Lucky Ltd was incorporated on 20 July 2014, and commenced trading on 1 December 2014. The following information is available for the four-month period 1 December 2014 to 31 March 2015:
(3) Lucky Ltd made a loan to another company for non-trading purposes on 1 February 2015. Loan interest income of £700 was accrued at 31 March 2015.
Required:
Will £700 accrued interest income be subject to corporation tax?
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 5 – Loan interest receivable
The accrual at 31 March 2014 has been calculated at £4,800, but because of falling interest rates the accrual should actually be £3,500.
Other information
For the year ended 31 March 2013, E-Commerce plc had augmented profits of £1,360,000, and has forecast that its augmented profits for the year ended 31 March 2015 will exceed £2,000,000.
E-Commerce plc does not have any associated companies.
Required:
Calculate interest income for the year ended 31/03/2014.
| Note | £ | |
|---|---|---|
| Operating profit | 1 & 2 | 519,300 |
| Other income | ||
| Income from property | 3 | 36,700 |
| Loan interest receivable | 4 | 8,100 |
| Profit on disposal of shares | 5 | 64,900 |
| Finance costs | ||
| Interest payable | 6 | (67,200) |
| Profit before taxation | 561,800 |
Note 4 – Loan interest receivable
The loan was made for non-trading purposes on 1 July 2012. Loan interest of £5,600 was received on 31 December 2012, and interest of £2,500 was accrued at 31 March 2013.
Required:
What is the loan interest receivable for the year ended 31/03/2013?
