Taxation

Assignment breif:
You are to assume that you are working as a Tax Manager, working for a firm of accountants.

A new client, Nick White, has asked your firm to act as tax advisers to both himself and his wife, Caroline.

Nick is self-employed and his wife is employed as his assistant. She answers the telephone, makes appointments, produces invoices and chases late paying clients. She would also expect to help out in times of emergency, in whatever capacity she can, to ensure that deadlines are met.

His taxable profits have been steadily rising over the last few years, but he expects that they have now stabilised at £115,000 per annum. This is before paying £5,000 salary to Caroline.

Nick has asked for advice on whether to incorporate his business. In particular, he requires details of:
1. the general advantages and disadvantages, given his level of profit.
2. the advantages and disadvantages of setting the company up with equal shareholdings with his wife. She would be registered as company secretary.
3. tax-efficient profit withdrawal. He wishes to leave £30,000 per year in the business to ensure he can afford up to date equipment, for emergencies and expansion if necessary.

Nick has asked for a meeting to discuss the matter, but in the meantime would like a preliminary report setting out the general factors to be taken into account.

Required:
1. to prepare a report for Nick, answering (generally) his queries as above.
2. to also include within the report details of any additional information, together with reasons, that you require before you would be able to finally advise him as to a prospective company’s shareholding and efficient profit extraction.

Assignment Guidance Notes

The report should be approximately 2,000 words in total. Although it has been specified as a Report to a Client, you are required to reference it as if it were an Academic Literature Review.

All the Learning Outcomes, as set out in the Module Study Guide, are covered by this assignment.

The Marks will be allocated as follows:

General Points on Incorporation 30 marks

Implications of Sharing Company Ownership with Wife 20 marks

Efficient Profit Extraction 20 marks

Further Information required 15 marks

Presentation 5 marks

Bibliography and Referencing 10 marks

Total 100 marks

Grade criteria:

This is how standards/grades will be achieved:

0-10 You have not attempted the assessment, or have submitted work which demonstrates extremely limited knowledge but does not demonstrate understanding

11-19 You have partially attempted or submitted assignment which demonstrates limited knowledge but does not demonstrate understanding

20-29 You have demonstrated very limited understanding and application of the relevant theories

30-49 You have demonstrated some understanding and have attempted to apply the relevant theories but not in a systematic and coherent manner

50-59 You have demonstrated satisfactory knowledge, understanding and application of the main concepts

60-69 You have demonstrated an above average grasp and application of the major relevant issues

70-79 You have demonstrated a very good ability to comprehend and apply all the main arguments in a clear and precise manner

80-89 You have demonstrated an excellent ability to comprehend and apply all the main arguments in a very clear and precise manner

90-100 You have demonstrated exceptional ability to comprehend and apply all the main arguments in a very clear and precise manner