TAXATION1. For many years Chris has worked as an employee on one year rolling contracts. His latest contract was not renewed and he left the company on 30 June 2012. His P45 shows that he earned ?18,000 and had tax deducted of ?4,000 for 2012/13. In addition his P11D shows that he had a company car (but no private fuel) which had a list price of ?10,000 and CO2 emissions of 124 g/km. Chris bought this from the company for ?3,000 when he left.2. Chris could not find another job, so set up as a self-employed contractor working from home. He commenced trading on 1 September 2012 and made up his first set of accounts for the 10 months to 30 June 2013.These accounts show turnover of ?60,000, less expenses of ?20,000to give a net profit of ?40,000 before taking into account the following items:Depreciation: Chris?s only purchase of capital equipment is computer equipment. This cost ?2,000 on 1 September 2012.Chris has kept detailed records of his mileage since 1 September 2012 and, out of a total of 7,000 miles driven in the 10 months, 5,250 were for business purposes. He considers that his car?s market value on 1 September 2012 would be the amount that he paid for it in June 2012. The car was recently serviced at a cost of ?450 and the cost of his insurance for the 12 months from 1 July 2012 was ?840.Use of home as office: He does not use any one room exclusively for business, but his fuel and telephone bills for the 10 months are as follows:Gas and electricity ? ?1,535 in total. Chris estimates that this is an increase of 15%Telephone ? ?1,250, an estimated increase of 70%.3. Details of his other income are as follows:i) He has a bank account and the amount credited to his account in respect of interest was ?200 for the year ended 5th April 2013.ii) He received net dividends of ?720.iii) He paid ?72 to Cancer Research under the Gift Aid Scheme.Required:1. To calculate, his tax payable, and class 2 and 4 National Insurance for the year ended 5th April 2013.2. To complete Chris Carter?s Tax Return for the tax year 2012/13.3. To write a letter to Chris Carter, in which you enclose his Tax Return for his signature, and ask him to return the form to you for onward transmission to the Inspector.You should include details of his Tax Liability, and any further Tax Payable, in your letter.In addition, Chris has heard that there are two methods for claiming business mileage whilst self-employed; the normal method by claiming capital allowances and actual expenses, or to merely claim a set amount per business mile. You should explain the two methods of claiming for the business use of the car, and the reason for the method that you used in his Tax Calculation.!
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