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Dear Sir,
can you please explain following question
Morris, Sally and Bernard have been partners for many years sharing profits and losses
30:50:20 respectively. On 31 January 2020 Morris retired.
Tax adjusted trading profits for the years ended 31 May 2019 and 31 May 2020 were
£108,000 and £120,000 respectively.
Morris has unused overlap profits of £10,000.
Complete the following statement:
The trading profit assessable on Morris is
A £46,400
B £14,000
C £24,000
D £56,400
for the tax year 2019/20.thanks
Hi,
Is the answer 46,400. If yes:-
Morris retires on 31-1-20 which comes in tax year 2019-20 , therefore his penultimate tax year is 2018/19.
The trading profit for year ended 31-5-19 falls in the tax year 2019-20, therefore it is assessed in 2019-20. Morris’s share in 108000 :- 108000*30% = 32400
He retires on 31-1-20, which is also in the tax year 2019-20. His share :- 120000*8/12*30% =24000.
Therefore his trading profit for 2019/20 will be 32400+24000-10000 = 46400.
Correct me if am wrong.
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