Taxation Fundamentals

Taxation Fundamentals Coursework

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This report has a 40% weighting in calculating your overall module mark. It must be electronically produced in a SINGLE WORD DOCUMENT.

The work must be submitted only electronically via Moodle inbox by 6:00 pm on Monday9 November 2020. You must keep a duplicate copy of all work submitted for assessment.

WORD PROCESSING SKILLS

Part of the purpose of the coursework in Taxation Fundamentals is to assess the ‘soft skills’ of students in terms of word processing. Therefore, we require you to submit a ‘Professional’ looking document which can earn up to 15% of the marks available for the coursework. The marks will be assessed with reference to matters such as:

  • Use of spellcheck
    ·Consistent and appropriate font size and style ·Correct pagination
    ·Page numbering
    ·Spacing
    ·Use of tables
    ·Word count
    ·Presentation of numbers
    ·General format and content issues

It is recommended that the following should be included in your document:
o Title/cover (including the name of course, the name of the module and coursework,

your date of birth, your name and student number, the date and the word-count) o Page of contents
oMain body of report (Scenario one, two and three)
o Bibliography (using Harvard style of referencing)

o Appendices as required

GUIDANCE ON REFERENCING
(Supplied by Academic Misconduct Officer)
The attention of every student is drawn to the warning in the course guide on late submission of coursework, mitigating circumstances and plagiarism. Correct referencing is an academic skill that you will be assessed on.

Correct referencing demonstrates that you have read appropriately on the subject, shows that you are acknowledging the sources you have used (that you are not trying to cheat) and provide information on useful sources of information to your reader.

Doing it correctly demonstrates professionalism. Doing it incorrectly will lead to reduced marks and possibly to disciplinary action, which includes the possibility of having your studies terminated. 2

Taxation Fundamentals Coursework
Display your date of birth prominently on the cover page to your assignment.

BACKGROUND

Fiona has contacted you for some tax related advice. She is aware that you are studying taxation at London South Bank University, and she would like you to help her to clarify some tax issues.

You are required to deal with both PARTS (Part 1& Part 2) Each of the 2 Parts will carry equal marks.
PART 1

  • ·  Fiona who is domiciled and resident in UK, from 6 April 2019 will be receiving a greatly enhanced salary (see note 1) and employee benefits (paid by her employer) in her new position and now would like to know how much tax she will have to pay in the current tax year
  • ·  In addition to her salary, Fiona was paid a bonus of £15,000 on 12thMay 2019. She had become entitled to this bonus on 22 March 2019
  • ·  Has recently received a major promotion at work and she will now be the Financial Controller for her employer, Rambo plc, a listed company.
  • ·  Entitled to the basic personal allowance of £12,500 and she contributed 5% of her monthly gross salary into Rambo’s HMRC registered occupational pension scheme
  • ·  Fiona’s husband Christian is unemployed, therefore he agreed to transfer ‘Marriage allowance’ to Fiona for income tax purposes.
  • ·  Fiona’s also has other income as detailed below.

Fiona also makes charitable donations (which qualify as gift aid) to the RSPCA. The net value of these donations is equal to 3% of her gross salary.

The proposed package of benefits is as follows:

  1. Fiona will also have use of a company accommodation (see note 2) 2. Car–herownchoiceuptothevalueof£25,000(seenote3)
  1. Unlimited fuel for car
  2. Access to a Music system for home use (see note 4)

3

Other Income

In the tax year 2019/2020 Fiona also received interest on her building society account equal to 4% of her gross salary.

In addition to this she has a portfolio of investments and in the tax year 2019/2020 she received dividend income equal to 10% of her gross salary.

Note 1

Use your date of birth to work out her salary to the nearest £.
Simply reverse your date of birth and divide by ten to get Fiona’s annual salary.
E.g. a date of birth of 22 August 1991 (22/08/91) produces a salary of £91,082. (910822/10)

Note 2

Fiona moved into the company accommodation in London on 6 May 2018. The property was purchased by her employer in 2011 for £180,000 and the company had spent £31,000 in August 2019 on improvements to the property. The Market value as at 6thMay 2018 was
£ 250,000

The property currently had a market value of £275,000 and has a rateable value of £11,600. The company provided all the furniture at a cost of £45,000, Fiona is required to pay all the utility bills for the property.

