Income Tax Law

a)    A few years ago, Joan purchased a house and a plot of vacant land. She converted them into three flats, which she rented out. Last year, she built a number of houses on the vacant land, which she then sold. At the same time, she sold the house she had converted, taking advantage of an improvement in the housing market.

b)    Sam is a sole trader and builds furniture at his workshop for his clients according to their individual specifications. Sam usually drives to work from his home in the mornings and back again in the evenings. On occasion he has to visit his clients to assemble the furniture onsite. Sometimes he goes rom his workshop to the client’s premises and then returns to his workshop. Other times, he goes to the client’s premises directly from his home and then returns home afterwards.

c)    QuikCoach Ltd is a bus company. It has leased a number of buses from Sterling Assets Ltd. One of these buses was recently involved in an accident when a car hit the bus. Fortunately, no one was injured but the bus was severely damaged. QuikCoach has received compensation for its losses from the car driver’s insurance company equal to the cost of repairing the bus and to QuikCoach’s lost profits for the time the bus was out of action needing repair.

d)    Roger runs a small bar in the City. He sells enough whisky for it to be worth his while to buy the whisky in batches. The wholesale price that he has to pay has been variable recently. In the last year, he paid prices ranging between £200-400 per case. Even at £400, he has been able to make a small profit. At the end of last year, he had eight cases on hand. So far this year, he has bought another 10 cases as sales have been good. Over the Christmas period, he gave away a number of bottles to some particularly regular customers, several of whom he regards as his friends.

Advise Joan, Sam, QuikCoach and Roger as to the INCOME TAX consequences of the above facts for each of them.

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