- 20 Marks
Question
MESINOY Limited has been carrying on business in Nigeria for many years. The company makes up its accounts to 31 December each year. Due to the increasing costs of operating in Nigeria, the board of directors decided to wind up the company’s business in Nigeria and relocate to a more tax-friendly country as of 31 May 2011.
Tax laws specify that a company winding up its business must comply with specific regulations. MESINOY Limited’s unutilized Capital Allowances were agreed upon by the tax authority, amounting to N460,000. The company applied for a claim to carry back this unutilized Capital Allowance, which was granted by the tax authority. Below are the adjusted profits for the relevant periods:
| Year Ended | Adjusted Profit (₦) |
|---|---|
| 31 December 2009 | 520,000 |
| 31 December 2010 | 450,000 |
| 31 May 2011 | 300,000 |
Additionally, a bad debt of N58,000 was recovered on 30 November 2011.
Requirements:
a. Compute the Assessable Profits of the company for the relevant years of assessment. (5 Marks)
b. Calculate the Capital Allowances to be rolled back to the relevant years. (5 Marks)
c. Compute the Total Profits for the relevant years of assessment. (5 Marks)
d. Briefly explain Best of Judgment (BoJ) Assessment. (5 Marks)
Answer
a. Computation of Assessable Profits for the Relevant Assessment Years
b. Capital Allowances to be Rolled back to the Relevant Years
c. Total Profits of the Relevant Years of Assessment
d. Best of Judgment (BoJ) Assessment Explanation:
A Best of Judgment (BoJ) Assessment is applied when a taxpayer fails to submit accurate returns or records. The tax authorities estimate the tax liability based on available information or assumptions to ensure compliance, especially when financial statements are deemed unreliable.
- Tags: Assessable Profits, Capital Allowance, Tax Rollbacks, Winding-up Business
- Level: Level 2
- Uploader: Kofi