Mr. Matata has approached you with a view to obtaining help in determining his taxable income for 2005. He has supplied the following information:
1.Business Income
He runs a small garage that generate taxable income of Sh.60,000. In 2004, he had a tax loss of Sh.40,000 from this business.
2.Wife’s Income
His wife was employed by Mafuta Ltd. as the Finance Director. Her salary was sh.52,000 p.m. Additional benefits include:
Company car 1800 cc.
House at New Muthaiga (market value of rent Sh.20,000 per month)
Staff gifts of oil products worth Sh.1000 p.m
3.Capital Gains
In the course of the year, the Matatas sold one plot they owned in Nairobi for Sh.1,200,000. This represented a gain of Sh.600,000 which they used to take a holiday to Mombasa.
4.Investment Income
Withholding Tax Net
Sh. Sh.
Dividends: 2,000 18,000
Kenya Breweries Ltd 1000 36,000
HFCK Ltd. 4,000 9,000
CMC Ltd.
Interest:
Kenya Commercial Bank Savings Account 2,000 18,000
HFCK – Housing Development Bond 7,000 63,000
Post Office Savings Bank – 20,000
15% 2010 Treasury Bonds. 1,500 13,500
5.Employment Income – Mr. Matata
He was employed by Utajiri Limited as the General Manager – Sales. His salary was Sh.40,000 per month and a bonus of 2% on total sales revenue. He had a car of 2000cc which he used to visit customers otherwise his wife would pick and drop him at the place of work each day using her official car.
6.Utajiri Limited insures all its sales against default from customers. The cost of the insurance was Sh.10,000 which represents 0.001 percent of sales. The company also paid sh.20,000 to cover the life of Matata and his household items.
7.PAYE of Sh.130,000 was deducted from Matata’s pay but due to an oversight in the part of the Chief Accountant the tax was not paid to the Collector of Income tax. His wife’s PAYE was Sh.180,000 in the year.
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