You are acting as tax adviser to Mills Ltd, which has a year end
31st March, and have been asked, by the Personnel Manager, to write
a report relating to the benefits package offered to certain grades
of staff. In particular he requires information on the following
items.
1.Cars
1. The Personnel Manager is reviewing the company’s position
regarding the provision of company cars and needs to know the
general changes that are proposed to the taxation of company cars,
both for the company and for the employees, for the next few tax
years.
2. From 6th April 2012, certain mangers are to be offered a
petrol driven 5 door hatchback, with CO2 emissions of 139g/km. The
list price of the car is £18,000, including VAT, but the company
has negotiated a 15% discount off this list price.
The company will pay for car tax of £120, insurance and
servicing of the cars.
The insurance for each car, on the company’s group insurance
policy, will be £400, and the other running costs (excluding fuel
for business mileage) are estimated to be £300 per year.
In addition, a manager can opt for a £500 annual reduction in
their salary, and in return receive petrol for private motoring.
You have been asked to calculate the total cost to the
company of purchasing and running one of these cars (excluding
petrol), and the Capital Allowances available for the year ending
31st March 2013. In addition, you are required to calculate the
benefit in kind for each manager, and hence the cost of the car to
a manager whose marginal rate of income tax is 40%. Also, set out
the facts that each manager needs to take into account when
deciding whether to accept the petrol for private motoring.
1.3 The Marketing Director’s son (aged 18) has recently
passed his driving test, and he is keen to provide the son with a
car. An acquaintance has told him that it would be cheaper for the
company to provide the car, especially if it were a low-emission
car. The Director has identified such a car, and it has list price
of £9,600, including VAT. It has CO2 emissions of 99g/km, and it is
petrol driven.
The cost to add the son to the group insurance policy would
be £500, the servicing costs are estimated at £300, and the car tax
would be £0.
The Managing Director’s marginal rate of tax is 50%, and
there is no discount available to the company for purchasing this
car.
The Personnel Manager has asked you to explain why it may be
cheaper for the company (rather than the Director to provide a car
privately) to provide a car for the son, and if the company does so
provide the car, to investigate the costs (both for the company and
the Managing Director) and Capital Allowances available for
providing the car for his son.
2. Vans
The company has 2 vans of less than 3,500kg. The drivers
commute from home to work in these vans each day, as they are
allowed to keep them overnight at home. All fuel for the vans is
paid for by the company. The drivers have both signed a declaration
to state that they do not use the vans for private use apart from
driving to and from work. However, one of the drivers has asked if
he can use the van to move house, and it has been discovered that
the other driver regularly uses “his” van to take items to the dump
at weekends.
You have been asked to explain the consequences of this
private usage. No benefit in kind has been assessed on these
drivers at present.
3. Provision of Staff Lunches.
There is a cafeteria available for staff, with a separate
dining area for directors and senior staff. Meals have been
provided for many years to all staff at cost price, but the company
is now investigating offering the meals in the senior dining room
(only available to senior managers and directors) free of charge.
Explain the tax consequences of this course of action.
Ignore VAT
This assignment is subject to ratification by the external
examiner
Assignment guidance notes
The report should be between 1,300 and 1,800 words in total.
You are required to reference this Report as if it were an academic
article by using the Harvard method. Your sources must be correctly
referenced, and if you use a direct quote (ie copying sentences or
paragraphs from existing material) these must be placed in
quotation marks.
Failure to reference is plagiarism and subject to the
sanctions set out in the University’s policy on plagiarism.
Reports must be word-processed.
In addition, an electronic copy must be submitted via
Blackboard for plagiarism checking. Paper copies will not be marked
unless an electronic copy is also submitted by the due date and
time. Please note that the University’s software checks against
published sources as well as other assignments, submitted both to
this University and to other Education Establishments.
You will be able to submit draft copies of your assignment
from 2 weeks before the due date and view the “originality report”
which will indicate the similarity your assignment has with other
sources.
If the report indicates that your draft is not sufficiently
original you will have the opportunity to re-draft it and view the
revised report. You can do this as often as you like up to the due
date. You will not, however, be able to submit through Blackboard
after the due date. You must in any case submit your paper copy to
TC375 no later than the due date. The paper copy that you submit to
TC375 must be identical to your final version submitted
electronically.
If you submit via Blackboard at the last minute, and your
originality report indicates a high degree of similarity with other
sources, you will have no opportunity to revise it and must
therefore submit a paper version as it is. Obtaining a last minute
originality report which indicates your assignment may be too
similar to other sources will not be accepted as a reason for an
extension or late submission. Where an electronic draft has been
submitted on or shortly before the due date and no final paper
version has been submitted on time the last electronic version may
be taken as your final submission and where appropriate put through
the University’s plagiarism procedures.
If, exceptionally, you have agreed an extension in advance
for valid medical or other reasons and are submitting after the due
date you must submit through TC375 and also ensure that an
identical electronic copy reaches the module leader, Josie Adams.
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