Marks tax adjusted trading profit for the nine-month period

Question

On 31 December 2012 Mark Anyang ceased trading as a marketing consultant. He had been self-employed since 2006. On 1 January 2013 Mark commenced employment as the marketing manager of Sleep-Easy plc. The company runs a hotel. The following information is available for the tax Year 2012/13:

Self-employment

1. Mark's tax adjusted trading profit for the nine-month period ended 31 December 2012 is Kshs 200,700. Thisfigure is before taking account of capital allowances.

2. The tax written down values for capital allowances purposes at Dec 2012 were as follows:

• Main pool Kshs130,800

• Expensive motor car Kshs140,600

The expensive motor car was used by Mark, and 40% of the mileage was for private purposes.

Employment

1. Mark is paid a salary of Kshs 30,250 (gross) per month by Sleep-Easy plc, from which income tax of 6020 per month has been deducted under PAYE.

2. During the period from 1 January 2013 to 5 April 2013 Mark used his private motor car for businesspurposes. He drove 2,500 miles in the performance of his duties for Sleep-Easy plc, for which the companypaid an allowance of Kshs 10 per mile.

3. On 1 January 2013 Sleep-Easy plc provided Mark with an interest free loan of 640,000 so that he couldpurchase a new main residence.

4. During the period from 1 January 2013 to 5 April 2013 Mark was provided with free meals in Sleep-Easyplc's staff canteen. The total cost of these meals to the company was shs 4,000.

Property income

1. Mark let out a furnished property throughout the tax year 2012/13. He received gross rents of 180,600, 5% of which was paid to a letting agency. During December 2009 Mark spent 50,040 on replacing dilapidated furniture and furnishings.
2. From 6 April 2013 to 31 December 2013 Mark let out a spare room in his main residence, receiving rent of

3,050 per month.

Investment income

1.  During the tax year 2012/13 Mark received dividends of 20,880, interest from government stocks (treasury bills) of 40,900, and interest of 4000 from an individual savings account (ISA). These were the actual cash amounts received.
2. On 3 May 2013Mark received a premium bond prize of 10,000.

Other information

1.  On 15 December 2012 Mark made a gift aid donation of 8000 (net) to a national charity.
2. Mark's payments on account of income tax in respect of the tax year 202/13 totaled ahs 110,381.

Required

1. Compute the income tax payable by Mark for the tax year 2012/13 and the balancing payment or repaymentthat will be due for the year.

2. Advise Mark as to how long he must retain the records used in preparing his tax return for the tax year 2012/13, and the potential consequences of not retaining the records for the required period.