(b) Explain how the adoption of residual income (RI) using the annuity method of depreciation might prove to
be a superior basis for the management incentive plan operated by NCL plc.
(N.B. No illustrative calculations should be incorporated into your explanation). (4 marks)
Assume that the rates and allowances for 2004/05 apply throughout this part.(b) Explain the consequences of filing the VAT returns late and advise Fred how he should deal with theunderpayment and bad debt for VAT purposes. Your explanation should be supported by relevantcalculations. (10 marks)
(b) Assuming that the income from the sale of the books is not treated as trading income, calculate Bob’s taxableincome and gains for all relevant tax years, using any loss reliefs in the most tax-efficient manner. Youranswer should include an explanation of the loss reliefs available and your reasons for using (or not using)them. (12 marks)Assume that the rates and allowances for 2004/05 apply throughout this part of the question.
(c) Calculate and explain the amount of income tax relief that Gerard will obtain in respect of the pensioncontributions he proposes to make in the tax year 2007/08 and contrast this with how his position could beimproved by delaying some of the contributions that he could have made in 2007/08 until 2008/09. Youshould include relevant supporting calculations and quantify the additional tax savings arising as a result ofyour advice.You should ignore the proposed changes to the bonus scheme for this part of this question and assume thatGerard’s income will not change in 2008/09. (12 marks)
(b) (i) Explain, by reference to Coral’s residence, ordinary residence and domicile position, how the rentalincome arising in respect of the property in the country of Kalania will be taxed in the UK in the tax year2007/08. State the strategy that Coral should adopt in order to minimise the total income tax sufferedon the rental income. (7 marks)
(ii) Explain how the inclusion of rental income in Coral’s UK income tax computation could affect theincome tax due on her dividend income. (2 marks)You are not required to prepare calculations for part (b) of this question.Note: you should assume that the tax rates and allowances for the tax year 2006/07 and for the financial year to31 March 2007 will continue to apply for the foreseeable future.