Question 6b ii
| Note | £ | £ | |
|---|---|---|---|
| Revenue | 264,900 | ||
| Operating expenses | |||
| Depreciation | 8,100 | ||
| Employee costs | 1 | 189,700 | |
| Lease of motor car | 2 | 1,200 | |
| Professional fees | 3 | 7,800 | |
| Other expenses | 4 | 202,800 | |
| (409600) | |||
| Operating loss | (144700) | ||
| Bank interest receivable | 0 | ||
| Loss before taxation | (144700) | ||
| Note 1 – Employee costs | |||
| Employee costs are as follows: | £ | ||
| Employee training courses | 3,400 | ||
| Employee pension contributions paid | 11,600 | ||
| Cost of annual staff party (for eight employees) | 1,500 | ||
| Balance of expenditure (all allowable) | 173,200 | ||
189,700 |
Note 2 – Lease of motor car
The lease is in respect of a motor car with CO2 emissions of 189 grams per kilometre.
Note 3 – Professional fees
Professional fees are as follows:
| £ | |
|---|---|
| Accountancy | 2,200 |
| Legal fees in connection with the issue of share capital | 3,800 |
| Legal fees in connection with the renewal of a 20-year property lease | 1,800 |
7,800 |
Note 4 – Other expenses
Other expenses are as follows:
| £ | |
|---|---|
| Entertaining UK customers | 1,700 |
| Entertaining overseas customers | 790 |
| Political donations | 800 |
| Balance of expenditure (all allowable) | 199,510 |
202,800 |
Additional information
Plant and machinery
On 1 January 2015, the tax written down values of Jump Ltd’s plant and machinery were as follows:
| £ | |
|---|---|
| Main pool | 12,100 |
| Special rate pool | 5,700 |
| Date of sale | Proceeds | Original cost | |
|---|---|---|---|
| £ | £ | ||
| Motor car [1] | 7 January 2015 | 9,700 | 9,300 |
| Motor car [2] | 29 March 2015 | 6,100 | 13,200 |
The original cost of motor car [1] was added to the special rate pool when it was purchased, and the original cost of motor car [2] was added to the main pool when it was purchased.
Previous results
Jump Ltd’s results for its two previous periods of trading are as follows:
| Year ended 31 May 2014 £ | Period ended 31 December 2014 £ | |
|---|---|---|
| Tax adjusted trading profit | 78,600 | 42,400 |
| Bank interest receivable | 1,200 | 0 |
Group companies
Jump Ltd owns 80% of the ordinary share capital of Hop Ltd and 60% of the ordinary share capital of Skip Ltd.
Hop Ltd commenced trading on 1 August 2014, and for the eight-month period ended 31 March 2015 has taxable total profits of £63,000.
Skip Ltd has been trading for several years and has taxable total profits of £56,000 for the year ended 31 March 2015.
Rates of corporation tax
Jump Ltd, Hop Ltd and Skip Ltd have always paid corporation tax at the small profits rate of 20%, and expect to continue to do so in respect of future profits.
Required:
(b) (ii) Advise Jump Ltd as to the maximum amount of its trading loss which can be relieved against its total profits for the year ended 31 May 2014 and the seven-month period ended 31 December 2014. (2 marks)