Tax Computation

Could anyone please help me with the following question:

Andrew Moore has recently sent in his books so that you can prepare his accounts and tax computation for 2012/13. From this information you have prepared his income statement which is as follows:

Andrew Moore. Income Statement for the year ended 31 December 2012.

£ £
Turnover note 1 70,000
Cost of Sales:
Opening Inventory 5,000
Purchases note 2 32,000
Less closing inventory (2,000) (35,000)
Gross Profit 35,000

Less: expenses: note 3
Rent 3,000
Light and Heat 1,000
Telephone 700
Stationery 500
Depreciation note 4 2,700
Loss on disposal of equipment, note 4 300
Motor expenses note 5 2,500
Bank overdraft interest 450
Sundry expenses (all allowable) 350 (11,500)
Net Profit £23,500

Notes to the accounts:
1. Turnover Receivables b/f (7,000)
Receipts 75,000
Receivables c/f 2,000 £70,000
2. Purchases Payables b/f (1,000)
Payments 26,000
Payables c/f 7,000 £32,000
3. For all the other expenses, other than those listed below, the difference between the accruals and cash accounting is minimal.
4. During the year Andrew purchased new equipment costing £5,000, and sold a machine for £600 (original cost £4,000). The balances brought forward for capital allowances on 1 January 2012 were as follows:
General pool £2,500
Car (agreed private use 50%) CO2 emissions 140g/km £6,500
5. Motor expenses: this cost relates to Andrew’s car and is the total running costs for the car. During the year Andrew drove 9,000 miles, 4,500 of which were for business.

Andrew has read that small businesses can now use a simplified method for preparing their Tax Returns and has asked if you will be preparing his accounts for tax purposes this year on the normal accruals basis, or whether you will be recommending the new “cash basis”.
When Andrew brought his books to you he kept you up to date with his recent business changes, which included:
1. He is planning to move to new business premises in the near future and has found that some landlords would prefer to receive a lease premium at the start of the lease period, followed by smaller monthly rents.
2. He had to sell his car in June 2013 for £500 as it had become very unreliable, and bought a replacement for £10,000. This car is six months old and has CO2 emissions of 130g/km. He estimates that it will be cheaper to run than his old car and should save about £300 per year.
3. He has had to increase his bank loan recently, but, as interest rates have remained low he estimates that the interest payable for 2013 should only increase to about £550.
4. He is looking to invest in some new equipment in the near future, and is considering buying under a hire purchase agreement.
5. He is worried about the current state of demand for his product, but hopes that demand will pick up in a couple of years’ time. However, he is not sure whether he will be able to avoid making a loss in at least one year in the near future.
6. Following on from point 5, he does not expect that his sales will increase dramatically for a few years, but does hope to expand significantly within the next 5-7 years.

Calculate Andrew’s Taxable profits for the year ended 31 December 2012 on the basis of the normal accruals accounting, and also a comparative calculation on the cash basis.