Faculty of Business & Society

Assignment Cover Sheet
Plagiarism Advice:
You must not engage in plagiarism when completing your coursework as it is a form of deception. It is deliberately or carelessly passing off another’s written or oral work as yours. If you engage in it, or allow others to copy your work, your work (and theirs) will attract a mark of zero pending investigation. Plagiarism includes copying the words (spoken or written), ideas or research results of another without acknowledging the original of the source. Acknowledging (crediting) a source requires an entry in your bibliography. It also requires proper annotation and applies to both electronic and paper sources. If an allegation of plagiarism is subsequently confirmed under the University’s procedures for dealing with unfair practices in assessments, it will go on your record and will be disclosed to those specifically requesting such information to be given in references for students.

Submission:
You are required to submit one copy electronically on Blackboard. Please also note any further instructions listed below.

Important Note:
Assessments received after the hand in deadline will be given a maximum mark of 40% if submitted within 5 university working days of the deadline or a zero grade if submitted after that. Please note that the university is open outside of term time and its working days consequently continue outside of term. This provision applies unless you have been granted an amended coursework submission deadline via the mitigating circumstances procedure; or mitigating circumstances are subsequently submitted and accepted. You can find out how to apply for mitigating circumstances from the FBS Faculty Advice Shop.

Fit to Sit:
The University operates a ‘fit to sit’ policy whereby all students, in submitting or presenting themselves for any assessments, are declaring that they are fit to sit the assessment. Students cannot subsequently claim that their performance in that assessment was affected by extenuating circumstances.

Important:
• This assignment constitutes 30% of the overall mark for this module and should be approx. 1,500 words or equivalent.

Background
A family friend, Frank Firter, who currently runs a take-away food premises in the local high street, is considering diversifying his activities by starting up a new restaurant. He has heard that you are studying taxation at University and has asked whether you would be able to do some research for him in relation to the tax implications of his new business.

It is intended that the new restaurant will be run as a sole-trader business and a premises has been identified in the town centre which could be leased for this purpose. The property has been empty for some time and has not previously been used as a restaurant. In return for a cheaper premium and a reduced rent, Frank has agreed that he will personally undertake and pay for any necessary alterations and refurbishment and will also purchase any equipment and furniture that is needed.

Frank realises his limitations and has therefore agreed to pay for the services of Berndt Souffle, who currently is head chef in a nearby restaurant, to run the kitchen. Berndt has told Frank that he should be treated as self-employed, but Frank is unsure why Berndt has asked this.

Frank’s wife Michelle will help him in managing the restaurant and Frank intends to pay her cash-in-hand (i.e. not operate PAYE on her wages) for any work she does. Their teenage children will also work evenings and weekends as waiters/waitresses and will help out with kitchen duties. Frank sees this as a way of reducing his profits from the business and also believes that the cash tips that his children receive will also be a tax-free way of them earning some money. His family members will also be allowed to eat at the restaurant without paying for their meals. All other staff at the restaurant will be paid the market rate for the jobs they undertake and will be paid under PAYE. He already employs a bookkeeper for his take-away business and she will take on the payroll for the new business.

Requirement:
You should write a research paper which clearly addresses the taxation implications and treatment of the main issues identified above. Marks will be awarded as follows:
For the quality of grammar/spelling/referencing, use of tax cases to support your advice and the professionalism and realism of your report. (10 marks)
•Expenditure on refurbishment, refitting and equipment for the new restaurant. You should clearly describe the different types of expenditure, using estimates for amounts, and explain the different treatments for income tax purposes. (30 marks)
•Berndt Souffle. Discuss the difference in the tax treatment to Frank’s new business of treating Berndt as self-employed, rather than as an employee. (10 marks)
Explain the factors that would be taken into account in determining Berndt’s status as employed or self-employed and advise which treatment is more appropriate. (10 marks)
•Discuss the proposed treatment of the earnings of Frank’s family members, outlining the key factors and the likely correct treatment of the payments.

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