Question 2a query 4
You are a trainee Chartered Certified Accountant, and your firm has recently completed its audit of E-Commerce plc’s financial statements for the year ended 31 March 2014. The company runs an internet-based retail business.
E-Commerce plc prepared its own corporation tax computations for the year ended 31 March 2014, and your colleague has completed your firm’s tax audit of these figures. E-Commerce plc’s original corporation tax computation, along with references to your colleague’s queries, is as follows:
E-Commerce plc – Corporation tax computation for the year ended 31 March 2014
| Query | £ | |
|---|---|---|
| Operating profit | 1 | 2,102,300 |
| Deduction for lease premium | 2 | (14,400) |
| Capital allowances | 3 | (209,200) |
| Trading profit | 1,878,700 | |
| Property business profit | 4 | 156,700 |
| Loan interest receivable | 5 | 42,400 |
| Taxable total profits | 2,077,800 | |
| Corporation tax (2,077,800 at 23%) | 477,894 |
Your colleague has raised some queries in regard to E-Commerce plc’s corporation tax computation. Apart from any corrections arising from your colleague’s queries, the corporation tax computation prepared by E-Commerce plc does not contain any errors.
Query 4 – Property business profit
There are two issues here:
(1) E-Commerce plc has claimed a deduction for repairs of £95,300 in respect of a warehouse which was purchased on 21 May 2013. The warehouse was purchased in a dilapidated state, and could not be let until the repairs were carried out. This fact was represented by a reduced purchase price.
(2) E-Commerce plc did not receive the rent due of £16,200 in respect of this warehouse for the quarter ended 31 May 2014 until 1 April 2014. None of this amount has been taken into account in calculating the property business profit for the year ended 31 March 2014.
Required:
Calculate property business profits for the year ended 31/03/2014.