- 20 Marks
AT – April 2022 – L3 – Q5 – Business income – Corporate income tax | Tax planning
A trainee accountant is tasked with correcting errors in the tax computation of Prime Shea Ltd. The tasks include determining allowable financial costs, preparing a revised tax computation, calculating the tax payable, and recommending a process for appeal against a tax audit assessment.
Question
a) You are a Trainee Accountant, and your manager has asked you to correct a company tax
computation which has been prepared by the Managing Director of Prime Shea Ltd, a
manufacturing company located in Batanyili, a suburb of Tamale in the Northern Region.
The company commenced business on 1 January 2014. The company tax computation is
for the year ended 31 March 2020 and contains a significant number of errors:
Required:
i) Determine the allowable financial cost for the year ended 31 December 2020. (4 marks)
ii) Prepare a revised tax computation to determine the chargeable income for the year ended
31 December 2020. (4 marks)
iii) Calculate the tax payable by Prime Shea Ltd under the Income Tax Act 2015 (Act 896) as
amended. (2 marks)
b) You are a final level CA student who has been helping Naagode Ltd on tax issues. Naagode Ltd has been doing business in the international space, importing and exporting products. You have been told that when you qualify, you would manage their Tax Department.
What has baffled the company lately is an audit outcome by the Ghana Revenue Authority. The audit was done in two-folds. One by the Post Clearance Audit Department of the Customs Division and the other by Tax Audit and Quality Assurance (TAQA) Department of Domestic Tax Revenue Division.
The audit findings are as follows:
Post Clearance Audit Department of the Custom Division:
Import Duties GH¢10,000,000
Value Added Tax (VAT) GH¢12,000,000
National Health Insurance Levy (NHIL) GH¢4,000,000
Ghana Education Trust Fund (GET/Fund) GH¢4,000,000
TAQA Department of Domestic Tax Revenue Division:
Corporate Tax GH¢230,000,000
VAT GH¢29,000,000
NHIL GH¢29,000,000
Withholding Tax (WHT) GH¢105,000,000
The management of Naagode Ltd has asked you to assess the chances of the Company if an objection to the assessment is raised as it considers the assessment quite excessive.
Required:
Recommend the process that the management should adopt to ensure success in its appeal.
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