ACCT3050

Principles of Caribbean Tax and Tax Management

ALTERNATIVE ASSESSMENT
CASE Scenarios

Submission Date: Wednesday, April 29, 2020 8:00 am – 8:00 pm (E.C.)

INSTRUCTIONS TO CANDIDATES:
This assignment has THREE case studies. You are required to do ALL THREE. Read each
case and respond to all the questions that follow.

CASE 1

1. (a) Kojo Anthony has been made redundant from a managerial position in a bank in
Jamaica where he had worked for the past fifteen years. The benefits which formed
part of his compensation package were a mortgage at 5% and a company vehicle
which had cost $3,000,000 when it was new. His plan is to go into business as a
computer consultant working in Jamaica and the Eastern Caribbean countries. He
has to decide whether
a) to operate as a sole proprietor or
b) to incorporate and be a director or shareholder or
c) to operate in partnership with a former school friend or
d) set up in business in one of the Eastern Caribbean islands

Prepare a memo to advise Kojo on his options. He wishes to take into consideration the
tax (corporate and individual) structure, available allowances, National Insurance/Social
Security costs, VAT/GST arrangements and the economic development in the respective
countries. You may refer to two of the Eastern Caribbean countries. [20 marks]
(N.B. 2 marks are available for presentation, grammar and spelling)

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CASE 2
Sylvia Charles, was born in Trinidad and educated at UWI St. Augustine. She had been
an Engineer in the sugar belt with Caroni Limited and moved to Barbados in 2014 to take
up a position with a sugar factor in that country. During 2019, she visited Trinidad and
Guyana several times as a consultant. She was paid $18,000(TT) but did not transfer any
of the money to Barbados as she has elderly relatives to take care of in Trinidad. She
received $200,000 (G) and this was remitted to Barbados. She has 3 children, aged 6, 5
and 2. Her husband, a Barbadian is a civil servant.
Sylvia earns $170,000 per year from the sugar factory; she is provided with a car that cost
$90,000 when purchased new in 2016 and the accommodation provided by the factory
would normally rent for $1500 per month. She pays a nominal rent of $500 per month.
She has paid $6,420 in National Insurance contributions and $1,200 in subscriptions to
the Professional Engineers Association, as well as $4,400 to a registered retirement plan.
She has a covenant with the Barbados Association for the Disabled, a registered charity,
and gives them $100 per month.
She own shares in public companies in Barbados and Trinidad and received dividends of
$12,000 (BDD) and $10,000(TT) for the year. The Trinidad dividends are not remitted.
Sylvia invested in a fishing boat with her husband in 2018 which cost $300,000. They
have an arrangement with a fisherman in Oistins to operate it. The arrangement is that the
fisherman takes 40% of what he catches and the Charles’ provide the diesel. For 2019
fish sales were $135,000. They spent $36,000 for the year on diesel. The Charles’ use the
boat several times during the summer holidays for family outings and Sylvia reports 50%
of the income on her tax return.

REQUIRED:
(a) Calculate the tax payable by Sylvia for the year 2019. [15 marks]
(Assume exchange rates of $1.00 (TT) = $0.30 (BDD) and $1(G) = $0.0096(BDD)

Extract from Barbados Revenue Authority website:

Commencement Date and Rates of Tax Effective July 1, 2019. The following
rates will apply to Personal Income Tax:
Taxable Income Rate of Tax Up to and including $50,000 12.5% Over $50,000
33.5%

(b) What advice would you give Sylvia to reduce her tax liability? [5 marks]

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CASE 3
Tropical Paradise Limited owns a franchise of restaurants on a Caribbean island.
An analysis of the financial accounts for the year ended 31 October 2019 was as
follows:
Gross profit from restaurant sales $ 14, 721,000
Other Income
Capital Gain from sale of property 343,000
Interest on Government debenture 65,000
Dividends received from local companies 92,000
Bank deposit interest 21,200 521,200
15, 242, 200
Less
Electricity 138,700
Depreciation (1) 148,000
Wages & Salaries 1,245,350
Directors’ fees 700,960
Advertising 40,500
Postage, telephone and stationery 104,500
Loan interest payable 35,000
Professional fees (2) 136,400
Miscellaneous expenses (3) 36,300
Subscriptions and donations (4) 14,000
Travel and entertainment (5) 50,000
Franchise fee 500,000 3,149,710
NET INCOME $12,092,490

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Figures in brackets refer to notes:
(1) Depreciation charged is $50,000 more than the wear and tear allowances
allowed by Inland Revenue

(2) Professional fees:

Audit and accountancy 60,000
Cost of successful tax appeal 1,000
Legal fees re collection of bad debts 3,600
Cost of defending action by a former
employee for sexual harassment 25,000
Architect’s fee for designing a new
Warehouse which was not used 46,800
$ 136,400

(3) Miscellaneous expenses

Expense accounts for overseas
sales persons 24,500
Christmas gifts to office staff by owners 11,800
$ 36,300

(4) Subscriptions and donations

Subscriptions to local newspapers 1,200
Donation to owner’s alumni university
overseas 7,000
Contribution to local football team 5,800
$ 14,000

(5) Travel and entertainment

Travel by owners to conference in
Miami for restaurant owners 5,000
Entertainment of overseas travel agents 3,000
Purchase of new bus to transport staff 30,000
Maintenance and upkeep of staff bus 12,000
$ 50,000

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REQUIRED:
(a) Calculate the corporation tax assessable and payable if these restaurants are located in
Jamaica, Trinidad or St Lucia (Select only 1 country) [15 marks]

As part of the calculation, indicate as a note why any item in the financial accounts
has been excluded. (You must indicate which country you have selected)

Corporation tax rates

Jamaica 30%
Trinidad 25%
St Lucia 30%

(b) Identify 5 documents that must accompany the corporation tax return when it is filed.
[5marks]