Annual investment allowance
Enhanced capital allowances
Structures and Buildings Allowance
* applies to investments made 1.1.19 to 31.12.20 then rate of £200,000 will apply
£1,000,000* £1,000,000
0%
100%
3%
2%
Corporation tax, allowances and reliefs
2020/21
2019/20
Corporation Tax rate
R&D tax credits SME scheme
19%
19%
230%
230%
R&D SME repayable credit
R&D Expenditure credit
Patent box
14.5%
14.5%
13%
12%
10%
10%
Film, High end TV and videogame tax relief
Diverted Profits Tax
25%
25%
25%
25%
Digital Service Tax
Bank Surcharge
Bank levy: 1.1.20 31.12.20 - equity and LT liabs 0.07%
2%
8%
8%
0.075%
0.15%
ST liabs
0.14%

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