(b) (i) Advise Andrew of the income tax (IT) and capital gains tax (CGT) reliefs available on his investment in
the ordinary share capital of Scalar Limited, together with any conditions which need to be satisfied.
Your answer should clearly identify any steps that should be taken by Andrew and the other investors
to obtain the maximum relief. (13 marks)
第1题:
(c) Assuming that Joanne registers for value added tax (VAT) with effect from 1 April 2006:
(i) Calculate her income tax (IT) and capital gains tax (CGT) payable for the year of assessment 2005/06.
You are not required to calculate any national insurance liabilities in this sub-part. (6 marks)
第2题:
(ii) State, giving reasons, the tax reliefs in relation to inheritance tax (IHT) and capital gains tax (CGT) which
would be available to Alasdair if he acquires the warehouse and leases it to Gallus & Co, rather than to
an unconnected tenant. (4 marks)
第3题:
(b) Explain the capital gains tax (CGT) and inheritance tax (IHT) implications of Graeme gifting his remaining ‘T’
ordinary shares at their current value either:
(i) to his wife, Catherine; or
(ii) to his son, Barry.
Your answer should be supported by relevant calculations and clearly identify the availability and effect of
any reliefs (other than the CGT annual exemption) that might be used to reduce or defer any tax liabilities
arising. (9 marks)
第4题:
(ii) Explain the income tax (IT), national insurance (NIC) and capital gains tax (CGT) implications arising on
the grant to and exercise by an employee of an option to buy shares in an unapproved share option
scheme and on the subsequent sale of these shares. State clearly how these would apply in Henry’s
case. (8 marks)
第5题:
(b) Assuming that the income from the sale of the books is not treated as trading income, calculate Bob’s taxable
income and gains for all relevant tax years, using any loss reliefs in the most tax-efficient manner. Your
answer should include an explanation of the loss reliefs available and your reasons for using (or not using)
them. (12 marks)
Assume that the rates and allowances for 2004/05 apply throughout this part of the question.
第6题:
6 Alasdair, aged 42, is single. He is considering investing in property, as he has heard that this represents a good
investment. In order to raise the funds to buy the property, he wants to extract cash from his personal company, Beezer
Limited, whose year end is 31 December.
Beezer Limited was formed on 1 May 1998 with £1,000 of capital issued as 1,000 £1 ordinary shares, and traded
until 1 January 2005 when Alasdair sold the trade and related assets. The company’s only asset is cash of
£120,000. Alasdair wants to extract this cash from the company with the minimum amount of tax payable. He is
considering either, paying himself a dividend of £120,000, on 31 March 2006, after which the company would have
no assets and be wound up or, leaving the cash in the company and then liquidating the company. Costs of liquidation
of £5,000 would then be incurred.
Since Beezer Limited ceased trading, Alasdair has been taken on as a partner at a marketing firm, Gallus & Co. He
estimates his profit share for the year of assessment 2005/06 will be £30,000. He has not made any capital disposals
in the current tax year.
Alasdair wishes to reinvest the cash extracted from Beezer Limited in property but is not sure whether he should invest
directly in residential or commercial property, or do so via some form. of collective investment. He is aware that Gallus
& Co are looking to rent a new warehouse which could be bought for £200,000. Alasdair thinks that he may be able
to buy the warehouse himself and lease it to his firm, but only if he can borrow the additional money to buy the
property.
Alasdair has a 25% shareholding in another company, Glaikit Limited, whose year end is 31 March. The remaining
shares in this company are held by his friend, Gill. Alasdair is considering borrowing £15,000 from Glaikit Limited
on 1 January 2006. He does not intend to pay any interest on the loan, which is likely to be written off some time
in 2007. Alasdair does not have any connection with Glaikit Limited other than his shareholding.
Required:
(a) Advise Alasdair whether or not a dividend payment will result in a higher after-tax cash sum than the
liquidation of Beezer Limited. Assume that either the dividend would be paid on 31 March 2006 or the
liquidation would take place on 31 March 2006. (9 marks)
Assume that Beezer Limited has always paid corporation tax at or above the small companies rate of 19%
and that the tax rates and allowances for 2004/05 apply throughout this part.
第7题:
(c) (i) Explain the capital gains tax (CGT) implications of a takeover where the consideration is in the form. of
shares (a ‘paper for paper’ transaction) stating any conditions that need to be satisfied. (4 marks)
第8题:
Assume that the corporation tax rates for the financial year 2004 apply throughout.
