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HIDDEN TREASURES Limited is an agro-allied and trading organisation which specialises in Crop and Grain production, Animal husbandry, Sale and distribution of Grains (i.e. cowpeas, guinea corn, millet, rice, beans and groundnuts).
The company has been in business for many years and it has been filing annual Income Tax returns regularly except VAT returns. On 16 March 2015, the Federal Inland Revenue Service (FIRS) served a notice of Tax Audit covering 2010 – 2014 financial years.
The management believed erroneously that since it deals in VAT exempt goods, it did not need to file VAT returns on a monthly basis.
In preparation for the visit of the FIRS, the company’s management invited you on 23 March 2015, to their office and gave you the following extracts from the company’s Statement of Comprehensive Income and agreed Capital Allowances:
| Year ended | Agric Production (₦) | Grain Distribution (₦) |
|---|---|---|
| Year ended 30/09/2010 | Loss (770,000) | (225,000) |
| Year ended 30/09/2011 | Profit 630,000 | 280,000 |
| Year ended 30/09/2012 | Loss (600,000) | (150,000) |
| Year ended 30/09/2013 | Profit 990,000 | 140,000 |
| Year ended 30/09/2014 | Profit 30,000 | 120,000 |
Agreed Capital Allowances are as follows:
| Tax Year | Capital Allowance (₦) |
|---|---|
| 2011 | 70,000 |
| 2012 | 65,000 |
| 2013 | 125,000 |
| 2014 | 115,750 |
| 2015 | 85,000 |
You are required to:
a. State the provisions of the VAT law with regard to rendition of returns by Vatable persons. (2 Marks)
b. Show by analysis the amount of losses carried forward under each income head shown above. (8 Marks)
c. Compute the tax liabilities for each year. (5 Marks)
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Mr. Danko Chinyere, who has worked in a neighboring African country for many years, returned to Nigeria in August 2018. He incorporated a private limited liability company known as ChiDan Limited located in Lagos on October 30, 2018. The company deals in processing and packaging of plantain chips for local consumption.
The directors of the company opened a business bank account with one of the leading commercial banks in November 2018. The company commenced full operations on January 2, 2019.
Your firm, Adama & Co., was appointed as the tax consultant to ChiDan Limited in January 2021. At the first engagement meeting with the company, you discovered that the company was yet to register with the Federal Inland Revenue Service (FIRS). Relevant taxes, including value-added tax (VAT), were not remitted to FIRS.
An extract of the company’s first set of financial statements made up to December 31, 2020, is as follows:
Required:
Advise management of the company on the following:
a. Due date for submission of audited financial statements to the tax office. (2 Marks)
b. Requirements for filing of VAT returns and remittance of VAT liabilities – Section 16 of VAT Act (as amended). (4 Marks)
c. Basis of assessment on commencement of business – Section 29 (3) of CITA
(as amended) (6 Marks)
d. The income tax liabilities payable for the relevant year of assessment
(18 Marks)
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Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Mr. Patapaa commenced trading on 1 April 2017 and has made the following sales:
| Period | Monthly Sales (GH¢) |
|---|---|
| April to June 2017 | 29,500 |
| July to September 2017 | 12,200 |
| October to December 2017 | 21,500 |
These figures are stated exclusive of Value Added Tax (VAT). Mr. Patapaa’s sales are all taxable activities.
As a trainee Chartered Accountant, you have advised Patapaa in writing that he should be registered for VAT, but he has refused to register because he thinks his net profit is insufficient to cover the additional cost.
Required:
i) Explain what period Mr. Patapaa was required to compulsorily register for VAT and the implications of continuing to trade after this period without registering. (2 marks)
ii) What are the sanctions for failure to register for VAT? (4 marks)
iii) Briefly explain from an ethical viewpoint the issues you, as a trainee Chartered Accountant, should consider to deal with Mr. Patapaa’s refusal to register for VAT. (2 marks)
iv) State the activities or persons that are exceptions to the normal threshold rules. (2 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
HIDDEN TREASURES Limited is an agro-allied and trading organisation which specialises in Crop and Grain production, Animal husbandry, Sale and distribution of Grains (i.e. cowpeas, guinea corn, millet, rice, beans and groundnuts).