Note 3

Choose a car (your personal preference) from the web for Fiona’s new vehicle. Give full details of make, model, list price, type of engine and CO2 emission. Get a screenshot of the car details from the website you used and attach in the coursework as an appendix.

Note 4

On 6 July 2018 the company lent Fiona a Music system costing £5,000 for her private use. On 31thMarch 2020 the market value of the system was £ 3000. Fiona paid £ 2000 to her employer and became the owner of that music system on 31 March 2020.

REQUIRED:
Write a report
with detailed explanation of Fiona’s income tax payable and her NICs for 2019/2020.

You must clearly show all the relevant calculations in detail, added as supporting documents for your report. Your calculation should be set out in a way that Fiona (not a tax expert) can easily understand.

Remember! – Fiona does not have much knowledge of Taxation issues!

Professional marks will be awarded for

  • ·  the overall presentation of the report,
  • ·  the provision of relevant advice and
  • ·  the effectiveness with which information is communicated.

Suggested word length for this report = 700 words. (Excluding calculations!) (Total 50 Marks)

4

SECTION B
PART 1 – Impact of taxes and tax planning – Financial Act 2019

A partner of your accountancy firm has requested you to prepare detailed notes on the impact of redundancy pay. During this brief meeting with you, the partner said the following, “When the employment of an employee ends prematurely (i.e. before reaching the retirement age or by resignation of the employee), it is called termination of the employment. Ordinarily this type of termination is initiated by the employer, therefore, breaching the employment contract between themselves and the employee. As a result, employers usually offer the employee some benefits at the time of termination to settle the breach of employment contract.”

The partner required you prepare a note that discusses the taxation of various benefits provided to the employees when their employment contract is terminated. Specifically, the following benefits must be separately discussed among any other benefits that you may come across in your research.

  • Gardening leave
    ·Payment for training and skill development of employee ·Past due salary & bonus
    ·Pay in lieu of unutilised holidays
    ·Payment in lieu of notice (PILON)
    ·Statutory redundancy pay up to £30,000
    ·Statutory redundancy pay above £30,000

The discussion should also include how to determine whether benefits are being paid as ‘services rendered under employment’ or ‘as compensation for breach of the employment contract’.

References to the relevant sections of the legislation (section 62 & sections 401- 416 ITEPA 2003) will enable you to secure higher marks.

 

 

 

 

REQUIRED:

Present your detailed notes in a report format.

Your summary should be detailed enough to be a basis for the partner to explain the matter to his clients. It may contain examples if that will improve the clarity of your report.

(25 marks – maximum 700 words)

5

PART 2 – Overseas workday relief

Employees who are resident in the UK but are not domiciled in the UK can benefit from a tax relief called ‘overseas workday relief’ for any days that they work outside of the UK while they are tax resident in the UK.

The manager of your accounting firm has asked you to prepare a detailed report on the importance of overseas workday relief.

REQUIRED:

Write a report as requested by the Manager. (Calculations are not required for this part of the question).

Your report should ONLY address the following issues:

  • One of the conditions of claiming overseas workday relief is to be taxed on remittance basis. Discuss under which scenarios, the employee will consider NOT to be taxed on remittance basis and elect for the otherwise exempt foreign earnings to be taxed in the UK.
  • Discuss the need to set up separate bank accounts to claim overseas workday relief. Explain what will happen if the foreign salary is paid in a ‘mixed fund’ account.
  • A non-domiciled employee who is coming to work in the UK for a period of three years has contacted you to advise him about the steps he needs to take to take full tax relief in lieu of the overseas workday relief.

(25 marks – maximum 300 words)

General presentation, English, bibliography and referenced citations in text and cross referencing will carry up to 10% additional marks.

(Total 50 Marks)

 

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