Question 4c

Chi Needle was born on 27 August 1968. She commenced self-employment as an acupuncturist on 6 April 2013, and for the year ended 5 April 2014 her trading profit using the normal accruals basis was £52,400, calculated as follows:
Note £ £
Revenue 1 71,900
Motor expenses 2 4,400
Other expenses 3 8,200
Capital allowances 4 6,900 (19,500)
Trading profit 52,400

Note 1 – Revenue
The revenue figure of £71,900 includes receivables of £1,600 which were owed as at 5 April 2014.

Note 2 – Motor expenses
The total motor expenses for the year ended 5 April 2014 were £5,500, of which 20% was for private journeys. This proportion has been disallowed in calculating the trading profit. During the year ended 5 April 2014, Chi drove 13,200 business miles.

Note 3 – Other expenses
The other expenses figure of £8,200 includes payables of £900 which were owed as at 5 April 2014.

Note 4 – Capital allowances
Capital allowances consist of an annual investment allowance claim of £4,020 in respect of office equipment purchased on 6 April 2013, and a writing down allowance of £2,880 claimed in respect of Chi’s motor car. The motor car had cost £20,000 on 6 April 2013.

Additional information
Chi has no other income for the tax year 2013–14.
She did not make any payments on account in respect of the tax year 2013–14.

(c) Calculate Chi Needle’s trading profit for the year ended 5 April 2014 if she had used the cash basis instead of the accruals basis.

1. Where relevant, expenses should be claimed on a flat rate basis.

2. You are not expected to recalculate the income tax liability or the national insurance contributions payable. (5 marks)

678 others have taken this question