AT – May 2016 – L3 – Q3b – Business income – Corporate income tax

Compute the penalties payable by the company

Question

b) ABC Ltd is a company under self-assessment and prepares accounts to 31st March each year. Its estimated chargeable income for the year 2014 was GH¢1.2 billion. However, the Company’s Returns, which were submitted to the Large Tax Payers Office at the VAT House on 15th April, 2015, showed a chargeable income of GH¢1.8 billion.

Compute the penalties payable by the company.

(6 marks)

(Note: Rate of Company Tax: 25%)

Answer

Penalty for underestimating estimated tax payable

Chargeable Income (based on Returns) = GH¢1.8 billion
Estimated Chargeable Income = GH¢1.2 billion (Self Assessment)
Estimated Chargeable Income = 66.67% of the Actual Income
(Calculation provided in the marking scheme)

Penalty Calculation

90% of tax payable based on actual income = GH¢405,000,000 (90% of GH¢450,000,000)
Estimated Tax (Self Assessment) = GH¢300,000,000
Difference = GH¢105,000,000

Penalty = 30% of GH¢105,000,000 = GH¢31,500,000
(6 marks)

Tags: Business income, chargeable income, Corporate Tax
Level: Level 3

Topic: Business income - Corporate income tax
Series: MAY 2016

Uploader: Dotse