solved: Katondo Manufacturing Company (KMC) plc is a Zambian resident…

  

Katondo Manufacturing Company (KMC) plc is a Zambian resident…Katondo Manufacturing Company (KMC) plc is a Zambian resident company engaged in manufacturing operations which is registered for Value Added Tax. The company listed its shares on the Lusaka Securities Exchange two (2) years ago when it offered 25% of the ordinary shares to indigenous Zambians. In March 2020, the company issued a further 20% of its ordinary shares to indigenous Zambians and as a result 45% of the shares of the company are now held by indigenous Zambians. KMC plc made a profit for the year, as per accounts, of K5,702,080 for the year ended31 December 2020. This profit figure was arrived at after taking into account the following: Investment income comprising rental income of K180,000, royalties amounting to K136,000, dividends from shares of non-mining companies listed on the LuSE amounting to K124,000, fixed deposit interest K23,800 and management and consultancy fees of K289,000. These were the actual amounts received in each case, withholding tax was deducted at source and paid on the appropriate due dates.Staff costs which included an annual salary for the Marketing Director of K650,000 who is accommodated in a company owned house for which he does not pay rent, employee training costs of K160,000, employee relocation costs of K340,000, loans to employees written off amounting to K380,000, employees golf club subscriptions of K18,000, employees professional subscriptions of K60,000, wages for casual workers of K56,000, fines of K25,000 for breaching labour laws and other employee’s salaries of K29,274,000.Legal fees which included legal fees in connection with issue of ordinary shares to indigenous Zambians of K13,800, legal fees for trade debt collectionof K14,400, legal fees for recovery of loans from former employees of K10,500, a premium paid to acquire the right of use of a popular brand name for a period of 20 years, amounting to K300,000 and legal fees incurred on the renewal of a lease of business premises of K18,500Bad debts expenses which included:K  Trade debts written off88,000Increase in specific provision16,000Decrease in general provision(36,800)Trade debts previously written off subsequently recovered(17,500) (5) Miscellaneous operating expenses which included:  49,700  Selling and marketing expensesK275,600 Theft of money by the finance director320,000 Theft of goods by the company’s security guards50,000 Depreciation of tangible non-current assets168,000 Loss on disposal of assets60,000 Christmas gifts to employees (food hampers costing K180 each)Gifts to customers of Kamuchanga Plc’s branded wall clocks(Costing K250 per customer)18,000 30,000 Provisional income tax2,023,000  2,944,600 The provisional income tax is the amount of provision income tax paid during the tax year 2020. Other InformationImplements, plants and machinery On 1st January 2020, company held the following implements, plant and machinery which were acquired at the following VAT inclusive costs and brought into use on the following dates:DateAssetVAT inclusive cost  K10 March 2017Delivery van (2,000cc)104,40020 April 2017Old manufacturing equipment928,00016 October 2018General plant and equipment580,00019 March 2019Pool car (1,600cc)127,600 During the year ended 31 December 2020, the following purchases and disposals of assets took place:Date                                                                                                   VAT InclusiveCost/(Proceeds) K4 March 2020Purchased Toyota Camry car (1,700cc)174,00016 July 2020Purchased Toyota Fortuner motor car (2,600cc)270,00018 August 2020Purchased new manufacturing plant1,044,00012 October 2020Sold the delivery van(58,000)15 November 2020Sold old manufacturing equipment348,00020 Dec 2020Sold poll car150,600 The Toyota Camry car is the Human Resources Manager’s personal to holder motor car and the Toyota Fortuner motor car is the Marketing Director’s personal to holder motor car. BuildingsOn 1 February 2020 the company completed the construction of a building at VAT exclusive cost of K5,000,000 which was brought into use immediately. The building comprised the following items: KLand                                                                                                   1,500,000Engineering drawing office                                                                       400,000Showroom                                                                                    200,000Factory                                                                                      2,600,000Administration offices                                                                  300,0005,000,000  REQUIREDCalculate the maximum capital allowances claimable by Katondo plc on the following assets held in the tax year 2020:The capital allowances on implements, plant and machinery (12 marks)The capital allowances on buildings                                     (6 marks) Compute the final taxable business profit after capital allowances for Katondo plc for the tax year 2020.                                                              (14 marks) Compute the income tax payable by the company for the charge year 2020.(8 marks)[Total: 40 Marks]  LawSocial ScienceTax law BAF 322

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