Mr Deane is a UK resident and is employed by

Mr Deane is a UK resident and is employed by BB Ltd, a company incorporated and carrying on business in England since January 2012. On 1 April, 2017, Mr Deane had to stationed in Hong Kong and he visited different places when carrying out his duties. It is accepted that Mr Deane’s employment with BB Ltd is located outside Hong Kong. You have been supplied with the following information in respect of Mr Deane for the year ended 31 March 2018:

(1 ) Mr Deane stayed in the following places:

Place Days

Hong Kong 280

Mainland China 25

Europe (including 15 days’ vacation leave) 60

365

In addition, he receives $41,000 per year as a ‘holiday allowance’. The purpose of this allowance is to enable her to return to his home in the UK once a year, as well as to fund other occasional holidays. BB does not monitor how this amount is actually spent. In fact, Deane spent only $33,000 of this amount on holiday travel in the 2017/18 year.

(2) Salary: $1,200,000

(3) Bonus: $300,000

(4) Allowance for stays in Hong Kong: $28,000

Allowance for stays outside Hong Kong: $23,250

(5) Directorship: Mr Deane was appointed as the managing director of CC Ltd, a subsidiary of BB Ltd is incorporated in Bermuda, and carries on an investment business in China. During the year, Mr Deane received director’s fees of $30,000.

(6) Mr Deane leased a flat in Hong Kong for his accommodation at a monthly rent of $30,000. His employer refunded the whole amount to him.

(7) Mr Deane’s son is studying in England and the school fees were paid by the employer directly to the school. BB Ltd paid total school fees of $120,000 during the year.

(8) On 1 February 2017, Mr. Deane was granted an option to purchase 80,000 shares of the company’s shares at $10 per share. He took the option and paid $80,000 for it on 1 February 2017. On 1 May 2017, he exercised the option to take up the shares when the market value was $51 per share. On 30 May 2017, he sold all the shares at the market value of $57.

(9) BB reimburses Mr. Deane for his electricity and gas bills, up to a maximum of $12,000 per year. To obtain this reimbursement, he must provide invoices to BB to prove that he has in fact incurred this amount.

(10) During the year, BB received and paid the following tax bills in respect of Mr Deane:

PRC individual income tax $30,000

Other SE Asian countries’ income tax $10,000

(11) Subscription fee

Mr Deane paid a yearly subscription fee of $30,000 to join a club as required by his employer. Joining the club assisted Mr Deane in promoting BB Ltd’s business activities. BB Ltd reimbursed the subscription fee to him.

(12) Mr Deane earned $60,000 from his part-time employment with an university in Hong Kong.

(13) Mr Deane gave $25,000 to charities in Hong Kong and $15,000 to charities in the UK during the year.

(14) Mr Deane is married with a son aged 20. As mentioned in (7) above, his son is studying in England. Mrs Deane is a housewife and is a permanent resident in Hong Kong. Mrs Deane’s mother (aged 58) and grandmother (aged 80) live in a nursing home. Mrs Deane paid all the nursing home bills amounting to $192,000 in the year to 31 March 2018.

REQUIRED:

a) Compute the number of days attributable to Mr Deane’s Hong Kong services for the year of assessment 2017/18.

b) Compute Mr Deane’s salaries tax liabilities for the year of assessment 2017/18. Ignore provisional salaries tax. Show all your workings.

c) Giving explanations of the treatment you have accorded for tax purposes to items (6), (9) and (10) above.

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