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Tax Law Problem Question TRADING INCOME

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    How best to answer this question?2 Jack owns a smallvillage garage and lives in a bungalow on the same site. The garage sells Tiger petrol and provides afull service and repair facility for cars and light vans. Jack’s accounts aredrawn up each calendar year. Hisaccounts for the year 2015 show an agreed operating profit of £50,000. In January 2015 Jack donated 100litres of free petrol to the local “mealson wheels” service. He also purchased abarn and the surrounding land, which was adjacent to the garage, from Peggy for£10,000. This was to provide additionalstorage space. Although the barn wasusable for farming it needed a considerable amount of work doing to it in orderto make it usable for Jack’s purposes. Jack also took the opportunity torebuild the part of his garage nearest to the barn and to construct a linkbetween the garage and the barn. He alsodiscovered that Ruth had a right of way across the land attached to the barnand paid her £4,000 to agree not to exercise that right for ten years. In May 2015 BrianTaxis, a local firm, which had had their cars serviced by Jack’s garage for thepast five years at a very favourable rate, sold their business to Grundy Cabs,who had their own servicing arrangements. Brian Taxis paid Jack £10,000 as compensation “to preserve goodrelations in the village”. Jack also agreedwith Tucker Tyres plc to stock only their tyres and was paid £5,000 to agreenot to stock any other make of tyres for two years. In October 2015 Jackwas successfully sued for negligence when a customer damaged her hand on adefective petrol pump. He also spent£10,000 repairing the lights on the approach to the site. Discuss Jack’s liability to incometax for the year of assessment 2015/16.
    100L of free petrol, non commercialdisposals
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