(b) Explain the corporation tax (CT) and value added tax (VAT) issues that Irroy should be aware of, if she
proceeds with her proposal for the Irish subsidiary, Green Limited. Your answer should clearly identify those
factors which will determine whether or not Green Limited is considered UK resident or Irish resident and
the tax implications of each alternative situation.
You need not repeat points that are common to each situation. (16 marks)
第9题:
(c) Advise Alan on the proposed disposal of the shares in Mobile Ltd. Your answer should include calculations
of the potential capital gain, and explain any options available to Alan to reduce this tax liability. (7 marks)
However, an exemption from corporation tax exists for any gain arising when a trading company (or member of a trading
group) sells the whole or any part of a substantial shareholding in another trading company.
A substantial shareholding is one where the investing company holds 10% of the ordinary share capital and is beneficially
entitled to at least 10% of the
(i) profits available for distribution to equity holders and
(ii) assets of the company available for distribution to equity holders on a winding up.
In meeting the 10% test, shares owned by a chargeable gains group may be amalgamated. The 10% test must have been
met for a continuous 12 month period during the 2 years preceding the disposal.
The companies making the disposals must have been trading companies (or members of a trading group) throughout the
12 month period, as well as at the date of disposal. In addition, they must also be trading companies (or members of a trading
group) immediately after the disposal.
The exemption is given automatically, and acts to deny losses as well as eliminate gains.
While Alantech Ltd has owned its holding in Mobile Ltd for 33 months, its ownership of the Boron holding has only lasted
for 10 months (at 1 June 2005) since Boron was acquired on 1 July 2004. Selling the shares in June 2005 will fail the
12 month test, and the gain will become chargeable.
It would be better for the companies to wait for a further month until July 2005 before selling the amalgamated shareholding.
By doing so, they will both be able to take advantage of the substantial shareholdings relief, thereby saving tax of £29,625
assuming a corporation tax rate of 19%.
第10题:
3 On 1 January 2007 Dovedale Ltd, a company with no subsidiaries, intends to purchase 65% of the ordinary share
capital of Hira Ltd from Belgrove Ltd. Belgrove Ltd currently owns 100% of the share capital of Hira Ltd and has no
other subsidiaries. All three companies have their head offices in the UK and are UK resident.
Hira Ltd had trading losses brought forward, as at 1 April 2006, of £18,600 and no income or gains against which
to offset losses in the year ended 31 March 2006. In the year ending 31 March 2007 the company expects to make
further tax adjusted trading losses of £55,000 before deduction of capital allowances, and to have no other income
or gains. The tax written down value of Hira Ltd’s plant and machinery as at 31 March 2006 was £96,000 and
there will be no fixed asset additions or disposals in the year ending 31 March 2007. In the year ending 31 March
2008 a small tax adjusted trading loss is anticipated. Hira Ltd will surrender the maximum possible trading losses
to Belgrove Ltd and Dovedale Ltd.
The tax adjusted trading profit of Dovedale Ltd for the year ending 31 March 2007 is expected to be £875,000 and
to continue at this level in the future. The profits chargeable to corporation tax of Belgrove Ltd are expected to be
£38,000 for the year ending 31 March 2007 and to increase in the future.
On 1 February 2007 Dovedale Ltd will sell a small office building to Hira Ltd for its market value of £234,000.
Dovedale Ltd purchased the building in March 2005 for £210,000. In October 2004 Dovedale Ltd sold a factory
for £277,450 making a capital gain of £84,217. A claim was made to roll over the gain on the sale of the factory
against the acquisition cost of the office building.
On 1 April 2007 Dovedale Ltd intends to acquire the whole of the ordinary share capital of Atapo Inc, an unquoted
company resident in the country of Morovia. Atapo Inc sells components to Dovedale Ltd as well as to other
companies in Morovia and around the world.
It is estimated that Atapo Inc will make a profit before tax of £160,000 in the year ending 31 March 2008 and will
pay a dividend to Dovedale Ltd of £105,000. It can be assumed that Atapo Inc’s taxable profits are equal to its profit
before tax. The rate of corporation tax in Morovia is 9%. There is a withholding tax of 3% on dividends paid to
non-Morovian resident shareholders. There is no double tax agreement between the UK and Morovia.
Required:
(a) Advise Belgrove Ltd of any capital gains that may arise as a result of the sale of the shares in Hira Ltd. You
are not required to calculate any capital gains in this part of the question. (4 marks)