Business Letter Sample: Letter of advice to BCP/BCL

商務(wù)信件格式范文  Business Letter Sample 商務(wù)函電

To Mr Bit Umen,

I have been engaged to review Black Carpet Partnership's (BCP) and Blact Carpet Limited's (BCL) tax returns that had been filed by your in-house accountant, and to classify the costs of BCP's and BCL's costs to determine which are capital and which are revenue for tax purposes.

In the Notice of Proposed Adjustment (NOPA) of the Commissioner of Inland Revenue (CIR), it disallowed all deductions for the project of Timaru plant, because as far as it concerned all of the costs are part of one large capital project, but deductions for certain types of expenditures which can meet the provisions in s DA 1(1) Income Tax Act 2007 (ITA) (formerly section BD 2 (1) (b) (i) and (ii) ITA 1994).

As we know, what is deduction in s DA 1 is determined by a general permission of the ITA 2007. Certainly there are some specific limitations(called the general limitations) in s DA 2 for this general permission. In section DA 3, there are also specific provisions which may supplement or override the general permission and override any or all of the general limitations.

Our work is in line with s DA 1 to s DA 3, as well as other common expenses which may refer to.

Before I prepare for, or respond to, any formal correspondence to the CIR or Inland Revenue on your behalf, I should give you some advice. These advice includes the various expenses that should be tax deductible or capitalised, and the restructuring of BCP into BCL.

At first, we should notice the specific time of the Timaru plant project and the time of restructure of BCP to BCL. You should prepare the legal documents to testify that before the restructure of BCP to BCL the Timaru project was already began. From the facts and assumptions provided to me, I found that the Timaru project started in January 2007, and the total work will take eighteen months. That is to say, it lasted from 2007 to the fist half of 2008. But the restructure of BCP to BCL effected from 1 July 2008, at that time, the Timaru project was ended. Therefore in my opinion, you should testify these facts.

Secondly, the NOPA of CIR thought that the costs of Timaru project should be capitalised as they form part of one large project, the CIR even thought the restructuring of BCP to BCL is tax avoidance. It is obviously bad for the reputation of your company. In my view, we should take the NOPA seriously, and review the every parts of the project to response the NOPA.

On the one hand, the project is not only for the business of BCP/BCL, it is also in order to meed the changed environment protection standards. For example, the standards for earthquakehttp://m.elviscollections.com/Thesis_Writing/MBAliuxueshengzuoye/ protection and building codes, the tower structure has to be tested according to these updated standards. On the other hand, we should stress the special features of the products of BCP/BCL. As we know, the main products of BCP/BCL is asphalt and bitumen, which is bulky, heavy materials with a high scouring effect. In order to produce safely, the regularly re-check of the equipments and plant is very important in the asphalt making process. Furthermore, the raw materials of BCP, which is chemical materials, may have potential danger should be handled with properly.#p#分頁(yè)標(biāo)題#e#

All the reasons above can explain why the project had been commenced. Therefore, we should prepare the relevant legal documents too.

Project in issue is "the Timaru plant", we should emphasis on the plant in particular. The Timaru plant is comprised with some special equipments, Every equipment is necessary for the plant to produce asphalt and bitumen. Because the Timaru plant is flag-ship of BCP, there are some aestheticqualities, including painting, to bring the plant to a more appropriate standard. Thus the expenses are different from the essential expense of equipment overhauled.

The other expense of the project is salary of professional engineers, who not only overhauled the Timaru plant work, but also tested the tower structure for earthquake standards. Some of them are outside engineers and contractors, and some of them are the employees of BCP. The expenses for them are different.

The NOPA of CIR denied all deductions of the Timaru plant. Thus we should clearly review all final figures and explain each part of the relevant work aims for what. You should guarantee all the final figures are real and objective, and also need documents if refer to.

At last, we should point out that, on the advice of BCP's lawyers, BCP restructured from a partnership into a company (BCL) during the first half of the 2008 year, the reason to commence the Timaru project is unrelated with the restructuring. It was expected that after the work was completed BCP would continue to produce and supply asphalt of the same grade and same quantity as it did previously. We must testify that.

The provisions of Income Tax Act 2007 provide how to calculate a taxpayer's net income, which deducts from the taxpayer's income all deduction. Our foundation to response the NOPA of CIR is the ITA 2007, in particular Deductions of the ITA. Beside that Act, I will also find some Cases to supplement our response. In the process, may also need some help from you to provide the facts and evidences the more the better.

Tax avoidance is bad for the reputation of any company. Therefore we should take the claim more caution. I will try my best to help you, as well as the BCP/BCL. Hope we have a satisfied cooperative relationship.

Thank you for your attention!

Best wishes,

(signed)
Chartered Accountant
Aug. 14, 2009