The company has been in business for many years and it has been filing annual Income Tax returns regularly except VAT returns. On 16 March 2015, the Federal Inland Revenue Service (FIRS) served a notice of Tax Audit covering 2010 – 2014 financial years.
The management believed erroneously that since it deals in VAT exempt goods, it did not need to file VAT returns on a monthly basis.
In preparation for the visit of the FIRS, the company’s management invited you on 23 March 2015, to their office and gave you the following extracts from the company’s Statement of Comprehensive Income and agreed Capital Allowances:
| Year ended | Agric Production (₦) | Grain Distribution (₦) |
|---|---|---|
| Year ended 30/09/2010 | Loss (770,000) | (225,000) |
| Year ended 30/09/2011 | Profit 630,000 | 280,000 |
| Year ended 30/09/2012 | Loss (600,000) | (150,000) |
| Year ended 30/09/2013 | Profit 990,000 | 140,000 |
| Year ended 30/09/2014 | Profit 30,000 | 120,000 |
Agreed Capital Allowances are as follows:
| Tax Year | Capital Allowance (₦) |
|---|---|
| 2011 | 70,000 |
| 2012 | 65,000 |
| 2013 | 125,000 |
| 2014 | 115,750 |
| 2015 | 85,000 |
You are required to:
a. State the provisions of the VAT law with regard to rendition of returns by Vatable persons. (2 Marks)
b. Show by analysis the amount of losses carried forward under each income head shown above. (8 Marks)
c. Compute the tax liabilities for each year. (5 Marks)
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Mr. Danko Chinyere, who has worked in a neighboring African country for many years, returned to Nigeria in August 2018. He incorporated a private limited liability company known as ChiDan Limited located in Lagos on October 30, 2018. The company deals in processing and packaging of plantain chips for local consumption.
The directors of the company opened a business bank account with one of the leading commercial banks in November 2018. The company commenced full operations on January 2, 2019.
Your firm, Adama & Co., was appointed as the tax consultant to ChiDan Limited in January 2021. At the first engagement meeting with the company, you discovered that the company was yet to register with the Federal Inland Revenue Service (FIRS). Relevant taxes, including value-added tax (VAT), were not remitted to FIRS.
An extract of the company’s first set of financial statements made up to December 31, 2020, is as follows:
Required:
Advise management of the company on the following:
a. Due date for submission of audited financial statements to the tax office. (2 Marks)
b. Requirements for filing of VAT returns and remittance of VAT liabilities – Section 16 of VAT Act (as amended). (4 Marks)
c. Basis of assessment on commencement of business – Section 29 (3) of CITA
(as amended) (6 Marks)
d. The income tax liabilities payable for the relevant year of assessment
(18 Marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Mr. Patapaa commenced trading on 1 April 2017 and has made the following sales:
| Period | Monthly Sales (GH¢) |
|---|---|
| April to June 2017 | 29,500 |
| July to September 2017 | 12,200 |
| October to December 2017 | 21,500 |
These figures are stated exclusive of Value Added Tax (VAT). Mr. Patapaa’s sales are all taxable activities.
As a trainee Chartered Accountant, you have advised Patapaa in writing that he should be registered for VAT, but he has refused to register because he thinks his net profit is insufficient to cover the additional cost.
Required:
i) Explain what period Mr. Patapaa was required to compulsorily register for VAT and the implications of continuing to trade after this period without registering. (2 marks)
ii) What are the sanctions for failure to register for VAT? (4 marks)
iii) Briefly explain from an ethical viewpoint the issues you, as a trainee Chartered Accountant, should consider to deal with Mr. Patapaa’s refusal to register for VAT. (2 marks)
iv) State the activities or persons that are exceptions to the normal threshold rules. (2 marks)
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