PROGRAMME
COHORT
BSc (Hons) Accounting
BACF/12/FT Aug
with Finance
BSc (Hons)
Management Finance
BMAN/11/FT Aug-Finc
BMAN/10/PT Aug Fin
Examinations for 2014 Semester I/2013 - 2014
Semester II
MODULE: BUSINESS TAXATION
MODULE CODE: ACCF3115
Duration: 2 Hours
Reading Time: 10 minutes
Instructions to Candidates:
1.
This paper consists of 2 Sections – Sections A and B.
2.
Section A is compulsory. Section A: 40 marks.
3.
Answer any two (2) questions from Section B. Section B: 60
marks.
4.
Questions may be answered in any order but your answer
should show the question number clearly.
5.
This paper carries 100 marks.
This question paper contains 4 questions and 7 pages.
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SECTION A: COMPULSORY
QUESTION 1: (40 MARKS)
Mr Sammy has been employed by a company for many years. He has always received
a basic monthly salary of Rs60,000. However, on 1st August 2013, he was promoted as
Finance Manager of the company and his salary rose to Rs80,000 per month. He is also
entitled to an end of year bonus of one month salary based on his latest salary.
Before he got promoted, Mr Sammy was provided with a company car of a cylinder
capacity of 1500 cc which had cost Rs600,000 to the company. It was established that
70% of the usage were for business. On promotion, Mr Sammy got a brand new car, in
replacement of the previous car which cost the company Rs1,800,000 inclusive of 11%
registration duties. The new car, which has a cylinder capacity of 2200 cc, is to be used
exclusively for private use.
On 1st March 2013, Mr Sammy took a loan of Rs950,000 to buy a plot of land. The loan
was secured on a life insurance policy for which Mr Sammy pays a monthly premium of
Rs2,200. The company granted 50% of the loan at an annual interest rate of 5%. The
balance was contracted with a commercial bank at an interest rate of 9% per annum,
while the repo rate was 4%. Mr Sammy is already the owner of a residential property.
On 4th June 2013, Mr Sammy travelled to Malaysia for business purposes. He was
granted a travelling allowance of 2,000 US Dollars when the exchange rate was Rs30
for the US Dollar.
Mrs Sammy is unemployed. The couple has two children. The elder one attends a local
public university for which the annual fees is Rs50,000. The younger one is still at
college.
Required:
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(a) Prepare Mr Sammy’s income tax computation and calculate his tax liability for the
year ended 31st December 2013..
(14 marks)
(b) When should the tax due be remitted to the Mauritius revenue Authority at latest?
What are the consequences for late payment?
(5
marks)
(c) What do you understand by the term emoluments?
(5
marks)
(d) Explain how your calculation in (a) above would be affected if Mrs Sammy was in full
time employment.
(3marks)
(e) What are the conditions to be satisfied for loan interest to be deductible?
(10marks)
(f) Briefly explain one additional relief, not included in the above question that a tax
payer could claim as a deduction.
(3marks)
SECTION B: ANSWER ANY TWO (2) QUESTIONS
QUESTION 2: (30 MARKS)
(a) During the year 31st December 2013, computer equipment bought on 1st January
2010 with a net book value of Rs280,000 was sold at an accounting loss of Rs60,000.
Depreciation is calculated at the rate of 10% per annum using the straight line method,
with full depreciation in the year of acquisition and no depreciation in the year of
disposal.
Required
(i)
Calculate the balancing adjustment for the year ended 31st December 2013.
(10 marks)
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(ii)
Explain how your answer in (i) above would be affected if the computer was sold
at
a price exceeding the original cost, and calculate the balancing adjustment.
(5 marks)
(b) Explain what is meant by the term ‘Resident’, and the reasons why it is important to
determine the residence status of an individual.
(5
marks)
(c) List and briefly explain five badges of trade.
(10
marks)
QUESTION 3: (30 MARKS)
Mr Tingkwe is self employed and has been trading for many years. His summarized
accounts for the year ended 31st December 2013 are as follows
Rs
Sales [Note(i)]
Rs
4,200,000
Less: Cost of sales
Opening inventory
420,000
Add: Purchases
2,352,000
Less: Closing inventory
(336,000)
Gross Profit
(2,436,000)
1,764,000
Less: Expenses
Wages and salaries [Note(ii)]
Electricity
Rent and rates
550,000
13,000
217,000
Insurance
50,000
General expenses [Note (iii)]
33,000
Printing and stationery
10,000
Telephone and postage
15,500
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Repairs and maintenance [Note (iv)]
69,000
Depreciation
24,000
Interest on loan
12,500
Legal and professional fees [Note (v)]
30,000
Bad debts [Note (vi)]
24,000
Loss on sale of furniture
Taxation (Mr Tingkwe’s income tax)
8,000
15,000
1,071,000
Net profit for the year
693,000
Notes:
(i) Sales include Rs24,000 reimbursed by Mr Tingkwe for goods withdrawn for his
private
use . This reimbursement represents the cost price. The normal gross profit margin on
sales is 40%.
(ii)
Included in wages are staff loan written off amounting to Rs 48,000, fines on
PAYE for late submission of Rs 5,000 and employer’s contribution of Rs29,820 to
pension fund.
(iii) General expenses comprise of:
Rs
Defalcation by employee
5,000
Donations to political parties
5,000
Staff end of year party
8,000
Entertainment- Mauritian customers
5,000
Entertainment- Overseas Customers
10,000
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33,000
(iv) Repairs and maintenance comprise of:
Rs
Partitioning of works office
22,000
Installation of new machine
12,000
Painting of building
20,000
Repairs to new building to make it usable
15,000
69,000
(v)
Legal and professional fees are made up as follows:
Rs
Legal costs for infraction of law
8,000
Defending action in respect of alleged faulty
goods
5,000
Cost in connection with a new lease
4,000
Defending the owner in connection with a
speeding fine
Accountancy fees
3,000
10,000
30,000
(vi) Bad debts comprise of:
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Rs
Provision against specific debtors
12,000
Trade debts written off
9,000
General provision
3,000
24,000
(vii)
Capital Allowances for the year ended 31st December 2013 have been computed
at Rs28,000.
(viii)
Assume the Mr Tingkwe has claimed Income Exemption Threshold Category C.
Required:
(a) Calculate Mr Tingkwe’s income tax liability for the year ended 31st December 2012.
(25 marks)
(b) Explain clearly the tax treatment for depreciation and how this item is dealt with by
the tax authorities.
(5 marks)
QUESTION 4: (30 MARKS)
(a) Explain what you understand by the Pay As You Earn (PAYE) System.
(3
marks)
(b) What are the obligations of an employer in relation to the PAYE system?
(10
marks)
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(c) How is PAYE calculated if an employee does not submit an Employee Declaration
Form (EDF)?
(2
marks)
(d) When should the tax withheld under PAYE be remitted to the Mauritius Revenue
Authority at latest?
(4
marks)
(e) An employee joined in March 2013 and advised his employer that this is not his first
employment. He drew a monthly salary of Rs40,000 and has claimed Category A as
Income Exemption Threshold in his EDF. Calculate the amount of tax deducted at
source under PAYE for the months of March to May 2013.
(11
marks)
***END OF QUESTION PAPER***
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