Posted: September 13th, 2017

Business Taxation

Paper, Order, or Assignment Requirements

Emma has been operating a successful interior design consultancy business. Due to the rapid expansion of her business in terms of sales revenue, in Feb 2013, Emma started to debate whether she should continue to operate as a sole trader or incorporate her business, where she would be 100% shareholder and director.
Emma has begun to seek professional advice on her business proposals from her accountant. She has a further meeting with this accountant next week to explore the tax University of Derby Online Learning
implications of incorporating the business. If possible she would like to incorporate it on 1 April 2013, and change the year end to 31 December; so the first set of accounts for the company, if Emma incorporates the business, will be for the nine months ended 31 December 2013. In preparation for this meeting the accountant has provided Emma with a forecast of the relevant tax information, which can be found in Appendix 1.
If Emma incorporates then the consideration will comprise £30,000 cash and 60,000 £1 ordinary shares at £6 per share. The market value and cost of the relevant business assets as at 1 April 2013 are:

Market Value Original Cost
(1.04.13)
£ £
Premises 220,000 80,000
Goodwill 140,000 nil
Trade receivables 20,000 20,000
Cash 30,000 30,000
Total 390,000

These values are considered to be a reliable estimate of the market values of these assets at the proposed date of incorporation.
In addition because the business has grown so much Emma is considering both moving the business to a more suitable business premise and expanding the business overseas, in particular into Europe.
With respect to the proposed move to new business premises she is not sure how to structure this purchase. The two alternatives she wishes to discuss with his accountant are as follows:

1. Purchasing the new business premises herself and charging the company a rent, or
2. Emma could provide the business with a loan for the business to purchase the new premises itself.

As regards the possibility of expanding the business overseas, Emma is still exploring some tentative opportunities at this stage; however, she would like her accountant to give her some relevant tax advice to assist her in exporting potential opportunities. University of Derby Online Learning

REQUIRED
Acting as Emma’s accountant write a business report in preparation for the forthcoming meeting, dealing with the following:
a) A critical discussion of the tax implications of the above matters in preparation for the meeting with Harry next week.

The discussions should be based on the information provided, and include all the major business taxes such as NIC, corporation tax, capital gains tax, VAT and the impact on Emma’s personal taxation position.
b) Emma also wishes to discuss with her accountant how she can extract the profits from the company in a tax efficient way. In the report identify the various methods available for extracting profits from a company and explain the tax implications for the company and for Emma herself.

The report should include the relevant supporting calculations of the income tax, NIC, and corporation tax implications in an appendix attached to it where appropriate.
Overall word limit: 2,500 words