Hnd Business Tax

Taxation Assessment

In order for Ali to know whether or not he has to pay income tax he should belief at the badges of trade. The badges of trade ar used as a guideline to assess whether someone is trading and therefore eligible to pay income tax. There are 6 badges of trade in total. These being the following; subject of the transaction, length of ownership, frequency of transactions, accessory work, reason for sale and motive.

The subject matter is determined by whether or not the item or products that the person has bought and exchange can be used for any cheer or entertainment. If they sully something that there can be no amusement from and the scarce way for them to construct some sort of reach from it is to sell the product for profit then it is deemed as trading. For example take the case of Rutledge v CIR (1929) where Rutledge bought and sold 1 gazillion toilet rolls this would be deemed as trading as the only enjoyment from these products would be the profit from sale. In relevance to Ali he can be judged on whether or not the cars he buys could be enjoyed.

Length of ownership is determined by how prospicient you have the products or assets. Generally when an asset is acquired it is used for a lengthy time or for use.



However if an asset or item is bought and then sold quickly it can be deemed as trading and the profits are taxable. Ali would have to olfaction at this as the cars he are buying are being fixed up and then sold on if he is doing this quite fast then he would have to pay income tax on his profits.

Ali ordain also be assed on frequency of transactions. This means that the more often you buy and sell something or commit the same transaction it will be seen as trade which Ali should look at as he is regularly buying and exchange cars which would be seen as trade.

Supplementary work is any work that is done to after(prenominal) the purchase of an asset to make it more likely to be sold. As Ali is buying these cars and then fixing them up and selling them it can...If you want to get a full essay, order it on our website: Ordercustompaper.com



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