Ican 2025 Advanced Taxation Question 1

Nancy Nigeria Limited, a manufacturer of soaps and detergents, was incorporated on April 1, 2020, but commenced business on July 1, 2020. At the 2023 Annual General Meeting of the company, the shareholders approved resolutions for the increase in the company’s share capital in 2024 and request for long-term bank loan in the first quarter of 2025, to fund expansion of the company’s operations. In December 2024, the company made preliminary request to its bankers and part of the documents to be submitted included the audited financial statements and tax clearance certificate (TCC) of the last three years. The company has been paying its taxes regularly, but it is yet to request for TCC since the commencement of business. The appointment of the company’s former tax consultants was terminated in early 2024, after the discovery by the Federal Inland Revenue Service (FIRS) of the tax consultancy firm’s professional misconduct in the annual returns filed on behalf of a client. The matter is currently before a Court of competent jurisdiction. Your firm of tax consultants has been engaged to procure the TCC for the company, after recomputing the tax liabilities from inception to the financial year ended December 31, 2024. The Managing Director stressed that the company is willing to make additional tax payments, if a case of under-payment of taxes is established. After accepting the engagement, your Principal Partner, during interaction with the Managing Director, opined that based on the provisions of the Companies Income Tax Act 2004 (as amended), the FIRS may consider instituting back duty audit on the company, hence the need for early preparation for their visit. The Managing Director seems not to understand the submission made by the Principal Partner. The company has provided all the financial records necessary for the conduct of this assignment.