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Memorandum:

Client:

Subject:

Prepared By:

Date:

Part (a):

Following points should be considered before going into any kind of client advisor relationship with
Nelson:

1. We should review the resident status of Nelson through his passport.

2. It should be ensured that ACCA’s ethics principles are followed along every future decision
regarding nelson and any potential future engagements with Nelson.
3. We should also consider the principle of professional competence. We must ensure that we have
the right skills and resources to agree for any engagement. If we lack professional competence,
we should either reject the engagement or reduce the threat to an accepted level.
4. We should consult with the previous tax advisor of Nelson.
5. We should lookout for any potential existence of money laundering threats and ensure that we
don’t get into engagement with a client who is involved in money laundering.

Part (c):

Calculation of taxable Income of limited company:

Annual Trading profit (7,050 * 10) 70,500

Less: Nelson’s salary (1,300 * 10) (13,000)

Less: Class 1 Employer NIC (13,000 – (9,100*10/12)) * 15.05% (815)

Taxable Profit 56,685

Corporation tax @ 19% 10,770

Post Tax Profit 45,915

Nelson will receive an annual gross salary of 13,000 for the year ended 23/24 and a dividend of 46,099.5.

Total taxes payable by Nelson:

Corporation tax 10,813.5

Class 1 Employer NIC 587

Class 1 Employee NIC (13000 – 12570*10/12) * 13.25% 335

Income Tax Payable NS Income 13,000 6,090

 Dividend Income 46,099.5

Taxable Income 59,099.5

Personal Allowance 12570 * 0% 0

Basic rate band 430 * 20% 86

Dividend NRB 2000 * 0% 0

Dividend BRB 35,270 * 8.75% 3,086

Dividend HRB 8,829.5 * 33.75% 2,918

Income Tax Liability 6,090

Total taxes payable 18,010

Part (b):