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Peter and Jane have been in partnership for many years preparing accounts to 31 July each year and sharing profits equally. On 1 September 2020, they changed their profit-sharing agreement so that peter was entitled to a salary of £9000 each year and the remaining profits were then split two parts to Peter and three parts to Jane. The partnership made a trading profit of £96,000 in the year to 31 July 2021.
What is Peter’s taxable trading profit for the tax year 2021/22 ?
Why are you asking me this question? To be honest I know the answer – have you tried the question and cannot understand your answer?
Yes, I have tried it but I am not getting the right answer I am getting the answer as £47400. But the answer is given as £44150. Please Can you explain me this question.
I get £44150 as well
The accounting period needs to be split into 2 periods – 1.8.20 to 31.8.20 – when they shared profits equally. 11/12 x 96,000 is £8000 so peters share is £4000.The second period is the remaining 11 months.
Peter is entitled to a salary – 11/12 x 9000 which is £8250
96,000 less £8,000 less £8250 leaves a profit of £79,750 to be split 2:3 – Peter’s share is £31,900
Total income for Peter is 8,000+8250+31900 = 44150
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